Sunday, April 03, 2005 |
Asking Only Half The Right Questions
Because McCourt put up little cash, his purchase has been seen as a high-wire act. But sports business experts say revenue-boosting moves in the off-season, combined with the underlying strength of the Dodgers — the team's large and loyal fan base — have convinced them that McCourt has a better-than-even chance of success.Making one wonder where Galatioto was last year when the Times busied itself interviewing fellows like Sportscorp Ltd. president Marc Ganis and Oak Park lawyer Keith Gregory, both of whom had extremely negative things to say about the McCourt ownership bid. And despite giving us a tasty conventional-wisdom treat from Andrew Zimbalist ("Baseball is happy to have all this debt on a major-market team because they can be pretty sure the Dodgers won't be pushing up salaries"), the piece steers clear of the sale's biggest negative, McCourt's failure to capture the Fox Sports West network along with the team. This was a prominent feature of the 2003 Broad/Checketts bid, which News Corp flatly rejected. The article does, however, give us a list of the things the McCourts have done to improve the Dodgers' revenue streams:"It's a great turnaround opportunity — a great brand, a great market with deep fan loyalty and very positive demographics," said New York investment banker Salvatore Galatioto, who for years ran the sports finance business at Lehman Bros. and recently opened his own firm.
All this is great news, of course, and far be it from me from complaining when Frank actually makes moves to stabilize the team's financial situation; we should rejoice, especially when none of it raises (most) ticket prices. Obviously the new field-level seats will cost more, but seeing how "the Dodgers ranked 20th of the 30 major league ballclubs, with an average ticket price of $16.92", there was -- at least in theory -- plenty of room to raise prices.
- An improved TV-rights deal signed with Fox at the time of the purchase, plus increases from other TV and radio fees, should boost revenue by about $15 million this year.
- The new field-level seats, which sell for $65 to $400 apiece, along with price increases on seats in the most desirable locations, should bring in $10 million to $13 million in new revenue, depending on attendance.
- Parking-fee increases imposed last year for most spaces and this year for season-ticket holders, plus new sponsorship and concessions contracts taking effect this season, together should add $10 million.
- Payroll is down by $10 million from 2003, Fox's last season. It remains one of the National League's three highest, however, enough to keep the team competitive, McCourt said.
Some early concerns circled around McCourt's intentions regarding the land on which Dodger Stadium stands upon:
Given his real estate background, McCourt's critics in Los Angeles suspected from the outset that his real interest in the Dodgers wasn't in building a world-championship team but in bulldozing Chavez Ravine for condos and retail.Indeed, he wouldn't have; given the initial hostility to his entrance, one wonders what that might have happened subsequently. But McCourt can spin anything he wants, and with anonymous partners whom he can slander at will, it's hard to check on this version of events.Some of his would-be partners had the same impression. McCourt said his original plan was to buy the Dodgers with a group of investors. As envisioned, he would be the controlling owner but would hold a 40% stake.
But the partners, whom McCourt declined to identify, pulled out when he made it clear that his agenda didn't include razing Dodger Stadium.
"I felt that if I led with my real estate chin, it would confirm all those fears and we'd never be able to overcome it," McCourt said.
Finally, the article presents a few numbers relevant to the current ownership. Fox had legally split the Dodgers into real estate and team components, for the purpose of easing financial issues during the sale. Now, McCourt owes:
Amount Source Collateral ==================================================== $150M Bank of America Chavez Ravine $125M Fox Sports Boston properties $75M MLB Revolving loan $40M Fox Sports McCourt personal assets $31M Fox Sports 3-year convertable note
This doesn't include a $20M interest payment McCourt will owe Fox Sports at the end of 2006.
McCourt, whose four sons range in age from 14 to 24, said he intended to prove that family ownership could work in the big leagues.Okay, fine; we still need proof that the McCourt era is going to be a good one for the Dodgers. With big baloon payments just around the corner and the team in "breakeven" mode despite solid attendance and a division title, serious questions remain. For me to walk away muttering that "the jury's out" represents progress, but I find myself less than satisfied by this article. More, we learn, are coming in future editions of the Times."God willing," he said, knocking on a wooden conference table, "our kids are going to own this team."
An impotant note is that McCourt has tried to put his best face forward just a few days after sacking the first marketing (PR) team he put in place, and at a minimum we should give him kudo's for at least making the effort to be accesible in terms of his financial underpinings, and in the greater scope - by trying to answer questions being addressed to the team by interested parties, that have largely gone unanswered since McCourt took over. There is obvious spin to this, but the few facts provided do help to clarify things a bit. Frank would be foolish to be too clear in all of this, and it will always be up to us to fill in the blanks. I think the money/revenue situation is very good for McCourt at present, assuming the team can draw 3.25-3.5M fans this season, which appears to be above his "break-even" point of 3M fans. I have no doubt but that any "profit" comes after $50M or so of earnings (over direct expenses) that goes toward debt service.
Keep up the good work bud. I read all the time.
: 4/03/2005 01:04:00 PM
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