Mar
29

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.

Categories : Analysis

28 Comments»

  1. Guest says:

    It must be quite something for Hal and Hank to know they are sitting on such a huge lottery ticket. I mean, they are VERY rich already. But if they sell, they become Warren Buffet rich.

    I don’t think I could ever see George selling. The Yankees were at the core of his self-image by the end. But Hal…he seems like a pragmatist who enjoys the Yankees, but the pinstripes aren’t necessarily coursing through his veins.

    I think he convinces Hank to sell once it stops being fun for him. Given the success and stability the Yanks have had in recent years, lets hope it never stops being fun for Hal.

    • Alkaline says:

      It would be an interesting scenario. I mean, Steinbrenner is synonymous with the Evil Empire/Yankees at this point. Can anyone imagine the Yanks without them at this point?

    • Ted Nelson says:

      Buffet’s net worth is reportedly $39 billion…

    • Bryan__from NZ says:

      Even without looking at the numbers, the Dodgers salely would likely be an overpay, unless Magic is going to leverage his LA cache and get his own TV network, then maybe go into partnership with the Lakers for content (he is a minority owner of the Lakers).

      That TV network would be a lot of fun, and surely worth more than YES network.

      • raul says:

        Magic sold his stake in the lakers to Dr. Shoon Shiong of Los Angeles a while ago to have the cash to invest his share in the Dodgers.

  2. Jack in Box says:

    You mean 400 million.

  3. Mykey says:

    Is it weird that I really like the Dodgers? Long time Yankee fan, yadda yadda, but I’ll pretty much always root for the Dodgers when they’re not playing the Yanks once in like 8 blue moons.

    • Mike Axisa says:

      The Dodgers were my second team last year. Watched the Yankees at 7, then the Dodgers late game afterward while writing the RAB recap. Hard not to watch with Vin Scully, Matt Kemp, and Clayton Kershaw.

    • Will (the other one) says:

      A generation ago the answer probably would’ve been “yes,” but these days I don’t think it’s anything strange. I’m not a die-hard Dodger fan, but I definitely consider them my NL team, and a big part of that has to do with their history and tradition.

  4. steve s says:

    I think the boys would have sold already if it weren’t for that quirky estate tax exemption that was in effect the year George died. It’s all about Hal and I agree with Guest above that it’s mostly business for Hal rather than a case of the Pinstripes flowing in his veins. I give him the length of Arod’s contract to sell the team since at that time it will be a clean break from the run the team has been on since 1996 or sooner if he feels that the Dodger price was inflated which may mean the window for the Yankee price to be postively impacted by the Dodger sale will not be around forever. As to who will purchase who knows who the hotshot billionaire will be in a few years but there is little doubt to me that Mr. Jeter will be the face of the purchasing group as well as a substantial investor.

  5. Januz says:

    One big point on the the Arod Contract, it is actually not as penal as one might think, because sports teams are allowed to depreciate players (Like what happens with equipment and cars) due to decreasing productivity value. In addition, the Yankees are also able to find offsets for that contract, by getting rid of bad contracts like Burnett’s, to be replaced with a more cost effective alternative (Such as Banuelos in 2013 & 2014). The bigger problem is the $60m of annual debt service on the new Yankee Stadium. If they start to have Citi Field type attendance, then they may find that number to be difficult to overcome (Which is why they constantly need to field a competitive club). We saw this concept with the Mets in the off season, where after a bad season and worse attendance, they decreased payroll by $50m. Finally, if they are able to get the payroll under $189m by 2014, it increases the odds of a sale, because they can save $$$$, which it can be put towards the debt payments on the Stadium. That will make the Yankees an even better investment for a prospective buyer.

  6. Andy In Sunny Daytona says:

    It’s kind of sad that the Magic Team paid $2.15B and still do not own all of Chavez Ravine. Why would they allow McCourt to have half the parking when they outbid the 2nd place team by over $600M?

    • CS Yankee says:

      Agreed, it makes no sense.

      McCourt is evil, but a genius nontheless. Puts a team on MLB’s credit card, improves his living standard, the Ex’s settlement is paid by the new buyer, he keeps half the dirt, and walks with what…one-billion dollars!

      Un-Freakin-real!

  7. Robinson Tilapia says:

    $2 billion……in cash. If there ever was a proper use for the “SMH” abbreviation, this is it.

  8. UYF1950 says:

    Allow me to make my version of the MasterCard commercial:

    Houston Astros Baseball Team $615MM
    Boston Red Sox Baseball Team $715MM
    Chicago Cubs Baseball Team $845MM
    LA Dodgers Baseball Team $ 2.15B
    NY Yankees Baseball Team: PRICELESS

    There are somethings money can’t buy, for everything else there’s the joy of knowing the Yankees won’t be sold.

  9. From everything I’ve read, the 2 billion dollar price tag that Magic Johnson and his group paid was, in simplest terms, stupid.

    They don’t own the parking lots, and the next highest bid was something like 1.1 or 1.2.

    Not to mention that after divorcing his wife and having to pay her half, getting a loan from FOX, filing for bankruptcy, and bleeding money, he was able to MAKE MONEY even after paying the debt to his wife.

  10. JMK says:

    Here’s a question – if the Yankees ever were sold, who would you want the new owner to be?

    Obvious answer is Mark Cuban. Any others you guys can think of?

  11. Vic says:

    Remind me to be terribly concerned about getting under the luxury tax threshold in ’14.

Leave a Reply

You may use <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong> in your comment.

If this is your first time commenting on River Ave. Blues, please review the RAB Commenter Guidelines. Login for commenting features. Register for RAB.