Dodgers’ Owners See Return on $2.3 Billion With Acquired Players

The Los Angeles Dodgers’ new ownership group is confident about making a return on its record $2.3 billion investment and the addition of All-Stars Hanley Ramirez, Adrian Gonzalez, Josh Beckett and Carl Crawford fits into that plan, Chief Executive Officer Stan Kasten said.

“We bought an asset at a unique time,” Kasten said at the Bloomberg Sports Business Summit hosted by Bloomberg Link in New York. “It’s an iconic brand, a little bit down on its luck the last few years, in the second-biggest market in America, in the media and entertainment capital of the world, with broadcast rights coming up for bid at a time when media rights are exploding. That’s an awful lot of good things that work in our favor.”

The Dodgers were sold in March in a bankruptcy auction to a group including basketball Hall of Fame player Magic Johnson and Guggenheim Partners executive Mark Walter. The previous record price for a Major League Baseball team was the $845 million that Joe Ricketts, founder of TD Ameritrade Holding Corp., paid for the Chicago Cubs three years ago.

With their existing broadcast contract with News Corp.’s Fox expiring after next season, the Dodgers have been aggressive in adding big-name players since the sale. They added Ramirez in a trade-deadline deal with the Miami Marlins in July and acquired Gonzalez, Beckett and Crawford last month from the Boston Red Sox as part of a nine-player trade.

All-Stars

Those four players have a combined 14 appearances in baseball’s All-Star Game and are making $74.2 million in salary among them this season.

“We couldn’t go into that market and tell our fans, ‘We’re going to do this right, we’re going to do this long term, just wait for 25 guys to grow into their uniforms,’” Kasten said. “So we were able to acquire proven stars in the chronological middle of their careers whom we couldn’t get any other way. This was a way to improve the team right away while maintaining our core belief in also building the scouting and player-development system. That was always part of our model.”

The new ownership is looking to rebuild a franchise that has won six World Series titles, tied for fifth-most in baseball. The team, which won its last championship in 1988, is in second place in the National League West division, 4 1/2 games behind the San Francisco Giants.

The Dodgers’ record sale price was driven in part by the value of its next broadcast contract.

Bundle Deal

“One way to look at it was that it was the sale of the Dodgers and a hypothetical (regional sports network) in one bundle,” Bruce Bennett, a partner at Jones Day, said at the Bloomberg Sports Business Summit. Bennett was the lead lawyer for the Dodgers in the sale.

The competition for sports programming, which is live and reaches a target demographic for advertisers of men age 18-34 years old, is driving up the price companies are willing to pay for media rights. Sports economist Andrew Zimbalist of Smith College in Northampton, Massachusetts, is among those predicting a heated bidding process for the Dodgers’ rights between Fox Sports and Time Warner Cable Inc. No talks with a rival to Fox are allowed until after November.

Kasten said the Dodgers are seeing strong support from customers, new sponsors, “strategic partners looking to align with our platform” and media partners. It gives ownership confidence as it seeks to restore the brand of one of the most iconic teams in professional sports, Kasten said.

“We think all of those things are going to work to put together a healthy economic picture with ample justification for the price,” he said.

To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net

To contact the editor responsible for this story: Michael Sillup at msillup@bloomberg.net

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