How could this happen?
How could Walter O’Malley’s perfect money machine be reduced to a figurative ward of the state?
It’s one thing when it happens to the Montreal Expos, a team with a bad stadium, attendance problems, and foreign exchange issues. Major League Baseball wanted the Expos to go ownerless, the better to move them elsewhere and sell to an eager bidder.
But the Dodgers? In Los Angeles?
Welcome to hard times.
The announcement Wednesday that Major League Baseball would take over day to day operations of one of its flagship franchises in the nation’s second-largest market was mind-boggling to anyone with a sense of history that goes back further than the first season of The O.C.
When Brooklyn Dodgers owner O’Malley brought his team to Los Angeles in 1958, he got one of the sweetheart deals of all time. Officials handed him approximately 315 acres of city-owned land near downtown, along with millions of dollars in road improvements, in exchange for the minor-league ballpark O’Malley owned in South L.A.
It took O’Malley until 1962 to build Dodger Stadium on the site in Chavez Ravine, but once he did the club set a new standard for profitability. The Dodgers ranked first, second, or third in the National League in attendance every year from 1962 until 1997; their broadcast revenues were commensurate with the city’s large and growing population.
Walter’s son Peter O’Malley sold the club to News Corp’s Fox Entertainment Group for $311 million dollars in 1998. The team fit into Fox’s efforts to solidify its regional sports cable holdings, particularly in opposition to rival Disney’s growing involvement in sports through its purchase of ESPN and then-ownership of the Anaheim Angels.
It appeared that baseball was on the verge of an era of team ownership by media entities, providing the equivalent of in-house programming at little risk to the network. Instead, the internet boom of the 1990s was followed by the real-estate bubble of the 2000s, and billionaire individuals stepped up to add baseball teams to their luxury portfolios. The media companies were willing to sell because they wanted cash for further acquisitions and consolidation; the baseball revenues were not significant enough to offset other losses in the volatile new media environment.
Disney sold the Angels for $180 million in 2003 to Arte Moreno, who grew the billboard company Outdoor Systems to the point where it could be sold to Infinity Broadcasting for $8 billion. Sam Zell purchased the Tribune Company and then sold the Chicago Cubs, Wrigley Field, and a stake in its regional cable network to the Ricketts family – founders of discount brokerage TD Ameritrade – for $845 million in 2009. And News Corp. sold the Dodgers to Boston real estate developer Frank McCourt in 2004 for $430 million.
With the certainty characteristic of the decade, McCourt took on the Dodgers as sole owner. He had been unsuccessful in his efforts to buy the Boston Red Sox (and move them to a new park he would have built on some South Boston waterfront property he owned), the Anaheim Angels, and the Tampa Bay Buccaneers. At last he was stepping up into the big leagues, and he moved west to be near his shiny new bauble.
What could go wrong?
Real estate never goes down. Leveraged money never comes up short. Marriages last forever. No California judge would ever rule that the team was community property, overturning a post-nuptial contract that appeared to give Frank McCourt sole claim to ownership of the Dodgers.
And none of these combined events could possibly leave the team in danger of missing its payroll, hamstrung in making deals, or cutting corners to the point where fans might feel fearful going to their cars in the parking lot after a game.
This is the state of big-money sports in the post-bubble era.
Major League Baseball will operate the team, as it did the Texas Rangers last season while another one-time high flyer, Tom Hicks, was waiting for his team to be auctioned by a bankruptcy court. Bud Selig acted now rather than allow Frank McCourt to continue to borrow against a potential rights deal; he has reportedly received two $30 million loans from Fox since the end of last season. MLB itself does not appear interested in giving McCourt the kind of eight-figure loans it extended to owners of the New York Mets, who face potential legal action over their investments with Bernard Madoff.
The hope is that the McCourts will agree to sell the team. Since they can’t agree who owns it, it’s hard to see how that will happen.
With legal action likely at every step, this mess isn’t going away any time soon. That’s good news for the rest of the NL West, and bad news for baseball as a whole.