Does Fox Have To Buy The Dodgers Again?

LA Dodgers
LA Dodgers

Early this morning, Major League Baseball and Frank McCourt issued a joint statement saying that they agreed to recommend to the bankruptcy court to hold an auction for the sale of the Dodgers.

When prospective owners are bandied about, Dallas Mavericks owner Mark Cuban comes up first, because he's a fan's owner and he has the cash. But Cuban told the LA Times yesterday that he wouldn't be interested in the team if the price was over $1 billion.

I think that still puts Cuban in the game. The price stays under that because nowadays you need about 60 percent cash to finance buying a team, compared to almost nothing when McCourt bought it. I don't think there's a ton of interested parties who have $600 million cash lying around.

Who else gets in? I think Fox , which sold the team, stadium and parking lots to McCourt for $421 million in 2004, could — and might have to — throw its name in the hat again.

Why? For the same reason they bought the Dodgers in 1998 for $311 million. They want the team's future television rights, which would begin in the 2014 season. A spokesman for Fox Sports could not immediately answer whether the speculation, which has been floated by some bankers, is rational.

What is clear is this: Fox Sports West and Fox-owned Prime Ticket is in a very tough position. After this season (if there is one) they lose the Lakers to Time Warner , which signed the team to a 20-year deal reportedly worth as much as $3 billion. And they lost USC and UCLA games to the upstart Pac-12 Network. If they don't get a deal for the Dodgers, the network is basically worthless.

The reason Fox sold the Dodgers is that they thought buying TV rights were a better financial move. They were reportedly losing tens of millions of dollars managing the team. But now, that just might be the cost of doing business in a marketplace that is much more competitive than it was just seven years ago.

We already know that McCourt valued the rejected 17-year Fox deal at close to $3 billion, while MLB valued it at $1.7 billion. Let's put the value right in the middle at $2.3 billion. That's $135 million a year. Now let's say that the Dodgers are worth roughly double what Fox sold them for seven years ago -- $840 million.

Isn't it worth it for Fox to at least buy 51 percent of the team to make sure their network survives? Seems like a valid opportunity cost to me. Fox already was willing to do plenty in hopes of doing a deal with McCourt. They front-loaded the deal, which was rejected by baseball, so McCourt could stay on as owner and they could get their TV rights. They advanced him about $50 million to meet financial obligations and offered him another $200 million loan.

For some, the question is not whether Fox should buy the Dodgers. The question is, can they afford not to buy the Dodgers?

"The concensus in the industry is that Fox really needs the Dodgers because if they don't get them, they are out of luck," said Adam Swanson, analyst for S&L Kagan, a media evaluation firm. "Because Fox is so dependent on the deal, I wouldn't count anyone out in terms of either bidding up the price or trying to win it outright."

Update: While it might make sense for Fox to bid, a source has told CNBC that it's not expected that they will. NewsCorp executives will likely address it in the earnings call later today.

Questions? Comments?