Dodgers to become first $500 million franchise
You’re saying, “No that’s not right. Didn’t the Dodgers sell for $2.3 billion last year?” That’s absolutely right. What the headline is referring to is $500 million in annual revenue. That’s all thanks to the deal the team has signed with Time Warner to create Sportsnet LA. The new regional sports network is set to launch with the 2014 season, so for now the Dodgers will have to limp along with Fox Sports. Sportsnet LA will give the Dodgers at least $280 million per year. The deal will run 25 years and provide the Dodgers with control over the network’s programming.
To understand what this means for the franchise and baseball as a whole, let’s look at how the new TV money will fit into the team’s revenue picture.
- $84 million in national revenue (much of it from new national TV contracts)
- $150 million in tickets and parking (based on 3.5 million total attendance)
- ~$30 million in additional local revenue (radio, sponsorships)
- $280 million from Sportsnet LA
Final estimate for 2014: $544 million. That will absolutely blow the Yankees, the longtime standard bearer, out of the water. There’s only so much the team can do to affect payroll because of luxury tax implications. Still, it’s an impressive haul that has to keep Larry Baer and company awake at night. There’s nothing the Giants can do to get within shouting distance of that figure unless they cut ties with Comcast and start their own RSN.
As much as the Giants owners may cry foul, one man who isn’t is Lew Wolff. When asked by USA Today’s Bob Nightengale to comment on the Dodgers’ coming windfall, Wolff sounded circumspect:
“I don’t know the details of the (TV) deal,” Oakland Athletics owner Lew Wolff told USA TODAY Sports, “but it’s a magnificent transition in the respect of the value of baseball. I’m hoping that when good things happen, all ships rise.”
Even if the Dodgers are required to share their entire revenue, Wolff says he is not concerned about the gulf between small and large-market clubs.
“That’s always going to happen,” Wolff said “but the Yankees haven’t’ hurt baseball, in my opinion.
“They’ve made us a lot more valuable.”
Can’t hate the player or the game, I suppose.
Pending league approval of the deal, the one matter that remains is the impact of revenue sharing. A bankruptcy court ruled that the value of any TV contract subject to revenue sharing is only $84 million, not $280-320 million. MLB argues that all of the Sportsnet LA money is subject to sharing. With the revenue sharing formula set up as a sliding scale to hit big revenue teams harder, the potential impact to the league and the have-not teams could be huge. Take that $544 million figure above and remove central revenue. Under MLB’s formula, the Dodgers would have to share ~40% of $460 million, or $184 million. If the bankruptcy court ruling stands, the team would have to share 40% of $164 million, or $65.6 million. That’s a difference of $118.4 million. Now consider that the total value of funds redistributed in 2012 via revenue sharing and the luxury tax is estimated to be $400 million. That means the Dodgers alone would bump the pool by almost 30%.
And if you’re Lew Wolff and your franchise can continue to receive revenue sharing through at least 2016 while there is no new stadium, the A’s annual revenue sharing receipt could go up by at least $10 million. Without selling a ticket, A’s 2014 revenue could be in the neighborhood of $140 million – though much of that would come at the end of the year, applicable to the following year. No wonder Wolff’s supportive. It helps the bottom line and inflates franchise value, leaving a franchise sales price of $500 million in the dust. Who’s in a hurry to build a ballpark now? Then again, it’s not certain where the A’s will play after this season…