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Dodgers to keep more than $6 billion from TV contract in tentative pact

In a potential settlement with Major League Baseball, the team could maintain its record player payroll. An agreement in the ongoing talks would end court's jurisdiction over Dodgers.

June 13, 2013|By Bill Shaikin
  • The Dodgers are set to retain more than $6 billion from their new television contract under a tentative agreement with Major League Baseball, according to people familiar with the agreement.
The Dodgers are set to retain more than $6 billion from their new television… (Christina House / For The…)

The Dodgers would retain more than $6 billion from their new television contract under a tentative agreement with Major League Baseball, according to two people familiar with the agreement.

The settlement would avert a showdown between the Dodgers and MLB in U.S. Bankruptcy Court and would effectively end the court's jurisdiction over the Dodgers' affairs. The people providing the information about the settlement spoke on condition of anonymity because negotiations have not concluded.

MLB officials declined to comment. Dodgers co-owner Todd Boehly said he could not discuss ongoing negotiations but said the team could maintain its record player payroll under the settlement.

The Dodgers would like to sign ace Clayton Kershaw to a long-term contract extension, and the expected price tag could be at least $200 million. New York Yankees second baseman Robinson Cano, the best player among potential free agents this fall, might also command a $200-million contract.

Boehly declined to comment on specific players. However, when asked whether the Dodgers could afford to take on two players with $200-million contracts if the baseball operations department recommended it, he answered, "Yes."

"And, if there was a need to put another $100 million into the stadium, we could do that too," said Henry Silverman, senior managing director of Guggenheim Partners. Boehly is the president of Guggenheim Partners and a partner in Guggenheim Baseball Management, the entity that owns the Dodgers.

In its first year of ownership, Guggenheim put $100 million into an initial round of Dodger Stadium renovations and took on more than $600 million in player salaries. The spending spree — and the record $2.15 billion Guggenheim paid for the team, stadium and land — was fueled partly in anticipation of the billions that would flow when the Dodgers sold their television rights.

The settlement between the Dodgers and MLB indicates the overall value of the Dodgers' 25-year contract with Time Warner Cable at about $8.5 billion, according to one of the sources of the settlement information.

The Dodgers' current contract with Fox Sports expires after this season. Fox pays the Dodgers $39 million this season, with the team forwarding $13 million to an MLB revenue-sharing pool.

Under the terms of a court settlement between MLB and former Dodgers owner Frank McCourt, the league agreed that $84 million would represent fair-market value for the first year of a new television deal, with the usual 34% assessment for revenue sharing.

Guggenheim initially took the position that any amount above $84 million was not subject to revenue sharing; MLB claimed every dollar of guaranteed television revenue was subject to the 34% levy.

MLB generally exempts profits from team-owned television networks. The Time Warner deal provides the Dodgers with ownership of the new SportsNet LA network, but MLB disputed how much financial risk the team would take.

Under the tentative settlement, the league would agree that about $130 million represents fair-market value for the first year of the deal; the Dodgers would pay 34% — about $44 million — into the revenue-sharing pool. Those figures would rise every year.

The Dodgers ultimately would pay close to $2 billion for revenue sharing over the life of the TV contract.

bill.shaikin@latimes.com

Twitter: @BillShaikin

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