Business Update with Mark Lacter

Dodgers; NBA lockout

KPCC's business analyst Mark Lacter talks about the possible sale of the Dodgers and the effects of the NBA lockout have been so far.

Steve Julian: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, the Dodgers season is about to end and the one ray of sunshine is Matt Kemp who has a chance at a Triple Crown. But is the team close to being sold?

Mark Lacter: Well, the commissioner of baseball is certainly hoping so. The league has filed papers that says Frank McCourt, who of course owns the team, has an unacceptable plan for bringing the franchise out of bankruptcy protection, and that the best way to resolve this mess is for a bankruptcy judge to authorize the sale of the team - something McCourt has been adamantly opposed to. What McCourt has been pushing is a plan to auction off the television rights to Dodger games that he says would bring in huge amounts of revenue and help pay off debts that the team owes. The league is opposed to an auction because it says that McCourt would only use the money to help pay for his personal debts, and there's evidence that he's siphoned off Dodger revenues in the past – even though he denies it.

Julian: But more basically, Major League Baseball doesn't trust him, right?

Lacter: Yeah, the League says that his reorganization plan would be in the best interest of Frank McCourt, but not the best interest of the Dodgers. Now, there's no assurance that the judge will agree that the team should be sold - and there's no assurance McCourt won't try challenging that decision (keep in mind that his only real leverage is that he's still the owner of the Dodgers and also keep in mind that in a bankruptcy proceeding it's only the creditors that truly matter).

Julian: And there's no telling how long that process might drag on…

Lacter: …or whether any new owner could take over before all the legal options get played out. So this could be a while. And it's bound to raises questions about next season's payroll (even though McCourt claims there will be plenty of money to spend on players). Meantime, Dodger fans really stayed away this season – actually this was the first year that the Dodgers had fewer fans than the Angels - and it was not only because the Dodgers were never in contention, but because Frank McCourt has become so disliked. The real danger is that people just get out of the habit of going to the games, which is obviously something that league officials don’t want to see happen. That helps explain why they are so desperate to find a new owner.

Julian: We never get to talk sports "as business," so let me ask you when the effects will start to be felt from the NBA lockout?

Lacter: The effects are being felt already Steve , with the league announcing that training camps won't open as scheduled and that 43 preseason games have been canceled, running through the middle of October. The first game of the regular season had been scheduled for Nov. 1, but it seems unlikely that's going to happen. Frankly, this could drag on into next year.

Julian: They're at odds over...?

Lacter: Well, what's interesting is that both sides sort of agree that the system needs to be changed and that most of the teams in the league have been losing money. The dispute centers on the maximum amount of money that team owners should be allowed to pay their players. Under the current system, owners have a salary cap of about $58 million, but they can go well over that amount if they pay an extra league tax. That's how the Lakers are able have a payroll of over $90 million, while the Sacramento Kings have a payroll of $45 million. The Lakers can afford to shell out that extra money because L.A. is such a huge market. You might recall that earlier this year the Lakers signed a new television deal with Time Warner Cable that's said to be worth around $3 billion.

Julian: Sacramento can’t match that…

Lacter: Right, so the league is pushing for a salary cap that’s really a cap. The players are opposed a hard cap because they worry it'll put a squeeze on salaries, which it clearly would. And they say that there are other ways of leveling the playing field, such as a system like that in the NFL where broadcast revenues are shared throughout the league. Both sides are digging in right now, but I'm guessing that once November and December come around, and players aren't receiving their paychecks, they might start pressuring their leadership to cut a deal. So the owners would seem to be in a better position to ride this out.

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


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