So what happened was a Federal judge ordered the sale of the Dodgers in bankruptcy court, and in such a way that pleases both Frank McCourt and Major League Baseball. McCourt gets to pick the sale price, and MLB gets to approve the new buyer. There’s just one problem: the LA Dodgers aren’t worth the $1 billion Frank wants for them.
There’s one simple reason for this, and it comes from designing and building the Oakland Baseball Simworld that was the basis for my company Sports Business Simulations: baseball team values are based on a “multiple” that’s just over 2 times team revenue for one year, or about 2.2.
Now the next question is what’s the Dodgers revenue?
Well, according to LA Weekly, it has been this:
2009: $282 million
2010: $265 million
2011 (first half): $120 million
So if we take the highest level of $282 million, and double that, it’s 620,400,000, or $620 million, if you like.
That’s a good $400 million less than what Frank McCourt wants.
Maybe he wants to make a profit on the sale? Well, OK. But look. Frank bought the team for $421 million in 2004, so if he followed formula, he’d still wind up with $200 million in profit.
But what Frank’s factoring in are his own marital problems and his wife’s desire for $100 million from him. Thus, the $1 billion asking price. So, LA Dodgers tickets, seasons tickets, and luxury box revenues aren’t going to the acquisition of new players, but to Frank McCourt’s wife.
That may read like a stretch, but that’s what it boils down to. The McCourts were using The Dodgers as their personal ATM, and may have wrecked the franchise for the next ten years.
No, take that back – they have.
Stay tuned.