The T.V. Deal and Guggenheim’s Equity: Might Mark Walter and Company Seek More Investors In The Dodgers?

New Dodger ownership under the Guggenheim Group took over the team in May of 2012. Now there’s speculation about how the group will be able to solidify its equity position in lieu of changes in the T.V. Deal (source of photo: Associated Press at http://binaryapi.ap.org/d1820942328440c2b89e0a9da1015795/512x.jpg)

When the Dodgers were purchased by the Guggenheim group for a record $2.15 billion plus half the rights to the Dodger Stadium land last May, fan optimism grew by leaps and bounds.  Dodger fans that had largely stayed away from the ballpark during the Frank McCourt era returned to the ball park in large numbers.  The team held onto first place throughout the first half of the season, generating a good amount of enthusiasm in the team.  Then when the team began to falter and fade in the pennant race, Stan Kasten and Ned Colletti went out and brought in Josh Beckett, Carl Crawford, Adrian Gonzalez and Nick Punto in a blockbuster trade with the Boston Red Sox.  Off-season signings of Hyun-Jin Ryu and Zack Greinke and a 5 year contract extension that could be worth up to and over $100 million with options and incentives for Andre Ethier blew up the Dodgers’ 2013 Opening Day Payroll to around $230 million.

Hopes were high at Dodger Stadium, and a new T.V. deal with Time Warner that reportedly would guarantee the team $7 billion over 25 years as well as their own exclusive cable channel

However, a few financial shadows have begun to hang over the team.  Acording to an article in Forbes Magazine, the Dodgers have now had to scale back the T.V. deal with Time Warner by about a billion dollars over the duration of the contract. In mathematical terms, this is about the equivalent of $50 million a year, or one star player contract, especially given speculation that staff ace Clayton Kershaw could be earning a pay day in the range of $200 million over 7 years and possibly more when the two sides come together for contract negotiations at the end of the 2014 season. With several other players on the team already earning 8 figure per-year salaries on the team, the loss of $50 million worth of revenue in a given season might be the difference between Kershaw being locked in to the team long-term and another team possibly stealing the lefty rotation topper away from Los Angeles.  The article discusses that some of this would be offset by the collective bargaining agreement and the distribution of revenue through revenue sharing anyway.  Regardless, this is a significant financial blow over a 20 year period and may put Guggenheim in a position to take on more equity investors in the team.

Clayton Kershaw delivers one of his 92 pitches against the San Francisco Giants on Opening Day, April 1st, 2013.  Kershaw would go on to pitch a complete game shutout, giving up 4 hits, striking out 7, and hitting what would turn out to be the game winning home run in the 8th inning.
Clayton Kershaw delivers one of his 92 pitches against the San Francisco Giants on Opening Day, April 1st, 2013.  Could a glitch in the Dodgers’ TV Deal with Time Warner cause Kid K to seek employment elsewhere in 2015?  (Image taken by Eric Becker, April 1, 2013)

This may only be the beginning of Guggenheim’s financial question marks.  Speculation over the continued role of previous owner Frank McCourt in the future land use of Dodger Stadium and Chavez Ravine has begun to garner more attention.  McCourt, who realized a billion dollar windfall and an elimination of all his debts when he sold the team, still owns half the land, a share valued at the time of the sale at approximately $150 million which effectively made the price tag for the Dodgers $2.3 million, even higher than the $2.2 billion bid presented by Los Angeles-based businessman and ArmItal Sports Chairman and CEO Josh Macciello.

Former Dodger owner Frank McCourt may be gone from day-to-day club operations, but with his billion dollars, his share of the land that Dodger Stadium and its parking lot sit on, and continued ownership of the Los Angeles Dodgers, the cries for McCourt to “go back to Boston” have not been answered. (Image source: Los Angeles Times at http://www.trbimg.com/img-51af7b38/turbine/lat-mccourt-la0004777686-20111114/600)

Speaking of Frank McCourt, let’s recap some reality.  He’s now a billionaire, he owns half the land that Dodger Stadium sits on, and while he can’t develop any portion of it without approval of the Guggenheim group as it currently stands, they also cannot develop it without Frank McCourt potentially having input on what is built there and realizing a future windfall, either in the form of an additional payout that would likely exceed the $150 million valuation of the land, or a percentage of the proceeds of whatever gets built in what is now the Dodger Stadium parking lot.

McCourt also still owns the Los Angeles Marathon and shows absolutely no intention to sell it.  Dodger fans who launched a boycott and even held organized protests in 2011 in an effort to drive McCourt away from the franchise appeared to have secured a victory when McCourt agreed to sell the team.  However, as the specter of McCourt continues to hover around Dodger Stadium and as fans continue to park on McCourt-owned land, and a new court order may cause for a release of Guggenheim and McCourt financial documents in regards to the sale by June 17th according to a Los Angeles Times article written by Bill Shaiken.  Making matters even worse, these documents drive speculation that McCourt may have gained more value from the sale than the $2.15 billion list price on the bid, which could make matters even muddier if McCourt’s ex-wife Jamie McCourt’s original $131 million divorce settlement gets thrown out and she once again becomes an ownership party to the Dodger Stadium land.

This may bring to fruition some or all of the points brought up by T.J. Simers in this Los Angeles Times article from April 10th of last year.  Simers mentioned that the title to 5 properties surrounding Dodger Stadium were to be put in McCourt’s name. “The properties, which appear to be a combination of parking lots and vacant lots, are located on Brooks Avenue, Boylston Street, Stadium Way and two on Lookout Drive.”

By all appearances, this would actually give Frank McCourt primary rights over five potentially strategic locations surrounding the ballpark, and not simply “half the land.”  How much permission does Frank McCourt actually need to utilize these properties to his advantage?  In what way does Guggenheim actually control these properties?  Perhaps more light will be shed on this deal on June 17th when Guggenheim releases more documentation regarding the sale.

Regardless of the situation with McCourt, the article regarding Guggenheim’s potential to need more equity and reminding us, once again, that the Dodgers were purchased with money that largely came from debts owed to insurance companies has to raise some eyebrows from Dodger fans who protested Frank McCourt’s ownership through boycotts and actual street demonstrations during the 2011 season. So significant was the movement that independent Los Angeles filmmaker Juan Diego Ramirez took to his camera and started filming the protests and going so far as to start interviewing Dodger fans and doing research into the situation that caused so many to act out.

In the event that Guggenheim hasn’t been fully forthcoming about their continued relationship with McCourt and other financial dealings, is it possible that the fan base may rise up again?  Mark Walter should certainly take heed of the potential reigniting of the fan movement, which echoed to City Hall itself which went so far as to endorse the idea of fan ownership of the team during the 2011 season.

Of course, fan ownership of the team would seem to be an unlikely course, particularly with well over a billion dollars potentially at stake.  So which L.A. area figures might be in line to bail out Guggenheim if they do, in fact, find themselves in need of a financial reprieve?

Patrick Soon-Shiong’s name seems to come up in nearly every conversation about a major property or entity in Los Angeles being for sale.  The Billionaire may have pockets deep enough to finance the Dodgers, and his 4.5% stake in the Los Angeles Lakers would indicate that Soon-Shiong may have an interest in acquiring a larger share of a sports franchise at some point.  However, Soon-Shiong’s stake was purchased from Magic Johnson, and despite this previous business relationship, Johnson looked elsewhere when he decided to attempt to become part of a team of investors to purchase the Dodgers while Soon-Shiong teamed up with Guggenheim rival Steven Cohen.  Interestingly enough, Cohen has since found himself involved in financial scandals of his own involving securities fraud and insider trading.  Given the similarities between Cohen’s issues and the current issues regarding insurance money with Guggenheim, Soon-Shiong’s affiliation with Cohen may be enough to cause more fan speculation about the richest man in the medical field.

Josh Macciello certainly cannot be discounted as a potential bidder on the Dodgers.  Despite speculation as to the source of his funds as he came seemingly out of nowhere to bid on the team, the reality is that Maciello had a lot of momentum amongst the fans during the bidding process and made himself highly visible. After his failure to advance his $2.2 billion initial bid past the first round of bidding, Macciello went on to put in an offer on the San Diego Padres, and has also expressed continued interest in purchasing a sports franchise via his old “Josh Macciello For Dodgers” Facebook page , now titled “Josh Macciello for Any Sports Franchise.” The page has gone dark since January 31st of this year, but one has to wonder if Macciello might once again make an appearance if the need for equity turns out to be real. A Gene Maddeus smear piece in L.A. Weekly shortly before the finalization of the bidding process put some hurt on Macciello’s reputation, but this piece by The Dodgers Beat (at the time still “Save The Dodgers”) goes into quite a bit of depth about Macciello’s background and links that would indicate that Macciello has, in fact, made the sort of economic splash that he claims. Further, this press release last year disputes and clarifies many issues in Maddeus’s article.

If Gene Maddeus’s description of Macciello is correct, then in all likelihood Macciello can be counted out. However, if Macciello’s press release is any indicator and if the Dodgers Beat article is any indicator, it would not be surprising to see Macciello step up once again and make a bid to own a part of the team.

If talks of the Dodgers using part of the parking lot to bring in an NFL team with a new stadium are true, then Tim Leiweke should not be counted out.  Leiweke, a large part of the movement to bring Farmers Field to Downtown Los Angeles while running things at AEG, stepped down earlier this year by what is called “a mutual agreement” while Phillip Anschutz took back primary day-to-day operations of AEG Entertainment and pulled it off the market.  With Leiweke now working with Maple Leaf Sports Entertainment and having amassed considerable wealth and influence through is work at AEG, it appears Leiweke may have both the leverage and the resources to purchase an equity stake or make an investment on behalf of MLSE on the Dodger Stadium land.  This would serve as a two-edged sword: Leiweke would get to build the NFL Stadium he wanted to build in Downtown Los Angeles, and he’d be doing so to the detriment of Anschutz, the ultimate slap in the face to his former business partner.

While publicly stating he would not want to “harm” AEG in any way, one has to wonder if Leiweke might team up with Guggenheim in a joint effort to bring the NFL back to Los Angeles while pulling the rug out from underneath Anschutz.

Could Tim Leiweke leverage his new role at Maple Leaf Sports Entertainment into a way back into the spotlight in Los Angeles? (Image source: L.A. Downtown News at http://bloximages.chicago2.vip.townnews.com/ladowntownnews.com/content/tncms/assets/v3/editorial/3/d7/3d7ec340-8e41-5912-863e-1be1203a6a3a/4ced6ea3a133a.image.jpg)

Another person to consider – and this is bound to give Dodger fans chills – is the specter of Frank McCourt returning to the fold with an equity investment.  Frank McCourt is now a billionaire, and even if ex-wife Jamie succeeds in not only having the initial divorce settlement thrown out but getting half the land that belongs to Frank in the deal along with half the money, Frank McCourt would likely have cash holdings still in the range of half a billion dollars and control of a substantial amount of property.  Given both his money and his continued control over assets around the ballpark, Frank McCourt could find himself having the last laugh at the fan protests that were a big part of driving him out of the owner’s box while pushing attendance down significantly.

Would the fans rise again if the now-wealthy Frank McCourt entered the fold?  It would be like one of those movies where you think you’ve killed the bad guy, only to have him suddenly spring back, badder and stronger than ever.

There are certainly plenty of other potential investors in the Dodgers, but these four names come strongly to mind, each for their own reasons.  Perhaps we will know more in about a week, when Guggenheim may find itself releasing several documents in regards of the sale of the team and the financial dealings it made with Frank McCourt.

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2 thoughts on “The T.V. Deal and Guggenheim’s Equity: Might Mark Walter and Company Seek More Investors In The Dodgers?

  1. Wow! I had no idea that the so called HUGE FUND had no money. If they need a billion they have my contact info. They know they could call me anytime and I would deliver. Just depends if they are willing to put folks who know the game of baseball in charge. EVERY move I said publicly not to do that would hurt this team has in fact hurt this team. And I already came up with a way to get them out of this hole. Now will they believe me or will they believe a free paper that makes its money from porn and massage on the back pages? Who knows. What I do know is I had the right bid to win. I had fan support. I told them many times to not do the trades they did because it would bury them. Let’s see how smart these men are. If they are smart they will try to reach out to me NOW!!!

    1. I have to agree Josh. We talked back in February 2012 at pretty great lengths when I met you at the blogger tourney and a lot of these moves have gone completely against your organizational philosophy. You talked about not just improving the fan experience and the ballpark, but supporting team chemistry. I’ve been seeing a lot of commentary about moves the team has made and someone pointed out that the only two guys on the team doing line sprints and significant warmups pre-game at the ballpark yesterday were Puig and Schumaker, while the entire Atlanta team was prepping, stretching, etc. Sure, it’s great to spend money to try to build a contender, but not if you bring in guys that appear to give up in June and can’t stay healthy.

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