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Report: the Dodgers got a sweetheart deal limiting their revenue sharing liability

Sep 27, 2012, 5:40 PM EST

Image (1) dodgers%20logo.jpg for post 3955

UPDATE:  It seems this was not really news, despite Bloomberg’s reporting it as such.  Bill Shaikin of the Los Angeles Times reported this back in May.  We missed it then.  Apologies to the Times.

5:40 PMIf this report from John Helyar of Bloomberg is true, whoa, MLB is going to have A LOT of explaining to do to, well, every team that is not the Los Angeles Dodgers:

The Los Angeles Dodgers have shot out of bankruptcy and into the ranks of baseball’s biggest spenders, fueled partly by a secret agreement between former owner Frank McCourt and Major League Baseball that may limit the revenue the team is obliged to share with less prosperous clubs.

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.”

The upshot: the Dodgers — based on assumptions about what their new TV deal will bring them — will be able to hold on to some $141 million a year that they would otherwise have to share with other clubs in the league. That’s because their new deal will bring in far, far more than $84 million a year. Indeed, its estimated that it’ll bring in $175 million to $225 million a year over the 20- year contract.

This would help in part to explain the massive sales price of the team, as the biggest financial hurdle a large market/revenue team faces is its revenue sharing obligations.

Major League Baseball Executive Vice President Rob Manfred pushes back against this, saying that the revenue sharing figures will be based on the actual TV revenue the Dodgers receive.  Which … seems like a direct contradiction of the whole story.  So, I’m not sure what’s going on here.  Bloomberg is obviously reporting, based on several sources, that there is a deal to cap revenue-sharing eligible TV money. Manfred’s words suggests that’s not the case.

Any help here, anyone?

  1. jayscarpa - Sep 27, 2012 at 5:48 PM

    I don’t see how MLB could implement a revenue sharing cap for one team without the knowledge and consent of all the owners. Sounds fishy.

    • pharmerbrown - Sep 27, 2012 at 6:03 PM

      Anything to get rid of McCourt. He seems to have personally embarrassed Selig to the point where he (Selig) would, at least in his eyes, be obligated to enable the sale in order to preserve the sanctity of the game.

  2. mlayer - Sep 27, 2012 at 5:50 PM

    Not sure how much of a story there is here. The CBA calls for all teams to share 34% of locally-derived revenue regardless of source, minus deductions for stadium expenses. There may be a cap, but the difference between capped and uncapped may be nominal at best.

  3. jfisher00 - Sep 27, 2012 at 5:59 PM

    Manfred seems technically right: the *Dodgers* will still have to share 34% of what the Dodgers bring in. Assume the TV entity will be an affiliate, and it’ll pay up to the Dodgers’ corporate parent, but not the Dodgers.

  4. jfisher00 - Sep 27, 2012 at 6:00 PM

    So, 34% tax on $84MM rather than ~$225MM.

  5. Panda Claus - Sep 27, 2012 at 6:25 PM

    Look, Peter Angelos got a sweetheart deal (the MASN TV network which shows both Oriole and National games) back when the Expos moved to DC. Angelos got a majority share of MASN money for going along with the move.

    While a very favorable Dodger deal sounds fishy, parity and complete revenue sharing has never really been in MLB’s bag of tricks leading up to this point. The current luxury tax/revenue sharing approach is better than it used to be, but it’s still a long way from fair.

  6. randygnyc - Sep 27, 2012 at 6:27 PM

    I don’t think it’s possible. I can’t wrap my head around the amount o civilf litigation that would surely follow, not to mention the criminal investigation.

  7. bigjimatch - Sep 27, 2012 at 8:26 PM

    bankruptcy filings filed online, if there were a compromise of mlb claims against the dodgers in the bankruptcy case, it may be in a pleading.

  8. hep3 - Sep 27, 2012 at 8:29 PM

    John Helyar wrote the book about baseball labor wars, The Lords of the Realm, and co-authored the book about the RJR-Nabisco merger, Barbarians at the Gate.

    I would think he may know what he is talking about. Business and Baseball are right in his wheelhouse. It will be very interesting to see how this plays out. It could be another Bud Selig embarrassment.

    • Bob - Sep 27, 2012 at 9:04 PM

      Bud Selig is an embarrassment.

  9. Bob - Sep 27, 2012 at 9:03 PM

    The Dodgers get the sweetheart financial deal once the new owners agree to move to the American League. It’s called the Astros Special, without the financial consideration.

  10. phillysoulfan - Sep 28, 2012 at 1:36 PM

    Yeah, I don’t see how Selig could have done this without the consent of the owners. He would also need consent from the player’s union as well. So I don’t think this is true.

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