Tuesday, April 03, 2012

The Dodger Deal – and its NFL implications

The sale of the Los Angeles Dodgers for $2.15 billion promises to be one of most important 2012 sports business stories. The $2.15 billion raised the bar for what sports franchises will be sold for in the future. The $2.15 billion price was the most ever paid for a North American sports franchise, surpassing the $1.1 billion Stephen Ross paid to buy the Miami Dolphins in 2009.

The sale caught the attention of National Football League owners. The sale increased the value of NFL franchises, and shone the light on how valuable the Los Angeles market is. Los Angeles hasn’t been home to an NFL franchise since the Rams left for St. Louis and the Raiders left for Oakland in 1995.

On February 25, 1989, Jerry Jones purchased the Dallas Cowboys from H.R. "Bum" Bright for $140 million. Jones isn’t planning on selling the Cowboys, but he has to know if he did, he’d be much richer than he is today.

"They probably undervalued it (Cowboys worth) according to the market place here,'' Jones said of the Forbes estimate in a Dallas Morning News report.

"I don't know how to get my mind or arms around that at all. It certainly wasn't something I might have had in mind when I got involved with the Cowboys and the team. It's impressive. It's very impressive.''

It’s not a matter of if, but when, the Los Angeles market is home to an NFL franchise (or even two) in the not too distant future. Los Angeles remains America’s entertainment mecca, regarded as the second most important U.S. financial market. The $2.15 billion price sends a clear message to NFL owners -- how valuable the Los Angeles market is. If a Los Angeles based MLB franchise is sold for more than $2 billion, it’s feasible the value of an NFL team in Los Angeles could be worth close to $1.5 billion.

The San Diego Chargers may be worth less than $1 billion ($920 million according to Forbes) and San Diego may be 121 miles from Los Angeles, but it might as was well be 1,000 miles away from Los Angeles. Los Angeles is a major market and a market without an NFL team. When Los Angeles finally builds an NFL stadium, the NFL could sell two expansion franchises to Los Angeles-based groups for a staggering $3 billion, that would be divided by the 32 current NFL owners.
Steve Tisch, co-owner of the New York Giants and part-time L.A. resident, told The Los Angeles Times Sam Farmer the sale "is going to draw a lot of attention to L.A. as a super-valuable market for sports teams."

Tisch added: "It kind of raises the bar for all of us. When a baseball club sells for over $2 billion when you fold in the real estate, it makes all of us stand up and say, 'Wow!' With our brands, with our teams, with our assets, we can't mess up. We're involved with something very special with tremendous value, but our commitment is to our fans, to our players and to the teams."

There has been some speculation there is enough land in the Chavez Ravine area where Dodger Stadium is, that could become home to an NFL stadium. The land is now owned by the new Dodgers ownership group and the Dodgers previous owner Frank McCourt.

Tom LaBonge, a councilman whose area includes Dodger Stadium, told the Los Angeles Times he believes the Dodgers purchase price could drive the new owners to develop the stadium site, adding, "I would have no problem with a football stadium there myself, if it was done appropriately."
NFL commissioner Roger Goodell said: "We've often said that that's an extraordinary stadium site up at Dodger Stadium.”

Though he is not the owner of a professional sports franchise, Pete Carroll knows both the Los Angeles market and the National Football League. Carroll was the head football coach at USC from 2000 to 2009; is currently the head coach of the NFL’s Seattle Seahawks; and he also coached in the NFL from 1984 to 1999.

"I think it's an enormous statement about the value of being in L.A. and the tremendous stage that they're on," said Carroll, coach of the Seattle Seahawks. "It sets a new mark for franchises in general in big-time sports. I don't know all of the makings of the group, but just the fact that Magic's (Johnson) involved is really exciting. Just because what he means to the community and all that."

As for NFL owners and their reaction to the news, Carroll said: "Oh, man, they've got to love that. That's a new day. That's a big marker. That's not just something-point-something. It's 2 billion."
Forbes released their 2012 MLB financial valuation on March 22, five days before the sale of the Dodgers was announced. According to Forbes, the average Major League Baseball team rose 16% in value during the past year, to an all-time high of $605 million. Forbes believed the Dodgers were worth $1.4 billion.

In November, Forbes determined the average 2011 NFL franchise was worth $1.04 billion. The NFL has a new ten-year collective bargaining agreement. In December, the NFL signed long-term television agreements with Fox, CBS and NBC that will see the NFL gets an average of $3.1 billion a year in rights fees over the life of the deal, and that doesn’t include the $1.1 billion ESPN pays the NFL for the rights to Monday Night Football. It’s fair to assume the value of an NFL franchise has increased at least 10% since Forbes last did their NFL franchise valuation.

The NFL in Los Angeles – it’s going to happen, take it to the bank. If the National Football League sold two expansion franchises to Los Angeles-based groups for a total of $3 billion, the 32 NFL owners would each take home $93.75 million in expansion fees.

For Sports Business News, this is Howard Bloom

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