Tuesday, January 29, 2013

Dodgers On Course For Disaster (x2)

Fresh off of the ebullience of striking it rich on a television deal, the Dodgers came into Monday getting hammered by critics on multiple fronts.

First off came news that MLB will be negotiating with the Dodgers exactly how much gets put into revenue-sharing buckets:

The new ownership group, which bought the team out of bankruptcy court in April 2012 for a record $2.1 billion, said it has created a company called American Media Productions that will start broadcasting Dodgers games in 2014 on a channel called SportsNet LA. Time Warner Cable, the largest carrier in the area, will be the network's first distributor.

Although terms were not disclosed, the SportsBusiness Journal calls it a 25-year deal worth $7 billion.

"We concluded last year that the best way to give our fans what they want -- more content and more Dodger baseball -- was to launch our own network," Dodgers chairman Mark Walter said in a statement. "The creation of AMP will provide substantial financial resources over the coming years for the Dodgers to build on their storied legacy and bring a world championship home to Los Angeles."

The deal is subject to approval by Major League Baseball, and one baseball source privy to the negotiations told ESPN.com the team and the league could very well butt heads regarding exactly how much of the deal will be shared with other teams.

TV rights are subject to revenue sharing, and high-revenue teams, including the Dodgers, have to share approximately one-third of their rights fees with low-revenue teams.

As part of the negotiations with the bankruptcy court, MLB agreed that the Dodgers' fair-market value would be set at $84 million a year with 4 percent increases each season.

The Dodgers could keep anything above that assuming the club took significant risk in starting its own network, as stated in the league's current revenue sharing rules.

But the team readily admits in its announcement that it is not taking the risk.

Time Warner Cable "has assumed most of the risk around the channel and promised to cover affiliate fees from distributors who refuse to carry it," the news release said.

Time Warner will also be responsible for other programming and will be the exclusive advertising and affiliate sales network of the channel.

In essence, the network will serve as a partner making guaranteed payments to the team.

Magic, time to lay on the charm and work us out of this one! But even if we get past the evil Minions of Selig, there's other issues: the "hangover" of all of our big-time contracts, says Dan Szymborski (link insider only):

The Los Angeles Dodgers have finally signed their gigantic TV contract, landing a deal with Time Warner that would yield the Dodgers between $7 billion and $8 billion over the next 20 years.

A chunk of that money will head back to MLB in the form of revenue sharing -- the haggling with MLB on just how much hasn't yet been completed -- but even after MLB and the Dodgers agree on just how much of that revenue will be subject to the 34 percent cut that heads to the revenue-sharing pot, that's a lot of green raining in Chavez Ravine. On the trajectory that they're on, the Dodgers will need quite a bit of it.

For the 2013 season, depending on how you count things, they currently have between $210 million and $220 million committed to players on the roster. That figure doesn't include the 2013 bills the team owes to Hyun-Jin Ryu ($3.3 million), Yasiel Puig ($3.7 million), Andruw Jones ($3.2 million), Tony Gwynn Jr. ($1 million) and an additional million from various contract buyouts. Throw in an extra $20 million or so for luxury tax and a half-million or so for each of the pre-arbitration players who play the year on the roster, and we're talking one-quarter of a billion dollars in payroll this upcoming season.

Just how much do the Dodgers owe in guaranteed salary? Through the end of the decade, more than $900 million. In fact, $100 million is already on the books every season through 2018, when the Dodgers will owe Matt Kemp, Zack Greinke, Adrian Gonzalez, Andre Ethier (buyout), Ryu and Puig $105 million.


The Dodgers project to be the best team in the NL West, north of 91 wins. But given our error bars at predicting the future no matter the method, a playoff spot, let alone the divisional title or a trip to the World Series, is far from certain. ZiPS gives the Dodgers a 62 percent shot at a playoff spot, not a number high enough that you want to start ordering the Cristal in bulk quite yet. Guggenheim Partners didn't invest massive sums of money not to get a solid financial return on its investment. A disappointing year or two, and it wouldn't be shocking if the biggest member of the consortium started to find the guaranteed cash from the TV contract a lot more appealing than playing high-stakes fantasy baseball.

The Dodgers certainly have a good chance at playing games until the end of October this season. If they do win the World Series in 2013, which would be the franchise's first since 1988, there will be one sweet celebration party. But as most can attest, the best parties frequently lead to the worst hangovers.

So basically, right when Guggs and Co. are trying to make it rain, everyone else is raining on our parade.



Dusty Baker's Toothpick said...

So, they're saying we're better off with Frank and Jamie?