While the local sporting public is being distracted by the shiny bright object that is new Dodgers owner Magic Johnson’s smile, it behooves readers of a business publication to wonder what in the Bernie Madoff is going on in professional sports? Two billion dollars? Really?
Actually, the New York Times values the sale of the Los Angeles Dodgers at closer to $2.3 billion, for a very interesting reason.
Much of the speculation surrounding the price the Dodgers would command was focused on ownership of the dreaded parking lots. As anyone who has attended a game well knows, it is almost impossible to go without subjecting oneself to the indignity of having to park at the stadium. There is almost no public transportation and Dodger Stadium is not conveniently located for street parking. So if you want to spend $9 for a beer and about the same for a Dodger dog to watch James Loney pop up to second with runners on – not to mention the ticket price – you have to fork over $15 to park your car.
The Dodgers averaged just under 3.25 million in attendance over the last two years. But not everybody comes by themselves in a car to see a given game, though it might seem like that when you’re trying to leave. So let’s say half of the attendees park, which comes to about $24 million a year. That’s just for parking. So it’s not surprising Frank McCourt kept insisting he wanted to hang on to the lots, which he had a right to do since he cunningly had set up ownership of the lots in a company he controlled separate from the entity that owned the baseball team.
And while much was made of this sticking point in the expeditious sale of the team, Major League Baseball Commissioner Bud Selig seemed to be rather sanguine about it. In getting McCourt out of the owners’ billionaire boys club, Selig had shown little compunction about putting on his brass knuckles and quashing the TV deal McCourt had cooked up with Fox, a move that forced McCourt into bankruptcy. Yet he did not bring the full force of MLB’s lawyers to bear on making sure the bankruptcy judge ruled that anyone who bought the Dodgers would control the parking lots.
It seems like an odd omission. By keeping the lots, McCourt had a way to leverage a bigger deal for the purchase of the team. But this is not something that Selig wants to impede. Franchise value is the No. 1 item on his agenda. There is all manner of criticism that can be leveled at Selig: one league with the designated hitter, one without; the All Star tie-game fiasco; interleague play; his comb-over or whatever else bugs you about his reign as commissioner. But one thing he has always done even better than Hyman Roth is make money for his partners. Bud knew, and so did the bidders for the Dodgers, that ponying up for the parking lots was going to be the premium they’d have to pay in order to get a shot at the TV deal that is yet to be negotiated.
The numbers that are being thrown around for the value of that deal are truly enormous. Even before the sale, it was going to be enough for McCourt to pay off his personal debt and then some. But now that a new ownership group is in that is fronted by such a popular figure as Johnson, it suddenly becomes an even bigger payday for the Dodgers.
I can’t get inside his head, nor would I want to, but it’s not too farfetched to assume Selig reasoned that the bidders were all big boys and could figure out a way to get what they wanted and still keep McCourt happy enough that he wouldn’t be a nuisance on his way out the door. The Johnson group is said to have agreed to go into a joint venture on ownership of the lots, which basically means they are buying out McCourt gradually. See? Everybody happy.
This is just the sort of ownership MLB likes these days. A buyout by a group that is beholden to a financial entity that put up the lion’s share of cash. The chief executive of Guggenheim Partners, Mark Walter, is the actual owner, since his company put up almost all the money.
They will expect the Dodgers’ revenue streams to start paying off their investment sooner rather than later, so Magic and Co. have their work cut out for them. So instead of having to deal with a deep-pocketed owner like Mark Cuban, who could be a potential gadfly for baseball, Selig and his cronies can sit back and watch Magic go to work on getting fans into the seats and hammer out a big fat television deal that enhances the value of the Dodgers and, by extension, the rest of Major League Baseball.
Robert Landry is the design director of the Los Angeles Business Journal and a hopeless baseball fan.
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