The Dodgers are no good for News Corp.
The media conglomerate might be looking at buying the team again -- and that's not in the best interest of shareholders.
Fox Sports, a division of News Corp. (NWSA), may be considering a bid for the L.A. Dodgers.
Fox Sports may participate in an auction for the bankrupt team, according to Bloomberg. But CNBC reports that the division has not explored a bid.
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1. News Corp. has already owned the Dodgers.News Corp. sold the franchise in 2004 to Frank McCourt in a purchase that was mostly financed by debt. McCourt has since lost control of the franchise, and it is now controlled by Major League Baseball. The team filed for bankruptcy protection on June 27.
Rupert Murdoch, the much-embattled chief executive of News Corp., already had his chance to own the Dodgers. It did not work out. The Dodgers have been a money-losing proposition, and for a publicly-traded company to lose money on an investment twice would surely be a catastrophe in the media. It would also tarnish Murdoch's reputation.
News Corp. paid $311 million to purchase the team from the O'Malley family in 1999. It sold the franchise to McCourt for $430 million, but not included in that were the massive hikes in payroll that never brought a playoff berth. In the new age of the sport, increased payrolls do not always lead to playoff baseball.
2. Sports and corporations do not mix.Most of the time, owning a sports franchise is a losing proposition. Few teams rarely turn profits, except if you are a football franchise or the New York Yankees. Time Warner sold the Atlanta Braves for the same reason: It never turned a profit. If Ted Turner could not figure out how to turn a profit with the Braves, and Murdoch could not do it previously, what makes him think he can do it again?
Sure, the television rights, which Bloomberg reports could cost $3 billion over the life of the contract, are a lot more expensive than actually owning the team. Perhaps with Fox Sports owning the franchise instead of News Corp., this could be a more profitable venture than the last time, but history has told us otherwise.
CBS (CBS) owned the Yankees in the 1970s, and sold the franchise to George Steinbrenner because the economics just were not there. The situation is different now, with baseball being more of a revenue driver than it was 40 years ago, but only time will tell in this case. History is not on Murdoch's side.
3. What happens if the Dodgers aren't good?
Fox Sports thinks it could turn a profit on owning the team and having the full television distribution rights. What happens if the Dodgers aren't good? Los Angeles is a notoriously fickle town, and the Dodgers have not been a winner in years. Last year they finished three games above .500, but did not come close to the playoffs.
The team has a decent young core, led by Matt Kemp, Clayton Kershaw and Andre Ethier, but these are people, not machines. If they get injured or do not perform well, team performance slumps as a result. They are also due significant raises, not like the standard 3% or 5% most employees get. These are world-class athletes, and get paid as such. If they do not perform, TV ratings, attendance and concession sales could drop.
Rupert, you sold the team once before. Once is enough. Let someone else worry about the headaches. Not just your sake, but for shareholders as well.
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