Did Dodgers Deal Give the Team Special Treatment?
It has been an interesting year to be a Dodgers fan. First you are dragged through the public spectacle of the McCourt divorce case, which made the once-beloved franchise the scourge of baseball. Then hope arrives with the long-awaited sale of the team to the group which includes Magic Johnson, bringing new fresh air to the franchise and an inspiring first half of play.
Then you hit the dog days, injuries take their toll, the Giants wake up and suddenly, the team is struggling to grab a wild-card spot. Maybe it was a nice effort and lots of hope for the future.
Then on August 25, GM Ned Coletti somehow pulls off a post trade-deadline blockbuster deal with the fading Red Sox, bringing in four superstars (including Adrian Gonzalez and Hanley Ramirez) with more than $260 million of contract obligations to Chavez Ravine just in time for the playoff race.
The deal again kick started the hopes of fans, who really saw the new ownership as willing to build the brand and spend whatever it takes to make the team a winner. However, the rest of the baseball world looked at the deal curiously. How could a group that had just doubled the biggest team sale in U.S. history still have an endless pot to go and acquire such risky and debt-laden contracts?
The deal, as baseball fans know, has not worked out on the field for the team thus far, with the Dodgers losing 17 of 29 games entering play tonight and edging closer to elimination as the days of the season draw to a close. But a report today by Bloomberg News may shed light on why the Dodgers were able to spend the money to acquire the contracts, a story which if true, probably makes the new ownership group even more astute than anyone even knew.
According to the story by John Helyar, Steven Church and Scott Soshnick, during the McCourt bankruptcy trial, MLB granted special and secret loopholes for the Dodgers to withhold money—millions—from the revenue sharing process that all MLB teams are subject to. Those special terms have given the Dodgers an advantage, and added cash to operate with, that they do not have to share with other teams.
They write: “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.'
With TV sports-rights experts saying the team could get as much as $225 million a year from a network’s rights fees, the Dodgers may enjoy an annual unshared windfall of as much as $141 million.
“The 'special terms' help explain the Dodgers’ improved finances since emerging from bankruptcy in April by being sold to a group led by Guggenheim Partners for $2.15 billion.”
MLB disputes the “special terms” according to Robert Manfred Jr., an MLB executive vice president, who is quoted in the Bloomberg story.
“The basic treatment is exactly the same as every other team in baseball,” Manfred said. “Any dollar that’s actually received in rights fees or signing bonus by the Dodgers is subject to revenue-sharing.”
However, many of those “special” terms have yet to be made public, and if true, thanks to some very shrewd planning, those who follow Dodger blue may get to benefit from more than a little added and unforeseen cash in the tiller as the free-agent market again opens.
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