Sunday, October 27, 2013

(Dodgers') Rising Tide Lifts All (MLB) Boats

Bloomberg projected values for all 30 MLB teams, and not only was there a 35% increase in average value from prior year, but much of that was led by the recent sale of the Los Angeles Dodgers, which reset team values league-wide:

Major League Baseball is catching up to valuations of the National Football League,” Anthony Di Santi, the managing director of the sports finance advisory division of New York-based Citigroup Inc.’s private bank, said at the Bloomberg Sports Business Summit on Sept. 10. “It’s because they’ve been exploiting the media opportunities that are available to them on a national level.”

He said regional sports networks also play a role when valuing teams. The Dodgers were sold in April 2012 for $2.15 billion to an affiliate of Guggenheim Partners LLC, a New York-based investment management firm with more than $190 billion in assets under management. Di Santi said the transaction price was influenced by the potential creation of a new cable TV network, and increased franchise values across MLB.

Ten teams are worth more than $1 billion. The Boston Red Sox and New York Mets each are valued at more than $2 billion, the data shows. [...]

The Dodgers’ $2.1 billion valuation is based on information provided by two individuals involved with the transaction who asked not to be identified because the details were private.

Guggenheim Baseball Management LP, a Los Angeles-based company led by financier Mark Walter, paid $2 billion for the team and Dodger Stadium, plus $150 million to form a real estate joint venture with Frank McCourt, the team’s previous owner. In exchange, McCourt transferred ownership of the 261 acres that surround the ballpark, most of which are parking lots, to the partnership.

The Guggenheim group includes basketball hall of famer Magic Johnson, who won five championships with the Los Angeles Lakers.

McCourt, who bought the Dodgers in January 2004, agreed to sell the franchise as part of a U.S. Bankruptcy Court settlement with MLB. He retains an option to buy back Guggenheim’s share of the land for its initial investment plus inflation, according to one of the people, contingent on construction of another sports stadium on the site.

NFL Commissioner Roger Goodell said in a June 2012 memorandum to professional football team owners that the league is considering sites in Los Angeles for a new stadium. Guggenheim will receive its $150 million investment back if the land is sold for any non-sports use.

Since the sale, the Dodgers’ annual revenue has risen by 38 percent to $450 million, according to a person with knowledge of team finances. Attendance also has gone up by 13 percent to about 3.7 million fans this season, the most in baseball, according to MLB.

During negotiations, McCourt’s representatives proposed starting a new regional sports network, which they referred to in presentations as YES West, that the new owners could create because the team’s deal with Fox was set to expire.

Guggenheim transformed YES West into SportsNet LA. The Dodgers will retain full ownership of the network through a subsidiary, American Media Productions LLC. Time Warner Cable Inc. has a 25-year agreement that allows the company to keep any profit made above guaranteed payments to Guggenheim, which will receive $200 million a year, after network costs and revenue sharing obligations to MLB.

The first payment from Time Warner is scheduled for January, and they would continue until 2038, stopping only in the event of a baseball labor dispute, according to the terms of the agreement.

Guggenheim believes the network is worth $2.75 billion, a discounted value of the guaranteed payments, one of the people said. SportsNet LA is scheduled to debut next spring. MLB has yet to approve the deal.

“That process is at a point where it’s pretty clear there will be approval of the Dodgers’ arrangement well before the 2014 season starts,” baseball’s Chief Operating Officer Rob Manfred said during an Oct. 15 interview at his office in New York.

There's also a cool interactive infographic which dissects how they came up with the value by team. For the Dodgers, total franchise value is $2.1B (2nd), with $1.84B of that from the team value (2nd) and $153M from related businesses (1st). Other ingredients to the team valuation break down as follows:

  • team revenues are $325M (3rd),
  • gate receipts $81M (10th),
  • concessions $29M (4th),
  • sponsorship $39M (4th),
  • media rights $100M (5th),
  • parking $10M (1st),
  • 2013 attendance 3.7M (1st).

One figures that with media rights set to skyrocket, there's a lot more value that can be unlocked with the Dodgers. Another interesting fact is that we lead the majors in parking revenue, but at a $10M revenue benefit it really is an insignificant figure relative to other team income streams--making Frank McCourt seem pretty short-sighted in his tenure's move to raise rates from $10 to $15 (a move which has since been rescinded by the Guggenheim Group).

Looking forward to us widening the gap between us and the third-most valuable MLB franchise, the Red Sox ($2.060B). (The Giants are 6th, with a $1.23B value.)


Cliff Beefpile said...

We ARE the one percent. Suck it, plebs!

goodchild27 said...

Hey, nice! My brother (Jeremy Diamond, name is at the bottom of it) made the infographic. He works at Bloomberg.

Dusty Baker said...

It was a very nice infographic!