Are you still wondering why the Guggenheim Baseball Partnership paid $2.1 billion for the Los Angeles Dodgers? That's far more than twice the previous record price for a major-league team, the $845 million paid by the Ricketts family for the Chicago Cubs in 2009. The answer to that question might be found in this Hollywood Reporter article that analyzes how the Dodgers could reap multiple billions --that's right, billions with a b -- of dollars with new television rights deals. The article suggests three ways that the team could structure its broadcast rights:
Dodgers’ TV Rights Could Be Worth $8 Billion
The Dodgers’ new owners paid over $2 billion for the franchise, a record price. Here’s one big reason why they spent that much money.
1. A conventional rights deal
The Dodgers can extend the license arrangements with Fox and/or KCAL; make deals with other stations in the market; contract with the two Time Warner Cable sports networks that launch Oct. 1; or license a new entity or some combination of these alternatives.2. A “hybrid model”:
The Angels, San Francisco Giants and Texas Rangers have partnered with Fox and Comcast regional sports network operators to license their rights and obtain a share of equity ownership. The risks of obtaining distribution are effectively mitigated, and a large entertainment company provides the financial backing. The Dodgers could make such a deal with Fox or TW Cable.
3. Start their own network:
The team would control production, ad and sponsor sales integration, team-related support programming and distribution of its product. But it would also undertake far greater risk, effectively "doubling down" rather than outsourcing the risk. Several teams have successfully launched such networks (the New York Yankees/Brooklyn Nets YES Network, Boston Red Sox/Bruins NESN).
The article estimates the potential revenue for each model, over a 20-year period in each case, to the Dodgers at $4.5 billion, $7.5 billion and $8 billion, respectively.
Eight. Billion. Dollars.
That is, over a 20-year period, $400 million in the Dodgers’ coffers every year, should they choose to go that route and start their own network. Given the success of the YES Network and NESN in major markets, it’s likely that a Dodgers TV network would be in line for the same sort of success.
This could be a game-changer. The Dodgers, over the last 15 seasons, have floundered under the ownerships of Fox and Frank McCourt, but now seem quite serious about playing with the big boys. The biggest current TV-rights deal, the $3-billion, 20-year deal between Fox Sports Southwest and the Texas Rangers, would be dwarfed by an $8-billion revenue stream from a Dodgers-owned TV network.
The Yankees and Red Sox have dominated recent years in large part because of the money they have reaped from their owned TV channels. The Dodgers could become the next big thing; even if they go one of the other routes, they’ll still gross more than the Rangers will under their current contract. Teams that don’t, or can’t, generate this sort of money will be left in the dust in the late 2010s, with the Dodgers joining -- or maybe surpassing -- the East Coast powers as the dominant club in baseball.
See More:
