For Potential Dodger Owners, How Much Is Too Much?

Somewhat lost in all the ownership hoopla of the last few days was this interesting tidbit buried in Bill Shaikin’s Saturday Los Angeles Times story on Stanley Gold & the family of the late Roy Disney potentially teaming up to bid on the team:

With Fox Sports and the Dodgers still in litigation, a mediator recently broached the idea of Frank McCourt selling the team to Fox so that McCourt could get a guaranteed sale price and Fox could secure the Dodgers’ long-term television rights, according to a person familiar with the talks.

Under that plan, Fox then would have facilitated a sale to another party, but the trial balloon was shot down over the potential price McCourt might accept to forgo an auction. According to the person familiar with the talks, Fox proposed a price in the range of $1.2 billion, McCourt proposed a price in the range of $2 billion, and neither side expressed much interest in meeting halfway.

Dodgers spokesman Robert Siegfried and Fox spokesman Chris Bellitti each declined to comment on the mediation. Bellitti, however, wanted to make one point clear on behalf of Fox.

“The company has no interest in ownership of the Dodgers,” he said.

Let’s say that this is true, and while we can’t know for sure that it is, Shaikin’s reporting has rarely been wrong throughout this whole ugly saga. If this is information is accurate, it could be an early indication that the sale price of the team might be quite a bit higher than any of us had originally thought; for some time, the prevailing public opinion (at least in my view) has been that the team and stadium could fetch between $1-1.2b. Now it seems that McCourt may have turned his nose up at a real, not just perceived, offer of $1.2b; as Shaikin notes earlier in the story, McCourt may think somewhere around $1.6b is doable. ESPN’s Buster Olney looked at the heavyweights involved and went further, suggesting that the sale price could be somewhere close to two billion dollars.

If that sounds like an obscene amount of money, well, it is. If you had two billion dollars in singles and stretched them end-to-end from here to the moon… you’d still have an absolutely ludicrous amount of money despite having wasted so much of it an unnecessary example of your wealth. To date, the largest sale price in MLB history is the $845m the Cubs (along with Wrigley Field) were purchased for in 2009, and that also included a 25% piece of Comcast SportsNet Chicago. I think you can certainly wonder if the Dodgers are really worth potentially twice as much as the Cubs went for, because while there’s no doubt that the Dodgers are a crown jewel of Major League Baseball, it’s not like the Cubs are exactly the Charleston Chiefs. I get that there’s Hollywood money and the appeal of looking like a savior to rescue a devastated franchise, but even so, that seems like an enormous leap in franchise valuation.

On its own, that doesn’t really bother me so much, other than the fact that McCourt probably gets to walk away from this being richer than ever. If that’s the price the market will pay, then that’s what it will pay, especially when the latest potential bidder, Thomas Barrack, can only be described as “cartoonishly rich”. (No, really, just look at the final section of his Wikipedia page: “As of September 2011, he is the 833rd richest person in the world, and the 375th richest in the United States, with an estimated wealth of US$ 1.1. billion. He owns a Gulfstream IV and lives on a 1,200-acre mountain ranch near Santa Barbara, California. In the summer, he lives in a castle in the South of France.” A castle!)

But I think it’s worth asking, what comes next after that kind of outlay? It’s not as though you purchase the team and then that’s the last check you ever have to write, especially if you want to win fans back with increased player payroll and stadium upgrades. That’s a whole lot of money, enough that even Thomas Barrack – shown at right – couldn’t afford to do it on his own. In order to make this work, the new owner is going to have to come up with the funding needed to purchase the team plus likely have dozens or hundreds of millions available beyond that. And most importantly, we’re going to need to make sure that this deal isn’t over-leveraged on debt, which was the mistake that got Frank McCourt into all this trouble in the first place. Obviously, a big appeal of buying the team is expecting the riches you’ll get from a new television contract, though that’s not necessarily an immediate income.

There’s always a bright side, and in this case, it’s a significant one: it’s hard to believe that a new owner would spend all this money to get the club and squander all that goodwill by not spending to improve the team. While it’s all but certainly not going to come in time to get Prince Fielder, we could see that influx coming by the July trade deadline or at the latest by next winter’s free agent market. It’s just another info point we have to keep in mind when observing the bidding process; simply being “a billionaire” might not be enough.