This is a very curious development in Forbes magazine.
Forbes reports that there is a potential deal in which a South Korean sovereign fund
would invest in the Los Angeles Dodgers. The twenty percent investment values the Dodger assets at $3 billion according to two sources with knowledge
of the negotiation said Forbes.
Three years ago Guggenheim Baseball Management bought the Dodgers from the divorcing McCourts. That deal placed a value of $2 billion
on the team and Dodger Stadium, and a value of $2.3 billion including
260 acres of surrounding real estate. The current negotiations with the
South Korean investors is for about 20% of the team and stadium but does
not include the nearby real estate or the regional sports channel created by by the Dodgers and Time Warner. The deal the Dodgers have with the Dodger network pays the team a
total of $8.35 billion over 25 years with the money guaranteed by Time
Warner Cable.
The Cubs have also sold a minority stake in the holding company for the Cubs assets, including Wrigley Field and real estate developments. It was reported the Cubs needed to raise $350 million to complete the real estate projects, including the rehab of Wrigley Field.
But this does show a weakness in the baseball business model. A successful, large positive cash flow business that baseball is touted as does not suddenly have two of its big market teams selling off large chunks of ownership (abet minority stakes) if everything is going great. There would be no need to find investors.
But in the Dodgers case, their network roll out was a disaster. TW tried to extract too high carriage fees with other California cable and sat-tv systems so 75 percent of the Dodger viewers were without broadcasts last season. Suddenly, the new network cash cow looks like a diseased beast of burden.
Other teams, like the Angels, have huge dead money contracts on their books which have choked this off season's roster rebuilding. The Mets are still on financial thin ice after the Madoff scandal. Mets owners have tried to sell a minority stake for several years but don't want to give up control.
Former commissioner Bud Selig used to crow about how great and profitable baseball was under his tenure. But that tide may be turning faster than we think.
