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SECOND SEASON |INSIDE THE DODGER FRONT OFFICE

How the Dodgers' Owner Got His Financial Lineup in Place

The first of two parts.

April 03, 2005|Thomas S. Mulligan | Times Staff Writer

When he sold the Dodgers to Fox Sports Enterprises in 1998, having lost $12 million the previous season, Peter O'Malley declared Major League Baseball's era of family ownership over.

Player salaries had grown too high for a baseball-only business to succeed, O'Malley said. He figured that corporate owners such as Fox Sports, a unit of media giant News Corp. with the ability to cross-promote the team through its TV properties, were the wave of the future.

This week, Frank McCourt begins his second season of trying to prove O'Malley wrong.

The question is the same today as when the Boston real estate man emerged 18 months ago as the owner-to-be: Is his wallet fat enough to keep the Dodgers competitive against teams owned by billionaires, well-heeled partnerships and Fortune 500 corporations?

Because McCourt put up little cash, his purchase has been seen as a high-wire act. But sports business experts say revenue-boosting moves in the off-season, combined with the underlying strength of the Dodgers -- the team's large and loyal fan base -- have convinced them that McCourt has a better-than-even chance of success.

"It's a great turnaround opportunity -- a great brand, a great market with deep fan loyalty and very positive demographics," said New York investment banker Salvatore Galatioto, who for years ran the sports finance business at Lehman Bros. and recently opened his own firm.

Fans returning to Dodger Stadium this weekend for the Freeway Series against the Angels are seeing a number of changes in the 43-year-old ballpark aimed at increasing revenue.

For example, some 1,600 premium seats have been added along the baselines. A 3-foot-high, 1,100-foot-long electronic "ribbon board" has been installed on the facing of the loge section to flash advertising, along with scores and statistics. Chicago-based Levy Restaurants, which used to handle just the premium dining, has taken over food concessions for the whole stadium.

McCourt, 51, has been widely criticized for a series of moves since buying the team, including gutting the front office, installing wife Jamie McCourt as executive vice president, trading popular players such as All-Star catcher Paul Lo Duca, failing to re-sign third baseman Adrian Beltre and dumping longtime announcer Ross Porter.

The owner made more headlines late last week -- firing two high-ranking executives, expanding his wife's duties and appointing his 23-year-old son Drew as marketing director.

Amid lingering doubts about his stewardship, McCourt recently drew back the curtain on the team's finances for the first time, explaining how his $421-million purchase was structured and how he intended to turn around a business that was losing as much as $50 million a year when he bought it.

The key points:

* An improved TV-rights deal signed with Fox at the time of the purchase, plus increases from other TV and radio fees, should boost revenue by about $15 million this year.

* The new field-level seats, which sell for $65 to $400 apiece, along with price increases on seats in the most desirable locations, should bring in $10 million to $13 million in new revenue, depending on attendance.

* Parking-fee increases imposed last year for most spaces and this year for season-ticket holders, plus new sponsorship and concessions contracts taking effect this season, together should add $10 million.

* Payroll is down by $10 million from 2003, Fox's last season. It remains one of the National League's three highest, however, enough to keep the team competitive, McCourt said.

Under the terms of the purchase, Fox agreed to give McCourt's Dodgers two so-called training-wheels payments: $35 million last year and $15 million this year. McCourt said the first payment and the parking and broadcast fee increases -- plus an attendance surge from the team's first divisional championship since 1995 -- put the Dodgers slightly in the black last year.

This year, he said, the reduced payroll, additional ticket revenue and new sponsorship and concession deals should more than make up for a smaller payment from Fox, again putting the team in the black.

"Being profitable isn't the point," McCourt said in an interview in his wood-paneled office overlooking left field. "The point is to at least break even and have a sound, healthy business."

Professional sports ownership has always been more about building the asset value of a franchise over time rather than taking out profit along the way.

McCourt's approach to real estate has been similarly deliberate. The jewel of his holdings is a 24-acre harbor-side parcel in South Boston that has mushroomed in value since he bought it 25 years ago, but it has been used mainly for surface commuter parking lots.

Long criticized in Boston for being too slow to develop the high-potential site, McCourt finally took a big step last month, forming a joint venture with Related Cos., developer of New York's Time Warner Center and the $1.2-billion Grand Avenue project in downtown Los Angeles.

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