There are some very sophisticated business people bidding for the Los Angeles Dodgers. There's hedge fund mogul Stevie Cohen, who is worth $9 billion and there's Stan Kroenke, who already owns the the Denver Nuggets, the Colorado Avalanche, the St. Louis Rams and English soccer club Arsenal.
One clearly knows how to make money. The other knows how sports businesses work.
And yet, no one I talk to can figure out how there's money to be made if the Dodgers are sold for more than $1.3 billion, as has been speculated.
The team itself is worth about $800 million and the land is worth another $200 to $300 million. One insider who has seen the financials confirmed that valuation.
But former owner Frank McCourt is intent on keeping that land.
So where is the additional $500 to $700 million coming from? There's sponsorship money and ticket money and in good years, that could mean a $50 million swing in revenue.
Some will say it's in the TV money, but it's not there either. A deal with a network would yield about $150 million a year, but if the Dodgers start a regional sports network, they'll likely be sharing at least 25 percent of the overall revenue, which would affect the rights fee.
The ideal model is to not involve the carriers at all and get 100 percent of the money, like the Yankees did when they started YES with the Nets and Goldman Sachs . But that means taking a lot of risk and the Dodgers brand isn't what it once was.
Major League Baseball is heavily vetting the bidders this week, which also include Jared Kushner, Stanley Gold & Magic Johnson. Since MLB doesn't want another McCourt, they'll be making sure that, beyond financing, the new owner has the wherewithal to generate more funds.
That's all well and good, but the greater problem is that it doesn't matter how much the new owner can spend beyond buying the team. If a bid is a stupid bid, do you think the owner wants to pump more money into the team? If a bid is fiscally irresponsible, does it necessarily increase the value of all teams? No. It's just an outlier.
Baseball is undoubtedly excited about getting rid of McCourt, but the price that a future Dodgers owner pays could create a different strain on the owner and baseball in general.
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