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How limited are the Dodgers new owners?

Mar 30, 2012, 8:12 AM EDT

ESPN Films "The Announcement" Los Angeles Premiere

I’m writing this from a hotel room in Los Angeles, where — despite it being just before 5am as I type this — my body thinks it’s still on eastern time. Stupid body.

Anyway, I flew here last night and, being a wise and prudent man, made my way to the hotel bar so that I might come to quickly understand my environment and the people that inhabit it. I found them to be a curious lot, somehow taken with the notion that the Dodgers’ new ownership group — despite not taking actual control for another month — will somehow will this team into immediate contention.

I was about to educate them about just how deluded they are when it comes to such matters — see my Dodgers preview here a little later this morning to get some real talk about this team that should disabuse anyone of such assumptions — but since they were buying my drinks I decided to nod and say “well, maybe.”

But no, it’s not happening. At least not in 2012. And not just because there is no way to practically improve this team at the moment. Rather, because there may be … constraints on this ownership group due to a $ 2 billion price tag.

Magic Johnson has basically pshawed that notion, saying that the Dodgers are going to be the Yankees west. But The Economist thinks differently:

At this price, everything would have to go right for the new owners to make a profit. They are required to make costly capital improvements to Dodger Stadium as part of the deal … And although the deal has been described as a “100% cash offer”, it is doubtful that even Guggenheim has $2 billion of its own capital lying under the mattress and available to buy a baseball team. The far more likely outcome is that the acquisition will have to be financed with a heavy debt load, whose interest payments will probably siphon off much of the franchise’s revenues and limit the owners’ ability to invest in it.

We’ve obviously seen that scenario before. But this time they’re claiming that things will be different. Will the new owners damn the torpedoes, and order full speed ahead on free agent acquisitions, or will they worry about that cash flow and skew conservative?

  1. robmoore - Mar 30, 2012 at 8:21 AM

    I would tend to think that with the revenue streams the Dodgers shoudl be able to pull in, they could manage $140 million payrolls and consider that conservative.

  2. brewcrewfan54 - Mar 30, 2012 at 8:23 AM

    I love getting hammered at a good hotel bar.

  3. stex52 - Mar 30, 2012 at 8:42 AM

    We are all pretty much speculating unless we have a good idea of the financing. If they are paying north of 100 MM$ just to service their debt, then they would have to be constrained. If it was just a cash deal (as claimed) then the only concern would be how small a return on investment the partners would be willing to see. I have to think that they have paid a premium price that it will take years of capital appreciation to grow into. In that case I would want a decent payout on my money. I think personally that such a large overpay (they had been estimated at 1.4 B$ value) and competition for the fan dollar with the Angels is going to hold them back for a while.

    • lanflfan - Mar 30, 2012 at 11:41 AM

      The only “competition” for fan dollar with the Anaheim Angels is from fairweather fans, people who know little about baseball and tourists. Real Dodger fans will be back with McAsshat out the door, and there are lots of those in LA (i.e. back to 3+ million in attendance for the year).

      • seanthegreatest - Mar 30, 2012 at 1:04 PM

        Seriously? “Real Dodger fans will be back”. Sounds fairweather to me.

  4. pbannard - Mar 30, 2012 at 8:44 AM

    For the opposite take, which argues the new Dodgers ownership will be in a strong position financially to spend money, see (via Dodger Thoughts). Agreed on this year, though – this is a perhaps a .500 team that has a chance to contend if they overperform/get lucky and 87-88 wins takes the division. The only midseason pickups I could see having an effect are Oswalt or a salary dump that still has something left in the tank (Jason Bay if he has a bit of a comeback season, perhaps? Can’t think of many others who could be useful enough to justify picking up).

  5. xpensivewinos - Mar 30, 2012 at 8:48 AM

    So when the dust settles, which of the “losers” from the Dodgers bidding war empties out the change in the ash tray in his car and buys the team 120 miles to the south????

  6. savocabol1 - Mar 30, 2012 at 9:00 AM

    Every owner wants to win. Just because Magic Johnson is one of those owners now, it is ridiculus to think that all of a sudden they are going to become a major power player.

    • paperlions - Mar 30, 2012 at 10:02 AM

      Or make good baseball decisions or hire the right people to make good baseball decisions. Getting the right people in positions to make good decisions is the most important thing an ownership group can do…after that, they just need to get out of the way and let the people they hired do their jobs.

      As a rule, the more meddling a baseball owner (or football owner) is, the more the team struggles and under-performs.

  7. mybrunoblog - Mar 30, 2012 at 9:41 AM

    How much of the team does Magic Johnson own? I understand he is wealthy but I doubt he has the cash to come up with the $ it took to get this deal done.

    • paperlions - Mar 30, 2012 at 10:05 AM

      Not much, he’s the “front man”, not the “money man”.

      • smoothaswilkes - Mar 30, 2012 at 11:47 AM

        not much is relative with the sale price being 2b but Magic is worth around 500m so I would assume he put $$ towards the purchase as well. Even though Magic is a great ambassador for Los Angeles and will do well in the “front man” role, it would be silly to think he doesn’t have much skin in the game.

  8. vanmorrissey - Mar 30, 2012 at 10:49 AM

    Agree wholeheartedly that the reality is they won’t be going out and spending on free agents anytime soon. Once the honeymoon period is over and reality kicks in, prices go up, Magic’s face is all over LA and the news trying to attract players, sure, they’ll be players for anyone out there and can afford to sign some of their own free agents, but it sure as heck won’t be a Yankees west. They’ll get the big TV deal to help out but Stan Kasten will be lifting the heavy load in getting the baseball side of things going. He’s good but it will remain to be seen how it plays out.

  9. blabidibla - Mar 30, 2012 at 10:53 AM

    Dodgers can count the fans returning to Dodger Stadium. With McThief gone, the nearly empty park will fill up again on a daily basis regardless of how well they play.

  10. tuftsb - Mar 30, 2012 at 11:20 AM

    The present value of a $ 3 billion/20 year new TV deal would be about $1.9 billion or $ 200 million shy of the purchase price. I do not think that the Dodgers new owners will be having financial difficulties

  11. lanflfan - Mar 30, 2012 at 11:49 AM

    Welcome to LA Craig. The weather won’t be trademark sunny, but it’s better than other places.

    I must agree that this year will be tough, with McAsshat remnants infecting things. But the fans will return with Frank gone, and things will turn around. I would trade 2-3 years of tough going while building through the draft/farm system and establishing a team that will compete for rings for 10 years.

  12. wj4122 - Mar 30, 2012 at 1:34 PM

    The stadium will fill up that’s a no brainier. The tv deal means that the new owners had to pay a little now but will be handsomely repaid!! Money is not going to be a problem. The dodgers have a great foundation to work off of with Matt kemp ,Clayton kershaw and in manager don mattingly. They have the brains with Stan kasten to make solid and smart deals and magic is going to take great care of the players even off the field outside of baseball. The dodgers is going to be the place to be if your a free agent. Wait and see how many big free agents hold out till they get the chance to bring the dodgers into negotiations……Cole hamels

  13. gogigantos - Mar 30, 2012 at 2:28 PM

    I wish they were limited. It seems to me that a group willing to over pay is a group willing to overspend to put asses back in the seats and get back to winning.
    F Magic and FFFFF the new owners and all their FFFFFFFen money.
    Craig, I think you are way wrong on this one. This is a group that has just begun to shell out the clams and the FFFFFFFFF Fodger Fans should be way happy about it. Sure, maybe it takes a year or two to wash off the dirt,, but man oh man. I shit myself what this group is ready to spend to make even more money. My only joy is that the assclown Colleti will soon be out of a job. Even so, he will retire to a nice island way beyond my means, or an office job with MLB?! Like all the assclowns in this story who stole more soul than they will ever have and living way beyond my means, I will never reach him, or them, to pop one in their skull like I think they need,,, run away Colleti,, not walk,, run from LA,,,
    run Frank
    run for the hills
    run for your life

  14. gogigantos - Mar 30, 2012 at 2:35 PM

    sorry,, simple answer,,, not limited at all

  15. spyder13met - Mar 30, 2012 at 11:45 PM

    The economist is an idiot.
    “At this price, everything would have to go right for the new owners to make a profit. They are required to make costly capital improvements to Dodger Stadium as part of the deal … And although the deal has been described as a “100% cash offer”, it is doubtful that even Guggenheim has $2 billion of its own capital lying under the mattress and available to buy a baseball team.”

    Anyone who owns a business that they started or bought knows that you don’t make a profit in the first few years as initial costs will amount to more than any returns. in the long run, the owners should make money, but it will take several years. I’m sure the new owners know this.

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