Tuesday, December 8, 2009

A change at the top.

I can't imagine Dodger fans have to be all that disappointed by the news that Frank McCourt is stepping away from his day-to-day responsibilities with the club. Dennis Mannion, hired originally to Jamie's old position as President of the Dodgers, now has everyone in the organization but Frank reporting to him. This includes GM Ned Colletti, who will take payroll directions from Mannion. T.J. Simers, whose apparent approval of Mannion is conveyed in the way only Simers can, writes,
In addition to sweeping the floors, Mannion sets the payroll with [Frank] McCourt's approval. He won't say what it will be this season. He says it makes no sense to divulge it to the competition -- or to fans, I presume, who might be interested in knowing how dedicated the Dodgers are going to be this season.
As for Frank McCourt, he was so bullish on running the Dodgers, he now works out of an office in Beverly Hills.
"Frank has had a desire for quite a while to separate himself from the day-to-day operations and focus his time of the developmental opportunity," Mannion says. "Additional ventures to look at are the development of the 360 acres around the stadium and ballpark improvement."
I say Simers approves of Mannion because he goes on to note Mannion's impressive track record, and even that he is likable, despite his Philadelphia roots. Simers does express concern over the team's owner distancing himself from day-to-day baseball and business operations. This is surely some residual pain left from the News Corp. era, but it's a fear I don't share with Simers.

We've seen time and again that owners who demand to make ground-level decisions have a tremendously difficult time fielding competitive teams. These magnates of industry figure they can master the business world, so, after all, how hard could a child's game be? The answer, of course, is that baseball is really, really hard. There are JD/MBA's in the mail room. People kill to get to decision-making positions in the game, and ascension usually doesn't happen by accident. Buying a team with the goal of assuming baseball operations authority is a quick recipe to field a loser.*

*Full disclosure: my dream in life is to buy a minor league team in retirement, and yes, take every bit of power I can grab. But that's life, isn't it? We can all do better than the next guy.

Point is, in my view, we shouldn't be upset that Frank is telling Mannion what he can spend and letting the baseball guy take charge. This, of course, leaves the matter of exactly how much money Colletti actually has to play with. Dylan Hernandez is on the case. Noting no current plans to decrease player payroll, Hernandez reports:
Colletti didn't rule out that payroll could increase, and downplayed concerns that have been raised about owner Frank McCourt's divorce proceedings and the club's decision not to offer any of its free agents salary arbitration. The club began last season with a payroll around $100 million.
"A lot of it depends on how the winter unfolds with revenue and different things along those lines," Colletti said. "If we see good signs, it goes up. If we don't see good signs, it probably doesn't go up."
I should be very clear right away: this is not how I want my baseball team run. I do not want player payroll to be highly correlated with the previous winter's season ticket sales. Why? Two reasons.

1. Investment in the organization should not be a year-to-year decision. There should always be $7 million available for a top-shelf amateur free agent. There should always be flexibility to add payroll through trade if the price (in prospects) is right. A player should never be passed over in the draft because of cost concerns. None of these points are meant to read that the Dodgers should always seek the most expensive players. Just that if your baseball guys run up the ladder and say that Player X at $7 million is an absolute steal, that $7 million needs to be there. It must not be dependent on season ticket renewals.

2. That 2010 payroll decisions are based on this winter's revenue forecasts suggests that the Dodgers are indeed running on perilously slim margins. Yes, it doesn't look like the payroll will decrease. But short of doing something completely insane--say, trading one of the team's premium young players who is arb-eligible--the payroll really cannot decrease. These guys are getting raises. At last year's $100 million mark, there just isn't room for free agents this winter.

Bottom line is that a major-market team should never have to operate like this. Either the team just really doesn't have the cash to make long-term investments, or the divorce really is casting a cloud of such uncertainty over the future of the franchise that spending is effectively frozen. Because--make no mistake--it is.

In the Simers piece, we get a rare acknowledgement of the divorce's potential impact from the Dodgers' front office:
As for the impact McCourt's divorce might have on the team's budget, Mannion says, "I do not believe this year, 2010, the Dodgers will be impacted by anything relative to the McCourts' personal life.
"I can't predict what will happen in 2011. I'm not a family lawyer and don't understand what might happen in the long term."
I'm not a family lawyer either, but I do understand this: if we are to believe Mannion, the club's penury this offseason is unrelated to the divorce. The Dodgers would have had no flexibility this winter, divorce or not. And even the man who doesn't understand what might happen in the long-term is already thinking the divorce's impact won't be felt until 2011.

There's no cash now. Investment in young players has ebbed for years. And the divorce hasn't hit the books yet.

I'm going to make a special effort to enjoy the 2010 team. Whatever flotsam and jetsam Colletti is able to stuff into the last two rotation spots, the team will be competitive because of its young core. If the club can't invest in young players and can't retain its developing stars, next year's team might be the last competitive one for a while.

I'm sure that there are many of you out there rooting for Jamie in the divorce, simply because it's the quickest way to new ownership. I can't say I blame you.


  1. Great post. At what point, if any, could we expect public opinion to sway so fiercly against the current owner that it forces a sale of the team? Based on what I'm reading, it's become doubtful that either of the McCourts has the financial wherewithal to run a competitive, big market MLB club. Is there any history in pro sports of public opinion shifting so radically against an owner that a sale became unavoidable? And at what point in the legal proceedings would a sale even become possible? I assume that Selig is too weak to ever force a sale, so I assume it would have to come from either financial necessity or widespread outrage from the LA fan base?

  2. Thank you for encapsulating what I have been saying privately to friends. I am a long time Dodger fan and I just feel that the current operating margins are so slim that no significant changes can be made.

    I guess my question is this - it seems like the Dodgers are the McCourts' main source of income (or at the very least, a significant source), and so the team has to be run at the highest profit margin possible - ie: capitalize on every advertising opportunity, spend as little as possible and make as much as possible, etc. How often is this successful? For example, it appears as if Arte Moreno derives most (or at least much) of his personal income from interests other than the Angels, meaning that he has the resources to go over budget for the Angels if there is a deal out there that they can't pass up.

    I just wonder how often a team is successful if the owner is always looking at the bottom line so s/he can pay their bills.

  3. David--

    In reality, public opinion can only force an owner to sell when the public stops going to games. That's not going to happen in Los Angeles, not in any meaningful sort of way. The market's too big, the brand too strong, and the Stadium too gorgeous. And about when a sale would even be possible...say Frank put the team on the market tomorrow. Jamie would likely file a motion requesting an emergency injunction to prevent any sale. She'd probably win on it. A sale isn't really feasible until the post-nup has been decided.


    I don't think anyone has a problem with the owners trying to derive an income from the team. At least I don't. I start to have a problem, though, when the baseball team--which, by public and private accounts enabled the McCourts to live quite a lavish lifestyle--can't make basic investments in its future.

    It all makes me wonder how ugly the debt service is for the Dodgers and related entities. I just can't comprehend how the Los Angeles Dodgers could be so financially challenged that season ticket renewals decide the payroll for the following season.

  4. No one has yet to explain to me why Bud Seelig approved the Mccourts, as opposed to Malcolm Glazer, Eli Broad, Alan Casden, Dave Checketts, or any one else with big bulging pockets. Who ARE these people? Were they in fact the beard for Fox, hand selected to siphon back every last dime that Murdoch put into the Dodgers during the News Corp. era? How does Bud Seelig deserve an annual salary of $20 Million dollars. Where is that coming from?

    In spite of all this mishugas, the team has made the NLCS the last two years, been in the playoffs four of the last five, and even with a further diminished starting staff, is my consensus pick to reach the LCS yet again. Preferable to Fox, or even the later O'Malley years I would say.

  5. Tony, let me explain it to you:

    LA is a huge market, and the Dodgers are an iconic franchise. With the right owner, they could turn into the Yankees West, dominating the NL and making it harder for the small market teams to compete, and even robbing middle-market teams like the Cardinals, Giants, and Rockies of the opportunity to feel they have a chance of winning the division or reaching the World Series unless they played the same game of insane salaries.

    McCourt was approved because Selig and most of the other owners want to maximize profits for MLB as a group. There is also a certain amount of East Coast bias involved, but this is a business and that is at best a secondary part.

  6. Thanks for the post, Josh. I think you post puts together how perilous the Dodgers operating expenses are for 2010. I have been reading the Dodgers are offering only one year contracts, and I am not surprise that Wolf bolted for the Brewers.

    In response to 6p00e550198bcb8834

    Southern California is a huge market. However it is bit fractured. The Dodgers don't own the broadcasting rights, News Corp./Fox Sports owns them, and they want to own them so a YES/NESN network doesn't pop up and hit Fox Sports West hard.

    The right owner for the Dodgers is probably a billionaire who would increase players' payroll to $125 million out of the Forbes guesstimate of $175-195 million in revenue. and can afford down years.

    It is obvious that the McCourt owned Dodgers can't go above $100 million payroll, and they may go to $75 million to $85 million if the team has to be on sold.

    Selig approved the sale to McCourt because he was doing it as a favor to Murdoch. If he wanted the Dodgers' ownership to be longer lasting, he would had forced a sale around $800 million for the Dodgers along with the broadcasting right. Instead Selig approved a $380 million dollar sale with $430 million in outside finance, with $75 million in MLB money in a credit line.

    If I have to Frank McCourt credit, I didn't think he would last this long, and both Frank and Jamie were living way beyond their means before the World Credit Crisis would punish heavily leverage people like the McCourts.

  7. In response to Tony's post..

    This is my explanation of why Selig approved the deal for the McCourt to buy the Dodgers in 2003/2004, it is solely based on second hand and third hand sources, and following the McCourts' finances for a couple years, especially their ownership in the 24 acres of South Boston property, aka Fort Point Channel/Fan Pier properties. (okay near the Fan Pier properties in which the Pritzkers (Hyatt Corp) owned)

    Yes, News Corp/Fox Sports was losing money, or had very slim profit margins owning the Dodgers. The business of MLB Baseball is renown for slim profit margins. It is also a sport that is main revenue is shut down for almost six months. In some ways Fox Sports bought the Dodgers in a hedging move if Disney was going to make the Angels part of a Disney regional sports channel..

    So by 2002/2003, News Corp didn't want to own a team. However they worried if they sold the Dodgers along with the broadcasting rights, the new owner, especially one with deep pockets will turn around and just hammer Fox Sports in Southern California with a YES/NESN type of network. However any major party would ant the broadcasting rights like Eli Broad, or the Glazers. They also have the money or could get the loans to set up a regional sports channel.

    Frank McCourt made a weak bid for Sox in 2001, and wasn't taken that seriously, (besides, he didn't have the greatest rep with the Mass state gov't and Mayor Menino's office. He also made a bid for the Angels, I don't know much about the bid, the financing or why his bid was rejected by the Disney Corp.

    When News Corp put the Dodgers on the block, McCourt didn't seemed to be that bad of a choice, he was in Real Estate, he bought the former Railroad yard in South Boston in 1978/79 for $8 million, and was worth $150-$200 million in 2003-2006, he seemed he could handle a trouble asset like a baseball team, and treated the purchase as taking over a bad real estate development.

    Why Selig approved the deal, because MLB was in the process of renegotiating its TV contract with Fox. Murdoch tended to overpay the contracts like his NFL/NFC deal, and Selig was looking out for all 30 teams rather than worried about the best owner for the Dodgers, who would get a cut of a multi year MLB TV contract with Fox. MLB pushed the deal with the McCourts because News Corp wanted it done.

    How the deal was finance was kind of strange, lots of promissory notes, credit lines, and some huge loans, which were flipped for bigger loans that the McCourts have to pay promptly or else.

    Selig made the right choice in approving the Henry Group to buy the Red Sox and 80% of NESN, even though having Jeff Loria anywhere near a baseball team is criminal. However baseball is a pretty labor intensive and messy business, and I think Selig was looking out for all 30 owners, and hoping the McCourts can get by on tight margins.