We find ourselves in the middle of one of the greatest wealth transfer periods of all time. Those with wealth must decide whether they want to make transfers, and if they do, they must decide how much, to whom, when and in what structure?
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Darren Rovell, host of SportsBiz on CNBC, tweeted that he had spoken to two bankers familiar with the Dodgers situation, and that they pegged their asset value “closer to $680M,” which makes sense considering that the recent sale of the Chicago Cubs, Wrigley Field, 20% ownership of Comcast SportsNet and land surrounding Wrigley Field was recently sold to Tom Ricketts for $900 million (of which, Forbes pegged the value of the Chicago Cubs around $642 million).
What does the Dodgers’ extremely high valuation mean to fans? Well, assuming some of the new owners actually want to make money off of their investment, this should mean that parking, concessions and tickets will all go way up.
So why was the winning bid for the Dodgers so high in comparison to the franchise’s actual value? One of the driving reasons may be the chance for the Dodgers to start their own specialized sports network, similarly to how the Yankees created the YES Network. The reason why that may not be completely viable? The Dodgers haven’t won a World Series since 1988. Since McCourt took ownership in 2004, the team’s winning percentage has dipped from 53.7% to 51.8%, and the team has been in only 23 playoff games over that period. Compared to the Bronx Bombers, who have had 53 playoff appearances over that same period and won four World Series titles since 1988, those numbers seem paltry.
According to a Harris Poll released in July of 2011, the Dodgers are tied for fifth-most popular MLB team with New York’s other MLB team, the Mets. The Yankees, Red Sox, Braves and Cubs come in at first through fourth, respectively.
So, to reiterate facts, the Dodgers are neither an extremely popular franchise, nor have they put a quality product on the field in recent years. McCourt, through sheer incompetence and arrogance somehow just became the most successful owner in MLB history, earning a 26% annualized return on his $371 million initial investment, which was almost entirely leveraged.
By using the franchise as his family’s own personal piggy bank, getting into an unbelievably messy divorce, and taking on more debt than some countries, he forced his franchise into a bankruptcy auction, where he was allowed to set the terms for the sales, solicit bidders, and drive the price up astronomically.
Fans of the Dodgers should be happy to have McCourt gone, he did them no favors and gradually drove the franchise into the irrelevancy, but Magic & Co. have to prove they can put a winning product on the field, or this inflated purchase price will means fans will be hemorrhaging major cash for a mediocre product.
Hey, at least it won’t be the first time someone’s overpaid for something in L.A.