Magic Johnson Wins Auction for Los Angeles Dodgers

Post #1 » by **HMFFL** » Wed Mar 28, 2012 3:24 am

Magic Johnson Wins Auction for Los Angeles Dodgers

Basketball legend Magic Johnson led a group that won an auction for the Los Angeles Dodgers baseball team Tuesday night, marking the final chapter of in a soap-opera style saga for the legendary franchise, according to people involved in the process.

With a bid of $2 billion, Johnson and partners Peter Guber, Stan Kasten, Bobby Patton and Todd Boehly beat out a group of some of the wealthiest businessmen in the country to land a team that is one of Major League Baseball's flagship franchises. The sales figure shatters the previous record sales price for a U.S. sports franchise, Steve Ross's purchase of the Miami Dolphins for $1.1 billion three years ago.

But buying the Dodgers now comes with a unique opportunity to launch a potentially lucrative regional sports network in the country's second largest market, or sign a new local broadcast deal with the current broadcaster, News Corp.'s NWSA +0.30% Fox unit, which has already offered the team a 17-year extension valued at nearly $3 billion. (News Corp. also owns The Wall Street Journal).

http://online.wsj.com/article/SB1000142 ... 33906.html

Pharmcat · Post #2 » by **Pharmcat** » Wed Mar 28, 2012 3:26 am

congrats to Magic

1) sign a tv deal
2) hire smart GM, allow the team to build shrewdly: farm system, key FA signings, etc

Post #3 » by **dockingsched** » Wed Mar 28, 2012 6:36 am

magic is just a minority owner, similar to jay-z and the nets.

Post #4 » by **craig01** » Wed Mar 28, 2012 8:52 pm

That was a lot of money.....

Post #5 » by **dockingsched** » Wed Mar 28, 2012 9:39 pm

craig01 wrote:That was a lot of money.....

probably too much money

http://espn.go.com/los-angeles/mlb/stor ... s-no-sense

Economist: $2B for Dodgers 'makes no sense'

"It's the craziest deal ever; it makes no sense. That's why you saw so many groups drop out," said Mark Rosentraub, a University of Michigan sports management professor. "I don't get it. The numbers just don't work. It doesn't make business sense. Nobody came up with this number. Under the most favorable circumstance you broke $1.1 billion with $1.4 billion getting crazy. Now you're up in the $2 billion range, which is over $800 million more than what pencils out for a profitable investment for a baseball team. If making money doesn't count, this is a great move. But now we're into buying art and I can't value art. I can just run the model numbers and this doesn't make sense."

One of the biggest reasons the Dodgers sold for $2 billion is the regional sports network battle currently being waged in Los Angeles between Fox and Time Warner. Last June, commissioner Bud Selig rejected a proposed 20-year, $3 billion deal between the Dodgers and Fox. The decision, according to Dodgers owner Frank McCourt, pushed the team into bankruptcy and forced him to sell the team. Last December, the Angels agreed to a new deal with Fox worth at least $3 billion over 20 years, which helped the team land Albert Pujols and C.J. Wilson in free agency. Last year, the Lakers announced they would be leaving Fox to join Time Warner for a deal reportedly worth $5 billion over 25 years.

The Dodgers are expected to sign a similarly lucrative deal with Fox or Time Warner, or they could simply start their own regional sports network like the Yankees have with the YES Network. The problem economists have with the sale of the team being tied to the television contract is teams use their television deals as revenue to improve the team, not to offset the costs of overpaying for a franchise.

"One of the things that commissioner Selig was trying to avoid when he did not authorize the contract between McCourt and Fox was he thought McCourt would take the money and pocket it instead of using it to build the Dodgers," Zimbalist said. "That indirectly will happen anyway because McCourt is going to get his money and the new ownership will have to use a good chunk of the television money to pay off their asset purchase."

Unlike the Angels and Texas Rangers, which signed a similar 20-year, $3 billion deal with Fox, the Dodgers' new television deal won't simply be a nice influx of cash used to upgrade the roster. It will likely be used to pay for the team, pay for improvements to the stadium and pay for developing the land surrounding the stadium.

"If you take the Fox deal or try to start your own network that's going to eat down your capital cost and you've just lost a huge share of revenue," Rosentraub said. "That's a source of revenue that other teams depend on and that's the issue. The Texas Rangers are swimming in cash and the Angels are swimming in cash because they didn't have these huge capital costs and their TV income is coming into the general operating fund. Well, you're not going to get that with the Dodgers. Not only that but you have problems with the stadium and have to make a significant investment in improving it. That's something the Angels and Rangers don't have to do. Then you have the parking and land surrounding it where you now have a partner in McCourt, who is at best, well, unpredictable. Sounds like a great deal, doesn't it?"

Post #6 » by **craig01** » Wed Mar 28, 2012 11:16 pm

dockingsched wrote:
craig01 wrote:That was a lot of money.....

probably too much money

http://espn.go.com/los-angeles/mlb/stor ... s-no-sense

Economist: $2B for Dodgers 'makes no sense'

"It's the craziest deal ever; it makes no sense. That's why you saw so many groups drop out," said Mark Rosentraub, a University of Michigan sports management professor. "I don't get it. The numbers just don't work. It doesn't make business sense. Nobody came up with this number. Under the most favorable circumstance you broke $1.1 billion with $1.4 billion getting crazy. Now you're up in the $2 billion range, which is over $800 million more than what pencils out for a profitable investment for a baseball team. If making money doesn't count, this is a great move. But now we're into buying art and I can't value art. I can just run the model numbers and this doesn't make sense."

One of the biggest reasons the Dodgers sold for $2 billion is the regional sports network battle currently being waged in Los Angeles between Fox and Time Warner. Last June, commissioner Bud Selig rejected a proposed 20-year, $3 billion deal between the Dodgers and Fox. The decision, according to Dodgers owner Frank McCourt, pushed the team into bankruptcy and forced him to sell the team. Last December, the Angels agreed to a new deal with Fox worth at least $3 billion over 20 years, which helped the team land Albert Pujols and C.J. Wilson in free agency. Last year, the Lakers announced they would be leaving Fox to join Time Warner for a deal reportedly worth $5 billion over 25 years.

The Dodgers are expected to sign a similarly lucrative deal with Fox or Time Warner, or they could simply start their own regional sports network like the Yankees have with the YES Network. The problem economists have with the sale of the team being tied to the television contract is teams use their television deals as revenue to improve the team, not to offset the costs of overpaying for a franchise.

"One of the things that commissioner Selig was trying to avoid when he did not authorize the contract between McCourt and Fox was he thought McCourt would take the money and pocket it instead of using it to build the Dodgers," Zimbalist said. "That indirectly will happen anyway because McCourt is going to get his money and the new ownership will have to use a good chunk of the television money to pay off their asset purchase."

Unlike the Angels and Texas Rangers, which signed a similar 20-year, $3 billion deal with Fox, the Dodgers' new television deal won't simply be a nice influx of cash used to upgrade the roster. It will likely be used to pay for the team, pay for improvements to the stadium and pay for developing the land surrounding the stadium.

"If you take the Fox deal or try to start your own network that's going to eat down your capital cost and you've just lost a huge share of revenue," Rosentraub said. "That's a source of revenue that other teams depend on and that's the issue. The Texas Rangers are swimming in cash and the Angels are swimming in cash because they didn't have these huge capital costs and their TV income is coming into the general operating fund. Well, you're not going to get that with the Dodgers. Not only that but you have problems with the stadium and have to make a significant investment in improving it. That's something the Angels and Rangers don't have to do. Then you have the parking and land surrounding it where you now have a partner in McCourt, who is at best, well, unpredictable. Sounds like a great deal, doesn't it?"

Ouch......and an interesting perspective

Pharmcat · Post #7 » by **Pharmcat** » Thu Mar 29, 2012 12:51 am

i thought it was a good deal

but the fact they didnt get everything makes it a bad deal imo

cb4_89 · Post #8 » by **cb4_89** » Mon Apr 9, 2012 3:29 pm

Well they will use the TV deal to pocket some cash to get some of their purchase price back. Who cares if they don't spend a lot of money? The Jays are owned by Rogers and they are penny pinching bastards. There is not difference here. At least the Dodgers have potential to spend money in the future.