Tuesday’s record purchase price for the Los Angeles Dodgers, by a group including Magic Johnson and Peter Guber, reflects the confidence the new owners have that the value of the franchise’s local TV rights will fulfill the highest projections.
After all, the principal buyer of the Dodgers, spending $2 billion for the team plus another $150 million to be in a partnership for the land surrounding Dodger Stadium, is the Chicago-based investment firm Guggenheim Partners (led by CEO Mark Walter), so it’s hard to position the purchase as simply a mere hobby with no regard for its financial bona fides.
The Dodger sale is expected to officially close by April 30, pending approval by Major League Baseball and the federal bankruptcy court the Dodgers have languished in since June.
For the past several months, estimates for the Dodgers’ local cable rights have been set at a minimum average annual value of $150 million, a figure that gained credibility after the Dodgers’ neighbors, the Los Angeles Angels of Anaheim, signed their own local cable rights extension with Fox for $3 billion over 20 years. A rights extension for less than that amount, negotiated in June between Fox and now-outgoing Dodgers owner Frank McCourt, was rejected by MLB commissioner Bud Selig for being “not in the best interests” of the franchise.
The next TV contract for the Dodgers, whose current deal with Fox expires after the 2013 season, is expected to go for unprecedented dollars because of the team’s fundamental importance in the Los Angeles sports television landscape — an importance only enhanced by the 180-degree turnabout of having the beloved Johnson as co-owner in place of McCourt, who with his ex-wife Jamie came to be reviled by fans for their management of the team’s finances.
Fox will be intent on retaining the Dodgers after losing rights to Johnson’s old team, the Los Angeles Lakers, to Time Warner Cable, which is launching English- and Spanish-language networks this fall dedicated to the perennial NBA powerhouse. Should the Dodgers leave as well, Fox would have to seriously consider shuttering one of its two local sports cable channels and the hundreds of millions in revenue that come with it. (News Corp.-owned Fox bought the Dodgers in 1998 essentially to launch that second channel.)
On the other hand, Time Warner Cable will be concerned about maintaining audience for its new channels during the summertime months without NBA action. Nabbing the Dodger rights would have the twofold benefit of boosting their own efforts while imperiling Fox’s, while Fox can say the same in reverse.
With an exclusive negotiating window through Nov. 30 on a contract extension, as well as certain rights to match competing offers thereafter, Fox will have the upper hand in the battle for the Dodgers, but the ultimate control of the bidding will go to Guggenheim’s Walter, Johnson, Guber and partners Stan Kasten, Bobby Patton and Todd Boehly. It will be up to them to decide whether to make a quick deal with Fox for financial certainty, or play out the bidding process to the fullest extent possible.
Johnson, Guber and Kasten bring relevant experience to the negotiating table. Kasten, the longtime Atlanta Braves and Washington Nationals executive who is likely to be Dodgers team president, has a lengthy history of dealing with the TV side of the game.
Guber’s entertainment resume is extensive, from his days as chairman and CEO of Sony Pictures Entertainment and prexy of Columbia Pictures to his current position as founder and CEO of Mandalay Entertainment. Guber is also a minority owner of the NBA’s Golden State Warriors, and he and Johnson are partners in the ownership of a minor-league baseball franchise in Dayton, Ohio that last year set a North American professional sports record by selling out its 815th consecutive game.
Johnson’s post-NBA business and entertainment career has storylines that counterbalance the endeavor he now jokes about, ill-fated Fox latenight talkshow “The Magic Hour.” Magic Johnson Enterprises includes a successful chain of movie theaters and a production company, and he announced in February plans to launch by June 30 a family-friendly cable network, Aspire, with initial backing from and distribution with Comcast.
One other consequence of the sale of the Dodgers, especially with Johnson and Guber on board, could be the increased entertainment profile of Dodgers players themselves as stars, along the lines of David Beckham or Magic himself, with future free agent acquisitions aiming to trump the marquee value of the Angels’ signing of All-Star Albert Pujols in December to a 10-year, $254 million contract (a deal made possible by the team’s contract extension with Fox).
In the meantime, Dodgers outfielder Matt Kemp, the 27-year-old who signed an eight-year, $160 million contract extension last winter, has a screen-friendly presence and, along with defending National League Cy Young award-winner Clayton Kershaw, 24, would certainly be the centerpiece of any marketing efforts that are likely to come. Dating back to the Sandy Koufax and Don Drysdale era, the Dodgers have had a history of mixing baseball with Hollywood.