Tuesday, April 17, 2012

What a difference an owner can make – Tom Benson saves the Hornets


On Monday afternoon, the National Basketball Association announced the 2014 NBA All-Star Weekend will be played at New Orleans Arena, home of the Hornets, pending the completion of the arena and hotel agreements. This will mark the second time the NBA All-Star Weekend will be hosted in New Orleans, having previously been held in the “Crescent City” in 2008.

“There is no better place to celebrate and showcase the NBA than in New Orleans, a city with a rich tradition of hosting major events that is second-to-none,” said NBA Commissioner David Stern. “Our 2008 NBA All-Star festivities proved a terrific experience for everyone involved, and we anticipate 2014 will be even better.”

Monday’s announcement capped a remarkable four days for the Hornets and the NBA in New Orleans. On Friday, New Orleans Saints Owner Tom Benson bought the Hornets for $338 million from the NBA, saving the Big Easy from losing their NBA franchise for the second time.

The NBA first arrived in New Orleans in 1974 when the league added New Orleans as an expansion team. The New Orleans Jazz left for Salt Lake City in 1979, becoming the Utah Jazz. The NBA returned to New Orleans at the start of the 2002-03 season when George Shinn moved his Charlotte Hornets to New Orleans after calling Charlotte home for 14 years.

Shinn moved the Hornets to New Orleans after he became embroiled in a sensation trial that was televised by Court TV. In 1999, a Charlotte woman accused Shinn of kidnapping and sexual assault. While the charges were later thrown out of court, Shinn did admit to having two sexual relationships outside his marriage. His reputation lost (Shinn reportedly has never returned to is His Charlotte), Shinn moved his NBA team to New Orleans.

In April 2010, Shinn began considering selling his majority share of the Hornets to Gary Chouest, who bought 25% of the team. The negotiations stalled due to the team's ongoing financial issues. Because Shinn was not in a financial position to continue to run the team, the NBA purchased the team and began looking for local ownership. The NBA completed their purchase of the Hornets from George Shinn and Gary Chouest in December 2010 for $318 million.

Not only did NBA owners get back what they paid for the team, each NBA team walked away with a profit of about $660,000.

Benson surprised many people when he bought the Hornets. In the years leading up to Hurricane Katrina, Benson talked about moving the New Orleans Saints. He purchased the Saints from John Mecom in 1985 after he learned from Governor Edwin W. Edwards that the team was on the verge of being sold to parties interested in moving the team to Jacksonville, Florida.

During the Saints' 2001 negotiations with the state of Louisiana, rumors began circulating that Benson would seek relocation if his requests — which included renovations to the Superdome, a new practice facility in suburban Metairie, and escalating annual payments from the state to the team — could not be met. Benson, born in New Orleans, owned a number of automobile dealerships in San Antonio. Time and time again Benson made veiled suggestions he was ready to move the Saints unless he received what he wanted from the state of Louisiana when it came to the Superdome (the Saints home).

NFL commissioner Paul Tagliabue (since retired) worked closely with Benson and the state of Louisiana, reaching out to both groups creating a long-term solution that would keep the Saints in New Orleans. In the aftermath of Hurricane Katrina, Benson stood by the rebuilt city and ended any discussions about moving the NFL franchise. The Saints resurgence was seen as a key New Orleans post-Katrina recovery. New Orleans will host the Super Bowl in February.

There was a growing concern in New Orleans after the league had owned the Hornets for two seasons, if the NBA didn’t find a local owner in the immediate future the league would sell the team to interests outside of New Orleans and the franchise would relocate. How and why could the NBA convince Tom Benson, who but for the perception of moving his NFL team out of New Orleans following Hurricane Katrina, to save the New Orleans NBA franchise?

“I told (brother) Larry I was a little bit concerned, even though (Bhathal – NBA rep) said he wasn’t going to do it, the first downturn he’d be looking to go to California or some place,” Benson said when the sale was announced Friday night. “That wasn’t very good.

“We really never stopped talking to (the NBA). With out-of-state owners … I called David and said, ‘Look, I’m the only guy you can count on who’s really going to stay here. Let’s work this thing out.’ ”

Sports marketing expert Marc Ganis helped put the deal together. Benson had made an offer to buy the team several months ago. That proposal was turned down by the NBA. Ganis told
the New Orleans Times Picayune he believed Benson was the perfect owner for the Hornets.

“I asked (Benson) a number of times: ‘Why do you want to do this?’ ” Ganis said. “I want them to know why they’re doing it. Don’t get caught up in a bidding war, or the ego of it. His answer was consistent from (the beginning) all the way to today. He wants to make sure this team stays in New Orleans, makes sure the team is successful in New Orleans and is an important part of the community. This is not a deal that’s going to generate some windfall profits return.

“I asked David: ‘Why do you want to keep the team in New Orleans?’ If he had an interest in maximizing the profit for the league, he very easily could have sold the team to someone who could have relocated it to San Jose, Anaheim, Seattle, Las Vegas. That wasn’t his interest. That was important. Asking each of them this question independently at different times, both of their answers were the same — that’s why this deal came together.

“Both principles had the same motivation (of keeping the team in New Orleans). David said, ‘We have a commitment to the fans of New Orleans who want the team to stay there, and we’re going to do everything we can to make that happen.”

Along with paying the NBA $338 million for the franchise, Benson also assumed the $125 million in debt the team has on the books.

Forbes Magazine determined in their latest NBA franchise valuation the average NBA team had a value of $393 million. The Forbes 2012 NBA list published in late January determined the Hornets value to be $285 million. The NBA selling the Hornets for $53 million more than Forbes subjective value for the franchise, suggests not only did the league do extremely well in selling the team for $338 million, but the value of an NBA franchise has increased substantially since Forbes January report.

For Sports Business News, this is Howard Bloom

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Monday, April 16, 2012

The Sacramento Kings arena deal – why the deal died


Joe and Gavin Maloof legally own the Sacramento Kings. However, if their business is going to succeed in Sacramento, the Maloof’s, as most owners of sports franchises, need to work with the local business community and have the support of the local population. As simple as that sounds, the Sacramento Kings uncertain future in Sacramento is for the most part based on the local business community and the Sacramento community no longer prepared to work with the Maloof’s.

The Kings arrived in Sacramento in 1985 after failing to find success in Kansas City. The arena seats 17,317, the lowest capacity of any current NBA facility. The arena cost $40 million to build and opened in 1968 and features none of the revenue-generating amenities most NBA arenas include. The arena has 412 club seats and 30 suites. Most NBA arena arenas have between 1,500 and 2,000 club seats and more than 100 suites.

During the NBA All-Star Weekend in Orlando, the Maloof’s and the City of Sacramento announced plans to build an arena. “Under the proposed terms of the deal, the city will contribute $200-$250 million to the estimated $387 million arena, mostly by leasing out parking garages around the facility,” said a person with knowledge of the negotiations in an ESPN report. That person, speaking on condition of anonymity, because the full financing plan will not be made public until at least Thursday, said Sacramento also will create revenue through a ticket surcharge.

“The Maloofs have agreed to contribute $75 million in upfront cash, which includes the sale of land around the team's current suburban arena, along with paying off a current $67 million loan to the city and contributing more over the course of the deal. Arena operator AEG also agreed to pay almost $60 million.”

That agreement blew up in the faces of the Maloof’s and the NBA on Friday night. There is no longer an arena agreement and the Kings face a very uncertain future in Sacramento.

The deal began falling apart Thursday evening when a group of 24 Sacramento business leaders published a letter in the Sacramento Bee, a letter they had sent to NBA commissioner David Stern. In that letter, the business “strongly suggested” Stern and the NBA encourage the Maloof’s sell the Sacramento Kings. The release of the letter was timed with an update the Maloof’s were providing Stern and the NBA Board of Governors in New York.

Late Thursday night, Sacramento Mayor Kevin Johnson (who played more than 12 seasons in the NBA) took an overnight flight to New York, meeting with Stern and NBA owners on Friday in hopes of making one last attempt to save the proposed Kings’ arena agreement.

“I think that upon closer review, which was their right, the owners of the Kings wanted to reexamine certain assumptions that everyone understood in Orlando (where the agreement was announced) about projections and the like.

“And it made them increasingly uncomfortable…they recognized that the fact that it was necessary to bring in a third party, AEG, because we needed their funds to finance, together with their existing funds, that were necessary for the NBA to advance, came with a cost that further burdened the team, and they ultimately decided that this was not a transaction that they wanted to go forward with, and that's their right.” Stern said Friday evening.

Was it really as simple as a bad deal -- one they should have never agreed to?

“It was a bad deal. The main thing was … the projected revenues were too high. They were at 2005 levels, before the housing bubble burst and the economy went down. We kept telling (NBA attorney) Harvey Benjamin that. He didn't listen, he didn't listen.” Joe Maloof told the Sacramento Bee Saturday.

“We feel like criminals, and we didn't do anything wrong. This was just the wrong time and this was the wrong deal. When the time is right, we'll do a deal. We'll look at another downtown deal or something at Natomas. Bring us a deal we can sign. Nobody wanted to get an arena done more than we did. We've been talking about it for 13 years. Everyone just needs to calm down. We all need to cool off.”

Maloof is correct in suggesting everyone needs to calm down, take a step back, and take a moment to reflect. What isn’t comforting is Joe Maloof’s believes that he and his brother feel like criminals. Maloof stepped pretty close to going over a line in attacking Sacramento Mayor Kevin Johnson Saturday in a USA Today report.

"I don't think I'd want to negotiate with the mayor," Maloof told USA TODAY Sports on Saturday. "Maybe there's someone else that I'd feel more comfortable with.

"We're disappointed in comments made by the mayor that we feel were shots to us that were unfair and not truthful."

Mayor Kevin Johnson's office shot back.

"As their bizarre press conference laid bare for all to see, dealing with the Maloofs is like dealing with the North Koreans— except they are less competent," Chris Lehane, executive director of Think Big, a committee formed by Johnson to keep the Kings in Sacramento, told USA TODAY Sports in a statement. "In Maloof-world, facts are fiction; truths are half-truths; and promises are broken promises. The City of Sacramento deserves better."

The arena agreement was announced as a March NBA deadline was approaching regarding whether or not the Maloof’s were going to relocate the team to Anaheim. The Maloof’s had to let the NBA know where their team was going to play during the 2012- 13 NBA season. The City of Anaheim actively negotiated an agreement with the Maloff’s that would have the Kings relocating to Anaheim next year.

There is little, if any, trust between the Maloof’s and Sacramento following Friday’s news. The business community took a very strong stand – demanding the Maloof’s sell the team before the arena deal fell apart on Friday. Is the Maloof’s next and last move to play the year in Sacramento and a year from now announce the franchise will be moving?

“That's not true, that's not true. I swear that is not going to happen. I don't care what rumors are out there. It's our team. We're not selling, and we're not leaving. Our identity is the Sacramento Kings. That's how we're known,” Joe Maloof said in a Sacramento Bee report.

There are a multitude of issues facing the Maloof’s. If they’re going to stay in Sacramento, those challenges start with trust.

An arena agreement was announced six weeks ago and that agreement is now dead. Joe Maloof can suggest the agreement made no sense but why did he and his brother move forward with that agreement only to realize six short weeks later it made no sense? And if the city of Sacramento and the Kings manage to negotiate another arena agreement, is there anything to suggest Joe and Gavin Maloof might walk away from that agreement?

If Joe and Gavin Maloof decide it’s in their best interest to move their NBA team, would the city they move to have any trust issues with the Maloof’s?

Will Rogers once said: “It takes a lifetime to build a good reputation, but you can lose it in a minute.” For Joe and Gavin Maloof, the mishandling of an agreement to build a new arena for their NBA team might cost them much more than that arena deal, it might cost them their reputations.

For Sports Business News, this is Howard Bloom

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Friday, April 13, 2012

Lamar Odom – why contracts shouldn’t be guaranteed


Lamar Odom has been paid $24.6 million to play basketball for the last three NBA seasons. Odom played a key role in the Los Angeles Lakers 2010 NBA championship. Last year, Odom was selected as the NBA’s sixth man. Earlier this week, Odom was asked to leave the NBA team he played for this year.

On December 11, 2011, Odom was traded to the Dallas Mavericks for a first-round draft pick and an $8.9 million trade exception after NBA commissioner David Stern vetoed a proposed three-team trade with the New Orleans Hornets involving Odom that would have sent him to the Hornets, Chris Paul to the Lakers, and Pau Gasol to the Houston Rockets. Odom felt "disrespected" after he learned of the Hornets trade publicly, and he requested a trade from the Lakers to another contending team. Later that day, the Lakers traded Odom to the Dallas Mavericks – the defending NBA champions.

The Mavericks and Odom ended their relationship earlier this week. Instead of releasing him, the team listed Odom inactive for the remainder of the season. Odom and the Mavericks didn’t work. Odom missed three Mavericks games after the NBA All-Star break for what was called personal reasons. The Mavericks sent Odom to the Texas Legends of the NBA D-League on March 2. A day later, the Mavericks cancelled the move. On March 24, Odom did not play in a 104–87 loss to the San Antonio Spurs, the first time he could remember not playing due to a coach's decision.

Odom’s Dallas career likely ended Saturday night during halftime of the Mavericks game in Memphis. Mavericks’ owner Mark Cuban visited the teams’ locker room during halftime. Odom had arrived late for the Mavericks home game Friday night and again for a team meeting Saturday morning in Memphis.
Cuban had enough of Odom.

"Well, yeah," Cuban told ESPN Dallas when asked whether that exchange was the final straw. "Just his response to it. Everybody goes through ups and downs. Every player does. We tried to put him in a position to succeed. You guys saw it, saw what we did. It didn't work.

Odom is an interesting off-court case study in what can go wrong for a professional athlete if his focus is taken away from the sport he’s being paid to play. He’s married to reality television personality Khloé Kardashian. Their wedding was featured on the E! reality-based series Keeping Up with the Kardashians, on which Khloé is a regular, with Odom appearing in a handful of episodes. On December 29, 2010, E! announced that it was planning another spinoff from the series featuring Lamar, Khloé and his two children from his previous relationship. The new series debuted on April 10, 2011.

Last year Lakers management voiced their displeasure with the camera crews that constantly followed Odom around.

The circus followed Odom to Dallas. Cuban told the Fort Worth Star Telegram he didn’t believe the camera crew following Odom bothered his team; he did believe the cameras had a negative impact on Odom.

"I do think that if you know you're on camera all the time, you know you're on camera all the time.''

And what precisely what does that mean?

"That means you pay attention to how you're going to look on camera,'' Cuban said.” If you're high enough visibility, you know there's a camera on you all the time and that it's going to show up somewhere, and that can influence your behavior.''

Mark Cuban is a passionate team owner, an owner who loves his team. When he purchased the Mavericks, one of his first decisions was to buy a plane because he wanted his players to travel in comfort. Cuban attends most of his team’s games in Dallas, and when the team is on the road. He’s often seen sitting somewhere near the team’s bench cheering for his team. He wears his heart on his sleeve.

"Everybody goes through ups and downs,'' Cuban said in a Dallas Morning News report. “Every player does. We tried to put him in a position to succeed. It didn't work. And I just asked him, 'Does he want to go for it or not?' I just didn't get a commitment. And that was the end.

"You can kind of tell sometimes when a guy's not focused and ready to play. This [at Memphis] was a big game for us, and he wasn't connecting to that. And if you're not positive energy, you're negative energy.''

Cuban never shies away from speaking his mind – telling the media how he feels. The confrontation between Cuban and Odom on Saturday night wasn’t the first time the two had talked about his attitude.

“I decided to try to help him and turn it into a positive. In any deal, sometimes you're on the right end. Sometimes, you're on the wrong end.

"Did I get my money's worth? No. I don't know that the word's 'cheated.' But did I get my money's worth? No.''

There are many people who do not like professional athletes. Countless people see professional athletes as overpaid and underachieving people. Lamar Odom could be the poster-boy for why so many people dislike professional sports and athletes.

Charles Barkley, a member of the Basketball Hall of Fame, told ESPN Dallas 103.3's while he will always stand by the players as far as the TNT broadcaster is concerned, Odom shouldn’t be paid the remainder of his 2011-12 salary or the $2.4 million buy-out for the final year of his contract.

"I mean, because he didn't earn his salary. He didn't earn it at all. I like Lamar as a person, but I'm disappointed about everything that happened in Dallas. And it's a shame that the Mavs got to pay him, to be honest with you, because he doesn't deserve to get paid for what he put out there this year. He doesn't deserve it, plain and simple.

"To sit at home and make that kind of money really pisses me off, to be honest with you, for the effort that he put out there," Barkley said. "He's going to make hundreds of thousands of dollars these next two paychecks…That's not fair to the Mavs. It's not fair to the game of basketball. I'm just disappointed in Lamar."

If an NFL owner believed a member of his team had underachieved on the football field, that owner could release that player and he wouldn’t have to pay him. NFL player contracts are not guaranteed. NBA, NHL and MLB contracts are guaranteed.

During the recent NBA collective bargaining negotiations, there were suggestions NBA owners wanted to create contractual agreements along the lines of how the NFL operates. If that had taken place, Mark Cuban wouldn’t have to pay Odom the balance of his $8.2 million 2011-12 contract or the buyout he’ll be forced to pay Odom.

Lamar Odom embarrassed himself and NBA players. Even more important, he may one day serve as the reason why NBA players might find it difficult to have their contracts guaranteed.

For Sports Business News, this is Howard Bloom

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Thursday, April 12, 2012

Should NBA basketball Olympians be paid?


The United States won a bronze medal at the 1988 Seoul Olympic Games. Shortly after the Games, the National Basketball Association approached FIBA (the Federation Basketball Association) and the two sides agreed NBA players would be welcome to represent their countries at the Olympic Games. The Dream Team was born, the 1992 U.S. Olympic Basketball team that featured Magic Johnson, Michael Jordan, Charles Barkley and Karl Malone, among others. The cavalcade of talent easily won the gold medal at the 1992 Barcelona Olympics.

The 1992 American Olympic Basketball team also generated tens of millions of dollars for USA Basketball through the sale of replica uniforms and other “Dream Team” related merchandise. The entire Dream Team, with the exception of Christian Laettner, has been inducted into the Basketball Hall of Fame as individuals. The Dream Team as a group, was enshrined in the Hall of Fame in 2010. The players didn’t have a choice when it came to the selling of merchandise bearing their likeness.

Several members of the 1992 Dream Team (Michael Jordan and Magic Johnson) covered up the Reebok logos on their uniforms during the medal ceremonies with American flags. Jordan was then, as he is now, closely linked to Nike. However, the players wanted to play for the red, white and blue. They were less concerned about the selling of merchandise and more focused on bringing basketball glory back to the USA.

The 2012 London Olympics are set to begin in less than 100 days. . Two current NBA players who have represented the United States at an Olympic Games, are less than enamored when it comes to giving up their marketing rights..

"First of all, it’s an honor to play in the Olympics, but there are a lot of things you do for the Olympics. A lot of jerseys you sell. There are a lot of things you do. We play the whole summer," Dwayne Wade told ESPN. "I do think guys should be compensated, just like I think college players should be compensated as well. Unfortunately, it's not that, but I think it should be something for it.''

USA Basketball was organized in 1974 and known as the Amateur Basketball Association of the United States of America (ABAUSA). The name change to USA Basketball occurred Oct. 12, 1989, shortly after FIBA modified its rules to allow professional basketball players to participate in international competitions. USA Basketball then admitted the NBA as an active member and made the change.

USA Basketball is responsible for putting together national teams for all international basketball competitions – everything from the Olympic Games to the World Junior Basketball Championships. The budget for those teams includes sponsorship revenues and…..the millions of dollars the sale of Olympic men’s team replica uniforms generate.

Ray Allen has made more than $100 million during his NBA career. Ray Allen was a member of the 2000 Sydney Olympic Games American team.

"You talk about the patriotism that guys should want to play for, but you (need to) find a way to entice the guys," Allen said. "It's not the easiest thing in the world if you play deep in the playoffs and then you get two, three weeks off and then you start training again to play more basketball where it requires you to be away from home and in another country. It's fun, but your body does need a break.

"Everybody says, 'Play for your country.' But (NBA players are) commodities, your businesses. You think about it, you do camps in the summer; you have various opportunities to make money. When you go overseas and play basketball, you lose those opportunities, what you may make… If I'm an accountant and I get outsourced by my firm, I'm going to make some money somewhere else."

Allen first represented the United States at the 1995 World Student Games. The men’s basketball team bills at the 1995 Fukuoka Games were paid by USA Basketball in part from revenues generated by the 1992 Dream Team.

The revenue generated by the Olympic “Dream Teams” doesn’t go to any one individual – it nurtures the growth of basketball in the United States.
The U.S. Olympic Committee does provide every American with $25,000 for winning a gold medal, $15,000 for a silver and $10,000 for a bronze. Allen is not expected to be a part of the 2012 USA Men’s Olympic Basketball Team.

"If it's licensing," Allen told Fox Sports. "(The players) are wearing jerseys and (others, but not the players, are) making money off it. Something (should be done) just to say to the guys, 'Hey, you guys are spending this much time, 40 days, playing basketball, we're paying for some type service that you provide, that you're getting some kind of kickback'… I know that you sell unlimited jerseys so I think the players should get some piece of that."

Allen is wrong – the money USA Basketball generates from the sale of the jerseys isn’t going to any individuals. Some of that money does offset the day-to-day operational costs for USA Basketball, but most of the money fosters the development of basketball.

Allen is correct when he talks about the major commitment it is to play for your country’s national team. The NBA season (when there isn’t a lockout) lasts six months, two more months if an NBA team goes to the NBA Finals.

LeBron James, a member of the 2004 and 2008 United States Olympic teams, will be a member of the 2012 London team. James also plans on leading the Miami Heat to the NBA Finals. If James and the Heat make it to the NBA Finals, James won’t have a break once the NBA Finals end in late June.

"I love representing my country, man," James said in an ESPN report. "I've done it since 2004 and I'm looking forward to doing it in London. As far as (pay), I don't know, man. It doesn't
matter. I'm happy to be a part of the team, to be selected again."

The United States is blessed with an abundance of basketball talent. The season may be too long for Dwayne Wade, but it isn’t too long for LeBron James and Chris Bosh. The trio all play for the Miami Heat. They’re also heading to London. James is on record and Bosh has no issues with how long their seasons last. If Wade has an issue, he could have told USA Basketball he wouldn’t continue as a member of the national team. No one would have thought less of Wade. He’s represented the United States at two Olympic Games – he’s done his part. If he’s looking for another dollar or two, at the expense of USA Basketball being able to pay their bills, Wade should stay home.

For Sports Business News, this is Howard Bloom

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Wednesday, April 11, 2012

Bobby Petrino – getting what he deserved (bad things happen to bad people)


The last six months has been a tremendous period of upheaval for the coaching fraternity. Jerry Sandusky and Bernie Fine stand accused of the sexual abuse of minors. New Orleans Saints Coach Sean Payton and former Saints Assistant Coach Gregg Williams are at the center of “Bounty Gate.” Miami Marlins Manager Ozzie Guillen is in the middle of a five-game suspension for extolling the virtues of Fidel Castro.

Arkansas University was forced to fire their Football Coach Bobby Petrino with cause, after he lied at an April 3 press conference.

"He made the decision, a conscious decision, to mislead the public on Tuesday, and in doing so negatively and adversely affected the reputation of the University of Arkansas and our football program," Long said, choking up at one point as he discussed telling players that their coach was gone. "In short, coach Petrino engaged in a pattern of misleading and manipulative behavior designed to deceive me and members of the athletic staff, both before and after the motorcycle accident."

Petrino was in the middle of a seven-year contract under which his salary averaged $3.53 million. His contract included an $18 million buyout clause if he was fired without cause (losing would have been considered fired without cause). He leaves Arkansas with nothing.

"Our expectations of character and integrity in our employees can be no less than what we expect of our students," Long said. "No single individual is bigger than the team, the Razorback football program of the University of Arkansas."

How and why did Bobby Petrino lose $18 million? In the simplest of terms – he believed he was bigger than everyone around him.

On April 1, Petrino was involved in a motorcycle crash sliding off Highway 16 near Crosses in rural Madison County, Arkansas. He was riding with former Arkansas All-SEC volleyball player, 25-year-old Jessica Dorrell, who he had hired on March 28, 2012 as the student-athlete development coordinator for the football program, after serving as a fundraiser in the Razorback Foundation.

Petrino held a press conference on April 3. At that media gathering, Petrino said he was alone during the crash. On April 6, just minutes before a police report was to be released showing Dorrell was also aboard, Petrino revealed that Dorrell was not only a passenger, but that he had an inappropriate relationship with her. Athletic Director Jeff Long placed Petrino on an indefinite paid leave-of-absence while he reviewed the situation.

Petrino admitted that he gave Dorrell $20,000. She was hired two weeks ago from a group of 150 applicants and reported directly to Petrino.

This wasn’t the first time Petrino embarrassed his employer. According to ESPN: “Petrino left the Atlanta Falcons with three games to play during the 2007 season, informing his players of his departure with a typed, 78-word statement taped to their lockers. Only the day before, Petrino told Falcons Owner Arthur Blank that he wasn't going anywhere.

In 2003, during his first season as a head coach at Louisville, Petrino secretly met with Auburn officials about replacing his old boss, Tommy Tuberville, as the Tigers' coach. Petrino and Auburn officials initially denied that their meeting ever took place at a southern Indiana airport. But when confronted with flight records that proved the clandestine meeting happened, Petrino eventually admitted it and said, "I'm a young coach. I made a mistake."

On December 29, 2004, three days before the GMAC Bowl, Petrino admitted he interviewed with LSU after Nick Saban left for the Miami Dolphins. LSU ultimately hired Les Miles, and the Cardinals went on to defeat Boise State 44-40.

Why Petrino believed he would “get away” with not telling the truth about the accident remains a mystery. On the field, under Petrino, the Razorbacks enjoyed tremendous success. Arkansas went 11-2 last season, winning 11 games in a season for the first time since 1977 and defeating No. 8 Kansas State 29-16 in the Cotton Bowl. In 2010, the Razorbacks went 10-3 and played in their first BCS bowl game since 1986, losing to Ohio State 31-26 in the Allstate Sugar Bowl (the victory was later vacated by the Buckeyes because of NCAA violations). Overall the football team went 34-17 in the four years Petrino was the team’s head coach.

That on-field success resulted in the football program generating more revenue than it ever had before.

“Under Petrino, the team averaged 94 percent capacity for home games. It was only 91 percent under [Houston] Nutt,” said Scott Prather, one of the founders of Coaches by the Numbers, a website dedicated to gathering statistical data on football coaches. “If you figure each ticket at an average of $50 per ticket, that’s nearly $600,000 per year.”

According to ESPN, “Football revenue overall rose by 54 percent during Petrino’s first three years, to $61.1 million. Auburn, which won a national title during that time period, saw a 30 percent increase. LSU’s revenue growth came in at 13 percent to $69.1 million.”

None of that mattered to Jeff Long, Arkansas’s athletic director, who stood up for more than the money when he fired Petrino.

“He engaged in reckless and unacceptable behavior that put his relationship in the national spotlight. Coach Petrino’s conduct was contrary to the character and responsibilities we demand from our head football coach.

“In fact, that is the very language that is included in his contract that he signed at the University of Arkansas,” Long said.
Petrino said he received word of his firing at 5:45 p.m. on Tuesday.

“I’m sure you’ve heard Jeff Long’s reasons for termination,” Petrino said in his statement. “There was a lot of information shared. Given the decision that has been made, this is not the place to debate Jeff’s view of what happened. In the end, I put him in the position of having to sort through my mistakes and that is my fault.”

When Penn State fired Joe Paterno, their Hall of Fame Coach on November 9, students rioted on the Penn State campus. Paterno coached Penn State for 46 years, won two national championships, and the football program was generating a profit of $50 million annually. The fall of Joe Paterno was directly linked to the school’s cover-up of a 2002 alleged rape of a 10-year-old by former Penn State Assistant Football Coach Jerry Sandusky, in the team’s locker room.

Reaction at Arkansas was muted Tuesday night. There weren’t any protests. Nationally media pundits believe Long had to fire Petrino. Doing what’s right can come at a price. Alumni donations increased in the last few years, directly related to the success Petrino created, coaching the football team.

“While talent reigns supreme within athletics, the personality of the leaders has a stronger tie than most people realize to donors, alumni, and especially, former student-athletes,” said Heather Collart (in an ESPN report,) a former athletics administrator, who now works for the Detroit Pistons.

The message from the university will be key in the next weeks several weeks, Collart believes.

“Boosters will always question difficult decisions, especially when it results in the loss of a figurehead who had an enduring personality or winning record -- however if you can point to a long-standing process that holds a mission statement as gospel, boosters will come to accept the decision much more quickly and in most cases will remain loyal to a program,” Collart said.

On the field, Bobby Petrino has been successful. Off the field, his behavior towards his employers was inappropriate twice in Louisville, and his departure from the Atlanta Falcons was anything but professional.

He lied at an April 3 press conference. Bobby Petrino’s life is in complete disarray. Anyone interested in hiring Bobby Petrino has to wonder if he can be trusted. It takes a lifetime to earn a reputation. A reputation can be lost in seconds. Time and time again, Bobby Petrino has made mistakes that can no longer be ignored. Losing $18 million and leaving his family in shambles might finally send Bobby Petrino a message – it’s time to grow up and take responsibility for your actions.

For Sports Business News, this is Howard Bloom

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Tuesday, April 10, 2012

Ozzie Guillen – a public relations disaster


On September 28, 2011, the Miami Marlins introduced Ozzie Guillen as their new manager. Before Guillen headed to South Florida, he spent eight years as the manager of the Chicago White Sox. In his second season with the White Sox, Guillen was selected as the American League Manager of the Year. The White Sox won the 2005 World Series. The White Sox’s record under Guillen was 678-617. Guillen may have lead his team to a World Series, winning more games than they lost, however, time and time again, he proves to be a challenge, even a liability when he isn’t on a baseball diamond.

On Tuesday, the Marlins suspended Guillen for five games following remarks Guillen made to Time Magazine in the April 9th edition. Time included an interview Guillen did with Sean Gregory. During the interview, Guillen is quoted as saying, “I love Fidel Castro.”

Guillen also stated: “I respect Fidel Castro,” Time reported. “You know why? Many people have tried to kill Fidel Castro in the last 60 years, yet that [SOB] is still there.”
Cuban Americans form the third-largest Hispanic group in the United States. Miami, with a Cuban American population of 856,007, stands out as the most prominent Cuban American community, in part because of its proximity to Cuba.

The Marlins opened the 2012 season at Marlins Park, built at a cost of $515 million. The Marlins contributed $155 million, South Florida taxpayers $360 million. The stadium was built on the site of the former Orange Bowl stadium in the heart of Miami’s Little Havana, in Miami’s Cuban Community.

A firestorm erupted immediately following Time’s release of Guillen’s remarks.

“I join the rest of our Miami-Dade County community and all freedom-loving people in condemning the statement made by Miami Marlins Manager Ozzie Guillen,” Miami-Dade Mayor Carlos Gimenez said in a statement Monday afternoon. “For too long, the Marlins organization has been the source of controversies in our community and I now challenge them to take decisive steps to bring this community back together.”

Late Monday, a Cuban exile group, Vigilia Mambisa, called for a protest outside Marlins Park against the Miami Marlins stadium in Little Havana, in response to the statements made by the Venezuelan-born Guillen to Time Magazine.

“We strongly disagree with the opinion of Ozzie Guillen, and consider it a provocation against the Cuban and Venezuelan communities,” said Miguel Saavedra, head of Vigilia Mambisa. “Tomorrow starts a boycott. We are asking for the resignation of Guillen.”

Hours before the Mayor’s statement on Monday, Miami-Dade Commission Chairman Joe Martinez also called for Guillen’s resignation.

Guillen has a home in the Miami area. His Hispanic background made him the perfect choice as Marlins’ manager. What Loria should have realized when he hired Guillen would become one of organization’s leaders both on and off the baseball diamond. Loria had to realize Guillen came with a reputation, one that could hurt the team’s image.

Guillen decided he wouldn't join the White Sox in the traditional White House visit after the team's 2005 World Series win, after Guillen visited President Hugo Chavez with a Venezuelan flag as part of the World Series celebration. In June 2006, he was quoted as calling then Chicago Sun-Times columnist Jay Mariotti a "fag." He later apologized for offending any homosexuals, but did not back down in his criticism of Mariotti.

In 2010, he spoke against Arizona's new law to deal with illegal immigrants, referring to the immigrants as "workaholics."

"And this country can't survive without them," he said. "There are a lot of people from this country who are lazy. We're not. Prove me wrong. A lot of people in this country want to be on the computer and send e-mails to people. We do the hard work. We're the ones who go out and work in the sun to make this country better."

In August, Guillen said that Asian baseball players were treated better than Latino players, stating that while it is common practice for major league clubs to provide a Japanese or Korean translator for their Asian born players, no such translator is provided for their Spanish-speaking Latino ballplayers.

On Monday, the Marlins announced Guillen would be flying back from Philadelphia where the team played, to address the media on Tuesday morning.

Moments prior to the start of the Tuesday morning press conference, the team released the following statement: “The Miami Marlins announced today the suspension of Manager Ozzie Guillen for five games effective immediately. The Marlins acknowledge the seriousness of the comments attributed to Guillen. The pain and suffering caused by Fidel Castro cannot be minimized, especially in a community filled with victims of the dictatorship.”

Baseball Commissioner Bud Selig said he supported the Marlins decision to suspend Guillen. He called Guillen's remarks “offensive to an important part of the Miami community and others throughout the world” and “have no place in our game.”

“As I have often said, baseball is a social institution with important social responsibilities,” Selig added in a statement. “All of our 30 clubs play significant roles within their local communities, and I expect those who represent Major League Baseball to act with the kind of respect and sensitivity that the game's many cultures deserve.”

The Marlins signed Guillen to a $10 million four-year contract on September 29, 2011. As impossible as it may seem, the Marlins likely considered firing Guillen five games into his four-year contract. One of the keys to the Marlins long –term business success is their interaction with the Cuban-American community.

Cuban–American relations haven’t existed since Castro came to power in 1958. There are those who believe once Fidel Castro dies, relations between the two countries will allow Cubans to travel to America (and Americans to travel to Cuba). Currently there are severe travel restrictions between the two countries. If travel restrictions are lifted between Cuba and the United States, given the proximately of Cuba and Florida, the Marlins can look forward to Cuban’s attending games at Marlins Park.

More than 100 Cuban-Americans gathered outside of Marlins Park Tuesday morning during Guillen’s press conference.

"I hurt a lot of people's feelings, a lot of victims," Guillen said during a news conference at Marlins Park. "I've apologized twice and I meant it.

"I say a lot of things and I never apologize but now I have to because I did the wrong thing. I'm behind the Cuban community. ... How am I going to make it better? ... I'm going to show the community that I support them 100 percent."

Guillen had this to say after learning he was suspended by the team and not by Major League Baseball for his remarks.

"The way I feel right now, I cannot say whether it's a good or not good decision," Guillen said. "But I respect their decision. I'm not in position to be complaining.

"It's not what happened today. It's what's going to happen in the future. I expect to be here for a long time. I live in Miami. My family's in Miami and I'm willing to do everything to try to make it better. I will help the Cuban community, the Latino community, like I always do. I hope I get better and people understand my situation and I'm willing to do everything in my power and the Marlins' power to help this community."

Marlins team President David Samson insisted the team didn’t consider firing Guillen nor was he asked to resign. Samson believes everyone deserves a second chance and Guillen’s five-game suspension represented both his second chance and how the organization was prepared to deal with Guillen’s off-color remarks.

It’s likely the Marlins included a morals clause in Guillen’s contract. The standard morals clause in sports and entertainment contracts protects organizations when an employee makes statements that do damage or harm to that business. There is little, if any, doubt Guillen has damaged the Miami Marlins and the organization’s ability to succeed in South Florida.
Ultimately, the fate of a baseball franchise is based on their success on the field.

The Marlins 2012 payroll exceeds $118 million; their 2011 payroll was $56 million. The franchise more than doubled their payroll. In a $515 million stadium largely built with taxpayer dollars, Loria invested in his team – sending a clear message to South Floridians – the Marlins are ready to be competitive on the field with an improved team, and off the field with a new stadium. Guillen is a key to the team’s success. It remains to be seen if Guillen is a part of the Marlins long-term plans.

For Sports Business News, this is Howard Bloom

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Thursday, April 05, 2012

The Masters and Augusta National – Women are not welcome


For the most part, the world we live in today is the “Age of Enlightenment.” One of the hallmarks of our society is that men and women are more often than not, treated as equals, but unfortunately, not in every situation. One area where men and women are not treated equally is the Augusta National Golf Club, located in Augusta, Georgia – home to golf’s most prestigious event, The Masters.

Founded by Bobby Jones and Clifford Roberts and designed by Alister MacKenzie on the site of a former indigo plantation, the club opened for play in January 1933. Since 1934, it has played host to the Masters.

Augusta National Golf Club has about 300 members at any given time. Membership is strictly by invitation; there is no application process. It is believed that annual dues are low (less than $10,000 per year) given that profits from the Masters broadcast likely sustain the club.

Amid much criticism of exclusive and discriminatory admissions, Augusta accepted an African-American member in 1990. A woman has never been invited to join Augusta National. A great deal of attention has focused on IBM chief executive officer Virginia Rometty and whether or not she will break the Augusta National gender barrier.

The past four chief executives of IBM -- a longtime corporate sponsor of the Masters -- have been members of the exclusive club. Rometty became the CEO of the computer giant this year.
Masters Chairman Billy Payne met with the media on Wednesday, offering his annual “state of the Masters.”
Payne and a member of the media shared this exchange.

Q. Mr. Chairman, I note your concerns about the growth of golf around the world, and I also note that Augusta National is a very famous golf club. Don't you think it would send a wonderful message to young girls around the world if they knew that one day they could join this very famous golf club?
CHAIRMAN PAYNE: Once again, that deals with a Membership issue, and I'm not going to answer it.

Q. No, it doesn't.

Q. Seems like a mixed message, Billy, is what he's saying. You're throwing a lot of money into growing the game, and yet there's still a perception that certain people are excluded.
CHAIRMAN PAYNE: That is a Membership issue that I'm not going to‑‑ thank you for your‑‑

Q. It sends—
CHAIRMAN PAYNE: Thank you.

Q. It sends a wonderful message to girls around the world that they could join this emblematic golf club; it's not a Membership question.
CHAIRMAN PAYNE: Thank you for your question, sir.

Q. Mr. Chairman, as a grandfather, what would you say to granddaughters? How would you explain leading a club that does not include female membership?
CHAIRMAN PAYNE: Once again, though expressed quite artfully, I think that's a question that deals with Membership, and‑

Payne might believe the membership issue is going to go away. Payne’s inability to deal with the issue will only fuel those determined to have Payne and Augusta National deal with women being invited to join Augusta National.

"I think they're both in a bind," Martha Burk told The Associated Press on Thursday evening. Ten years ago, Burk then the Chair of the National Council of Women's Organizations, challenged Augusta National on the club’s refusal to invite a woman to play in the Masters. Hootie Johnson, chairman of the club at the time, said Augusta might one day have a female member, but it would be on the club's timetable, and "not at the point of a bayonet."

"We did raise the issue," Burk said on CNN. "If we had not done that, this would not be on the table now."

"What IBM needs to do is draw a line in the sand – (and say) ‘We're either going to pull our sponsorship and membership and any ancillary activities we support with the tournament, or the club is going to have to honor our CEO the way they have in the past,’" Burk said. "There's no papering over it. They just need to step up and do the right thing. They need to not pull that argument that they support the tournament and not the club. That does not fool anybody, and they could undermine their new CEO."

IBM is one of the Masters’ major sponsors. Rometty is well respected and regarded as one of the most powerful women in America today. It is inconceivable IBM would continue their partnership with Augusta National if the company’s CEO is not invited to join an organization that invited the current CEO’s four predecessors. IBM represents America, IBM is an American ideal. If Rometty is not invited to join Augusta in the near future, not only will IBM end their partnership with Augusta National, but IBM’s other corporate partners could end their relationships as well.

Payne was the CEO for the 1996 Atlanta Olympic Games. Two years ago, Payne stepped into the troubles Tiger Woods was having with his personal life and he was disappointed in Tiger saying “It’s not simply the degree of his conduct that is so egregious here,” Payne said. “It is the fact he disappointed all of us and, more importantly, our kids and grandkids.

“As he ascended in our rankings of the world’s great golfers, he became an example to our kids,” Payne continued. “But as he now says himself, he forgot in the process to remember that with fame and fortune comes responsibility, not invisibility.”

Payne believed he had the right to judge Tiger Woods and his behavior, now Payne, his values and the beliefs of the Augusta National golf course are under the same microscope Payne placed Tiger Woods under, in large part because of how Tiger Woods treated a woman, his wife.

Rometty hasn’t raised the issue of her joining Augusta National. She knew the issue would come to her, given the long history of former IBM’s CEOs being asked to join Augusta National.

"Really, I don't think it's her responsibility," Burk said. "It's the board of directors. They need to take action here. They don't need to put that on her. They need to say, 'This is wrong. We thought the club was on the verge of making changes several years ago, and we regretfully end our sponsorship to maintain her credibility and the company brand.'”

Augusta National’s current membership includes Bill Gates, Warren Buffett, Jack Welch, Pete Coors, former chairman and CEO of Coors Brewing Company, current Chairman of Molson Coors Brewing Company & Miller Coors, James D. Robinson III, former CEO of American Express, Harold "Red" Poling, former CEO of the Ford Motor Company, T. Boone Pickens, Jr., oil tycoon and Hugh L. McColl Jr., Former CEO of Bank of America – all Titans of industry.

The die has been cast, the issue can no longer be avoided – IBM chief executive officer Virginia Rometty must be invited to join Augusta National.

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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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Monday, April 02, 2012

Sale of the Dodgers – still the big news of the day


The NCAA Basketball Championship will be decided tonight in New Orleans. But the biggest news in the sports industry continues to be the sale of the Los Angeles Dodgers for $2 billion, a sale price that increases the value of every sports franchise. If a Major League Baseball franchise forced into bankruptcy by the mismanagement of their ownership could sell for $2 billion, then every sports franchise increased in value as a result.

The sale completed late Tuesday evening has resulted in Dodger tickets becoming a hot commodity.

"There is definitely a renewed sense of excitement with our fans, and it has really resonated (in terms of sales)," said David Siegel, Dodgers senior director of ticket sales in an ESPN Los Angeles report. "Our phones have been ringing like crazy.

"We have seen a spike across all of our tickets sales," he said.

The Dodgers led Major League Baseball in tickets sold throughout most of the 1970’s and 1980’s, often averaging more than 3 million fans annually. The surge in ticket sales – a direct result in increased consumer confidence. The Dodgers won during Frank McCourt’s ownership period, but the team lost on the field last year and were an embarrassment off the field.

"From my perspective, I think there are a lot of factors," Siegel told ESPN. "I think as a result of lowering prices across the board, adding some great season-ticket holder benefits and amenities, all coupled with our transition into a new ownership, we finally are starting to see some traction from all the work we have put into this over the past several months.

"Also, we are seeing a lot of season-ticket holders who flat-out canceled last year calling back now to see if their seats are still available." And in many cases, as Siegel told ESPN, their former seats have been available.

"Those that canceled the last couple of years, we are actually happy to let them keep their same seniority, those that have been with us for a really, really long time," Siegel said. "Obviously, if their old seats aren't available, they aren't available. But in almost every case, we have been able to get them very comparable seats or even better."

The rush in ticket sales shouldn’t surprise anyone. A better question that needs to be asked— does the $2 billion price the franchise is being sold for make financial sense?

"It was an extraordinary and surprising price," said Andrew Zimbalist, a professor of economics at Smith College in an ESPN Los Angeles report. "I rarely admit to not anticipating these things but I did not anticipate a $2 billion price. Keep in mind, in addition to the price, the new ownership group will have to invest something in the neighborhood of $300 million to refurbishing Dodger Stadium and that price does not include $150 million for the surrounding real estate. At the end of the day, you have to question this deal."

Andrew Zimbalist is to the sports industry what EF Hutton was in those infamous investment commercials, except when Andrew Zimbalist talks – you better listen. Zimbalist knows what he speaks. Zimbalist isn’t the only economist who doesn’t believe this deal makes sense.

"It's the craziest deal ever; it makes no sense. That's why you saw so many groups drop out," said Mark Rosentraub, a University of Michigan sports management professor. "I don't get it. The numbers just don't work. It doesn't make business sense. Nobody came up with this number. Under the most favorable circumstance you broke $1.1 billion with $1.4 billion getting crazy. Now you're up in the $2 billion range, which is over $800 million more than what pencils out for a profitable investment for a baseball team. If making money doesn't count, this is a great move. But now we're into buying art and I can't value art. I can just run the model numbers and this doesn't make sense."

The sale price might not make economic sense to two leading and well-respected sports economists, but the Dodgers remained one of sports strongest and marketable brands – and that was with Frank and Jamie McCourt driving the team into bankruptcy protection.

The once-proud franchise was driven into bankruptcy by the McCourts last June when they couldn't meet player payroll or pay bills after MLB Commissioner Bud Selig declined to approve a $3 billion agreement between FOX and the Dodgers to extend their television broadcast rights. The new ownership group can expect to sell the Dodgers local TV rights for at least $3 billion.

"It's impossible for them to make money with this," one highly ranked executive told ESPN’s Buster Onley. "Impossible. I know their revenue streams, and even if they get a TV deal, that's a huge payoff; they can't make money."

Said another highly ranked executive: "From a business perspective, this can't work."

If they can’t make money, why did Mark R. Walter, controlling partner, as well as Magic Johnson, Peter Guber, Stan Kasten, Bobby Patton and Todd Boehly pay $2 billion?

They also now control the land around Dodger Stadium, with Frank McCourt as a partner. There have been suggestions, and at this point they are nothing more than suggestions, Walter and company may sell part of their land to groups interested in building an NFL stadium in Chavez Ravine. There lies one of the biggest problems with the proposed sale – Walter and his group agreed to control the land in and around Chavez Ravine with McCourt.

"I still don't understand how you could pay $2 billion for the Dodgers and not get the clear title to the Chavez Ravine land," Rosentraub said. "Look at everybody who has ever been a partner with McCourt. I think they would tell you to get stock in Gaviscon because you're going to need it. Maybe he'll have a life-changing experience but you have a guy with a track record of getting into legal action with his partners on deals going back more than a decade. You may end up spending a great deal of time in court and paying legal fees against your new partner. I don't get that one. I know people who backed out of the deal because they didn't want any kind of partnership with him."

"It's problematic," Zimbalist said. "He was looking for some kind of ongoing revenue stream and he got it. Here's a guy who borrowed practically all the money to buy the team for $430 million and now he's selling it for $2.15 billion and he's coming out with a healthy capital gain – it's repulsive. This is someone who doesn't deserve to walk away with a healthy profit after eight years of running the Dodgers in the most egregious, the most inefficient, the most self-interested, and the most vainglorious, idiotic way possible. It really is repulsive that he will still be making a profit in some way."

Zimbalist and Rosentraub are masters at understanding how the economics of the sale of the Dodgers can – or as they believe – can’t work. However, what they may have discounted is the “value” Walter and his group sees in buying the Dodgers.

Walter is CEO of Guggenheim Partners, a Chicago-based financial consulting firm estimated to be worth more than $100 billion. Guggenheim Partners are now the parent company for the Los Angeles Dodgers. Could Guggenheim leverage any losses they incur as owners of the Dodgers against profits Guggenheim generates? Or is it simply a matter of boys with nearly unlimited resources wanting to be the boys with the biggest toys. Maybe to Walter and his group it’s that old expression “He who has the most toys wins” and with the Dodgers Guggenheim has a very big toy.

For Sports Business News this is Howard Bloom

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