McCourt Sets Chilling Stage for Future Franchise Sales
Baseball fans everywhere had to be ecstatic- or at least interested- when Frank McCourt finally let go of the Los Angeles Dodgers (or as he must have called it, the expense account) to a group led by NBA star Magic Johnson. It is important to note that while Magic’s face was at the front of this push, it was more of a PR move (and a brilliant one at that) than a representation of where most of the money is coming from. Mark Walter, CEO of Guggenheim partners, will be the controlling owner and will be footing the bill as he looks to recoup that record-shattering $2 billion price tag for one of the nation’s most storied baseball franchises.
It left me wondering whether Peter Angelos would ever do us a favor and be careless enough with the team’s finances to be forced to sell. There is one big piece that is missing in the celebration, however. One that may very well play a role in any future financial mismanagement by team owners. At the end of the day, Frank McCourt won and baseball fans lost.
No one is happier right now than Major League Baseball, who gets to see their product as the highest price ever paid for a sports franchise– anywhere. While football may be dominant to American fans, baseball just set a new standard for the cost of doing business in their elite 30-member club. After purchasing the team for $430 million in 2004, McCourt racked up almost $600 million in debt and lost another $131 million in his divorce settlement with Jamie McCourt and still winds up doubling his investment with a $860 million profit. Sports might be the only business in the world where one can purchase a company (or in this case a licensed subsidiary), drive it into the ground, and sell it for far more than you purchased it. The brand is simply that strong.
Given Angelos’ clawing and scratching for MASN TV revenue over the entire Maryland-DC area and his conservative spending habits, it is beyond doubtful that he would ever sell the Orioles without profiting handsomely. He and his representatives will surely seek another earth-shattering deal, despite the fact that Baltimore, while it has a loyal fan base (everyone has their limits however) and higher potential revenue than most markets of the same size and affluence (as evidenced by past payrolls when fans were in attendance), is no where near the brand power of the Dodgers. It didn’t matter that the Dodgers’ finances and reputation with their local fans were in the gutter either after a vicious attack outside the stadium and horrible security, either.
Frank McCourt knew he had to sell… eventually. And that was the key. He stalled as long as he possibly could and forced his bidders to come with something that would blow him away- and in doing so giving him a de facto reward for all of his irresponsible actions. Any owner now knows that if you tie up Major League Baseball long enough, you will make a profit and it doesn’t matter what you do to your team in the meantime. Higher franchise costs are great for the league and great for the owners, but only because it helps their bottom line when they choose to sell.
Fans of the Royals, Orioles, Pirates, and other franchises suffering from incompetent or ambivalent ownership just saw the odds of their teams getting rescued get a little longer as the cost of anteing into this game just got a lot higher. This is a great time to be a Dodgers fan, and for their sake I hope that they can finally get a return on the talent they have in stock and fine personnel folks they have running that team. They were the only ones in the room interested in winning on the field. For the rest of the fans of struggling organizations, they will just have to wait a little longer.