LA Dodgers: 9 Reasons Why Rejection of FOX TV Deal Affects Current Ownership
After 20 months of wrangling by Los Angeles Dodgers owner Frank McCourt, his estranged wife Jamie and MLB commissioner Bud Selig, the Dodgers are no closer to resolution of their ownership issues after today’s announcement by Selig that MLB will not approve the pending TV rights deal between McCourt and FOX Sports.
In a statement released through MLB.com, Selig said:
"Pursuant to my authority as Commissioner, I have informed Los Angeles Dodgers owner Frank McCourt today in a detailed letter that I cannot approve the club's proposed transaction with FOX. This decision was reached after a full and careful consideration of the terms of the proposed transaction and the club's current circumstances. It is my conclusion that this proposed transaction with FOX would not be in the best interests of the Los Angeles Dodgers franchise, the game of Baseball and the millions of loyal fans of this historic club.
"Mr. McCourt has been provided with an expansive analysis of my reasons for rejecting this proposed transaction. Critically, the transaction is structured to facilitate the further diversion of Dodgers assets for the personal needs of Mr. McCourt. Given the magnitude of the transaction, such a diversion of assets would have the effect of mortgaging the future of the franchise to the long-term detriment of the club and its fans.
"As I have said before, we owe it to the legion of loyal Dodger fans to ensure that this club is being operated properly now and will be guided appropriately in the future. This transaction would not accomplish these goals."
While the announcement by Selig does not mean that McCourt is no longer the owner of the Dodgers, there is no question that today’s decision spells the means to the end of the McCourt era in LA.
For weeks, McCourt has said that the financial health of the Dodgers hinges upon approval of the deal worked out between McCourt and FOX Sports, in which FOX would obtain exclusive rights to television broadcasts at a cost of $3 billion over 17 years.
Reportedly $385 million was to be paid upfront by FOX, and recent reports suggest that almost half of the upfront payment would have gone directly to the McCourts, presumably to clear personal debt and to resolve their current divorce settlement.
Just moments ago, Frank McCourt released a statement through the Dodgers' press office:
“We are extremely disappointed with the Commissioner’s rejection of the proposed FOX transaction which would inject $235 million into the Los Angeles Dodgers. As Commissioner Selig well knows, this transaction would make the Dodgers financially secure for the long term and one of the best capitalized teams in Major League Baseball.
“For weeks Major League Baseball has consistently made public pronouncements asserting that Jamie McCourt’s agreement of the Fox transaction also was needed; that the Court adjudicating the McCourt divorce grant its approval of the transaction; and the Dodger organization provide all data requested by Major League Baseball to satisfy the so-called investigation ordered by Commissioner Selig last April – the latter also being the excuse he gave at that time for delaying his approval of the proposed FOX transaction.
“All the requirements for the Commissioner to approve the FOX transaction were put in place by last Friday: Frank and Jamie McCourt entered into an agreement based on the proposed transaction; the Court ordered, among other things, that the FOX transaction is “in the best interest of the Los Angeles Dodgers and should be consummated immediately;” and all information requested by Major League Baseball under its so-called investigation has been provided by the Dodgers.
“Commissioner Selig’s letter of rejection is not only a disappointment, but worse, is potentially destructive to the Los Angeles Dodgers, and Major League Baseball. Accordingly, we plan to explore vigorously our options and remedies with respect to Commissioner Selig’s rejection of the proposed FOX transaction and our commitment to protect the long-term best interests of the Los Angeles Dodgers.”
There are quite a few other ramifications that go along with today’s ruling by Selig and MLB, and Bleacher Report will break down each one of those ramifications.
Doug Mead is a featured columnist with Bleacher Report. His work has been featured on the Seattle Post-Intelligencer, SF Gate, CBS Sports, the Los Angeles Times and the Houston Chronicle. Follow Doug on Twitter, @Sports_A_Holic.
1. McCourt Divorce Settlement Now Null and Void
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On Friday, the McCourts reached a divorce settlement in which both Frank and Jamie agreed to a one-day trial in Los Angeles on Aug. 4 to determine whether or not Frank himself would be granted sole ownership or whether the Dodgers would be considered “community property.”
The settlement also promised a payment of $100 million to Jamie and sole ownership of the couple’s seven luxury homes if the judge in the case ruled that Frank McCourt is indeed the sole owner.
However, the settlement now becomes “null and void” after Selig’s decision to reject the TV rights deal, meaning the McCourts are no closer to settling their divorce case than they were 20 months ago.
2. Los Angeles Dodgers Could Be Seized by MLB After June 30
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Without the upfront money that the FOX TV rights would have provided to Frank McCourt, he is now clearly in danger of not being able to meet a substantial payroll deadline for the Dodgers on June 30. The upcoming payroll also includes more than $8 million due to ex-Dodger Manny Ramirez in salary deferrals.
If McCourt is unable to meet the payroll, MLB would cover the payroll period and demand that McCourt immediately put the team up for sale. If McCourt refuses, which is likely given his previous stances, MLB would then seize control of the team and offer it up for sale, with the profits from the sale going to McCourt.
3. Sale of Dodgers Likely to Be Delayed by Court Proceedings
Tim Brown of Yahoo Sports also believes that Selig is digging in for a protracted fight, and that he is well-prepared in the event that happens.
4. Sale of Minority Share of Dodgers Unlikely to Alter MLB Stance
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In the past, Frank McCourt has said that he would not give up ownership of the Dodgers, and also that he would not entertain the thought of selling a minority share in the team, similar to what New York Mets owner Fred Wilpon did just a few weeks ago.
Even now, if McCourt were able to find an investor willing to invest in a minority share, the deal would be subject to both the approval of MLB and the consent of Jamie McCourt. Any minority share investment would require that McCourt establishes sole ownership, and that obviously won’t happen until at least August.
5. Bankruptcy Proceedings Can’t Save McCourt’s Ownership Issue
With the rejection of the FOX television rights deal, Frank McCourt could file for bankruptcy and petition the judge to immediately order the implementation of the FOX deal.
However, MLB has a clause in its bylaws that allows commissioner Bud Selig to strip an MLB team from any owner who chooses to file for bankruptcy. That clause was a major factor in the Texas Rangers’ ownership situation last year with former owner Tom Hicks and his bankruptcy case.
A bankruptcy judge in that case ruled that the Rangers could indeed be sold despite Hicks’ claim that it should be protected, and the team was ultimately sold to a group headed by Nolan Ryan and Chuck Greenberg for approximately $593 million.
6. MLB Valued FOX TV Deal at Below Market Rate
Kevin C. Cox/Getty Images
The reported deal between FOX Sports and Frank McCourt had allegedly been valued at “in excess” of $3 billion over 17 years. That number includes the $385 million that would have been paid up front to McCourt to allow him to make payroll and satisfy personal debts.
However, in its research, MLB valued the deal at somewhere closer to $1.7 billion, which would have been well below market for a TV rights deal, and would have helped to set a bar that would have given other media conglomerates much more leverage in future deals.
If you don’t think this rejection is more about money and value than anything else, guess again.
7. Bud Selig Clearly Did Not Want the Team Further Leveraged by a Bad TV Deal
In his statement on MLB.com, Commissioner Bud Selig was clearly appalled at the revelation that almost half of the upfront money to be paid by FOX Sports to Frank McCourt would have been used for personal gain.
In his statement, Selig said:
“Critically, the transaction is structured to facilitate the further diversion of Dodgers assets for the personal needs of Mr. McCourt. Given the magnitude of the transaction, such a diversion of assets would have the effect of mortgaging the future of the franchise to the long-term detriment of the club and its fans.”
While many may think that Selig’s decision may be personal, or based on money, he is also a baseball purist who does not want to continue seeing the Dodgers’ franchise dragged through the mud any longer.
8. McCourt Could Still Possibly Be Landlord of the Dodgers?
One of the things that McCourt did in the course of time after purchasing the Los Angeles Dodgers was to split up its assets—the team, Dodger Stadium and the parking lots are all controlled by separate business entities.
So, while MLB could seize control of the Dodgers, McCourt would still own the parking lots and, according to NBCSports.com, other manners of ancillary income.
MLB could counter that by demanding that a judge seize McCourt’s other team assets as well, to protect the total Dodger package and make it more attractive to be purchased by a multi-millionaire/billionaire.
9. Los Angeles Dodgers Fans Ultimately Continue to Get Screwed
No matter how Monday’s decision bears itself out, the fans of the Los Angeles Dodgers are once again left wondering what will happen to one of the most storied professional sports franchises in history.
Attendance is down significantly, and the Dodgers will more than likely draw less than 3 million fans for the first time in 19 years. The team itself is nine games under .500 and with no money coming into the coffers, there is no hope of making any player upgrades anytime soon.
Unfortunately, MLB and Frank McCourt will prolong this battle, and Dodger fans will be left spinning in the wind for some time to come.