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Comparing and contrasting the Wilpon fooforaw and the McCourt arglebargle

Feb 9, 2011, 3:30 PM EST

Frank McCourt

That’s what Bill Shaikin is up to over at the L.A. Times today.  At least comparing the possible solutions to it.

Shaikin notes that one possible outcome that is being discussed with the Mets is that the Wilpons would sell part of the team and maybe a stake in their television network SNY and use the money to pay off the bankruptcy trustee. Shaikin writes:

What that means is that Wilpon could sell a share in the Mets and/or SNY, the team-owned cable channel, to help finance a settlement, at $1 billion or something less. And what that means for baseball is that Wilpon would be diverting the money generated from any such sales to resolve litigation rather than to improve the team.

McCourt and his attorneys would find that extremely interesting.

Commissioner Bud Selig has so far resisted any deal in which Fox would pay McCourt a hefty sum in exchange for the Dodgers’ long-term broadcast rights. The logic: The money Fox would pay should go to improve the team, not to pay off an ex-wife in a divorce settlement.

Except I don’t see how these situations are similar. At all.  In the Wilpons case it would be selling an interest in the actual network that they own, not auctioning off the team’s broadcast rights for the purposes of settling litigation.  In the former case it’s the owners’ property being sold. In another it’s revenue that should, by all rights, inure to the benefit of the team itself, being diverted away from the team.  Frank McCourt doesn’t own FOX Sports.  His team sells the right to broadcast baseball games it plays.

A better analogy here would be if McCourt wanted to sell off his stamp collection or some other big parking lot he owns or something to pay off his wife.  I’m sure that Commissioner Selig would have no trouble with that.  I can totally see, however, why he’d differentiate between Wilpon using SNY sale proceeds to pay off the bankruptcy trustee and McCourt using the Dodgers’ broadcast rights to finance his divorce settlement.

So sorry Frank.  Your problem may not be as big as Fred Wilpon’s problem. But your universe of possible solutions is indeed smaller.

UPDATE: There’s a lengthy and quite critical update to this post here.

  1. professorperry - Feb 9, 2011 at 4:07 PM

    The solutions here are obvious.

    McCourt calls up the Wilpons and tells them about a great investment scheme and uses the money they borrow to invest to pay off Jamie. The Wilpons then convince others to invest in McCourt industries, and use that money to pay off the Madoff debt.

    BRILLIANT

    • kiwicricket - Feb 9, 2011 at 6:18 PM

      Win win…..win

  2. indyralph - Feb 9, 2011 at 4:22 PM

    I see how they are different, but are they really THAT different? An interest in a network is a different asset than broadcasting rights, but they are both assets. And both assets derive (most of) their value by association with an MLB team. It seems to me that the only real difference is precedent. While all teams (I believe) currently sell broadcasting rights and use the revenues to support their teams, not all teams have their own networks which generate revenues that support the teams. So the Wilpons would not become the first team without a network, but Frank would be the only team without broadcasting revenue. Unless something compels owners to use broadcasting revenue to support the team (aside from fan and media outrage), I’m not sure there is that big a difference.

    • Craig Calcaterra - Feb 9, 2011 at 4:34 PM

      Never underestimate the value of the outrage.

      What I didn’t say in the post but which should have been made more clear is not that the distinction makes sense. It’s that the distinction is very important to Bud Selig and he will, for various reasons I’m going to write about later, likely work hard to make sure that RSN money and pure rights money are treated very differently.

      • indyralph - Feb 9, 2011 at 4:41 PM

        Fair enough. I can see how the precedent I mentioned would make Selig want to make a clear distinction between the two. Thanks, Craig.

  3. seeingwhatsticks - Feb 9, 2011 at 4:38 PM

    What would the minority Mets investor actually be getting? I mean other than debt. The Wilpons are pretty clearly incompetent and they wouldn’t be giving up any control of the team. The franchise is mortgaged to the max so any profits generated are going to go towards paying off debt for the forseeable future. The minority investor is basically giving the Wilpons a loan that may or may not be repaid someday in the hopes that the franchise value will dramatically increase. I think it’s becoming clear that the Wilpons want to retain their team, and the status that comes with being an owner, even though they can no longer afford it. A competent commissioner with a pulse would probably be putting pressure on them to sell ASAP but I don’t think Bud has ever been described as “competent” or having a “pulse.”

    Put aside for a second the question of why anyone would want to invest with the Wilpons given all we know. If the Wilpons owe close to $1 billion, and the team is worth about $900 million, how can they afford to retain any interest in the franchise (let alone controlling interest)? What am I missing?

    • indyralph - Feb 9, 2011 at 4:49 PM

      I mostly agree with your whole minority investor theory. But the math is not quite as simple as your last sentence. There are plenty of people right now who have $100k mortgages on homes that are now worth $90k. They’ll keep their homes as long as they can still make the mortgage payment. Where it would become an issue is if the bank suddenly said, “Nope, we need our $100k back now.” Then most of those people would lose their homes. And that’s the situation the Wilpons face. So the Wilpons could be holding out for a settlement that allows them to pay periodically without selling their most valuable asset. And Bud may just be hindered by the practicality of selling a sports franchise ASAP while dealing with a stubborn owner. Not to say any of that is a realistic outcome.

      • seeingwhatsticks - Feb 9, 2011 at 4:54 PM

        That’s true. I guess I was jumping ahead a few steps. I do wonder how much money they can actually be making and thus how much debt they can actually be paying off, when they seem to have no cash reserves, a bloated payroll, and a bad team? The Mets were 12 in attendance last year at about 32,000/game while playing in the biggest media market in the country in a stadium that’s only 2 years old. Without Santana, and with a team that has no chance to compete, how do they expect to even maintain that, let alone improve on it? I don’t have tv ratings info available but I would suspect those were down and will continue to fall as well.

      • indyralph - Feb 9, 2011 at 5:08 PM

        Agreed. Forbes estimated 2009 operating income of $26 M. That’s a lot of years to get to $1 B. But I suspect the Wilpons still expect (though each day it sounds less realistic) to have to pay a fraction of that. And they may have other assets less dear to them than the Mets that they’d be willing to sell first. I understand why they aren’t throwing in the towel just yet.

      • Dan in Katonah - Feb 9, 2011 at 5:14 PM

        This harkens back to the early posts about how the whole Madoff mess will effect the Mets. If the revenue is being directed to pay foolishly incurred debt, then you can forget chasing Pujols or any other decent FA and kiss Reyes goodbye at the trading deadline. Not to kick the hornet’s nest, but I notice a certain acerbic, quote-loving poster has been particularly quiet as the facts and allegations against his super-friend Fred keep rolling out…

        What say you Chris, still think this whole fiasco will not effect the team going forward?

      • chrisny3 - Feb 9, 2011 at 6:28 PM

        LOL, Hi Dan in Katonah! I see you haven’t forgotten me (and I see Craig is just as enamored with the Madoff affair as he was all last week).

        I never said the Madoff thing “won’t effect the team going forward.” I suggest you read my position more carefully next time so you won’t misrepresent my opinions.

        I did say 1) That up until the lawsuit being filed last December, Madoff had no significant impact on the Mets and 2) The Wilpons and Katz would be better off fighting the lawsuit than simply agreeing to pay Picard what he wants, which we now know is a billion bucks. And Picard isn’t budging from that amount, reports said last week. Therefore, if the Wilpons/Katz end up paying substantially less than a billion dollars, which I predict will be the case in the end, then they will definitely have come out ahead vs. just giving in to Picard’s outrageous demands.

      • chrisny3 - Feb 9, 2011 at 6:39 PM

        As for how this MIGHT impact the Mets going forward, Dan? Let me speculate …

        In the short term, for the remainder of the season, I don ‘t think there will be any significant impact. The payroll is 150 million, one of the largest in the game, and it will stay that way (more or less) all year. Moreover, absent a settlement, this case stands to drag on perhaps into 2012 and beyond. The Wilpons/Katz are already appealing a specific aspect of this lawsuit (net equity) before a federal appeals court on March 3rd. Given the appeal even before any trial or settlement, I wouldn’t be surprised if this doesn’t get settled until 2013. During that time, the Wilpons will continue to run the team, with budgetary restraint yet no substantial budget cuts. In other words, I doubt you will see a payroll in the future that is significantly less than what it is now.

        In the long term — a year or 2 or 3 from now, it is anyone’s guess. It all depends on how everything goes in terms of the lawsuit and in the appellate courts. It could mean very little ultimately changes for the Wilpons and the Mets … or it could mean a WHOLE new ownership in place (but not before 2012).

  4. crankyfrankie - Feb 9, 2011 at 6:14 PM

    I concur with everyone’s take on there being no upside to being a minority owner of the Mets. There is no upside to investing any money into this sinkhole. I feel bad for Alderson and friends as they have signed on to Captain the Titanic.

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