New Dodger owners: What are their plans for Dodger Stadium?

First off, let’s set the headlines straight: Magic Johnson is not buying the Los Angeles Dodgers. Rather, a group of businessmen, including investment services firm Guggenheim Partners CEO Mark Walter, longtime baseball exec Stan Kasten, and, yes, Johnson, have agreed to plunk down $2 billion to buy the Dodgers and Dodger Stadium out of current owner Frank McCourt’s bankruptcy proceedings.

Aside from the issue of why the Dodgers are suddenly worth $2 billion — something that Forbes magazine, which had the franchise valued at $1.4 billion, neatly avoided discussing, though it did give some clues in its recent article on soaring TV rights fees (hint: sports are the one remaining thing people will pay to watch live) — the immediate question here is what this will mean for Dodger Stadium, which has been the subject of various renovation and replacement rumors over the past few years. McCourt will still own much of the surrounding parking lots, which would seem to rule out the kind of major area redevelopment that he’d talked about a while back. Likewise, the notion of building a new baseball stadium downtown and putting a football stadium at Chavez Ravine probably won’t be happening given that AEG isn’t involved in the purchase (not that AEG’s football plans are exactly going anywhere at the moment, anyway).

That leaves … Orel Hershiser’s drawings? We’ll probably hear more from the Guggenheim group eventually, but you have to figure their first priority is rebuilding the team on the field and fan support, both of which were left in a shambles by the McCourt years. The fate of baseball’s third-oldest surviving stadium will have to wait a bit.


22 comments on “New Dodger owners: What are their plans for Dodger Stadium?

  1. I don’t understand the economics of this sale at all unless the team was wildly undervalued in 2004? And the Cubs just sold for less than a billion?

    I don’t understand and I work with money all day.

  2. whoa. had not seen the “Hershiser Plan”. Tiger Stadium right field in right field? All for it. they just need to put a big old light stanchion on it.

    oof.

  3. These idiots are basically going to make the fans pay for this deal through the cable fees. What a scam. I can live without sports channels if they want to charge people so much for it. This is what happens when billionaires and dumb rich people lose their mind.

  4. I think the issue isn’t whether people can live without sports channels, but whether people can live without sports channels as well as they can live without sitcoms. Ad money has to go somewhere, and right now sports is the only thing with sizable viewer numbers.

    I do wonder how far they can push cable rights fees, though. There has to be a point of diminishing returns eventually.

  5. Josh, I think it comes down to it having been an auction. The groups were played against each other bidding until one group won. Their value probably is more in the 1.4 billion range despite the sale price.

  6. Neil, I imagine the Dodgers have probably gone past that point. The teams and the broadcasters seem to just pick a high number and agree with it, and it’s disgusting.

    Also, remember, companies that supply the ad money are also passing the costs onto their customers with their products in stores. Therefore, if a company feels they must advertise during the Super Bowl, they will pay to advertise during the Super Bowl. Honestly and truly, do Super Bowl ads make anyone go out and but a product? These companies are just as irresponsible as the leagues. Consumers will figure it out soon, though.

  7. Wait, people will overpay by $600 million so long as it’s an auction? Clearly I’ve been going about my eBay sales all wrong…

  8. Is it that an actual free market views sports teams are worth a lot more than we previously thought? Aren’t most of these purchases largely controlled by the leagues themselves, who restrict who they deem qualified to bid, and thus greatly reduce the amount of available buyers? For example, hasn’t baseball essentially told someone like Mark Cuban, “sorry, not welcome here.” And hasn’t MLB awarded lower-bidding owners teams before on reasons suspected to be more related to who Bud Selig’s buddies are? I really wonder whether the fact that this process has been overseen by a federal bankruptcy judge means that such cronyism wouldn’t be tolerated. I can’t imagine a judge singing off a purchase for less money just because Bud owes that owner a favor.

    As for the Dodgers themselves. I’m a lifelong Dodger fan, and I bailed on them in 2004, swearing not to return as a “real fan” until McCourt was gone. So I (and I believe many, many others) am shocked that he will be allowed to have any part of the Dodgers going forward. He really needs to be completely severed from major league baseball forever.

    Second, I’m going to try to ignore the fact that despite everything he did to devalue the franchise in every way possible, he’s still going to make money in the end.

  9. Neil, I’ve sold plenty of crap on eBay and the bidders have overpaid for many of my items. Some of them ridiculously, not unlike the Dodgers. Auctions are blind emotional capitalism at its worst.

  10. Roger C.

    There is a reason why CBS will likely get $3.5 million for the average Super Bowl ad next season. The NFL is the nation’s most popular sport. Advertisers will spend millions not only to appear during the game, but they will also spend millions to produce and promote the ad.

    For example, lets say that Coca-Cola plans to radically change their formula to cut out Corn syrup and replace it with beet sugar from Brazil. They could build a campaign and create the actual ad to air during the game.

  11. @ Neil – I got out of the cable game in 2000 when I got sick of wasting hundreds of dollars a year on a bunch of channels I didn’t even watch – and I despised ESPN & its programming. I don’t need to see all 162 games of my team & 70+ free-TV games a year is more than enough, plus all games are on radio for free. The digital transition on antenna over the-sometimes-fuzzy analog signal made it a lock that I would never miss cable TV. It’s easy to show fiscal restraint, it’s just the vast majority of people don’t do it.

    @ Dan – your tiff would have merit if the “buy it now” with a price you set option didn’t exist. And I’m sure you had no problem taking too much money from bidders. Capitalism is not the problem.

  12. Jessy S., my point was, in order to pay those advertising fees that will come about as a result of that ridiculous deal, the companies will have to pass the costs onto the consumer!!! Most of these companies have no business advertising either; they do so only for egotistical reasons. That’s why people pay so much for Nike’s, and nothing for say, Avia’s. Nike thinks they have to pay a bunch of jocks millions a year to be successful. There’s nothing special about their shoes. I guess it’s working, but they’re basically just like Apple in that they convince their customers that they are better than their rivals when they really aren’t.

    BTW, Jessy, it’s rare for Coke to ever successfully launch a product through an ad campaign. People like Coke, period. Any other product they make, people like because they try it out at the convenience store. Mexican Coke only got popular through word of mouth. There was no major ad campaign! What about Facebook? They’ve never had TV ads, and they’re wildly successful. Google never had ads for their search engine.

  13. No to Orel’s Dodger Stadium concept – the stadium itself is not the problem – and not because it only gets used from innings 3 through 7. A generously large population base & winning baseball will take care of the rest. Had they gotten this done sooner they could have landed Pujols or Fielder.

  14. Some seriously “interesting” theories about economics and advertising being thrown around here…

    “Is it that an actual free market views sports teams are worth a lot more than we previously thought? Aren’t most of these purchases largely controlled by the leagues themselves, who restrict who they deem qualified to bid, and thus greatly reduce the amount of available buyers?”

    Important point. You really can’t compare previously paid prices without taking into account the fact that they’re usually “insider” deals where the price is set without the benefit of an open auction (not that this was a truly open auction, but closer to that than usual). After seeing the recent TV deal numbers, the price doesn’t seem that ridiculous. Even a semi-auction reflects the true value more closely than the way franchise sales are usually conducted.

    “These idiots are basically going to make the fans pay for this deal through the cable fees.”

    Don’t know about the “idiots” part, but otherwise true. Considering their semi-monopolistic position, cable companies should be forced to offer “a la carte” menus. Deals like this will make that much less likely to happen. You try pushing that concept when your opponents are Comcast, Verizon, MLB, NFL, NBA…

    At least TV viewers do have some options (unlike tax payers), although baseball on over-the-air TV is going/gone in many cities. If you don’t have an allegiance to your local team(s), MLB.TV is a reasonably priced option.

    “…sports are the one remaining thing people will pay to watch live…”

    An important piece of what the RSNs are willing to pay for rights. I DVR everything – except sports. Live sports are just about the only time they successfully get me to view ads. That’s got to make advertising on games a whole lot more valuable than advertising on “House”.

    I have to admit that I don’t know all the facts about how badly McCourt ran the Dodgers, but it’s interesting to see all the comments around the web about his involvement in the $0.15B part of the deal. Unless I read some false information, he’s just a part of a group which also includes Magic.

    In the long run maybe it’ll turn out that they’ve paid too much. But given the history of sports franchises, probably not. In any case, nobody is putting up $2B+ in cash and debt in a “blind, emotional” way.

  15. Deals like this will make that much less likely to happen. You try pushing that concept when your opponents are Comcast, Verizon, MLB, NFL, NBA…

    Why would Verizon (or any other pipe owner) be against Ala Carte? I think we are a few years away from a big knock down fight in DC with the Leagues and EPSN on one side and the cable and sat companies on the other.

    Comcast being both a content provider and a service provider can’t lose.

  16. Roger C.

    My point was pretty much the same as yours. I mention the Super Bowl which is the biggest event of the year when it comes to television save for Olympic events such as the Beijing Opening Ceremony.

    I don’t know how much television you watch, but Coke is also a big advertiser. I wouldn’t put it past them to launch the healthier brand of Coke during the first quarter of the Super Bowl. Yes a lot of the stuff that is advertised will be costing more, but people tend to gravitate toward their sport heroes. As a result, the average person will want to try something that is endorsed by their favorite sports star.

    Example, some people will try a restaurant because it is endorsed by future NBA Finals MVP Derrick Rose while others spend hundreds on shoes because Michael Jordan was the best player in the world.

  17. After the initial shock wore off… I checked some of the sports business boards and sites.

    I haven’t found a single reputable SB consultant or writer who believes there is any way that the new owners can make a profit on this deal.

    Yes, it’s an iconic franchise. And yes, it’s been badly run for nearly a decade. But to put things in perspective, you’d have to earn $156m in profit on operations to earn a modest rate of return on this investment (or pay the debt service in the event the purchase is heavily financed, which I understand it is not).

    The total revenue of a median (Seattle, #15) MLB team last year was $204m, according to Forbes.
    The Angels revenue was $222m, with an operating income of $12m. The arch rival Giants total revenue was $230m. Their OI was $30m.

    At the thick end of the wedge, the Yankees had $427m in total revenue and a $26m OI. The Red Sox and Dodgers were $272m/-$1m and $246m/$33m respectively, in 2nd/3rd place.

    In other words, just to earn 4% ROI (or debt service cover) on this purchase, the new owners will have to increase net earnings by nearly 500%.

    I am sure cable fees and everything else associated with the club will go up. But the Dodgers will have to more than match the Yankees in total revenue (and not spend any more on the team itself) to reach that point.

    I think that’s unlikely, even with a $3Bn tv contract.

    Maybe the rumours about the old oil wells O’Malley had capped before Chavez Ravine was levelled to build the stadium were true… Does the “Johnson group” own the mineral rights?

  18. “Why would Verizon (or any other pipe owner) be against Ala Carte?”

    Because not many semi-monopolies are in favor of giving their customers the option of paying less? In a perfect world perhaps they’d be charging customers a flat access fee and passing along rights fees without modification. But I’m sure they charge a little more for every channel you get, making more profit per “Gold” tier subscriber than per “Silver” tier subscriber. If the pipe owners were in favor of a la carte, it would already be available. Nothing to stop them from implementing it. The only folks pushing a la carte are consumer rights organizations.

  19. Interesting read John Bladen. You have just given the Los Angeles Dodgers a heavy reason to move from Dodger Stadium. I can see an argument where the Dodgers see Frank McCourt holding the bag while opening a brand new ballpark near Santa Monica Pier. Seriously though, I am sure that Jamie would have something to say about his upcoming payday.

    BTW, there is no attacking on this site by me. When it comes down to it, who in their right mind would allow a person such as Frank McCourt to profit from the Dodgers long term. Of course that is only if the sale goes through.

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