- 04/15/2012, 10:48PM ET
M as in Mancy said 04/15, 10:48 PM
Frank McCourt???s conduct and finances turned the Dodgers into a laughingstock. But now that Magic's ownership group has paid 2.15B for the franchise, is all well in LaLa land?
I get worried every time an exorbitant number gets thrown out there. As of 2011, Forbes valued the franchise at 800M. 2009 and 2010 was 722M and 727M. From 2009-2011, team revenue hovered in the 245M range. Yet somehow they paid almost 4 times what the franchise was worth. All this evidence is to show they grossly overpaid and it can come back to bite the fans???
This year is as smooth as a Matt Kemp swing. However the ownership group will want to recoup their purchase price through other ways. Higher ticket prices, merchandise, concessions, parking fees? They could be pricing out the average fan... Cheaper free agents, smaller front office and coaching salaries? ...While putting out a cheaper product. They???ve said all the right things. But when a poor man buys a Corvette, he has to skimp on the extras. No LS7 engine, no leather seats, no sweet rims, no GPS???
I just hope in 3-5 years the fans don???t wake up in a stripped down Corvette. But that???s why he???s called Magic, right?
C-C-C said 04/15, 11:50 PM
Forbes "valuation" is meaningless. A business is worth whatever someone is willing to pay for it. There were multiple bids for the Dodgers driving up the selling price. Is it an obscene amount of money for a baseball team based on previous sales? Of course. But that has nothing to do with whether or not acquiring the team was a good move by the Magic group.
After the Yankees, the Dodgers are the most history rich franchise in baseball, a business where history is everything. We aren't talking about buying the Royals, here.
From a financial standpoint, this deal makes plenty of sense. Fox Sports and Time Warner have been getting into bidding wars over broadcast rights in the L.A. market and the Dodgers TV contract is about to expire.
TW just paid 5 billion for broadcast rights to the Lakers over the next 25 years. Assuming a similar TV deal for the Dodgers and $2bil was a steal. That deal would pay for the team in 10 years with the rest profit.
As for Magic, his share of the team is negligible. He put up little of the money himself. His participation is about image and will go a long way toward increasing revenues. It's can't lose for him.
M as in Mancy said 04/16, 01:25 AM
The debate is not about Guggenheim Financial (to be precise) getting a GREAT deal, it's about the fans. (sob)
I like your financial line of logic. If you were running Wall Street we'd all be rich! Empirical evaluation is useless; just buy it, and then sell it onto the next sucker, right? Forbes bases their valuation on debt, revenue, operating income, market, player expenses, etc, etc. If Guggenheim's cost is absorbed by cable's deal, then cable will pass it on thru higher rates from local businesses and FANS. I don't understand the black box calculus, but I certainly don't think real value is irrelevant when considering that costs are ALWAYS born at the bottom level. (fans, sob)
If the buyer is smart, and not thinking with their fanhood (sob), they would be trying to narrow that discrepancy btw actual value and purchase value. The big TV deals are CONTINGENT on perceived future value. If in the future they want to renegotiate a new TV deal, a new stadium, franchise sale, or Guggenheim Financial goes under, it would be wise to increase real value. Soon. 3-5 years. At the fans' expense.
Number typo. Not 4x, 3x the perceived value. Could have called me out.
C-C-C said 04/16, 08:32 AM
I didn't call you out because perceived value is meaningless as it has no relation to actual value. Perceived value only factors in what is, it doesn't factor in what will soon be...a very very large TV contract. THAT is the 'real value' of the team
The argument that fans will have to pay more via gate/parking/etc doesn't fly. If they price themselves out the market they will hit the law of diminishing returns. It's never as simple as raising prices to recoup costs as that results in fewer customers, hence less revenue. All teams maximize these things based on their market, not purchase price
The argument that fans will have to pay more via higher cable rates as a result of this deal also fails quickly. The team is going to get a max deal regardless of who owns it or how much was paid. This deal will not affect cable prices more than any other would
We've already established that the purchase price will be borne by the new TV deal, hence no need to cut player payroll resulting in an inferior product. Quite the opposite, they are likely to INCREASE payroll to make the product more attractive thereby increasing attendance and maximizing that parking
M as in Mancy said 04/16, 07:47 PM
Look man, you have relevant evidence that supports powerful, logical arguments. But???
Value is ALWAYS based upon set standards and metrics. That's why there's Kelly Blue Book for cars, why employers review resumes, why financial analysts crunch P/E ratios. Someone wise will decline the "emotion fee" and pay based on empirical data. Cable knows this, Guggy knows this and thus increase revenue (ticket prices, merchandise, concessions, etc) and cut costs (payroll, amenities, etc) to try to make the Dodgers truly worth 2.15B. BTW, Fox owned Dodgers before McCourt. They wanted out, sold and know the true value. Position of strength. Really think they'll overpay?
Every entity is propped up by the consumer, investor, taxpayer, or fan. Money doesn't grow on trees. Guggy bets their investment becomes self-sustaining profit. They can't bleed Chicago investment funds to prop up a baseball team in LA without investor approval. That's called fraud. And the TV deal might be paid thru commercials every 2 mins and cable bills the size of a car payment. Guess who foots the bill? The blue collar local who knows value and can't take his kids to a game anymore. Cinderella strikes midnight
C-C-C said 04/16, 11:46 PM
Value is ALWAYS based upon set standards and metrics.
If this were true, then valuing stocks would be simple. Just figure a fair P/E ratio and apply it equally to all. There are many more factors to consider.
Investments can be worth more or less than the sum of it's parts. Right now, if you sold off the Dodgers at a garage sale piece by piece it wouldn't bring anywhere close to the 2bil they cost to acquire. But when you factor in the likely value of the upcoming TV deal the Dodgers 'true worth' is going to skyrocket.
This is akin to buying a house for $200k on a 25 year mortgage then having someone pay you $500k to put advertising on the front lawn. Even if you overpaid for the house initially, in the end you got a steal.
MLB is capitalism in it's purest form. The team CAN'T gouge fans or cut payroll. Any attempt to do so lowers revenues. It's basic supply and demand. Ask the Yankees...even THEY had to adjust ticket prices downward in the new house when it was half empty initially. Cable CAN'T increase prices above what people are willing to pay or satellite sales will skyrocket. The market, not the sale price, dictates these things.
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