Business Update with Mark Lacter

LA Dodgers; Sacramento Kings

KPCC business analyst Mark Lacter talks about how the beating of a San Francisco Giants fan at Dodgers Stadium has economically affected Dodgers' onwer Frank McCourt; he also talks about whether the Sacramento Kings will move to Anaheim.

Steve Julian: Mark, the Dodgers were in San Francisco last night, nearly two weeks after team fans critically beat a Giants fan on Opening Day in LA. Players from both teams told the crowd the rivalry belongs only on the field and there was a fundraiser yesterday at Dodger Stadium. I can only imagine the attack has to add to Frank McCourt's problems.

Mark Lacter: It's not only that horrible incident involving the Giant fan getting beaten up. It's the general lack of security that anybody going to the ball park has probably noticed, it's the minimal lighting in the parking lot, it's the fact that the team promotes those half-off beer sales - these are all examples of the way that McCourt has been operating the club. And you can start to understand why he has such a bad reputation in major league baseball circles - and why the league officials are said to be so reluctant to approve his $200 million loan from Fox. That's an advance on a possible TV deal with the Dodgers, and McCourt apparently needs the money - badly - so he can work out his divorce settlement and hold onto the team.

Julian: He's not the first baseball owner who has run into financial problems.

Lacter: True. You have the owners of the New York Mets - they're trying to find new investor money after losing millions of dollars on the Bernie Madoff scam, and they're being sued by the trustee representing the Madoff victims. So, just because you're rich doesn't mean you're necessarily wise. Of course, these are not just any investments; the Dodgers are a beloved institution in the city of L.A., and the big concern about McCourt - and this really goes back to when he bought the team in 2004 - was that he would not embrace that responsibility (you might recall that the purchase price was $430 million and McCourt borrowed all but $9 million of it). So a pretty good deal. The divorce filings provided a window into just how good a deal it turned out to be - Forbes magazine reported that from 2004 to 2009, Frank and Jamie McCourt used the Dodgers to rack up almost $500 million in debt - money that was used for a $28 million home in Malibu, among lots of other trinkets.

Julian: How have they used their revenue?

Lacter: The team does make lots of money, but here's the thing: most of the profits have been used just to pay down the interest. And yet, McCourt manages to hold on because the Dodgers have the third-highest value of any team in major league baseball, according to Forbes, at $800 million (only the Yankees and Red Sox are higher). So as long as the cash from ticket sales and other revenue keeps coming in, he might manage to remain owner - and guess what, he's made no secret that he wants his sons to take over the franchise. So you're looking at a possible McCourt dynasty, whether we like it or not.

Julan: In keeping with the sports-as-business motif, the Sacramento Kings are ready for a move to Anaheim.

Lacter: They still need 16 of the 30 team owners in the NBA to sign off on any move, and for what it's worth both the Lakers and Clippers aren't thrilled with the idea of having to compete financially with a third pro team in the L.A.-area. The Lakers just cut a huge TV deal with Time Warner Cable and so having another local team would presumably eat into revenues, especially if the Lakers start losing and the new team starts winning (although the Kings have one of the lowest payrolls in the NBA, so I wouldn't hold my breath). I also wouldn't hold my breath about this deal not going through - no franchise in modern NBA history has been denied a request to move and it's not likely to happen now. The owners of the Kings, the Maloof family, already have a new name in mind: They want to call the team the Anaheim Royals. (They're also thinking about the Orange County Royals.)

Julian: The team's history dates back to the 1920s when it was the Rochester, New York Royals and then, in the late 1950s, became the Cincinnati Royals. So why are they moving?

Lacter: Well, it's partly the result of being in a tiny media market, with a very small corporate base, and having an old arena that the team owners have been trying to replace for years. The city of Sacramento turned down several proposals to build a new facility, and voters have said no to any public financing (as they would most anywhere else in the country). So the Maloofs began looking down south, and they got hooked up with the Orange County billionaire Henry Samueli. He's apparently offering them a $75 million package to get the team into the Honda Center (that includes $25 million just to spruce up the place). So this is really a story about how the major markets continue to have a huge lock on professional sports (with the possible exception of a place like San Antonio). And one more note involving rich guys owning sports franchises: An L.A. billionaire named Tom Gores, who is a native of Flint, Michigan and made his money buying distressed companies, he's just purchased the Detroit Pistons, as well as The Palace of Auburn Hills, which is where the team plays. No purchase price was announced, but news reports say it was around $420 million. That would be $60 million more than what Forbes has valued the team. It's probably safe to say that he'll put down more than Frank McCourt did when he bought the Dodgers.

Julian: Thanks Mark. Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


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