Tuesday, May 10, 2005


McCourt In The Black?

McDebt no more? The Dodgers almost broke even last year, and things look better this year.

McCourt's purchase of the Dodgers included a $15 million payment from FOX for this season, which nearly matches the $20 million stadium upgrade during the off-season. The Dodgers decommissioned $6 1600 Pavilion seats in favor of 1600 new seats with an average ticket value of about $100, according to the Daily News. More than three quarters have already been sold, so that's a net gain of about about $7 to 8 million so far.

Thanks in large part to the terriific team last year, the total attendance was about 3.49 million, which was the highest since 1983. This year's attendance is currently at 647,000 in 14 home games, according to ESPN. Take out the home opener sellout, average it out to 80 games, and add back in the home opener, and the team is on track for about 3.7 million visitors, which would set a team record. That would be an additional 200,000 tickets sold over last year. Figure that an average seat is about $19 buckos, and that's about $3 to 4 million more.

Say that each one of the estimated extra 200,000 attendees spends about $10 on food and merchandise. Say that they show up in sets of 4 and park for $10. I think that's conservative, and thats about $2.5 million more.

By my calculations, LA could take in about $14 million more than last year in ticket and stadium sales alone. And if the team stays in 1st place, more people might show up. After all, a game at Dodge Stadium is still a bargain compared to other cities, according to the Fan Cost Index. Not to mention going to Staples Center to see the lottery-bound Lakers and Clippers.

Payroll is down about $10 million, for now.

The net difference from last year to this year is already looking to be almost $25 million. This doesn't include the extra advertising all over the Stadium, nor the new sponsorship agreement with FOX that kicked in this year. And who knows the details of the penny-pinching the McCourts are doing within the organization. Cutting unneeded employees from the payroll? Collecting cans in the parking lot? Who knows. I'm guessing a turnaround of about $35 million compared to last year.

McCourt managed to buy from a motivated seller by somehow borrowing more than what he paid. After FOX and Malone nearly ruined an organzation by overspending and depleting the farm system, McCourt stands to possibly turn a decent profit in just his second year of ownership. The organization as a whole is leaner and trimmer, and not just on the baseball side, where Depodesta is continuing what Evans started, albeit with a different evaluation mindset.

The cash flows are looking good for McCourt. The PR department could use some work, though.

Very interesting. Did you read the MLB memo linked in the article you linked to?

The more I find out about this McCourt, the more I admire his huge gamble. He's debted himself to the gills and mortgaged his prime seaport property to buy the club. But even with improved cash flow, he has a high hill to climb.

In the next 3 years he has to come up with $235 million ($80 mils to repay Fox loans for purchase of the club, $30 mils in "extra equity", and $125 mils to repay the Fox loan on the seaport property). In other words, he has to sell his seaport property and/or take on equity partners in the Dodgers. The later task especially will be helped by a club that is successful on the field and at the bottom line. Contrary to chicken-little "McCheap" theories, he doesn't couldn't raise enough money fast enough by simply slashing the payroll.
i perused the MLB memo, but didn't look at all the details. i took roadsidephoto's summary as fair.

i don't think he wants sell the property yet. didn't i read somewhere that he hired some company specializing in retail development?

i agree that with success on the field, it will be easier to find a minority partner(s) with mucho cash. maybe hormel? rename the stadium "farmer john field" and market farmer john products to all over the country as a premium brand?

i should have mentioned that the "pre-existing compensation" from FOX decreased from $35 mil to $15 mil this year, so that's -$20, but with the renovation a 1 time sunk cost and additional revenue next year (KCAL, etc) the boat doesn't seem to be sinking.
"Roadsidephoto" would be the late Doug Pappas.

Interesting commentary but I'm not sure I find it convincing just yet. As others have noted, the baloon payments coming up in the next 48 months are simply enormous. Getting salary down short term is helpful but not necessarily enough.

The problem is that we still have to rely on very tenuous data about the deal.
i should add this. mccourt didn't hire a development company. it's a joint venture on his property, and is discussed here at BBWC.


sounds like mccourt could be getting some upfront cash and construction costs covered from the partnership in exchange for partial ownership. some cash from this and mccourt might be ok in regards to debt if he finds a minority owner with more cash. no hard proof though.

pushing his real estate proposal though the muck of boston politics is an entirely different matter, though. mccourt's juggling a lot of balls in the air...
Or, McCourt could refinance his mortgage on Dodger Stadium. http://losangeles.dodgers.mlb.com/NASApp/mlb/news/press_releases/press_release.jsp?ymd=20050512&content_id=1047628&vkey=pr_la&fext=.jsp&c_id=la

Note especially this quote which echos smog's post: "The market's quick acceptance of the private offering reflects the value of the assets and Mr. McCourt's success in operating the franchise as a healthy business. When he acquired the team in 2004, the franchise was losing in excess of $50 million a year. The franchise expects to break even this year."
i called it!
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