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Thursday, Dec 7, 2023

Business of Sports: Why Dodgers President Stan Kasten Is Sticking With His Game Plan

In the afterglow of their first World Series title in 32 years, the stars would seem to be aligned for the Los Angeles Dodgers.

After all, the team plays in the nation’s second-largest market, its fanbase is famously loyal, it boasts a deep roster filled with marquee talent and its stadium is fresh off a $100 million facelift.

But even with those sizeable advantages, Dodgers President and Chief Executive Stan Kasten said there’s no escaping the impact Covid-19 has had on the organization.

“I can’t sugarcoat how difficult and costly the last year, and this one, have been and will be,” Kasten said. “Going forward, we will have bigger numbers and bigger losses than anyone. I do think because of our marketplace and our fan support, we do have a chance to get back quicker than most. But it will be hard.”

When asked about losses caused by the pandemic, Kasten will only say, “It’s a big number for 2020, and it’ll be a big number in ’21.”

In some ways, the Dodgers are victims of their own success. The club has won eight consecutive National League West titles and appeared in three of the last four World Series. That whets appetites for more and sets high expectations.

“The Dodgers have continued to double down on delivering an elite product for fans — from roster-building to stadium investment — and deepening their ties in the community,” said Sean Clemens, principal and director at Park Lane’s sports investments division in Santa Monica. “L.A. sports fans tend to have high expectations, and the Dodgers have consistently hit and surpassed those.

“The club has been aggressive in building the team and stuck to its principles of keeping the farm system strong and limiting exposure to longer-term contracts. The front office knows the window for championships is now, and the fans appreciate that continued pursuit.”

The Dodger way

While some Major League Baseball teams tear down and rebuild after a championship due to player salary demands, that’s not the Dodger way.
During the offseason, the organization actually boosted its roster payroll to an MLB-
leading $245 million. That’s more than 25% higher than the second biggest spender, the New York Yankees.

Offseason moves included a three-year contract to 2020 National League Cy Young Award winner Trevor Bauer. The new deal makes him the game’s highest-paid player in 2021 with a salary of $40 million — a single-season MLB record. And he’ll make even more in 2022 — a whopping $45 million.

Kasten was part of the investment group led by Guggenheim Partners Chief Executive Mark Walter that purchased the Dodgers from Frank McCourt in 2012 for a then-record $2.1 billion. Forbes estimates the team’s current value at $3.4 billion.

From the start, Kasten said, management has taken a long-range approach to the business of baseball.

“It’s a mistake … looking at one-year snapshots. Don’t do that. We don’t. You have to appreciate that we have a long-term plan that we enunciated the first day we took over.

“We’re still working on that plan that has been successful. If you’re a fan, I think the only way you need to look at this is: How is the team I’m supporting performing? What is my experience at the stadium? How is this team relating to us in our community?”

Another sizeable advantage for the Dodgers is their television rights deal. The team is midway through a 25-year, $8.2 billion package tied to its team-owned cable TV channel, SportsNet LA.

Last year, for the first time, the Dodgers reached full distribution for the network after adding satellite partner and El Segundo-based DirecTV, now owned by AT&T Corp. That move greatly expanded the team’s commercial exposure.

Lucrative TV deal

The TV deal allows for more flexibility in times of trouble, Kasten conceded.

“It does for sure, but nothing will ever work without good decisions in the front office,” he said. “Yes, cushions are great, revenue streams are great, but they dry up if you don’t make good decisions. We rely on our people to make those decisions, and so far we’ve had a pretty good track record.”

Even with the benefit of TV money, the Dodgers had to make the painful decision to implement layoffs across the organization last November because of the pandemic.

Kasten said employee cutbacks at a time of roster additions are two “different and distinct decisions, and the question and answer is different for each. One question is: How do we continually invest in our product and what should the returns be? We fortunately don’t have to build one year at a time. Some do have to do that. The second one here is: What is the responsible course for running your business? You always have to evaluate that.”

One element reinforced by Covid-19 has been the Dodgers’ unique relationship with Los Angeles.

The club has long occupied a special place in the heart, and hearts, of the community. And the Dodgers’ 2020 championship, along with moves made by the team away from the field, served to amplify those ties.

Last spring, Dodger Stadium became the largest Covid testing center in the world, and in November it played host to a popular voting center. At the start of 2021, it began serving as a large-scale vaccination center.

Kasten also points out that the franchise was named 2020 Sports Humanitarian Team of the Year by ESPN (earning a $1 million grant) for community work by the team’s official charity, which also benefited from the sale of fan cardboard cutouts that filled the stadium last season.

A unique advantage

As a whole, baseball suffered during 2020 when the regular season was derailed during spring training. MLB finally launched a truncated 60-game regular season that ran from late July to early October. The World Series ended in the controlled neutral environment of Arlington, Texas.
But this year, baseball has the benefit of a uniquely leveraged position. Teams play in larger, mostly outdoor facilities. They each have 80-plus home dates. And thanks to increasing vaccinations, states are easing pandemic restrictions to allow for limited fans — and that number can grow substantially as areas move into new tiers of access.

“Last year, we were at a disadvantage because we were the only sport that lost an entire season of fan attendance revenues,” Kasten said. “Now we do have an advantage, and particularly with Dodger Stadium, we have the most beautiful place ever to play or watch the game of baseball. I think if it’s possible, going forward, we’ll appreciate that even more because it was taken away from us. There’s nothing like sitting outdoors in the fresh air on an evening or afternoon at the beginning of the baseball season. Opening day is always a sign of renewal and optimism, and it will be like that in a way it has never been before.”

At their home opener last week, the Dodgers hosted fans for the first time since the end of the 2019 season. While Covid restrictions meant it wasn’t a sold-out crowd of 56,000, a dedicated and socially distanced group still brought the noise and the energy that are hallmarks of the Dodger Stadium experience.

“When this pandemic began a year ago, one of the fears I had (was) that, whenever it is we do open up, will fans be reluctant to come? Will they have residual fears?” Kasten said.

“I think as we now know from watching malls and airports and any place where people are gathering again, fans will be dying to get to our ballpark in L.A.,” he added. “We may only get to start with 11,000, but soon thereafter it will creeping up, and fans will love it, and TV ratings will follow, and sponsorships will follow. Then we will know we have come through an awful time.”

Keep reading the 2021 Business of Sports Special Report.

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