Once upon a time there was something in this country known as the Penn Central Railroad, and it went bankrupt in the 1970’s. The eastern terminus was the Boston seaport. A novice developer named Frank McCourt put up $300,000 in equity to purchase the 24 acre rail yard by the waterfront. A decade of Jarndycean litigation ensued, and when the smoke cleared, McCourt emerged as the title holder. Happily for him, during that time his legal opponents had turned the yards into a parking lot, generating $4 million in annual income. The parking lot now belonged to Frank and became his personal cash cow. The Commonwealth of Massachusetts paid him $30 million for use of half of it during the construction of the Big Dig. He then sued the state for infringing on his property rights and won an additional $32 million. In 2004 he bought the Dodgers, leveraging the equity he had in the parking lot in Boston.
Let’s unpack this. McCourt puts up less than a million dollars to be a developer, develops nothing in two decades, and ends up owning one of the storied franchises of sport. Eight years later, without a World Series appearance or any serious investment in the team, he sells for….$2 BILLION. That’s twice the price of any franchise in history. That’s $1.3 Billion more than the Dodgers were valued in 2010 by Forbes magazine.
Here’s the punch line: McCourt gets to keep a 50% ownership of the stadium parking lots and their yearly income of…reportedly, $5 million. Have you ever heard such madness? Who would be the signatory to a deal like this? Where is this money coming from?
And now the Dodgers are off television in 80% of LA, hostage to machinations between competing cable interests. Or so we are told.
Here’s the real punchline: McCourt is not actually the villain here. You read that correctly. Other than being a cheapskate owner and living like Croseus off increased ticket prices, what are his sins? He made two exceptionally advantageous deals, one to buy and another to sell. On neither occasion did he hold a gun to anyone’s head. Under his reign, all Dodger games were on TV, half of them on local broadcast, freely to be had with an antenna.
No, the villains here are prominent local businessmen Stan Kasten, Peter Guber and Magic Johnson. They may be rich, but they don’t have a billion dollars between them. They don’t have half a billion. What they have is the cable rights to future Dodgers broadcasts, against which they have leveraged this deal. Under the new regime, Dodger games are available only on a newly created one-team channel called SportsNetLA. Time Warner Cable is demanding from competing cable operators $5 a month/per subscriber to carry the broadcasts. Naturally, Direct TV and others are resisting. What the new Dodger ownership is demanding is nothing less than a lien against the earnings of every working southern Californian with a TV connection, whether they watch baseball or not.
The Dodgers have the right to charge $20 for parking and $40 for nosebleed seats, even $10 for a hot dog, if they choose. They can package all their broadcasts behind a paywall like NFL Sunday Ticket. May the team live and prosper, and I say that as a lifelong SF Giants fan. What the new owners DON’T have the right to do is off-load the obscene weight of the McCourt buyout on the unsuspecting people of Los Angeles. If selling the Dodger channel on an a la carte basis was a viable business plan, (i.e, if there were enough Dodger fans willing to pay), they would have done so. It isn’t, therefore they haven’t.
The investors are not paying McCourt, we are. Against our will, and without being told we are.
So, if I have this straight in my head, I am now in a position of rooting for the remnants of the Howard Hughes empire to hold the line against the former head of Sony Studios and a subsidiary of the 3rd largest media company in the world in a battle over who will finance the contracts of Zack Grienke and Clayton Kershaw, and possibly a Grove-like development in the hills above Echo Park. Because if Direct TV caves, the others will as well, and very soon we will all be getting a bump in our monthly bills, and when we sit down to write checks every month a nice piece of that will be going directly into the pocket of Frank McCourt, parking lot king.
No wonder they got Magic Johnson to be the public face of this deal.
That’s one way people in Brentwood screw people in Van Nuys.