How much is that baseball team in the window?By
Magic Johnson and a group of investors sent shockwaves through baseball on Monday when Frank McCourt revealed the group’s $2 billion bid for the Los Angeles Dodgers. Coupled with a $150 million deal for the parking lots that surround Dodger Stadium in Chavez Ravine, it was a monstrous deal that not only dwarfed the next highest bid but set a new mark in professional sports. Of course, it left many in New York wondering for just how much the Yanks could be sold.
The Yankees brass, of course, noticed the sale. How could they not, after all, considering they control the most valuable franchise in baseball right now? “It is an incredible price. If they are worth $2 billion, one can only imagine how high the Yankees’ value is,” Randy Levine said to ESPN New York.
Hal Steinbrenner seemingly spoke in awe of the big figures as well. “It’s certainly a big price. It’s interesting,” he said. “No, I haven’t thought about how this would impact it. We’ll have to see what happens with that sale. It’s a big number.”
It’s a big number indeed, and the Steinbrenners insist they aren’t looking to sell the Yankees. They’re quite content to hold onto their inheritance and allow the team to continue to thrive. Between the YES Network and the team itself, the owners are sitting pretty. We can still play that “what if” game though. What if the Yankees were put up for sale?
As a starting point, we have the recent Forbes valuations. With little explanation, the business mag pegged the Yanks’ value at $1.85 billion, tops in the game. The Dodgers were second at $1.4 billion. A back-of-the-napkin calculation would lead one to believe the Yanks could sell then for $2.775 billion.
Yet, as Richard Sandomir writes in The Times today, not all things are equal. The Dodgers’ deal is a creature of good circumstance and geography that came in $650 million above the next highest bidder. Essentially Magic Johnson and his co-investors — who are going to pay in cash — were bidding against themselves. Sandomir summarizes:
Johnson and Walter are betting on reviving the Dodgers’ fortunes now that the Frank McCourt era is over. More important, the sale price is enormous because the buyers anticipate a huge windfall from a new cable TV deal that would go into effect after the 2013 season. [Investor Mark] Walter said: “It will be substantial.”
It will have to be. To get the most money, the Dodgers will probably be the centerpiece of a regional sports channel that will funnel enormous annual rights fees to the team and amass monthly subscriber fees from the cable, satellite and telephone companies that will carry its games.
A bevy of media companies are likely to line up to give the Dodgers the most lucrative deal, which could couple ownership of a channel with huge yearly rights payments. Time Warner Cable, for instance, is creating two networks, one in English, one in Spanish, with Johnson’s old team, the Los Angeles Lakers, at their core. The Lakers are expected to ultimately realize huge profits from the deal.
It’s worth noting as well that the Dodgers’ deal involved a significant chunk of change for the rights to revenue from the vast acres of parking lots that surround Chavez Ravine. The Yankees would enjoy no such luxury. The city controls the parking lots around Yankee Stadium, and in fact, the city controls the land underneath the stadium as well. No one wants to park in the transit-rich South Bronx, and the city would raise hell if it tried to sell the former park land. Ultimately, then, TV is king.
In contrast to the recently-acquired Cubs, who carried a purchase price of $845 million, the Dodgers’ next owners will benefit tremendously from a brand new TV deal, and that’s a luxury the Yankees also do not have right now. Their rights lie with the YES Network, in which, according to reports, the Yanks have a 30 percent share. Now, that alone could be worth around $1-$1.5 billion, but how to structure such a sale? To maximize their take, the Steinbrenners would have to sell the entire club and their YES share. Even without the fortuitous circumstances in Los Angeles, a Yankee sale involving the team and the TV network could reach $3 or even $4 billion.
At that point, questions begin to shift from “how much” to “who.” Who would spend $3 billion for a baseball franchise and a broadcast TV station that has no chance of controlling much of its Internet broadcast rights? (Those rights belong to MLB Advanced Media and will for the foreseeable future.) It may be a moot point as the Steinbrenners continue to say the club is not for sale, but one thing is certain: Baseball franchise values are on the rise.
On paper, the rich are getting richer, and so too are the smaller market teams. The Dodgers’ sale is a tide that can lift all boats. Frank McCourt, who invested just over $400 million in the Dodgers, walks away a very wealthy man. The Boss, on the other hand, spent just $10 million on the Yanks 40 years ago, and even as his children vow to keep the team, that allure of the cash must be strong indeed.