Published in: Los Angeles Times
Author: Helene Elliot
Description: For sale: a baseball team with a storied history but less-than-stellar recent past. Its name resonates across generations but needs some TLC. Has great location and potential to generate billions in TV rights fees. Inquire with Blackstone Advisory Partners.
For sale: a baseball team with a storied history but less-than-stellar recent past. Its name resonates across generations but needs some TLC. Has great location and potential to generate billions in TV rights fees. Inquire with Blackstone Advisory Partners.
If all goes according to the terms of a settlement between Major League Baseball and owner Frank McCourt, the Dodgers will be sold in the next several months, with Blackstone brokering the deal for McCourt. Fans, including some who stayed away from Chavez Ravine to protest McCourt, are eager to know who the next owner will be and what direction the Dodgers will take.
Will this person or corporation have the passion and resources to restore the Dodgers' good name? Or will the new owner seek fame or real-estate riches and make only cosmetic fixes to the image McCourt tarnished?
"Because he did such a poor job the last few years kind of running that franchise into the ground, just by virtue of what fans had to deal with the last two years makes whoever is coming in look like a white knight," said Patrick Rishe, associate professor of economics at the Walker School of Business at Webster University in St. Louis and a part-time Los Angeles resident.
Not long ago, McCourt appeared to be the savior who would rescue the Dodgers from the cold clutches of Fox's News Corp. But things changed quickly when he and his wife, Jamie, split, and the Dodgers' situation ended up worse than before.
New ownership can bring positive changes, but - as with Fox's sale to McCourt - things can sometimes go sour.
The ultimate positive transformation was performed on the New York Yankees, who languished under CBS' ownership before a group led by George Steinbrenner bought them in 1973. Steinbrenner, who exploited free agency and recognized the value of TV rights, turned the Yankees into a headline-grabbing winner and international brand. His group paid about $8.8 million; the Yankees were valued at $1.7 billion by Forbes this year.
Dire circumstances led Mario Lemieux to rescue the Pittsburgh Penguins by taking an ownership stake in 1999 instead of money he was owed by the bankrupt team. The Penguins won the Stanley Cup in 2009 under Lemieux, who engineered their move to a new arena with better revenue streams.
Among small-market teams, the best example of a new owner's beneficial impact is Peter Holt's purchase of the NBA's San Antonio Spurs for $75 million in 1993. The Spurs are now worth more than $400 million and have won four titles under his ownership.
Robert Kraft's 1994 purchase of the New England Patriots is considered the model rejuvenation of the last 20 years. The Patriots were 14-50 the four seasons before he bought them for $175 million and have since won five conference championships and three Super Bowl titles. He privately financed a new stadium and developed the surrounding area, raising the franchise's valuation to $1.4 billion in Forbes' estimates.
"In football, what the Krafts have done in New England is nothing short of phenomenal," said Robert Boland, a professor of sports business at New York University's Tisch Center. "It's probably the single biggest turnaround in that sport."
In other cases, though, new ownership sent teams in the wrong direction.
Trucking magnate Jerry Moyes bought the Phoenix Coyotes in 2005 but soon wanted out. However, the NHL blocked his attempts to sell them to an owner who would move them and he filed for bankruptcy in 2009. The NHL bought the Coyotes and still operates them.
The Phoenix Suns have struggled since penny-pinching Robert Sarver bought them in 2004 for $404 million, and Michael Jordan hasn't duplicated his on-court magic as an owner of the Charlotte Bobcats. Stephen Ross bought a half-interest in the Miami Dolphins in 2008 and most of the rest in 2009, but the team is 16-25 the last two-plus seasons. Dan Snyder's ownership of the Washington Redskins has been a mess, with seven coaching changes in 12 seasons.
"All the money in the world and he has proven willing to spend it but hasn't spent it wisely," Scott Rosner, associate director of the Wharton Sports Business Initiative at the University of Pennsylvania said of Snyder.
"He's very involved in the day-to-day operations of the team, which is his right as the owner. It's just not necessarily the most intelligent thing to do."
Looking at the last 10 to 15 years, ownership changes involving the Dallas Mavericks, Boston Celtics and Boston Red Sox have produced triumphant turnarounds. Even the most anxious Dodgers fan can take hope from those sales.
"Ownership of a pro sports team is a very diversified business. Your customers are your fans, but your product is winning and winning as relatively cheaply as you can, so you have to maintain the right balance of players and stars and evaluate your talent accordingly," Boland said.
"A lot of owners fall in love with their players and overvalue their own players and mess up the payroll that way, or they don't fall enough in love with them and hate them all. It's a very complex business and some of it is knowing when do you break ties and when to produce stability, and knowing when the heck to get out of the way of your own management people with new and great ideas, and be able to adapt to the changing dynamics."
Rosner divides owners into two categories. Profit maximizers "are in it for the operating profit and the capital appreciation and some combination thereof," he said. Utility maximizers buy teams for ego or to network with power brokers and boost their other businesses.
That describes entrepreneur Mark Cuban, who bought the Mavericks early in 2000 for $280 million. They had missed the playoffs 10 straight seasons and in eight of those didn't win 30 games. But under the outspoken, hands-on Cuban, they have qualified for the playoffs every season since 2000-01, including a loss in the 2006 Finals and their first NBA title last June. They have sold out every home game since Dec. 15, 2001.
"Cuban took a moribund franchise that was Texas' version of the Clippers and made them a story," Rishe said. "They were consistently competitive and relevant, and ultimately, champions."
Cuban has said he inquired about the Dodgers but backed off after learning the price would top $1 billion. Rishe said Cuban, whose net worth was pegged at $2.3 billion by Forbes in September, has the financial liquidity to meet MLB's higher, post-McCourt standards. "I think that would be more of a fun selection," Rishe said.
When Wycliffe and H. Irving Grousbeck and Stephen Pagliuca bought the Celtics for $360 million in 2002 from the Gaston family, they named their investment group Banner 17 LLC to symbolize their aspirations. They seemed wildly optimistic because the Celtics had missed the playoffs six straight seasons, but strategic planning and free-agent investments helped them win banner 17 in 2008 over the Lakers, who won their teams' rematch in the 2010 NBA Finals.
The Red Sox were sold lock, stock and curse of the Bambino to a group led by John Henry, Larry Lucchino and Tom Werner for $700 million late in 2001. They won the World Series in 2004 for the first time since 1918 and won again in 2007, becoming Forbes' second-highest-valued franchise in baseball at $912 million.
A few other franchise sales appear headed toward success, but it's too early to judge. One is the Texas Rangers, who were bought out of bankruptcy by Chuck Greenberg and Nolan Ryan in 2010 and reached the World Series each of the last two seasons.
Seemingly all of Canada is rooting for the Winnipeg Jets, who were purchased and moved from Atlanta before this season, but sentiment isn't helping their leaky defense.
And some sales have had mixed results. Close to home, Arte Moreno bought the Angels from the Walt Disney Corp. in 2003 and instantly won fans' allegiance by cutting beer prices. He followed that by building a team that made the playoffs five times in six seasons, but the Angels have missed postseason play the last two seasons despite high payrolls. Forbes this year valued them at $554 million, three times what Moreno paid.
The Dodgers might sell for more than $1 billion, a function of market and tradition.
"The Dodgers are, absolutely, a trophy franchise," Rosner said. "You look at this and frankly it couldn't be much worse if you're a Dodger fan. They're not the worst team in the league on the field or anything - it's just been very difficult to see your team go through this. And the next owner has just a wonderful opportunity to turn things around both on the field and off."
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