Weekly Hit Ground Ball: MLB and the Dodgers

WHGB11It’s a tale becoming all-too familiar to sports fans.

An iconic sports team is subject to a highly-leveraged takeover by someone without existing links to the club, giddy with excitement at the prospect of exploiting the history, tradition and fan base.  Initial scepticism is put to one side by many at first while the team does well, but slowly the financial burden placed on the organization starts to tell.  Spending on players goes down while the fans’ loyalty is exploited in rising ticket prices, concessions and merchandise. 

Fans of opposing teams may not have much sympathy when Liverpool FC, Man Utd or the Los Angeles Dodgers have their usually gilded lives blighted in such a way, but it’s a depressing development all the same.

MLB Commissioner Bud Selig this week used his ‘best interests of baseball’ powers to step in and take control of the Los Angeles Dodgers due to mounting concerns about the way the prestigious organization is being run. 

Judging by the articles and comments online, the news has been welcomed by the vast majority of Dodger fans.  The current owners, Frank and Jamie McCourt, are more than a match for the Glazers in the unpopularity stakes following the fall-out from their divorce.  Not only has it left their finances, and therefore the Dodgers’ finances, in disarray, but it also very publicly revealed that they were using the Dodgers to fund a lavish lifestyle for themselves and their family.

Frank McCourt reportedly borrowed $30m last week so that he could meet payroll obligations and Selig has decided enough is enough.  

The Premier League’s Chief Executive Richard Scudamore spends a considerable amount of time defending owners’ rights to spend what money they like and to use the business models they want.  While he has to look out for the reputation of the league as a whole, he doesn’t see it as his place to interfere any further. If he did interfere, that might make the next multi-billionaire decide to ‘invest’ his money elsewhere, or eventually make the top clubs decide to break away and run their own pan-European competition.

Selig will also defend owners to a large extent, essentially he does work for them after all, but MLB is a closed shop and that means those involved can have a much greater say in how it is run. 

Think of it this way: there’s a great banquet of billions of dollars laid out on the table and only 30 seats around it.  You can only grab a chair if one becomes available and you’re only allowed to sit yourself down if the others allow you to.  The owners have their differences and disputes, but ultimately it benefits them all to work together so that revenues continue to grow.  And if one of the marquee franchises in a major media market is being badly compromised by the owners’ financial problems, then the others don’t expect the Commissioner to sit idly by.

It may be a positive development for Dodgers fans desperate to see the back of the McCourts, but this move poses more questions than answers.  Reports are that Frank McCourt is considering suing Bud Selig and while it seems highly likely that the McCourts’ ownership is coming to an end, there’s no telling when that moment will come.  The Dodgers aren’t the only team under financial difficulties either, with the New York Mets’ ownership being embroiled in the Madoff affair.  Selig insists the two cases are different; however the history of MLB taking over teams in trouble (few will forget the way the Montreal Expos were handled by MLB) means that the prospect will inevitably hang over the Mets for the forseeable future.

Additionally there’s the thorny issue of how MLB’s involvement will impact the Dodgers and their competitors.  Should they be restricted in what they can do or be allowed to carry on as if nothing has happened? 

The Texas Rangers filed for bankruptcy last year during their protracted sale (Tom Hicks take a bow), yet they were able to trade for Cliff Lee (and take on his salary) and received a loan from MLB to help them through the season.  You could argue it was within an agreed budget and that Rangers fans shouldn’t have been denied the opportunity for their team to compete and, as it happened, to make it to the World Series.  If you’re a rival watching the Rangers fly past while you run your organization so that you don’t end up in a bankruptcy court, it might not seem quite so fair.

And we can’t overlook the fact that it was Bud Selig and the other owners who let the McCourts take control of the Dodgers in the first place.  Their faith proved misguided in that case and that often seems to happen.  MLB and the Premier League will downplay or pass off concerns if they want a deal to go through, or if they have little choice about it.  For all the rhetoric, the Premier League doesn’t have much in the way of powers to stop someone buying a team and in the Dodgers’ case it seems that the former owners’ (Rupert Murdoch’s FOX/News Corp) desire for the sale to proceed weighed heavy on the mind owing to their additional position as a major TV rights holder. 

The MLB bean counters accepted the McCourts’ plan despite concerns expressed at the time about their financial resources.  In fairness to MLB, no deal or business plan is risk-free and they surely wouldn’t have allowed the takeover to happen if they didn’t believe it could work.  Yet what does ‘work’ mean in this context?  It means running the team so that it continues to generate lots of revenue and keeps a decent product out on the field while channelling millions to pay off the loans used to buy it in the first place (possibly also to cover losses of other business interests as well).

The McCourts’ divorce has created this ultimate problem, but if they remained a happy couple today then the rising prices, plans to lower payroll and the use of money to fund an extravagant lifestyle (not to mention paying two sons $600k each despite neither of them really working for the team) would still be there. Selig wouldn’t have used his ‘best interests of baseball’ powers to do anything about it, or to do anything about it happening at any ballclub, because from a business standpoint if things are ticking along, there’s no real problem.

But is it in the ‘best interests of baseball’, or any other sport, to be run on those lines?

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