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

20 thoughts on “Dodgers to become first $500 million franchise

  1. I’ve mentioned this before but this post sums it nicely. As long as a San Jose ballpark (or Oakland, or…) keeps getting delayed by MLB, the A’s owners can continue to put .500 teams out on the field and collect revenue sharing checks. And hey, if they ever get tired of that they can always sell the franchise for a tidy profit.

    From an ownership/revenue perspective, it’s really a higher priority for MLB then the A’s owners to get the A’s into a new stadium. Sure, A’s ownership would make more money in a new stadium but since there is little they can do to force a move they can just let it ride at O.co Coliseum.

  2. Just another article of the haves and have nots. The Dodgers will be like the Yankees in a couple of years with a bunch of aging veterans and contracts that they will not be able to unload. Expect this to be the norm across MLB with the increase TV and internet revenue.

  3. The revenue-sharing and luxury-tax (i.e., “Competitive Balance Tax”) terms in the last CBA are complicated, but both schemes end in 2016. The A’s, of course, get a break on revenue-sharing until 2016, so long as they don’t have a new ballpark. If they do get a new park by then, they automatically become a top-tier payor team in the revenue-sharing regime. (That’s because the Bay Area is designated one of the top markets. For a quick view of this stuff, see Attachment 26 to the 2012 CBA.) Sort of an incentive NOT to move in before 2016, wouldn’t you say?

    Of course, the 2016 termination of the current RS/LT schemes is probably not true a fiscal cliff. A new CBA will address all revenue manipulation issues in 2016. Hell, maybe a cap will look good by then. But between now and 2016, Wolff/Fisher can do quite well in a rundown park in Oakland.

  4. @ John,
    Love how you try to speak for what MLB wants for the A’s or what’s their “higher priority.” Alas, like the rest of us, all you presented was an opinion.
    That said, you are wrong on one point for sure: the A’s AND MLB make more money with the A’s in a new yard (not just the team) vs them staying on revenue sharing welfare indefinetely.
    Yes, that new yard in San Jose won’t happen until 2018, so you’re correct in that the A’s will do OK financially until then. But it’s not the A’s or leagues ideal arrangement in terms of generating maximum revenues.
    In closing, financially/revenue-wise new ballpark for the A’s ideal for MLB over staying in decrepit football stadium.

  5. @ John – in case you didn’t notice, the A’s didn’t finish .500 last year, nor are expected to this year. They also went to the 2006 ALCS, but who cares about that right? They’re just the Marlins west pocketing all the money they can! :x

  6. This seems unsustainable… Like the Internet bubble… or the housing bubble…

    Additionally, if all this effort is put into watching on cable, at home … who the hell is going to the ballpark? Are sellouts “important” when cable is making everyone fat?

  7. @David

    I’m with you on this. The same thing is fueling the college football boom. Schools are shifting around for different combinations of high volume viewers and markets for more and more money. At some point the music has to stop. The vehicle changes from TV to the iPad and live to streaming.

    The death of advertising revenue to regular cable programming has already come and eventually sports will be next. They will endure, but i wonder if this is truly the hey-day of bloated contracts we will look back on as completely unsustainable.

    MORE CHAMPAGNE, PLEASE!

  8. Wait a minute — now it’s ok if the new stadium opens in San Jose in 2018? Meanwhile, Wolff/Fisher get a pass for keeping a low-budget team in the E Coli while raking in revenue shares? Wolff/Fisher are laughing all the way to the bank under cover of signs that say “blame the Giants.” Also, a lot can happen between now and 2018, including, but not limited to, Lew Wolff’s retirement.

  9. @suit,
    Wolff himself said the yard won’t open until 2018. Why we have to wait so long, I guess we won’t know that until the deal is annoinced, but no one suggested that it was “OK,” its just the reality now. As for a lot can happen between now and then; why are you implying (perhaps hoping?) That something will occur to screw up an A’s move to San Jose? Your Giants already have everything, yet still rooting for failure of our A’s and San Jose?

  10. OT: So when is all that content (comments) that were zapped last week going to be back? That thread on Larry Baer had some juicy comments that I was hoping to respond to and track.

  11. @ XS – You can send a letter to your beloved Gnats asking why they have stonewalled the A’s efforts to go to SJ, now incurring a delay to 2018. And no, it’s no it doesn’t mean we’re content with the situation, but it is acceptable given the circumstances imposed by the Gnats. Also, since you haven’t noticed, the A’s might not play at E. Coli in the coming years and are fielding a quite competitive team even with the low team budget. Sure, a lot can happen from now until 2018, with things like Charles Johnson or Larry Baer selling the franchise as well, right? Buy low, sell high…and run off to St. Petersburgh! :X

  12. I truly believe that the Giants saw the day of skyrocketing revenues from local cable TV programming with respect to local MLB team broadcasts. It is for this reason that the Giants hoped that the A’s would be frustrated enough from their East Bay stadium difficulties and territorial restrictions, to be forced to move out of the Bay Area market altogether. Then the Giants would truly have the entire Bay Area market all for themselves, and to get a lucrative Cable deal similar to that of the Dodgers.
    The A’s were never a threat to the Giants anywhere in the Bay Area, including San Jose. The Giants wanted the entire Bay Area local cable/TV MLB team revenues all for themselves.

  13. Re: Miami marlins deal…

    Dear marlins fans…..took bad. If u guys didn’t want a ballpark then.you would not have q baseball team today…and the owner would have found another city anyway…so this is a message to Carolina panthers, Oakland teams and other places when it is city vs new sports facility….if u don’t want to publicly fund a stadium…fine, but don’t cry when the team leaves…is it fair???…no….but I’m tired of the crying from tax payers…we all pay taxes WHO CARES shut up or move to another county.

  14. Yes, cities that play the “Let the owner build his own stadium/arena!” game usually find themselves minus a team. See: Browns leave Cleveland, Sonics leave Seattle, Isles leaving Nassau County, Kings heading out of Sacto, Expos depart Montreal, etc.

  15. I do feel that owners and the city could come with more creative ways to publicly fund a stadium without the extra drama ( because its expensive and going to have drama anyway), but yeah 70% on taxpayers

  16. In Oakland’s case, the city insists the ballpark be built privately. And the owner concurs – provided the ballpark is built 30 miles away.

  17. Am I the only one who gets this message every time:

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    • @ni9er – Try clearing your browser cache. Readers may have seen that message over the weekend while I was fixing the database problem.

  18. Pingback: Weekly Hit Ground Ball: Spend, spend, spend | BaseballGB

  19. I guess teams are counting their eggs before they hatch. Can’t wait to see the Dodgers implode over the next decade to due to unrealistic and unsustainable revenue streams and bad contracts. The only true RSN is the Yes network and even they show more the baseball 24/7.

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