When Magic Johnson and his Guggenheim Partners cohorts dropped over $2 billion on the Los Angeles Dodgers, nobody could figure what the motivation behind that move was.
Yes, the Dodgers are in America’s second largest media market. Yes, Los Angeles boasts a large Latino community that loves its baseball. Yes, there is a certain allure attached to this franchise that only the New York Yankees, Boston Red Sox and a select few other brand name MLB franchises can offer. But none of those things justified spending nearly twice the previous record for money spent on an American sports franchise.
As it turns out, there was a reason that Magic (who dropped $50 million of his own money) and his partners did this deal. According to Bloomberg, the Dodgers’ highly publicized bankruptcy settlement did more than just make them the laughing stock of the baseball world for a short period of time – it also entitled them to certain perks that other teams probably wish they were entitled to.
Via the report:
A settlement ending their 2011 battle in U.S. Bankruptcy Court gives the Dodgers’ new owners a chance to cap income subject to revenue-sharing from a proposed regional sports network at about $84 million a year, according to five people familiar with the confidential “special terms.” With TV sports-rights experts saying the team could get as much as $225 million a year from a network’s rights fees, the Dodgers may enjoy an annual unshared windfall of as much as $141 million.
Suddenly it all makes a a lot more sense, right? That’s why the Dodgers have been blowing money left and right, and that’s why nobody within the upper echelon of the franchise seems to be particularly troubled by this year’s woes. They see an opportunity to become the New York Yankees of the West and, if it doesn’t happen this year, they know it will happen soon enough. When you're making money hand over fist, time isn't as of the essence as it is when you're on the verge of bankruptcy.
This report will probably spark a serious debate regarding the awful way that baseball picks and chooses which franchises will be successful. Oh wait, no, scratch that – this sport is built on that very concept.