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JAMES FLANIGAN

And It's Out of the Ballpark . . .

May 18, 1997|JAMES FLANIGAN

Fittingly, confirmation that Rupert Murdoch's News Corp. is in talks to purchase the Los Angeles Dodgers came last week from both Los Angeles and Tokyo, where Murdoch was signing up partners for his Japanese satellite broadcasting service, JSkyB.

It was fitting because the future of the Dodgers--as well as of most other baseball teams and franchises in other sports--will involve greater international presence.

Dodger players soon will be playing more exhibition games in Asia, greeting fans who watch them on Murdoch-owned satellite services based in Hong Kong and Tokyo. The Dodgers and other teams already play many exhibitions in Mexico.

And within a decade, it's a good bet that teams from other continents will be part of U.S. major league sports.

Indeed, the promise of growing international markets is one reason for the relatively high price being discussed for the Dodgers: $350 million.

But a question arises. The Dodgers' present owner, Peter O'Malley, was the first sports businessman to see international possibilities. In the 1980s, he hired Mexican pitcher Fernando Valenzuela and drew millions of followers in Mexico and Latin America. Two years ago, O'Malley eagerly paid a $2-million bonus to snare Japanese pitcher Hideo Nomo. He then added South Korean pitcher Chan Ho Park to the Dodger rotation.

So why are O'Malley and his family selling now, when international markets beckon more than ever?

Because the economics of big-time sports today demand corporate ownership. As sports teams have become entertainment attractions, anchoring television and cable networks, team revenues have risen, but so have costs. Athletes make as much as movie stars, and often are better known. To shoulder the bigger budgets, sports owners need the multiple sources of revenue that media-entertainment corporations have.

Proportions are different. A value of $350 million is immense to the O'Malley family but, frankly, a lesser investment to News Corp., which is discussing a $1- billion offer for Pat Robertson's Family Network even as it carries on talks with the Dodgers.

Three years ago, News Corp. paid $1.6 billion to bolster its Fox Network with National Football League broadcasts; in Britain, rights to soccer games were key to success of its BSkyB satellite venture. The Dodgers, already on Fox cable channels domestically, will go by satellite to other parts of the world.

Sports ownership by media companies has been growing fast. Walt Disney owns the Anaheim Angels in baseball and the Mighty Ducks in hockey; since its merger with Turner Broadcasting, Time Warner owns baseball's Atlanta Braves and basketball's Atlanta Hawks.

"Murdoch buying the Dodgers sends a big signal. Teams in every sport are now looking for corporate buyers," says investment banker Paul Much of Houlihan Lokey Howard & Zukin, a consulting and investment firm specializing in sports franchises.

Teams in smaller markets that may not attract major corporate attention "will go public" to get needed capital, Much predicts.

He recently wrote an analysis pointing out that sports franchises fetch a higher value when they are combined with other assets than they do as stand-alone teams. As examples, Much compared Florida Panthers hockey team stock, which rose in value after the team merged with two resort businesses, to basketball's Boston Celtics limited-partnership shares, which were trading--on the New York Stock Exchange--below invested capital value until a recent uptick.

Owners of baseball and other sports teams reportedly passed that analysis around.

Still, for all the fanfare about today's deals, there is nothing new about corporations owning sports teams. In 1964, CBS bought the New York Yankees, for $13 million, with an early idea of the marketing synergies buyers dream of today. But it was a different time, the marketing connections never jelled, and CBS sold the Yankees in 1973 for $10 million to an investor group led by businessman George Steinbrenner.

In 1981, Tribune, owner of the Chicago Tribune and other newspapers and of television stations, bought baseball's Chicago Cubs for $20.5 million. The team might fetch closer to $200 million today. But the real payoff for Tribune is that the Cubs as a marketing attraction have increased the value of the company's WGN cable superstation.

And there is nothing new about teams as marketing adjuncts of other businesses. The 1920s Yankees of Babe Ruth fame were owned as a marketing ploy by brewer Jacob Ruppert; basketball's Pistons, now in Detroit, originated in Fort Wayne, Ind., as a billboard for auto parts maker Fred Zollner.

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