'We Owe the Fans a Winner'
Back from the McCourt disaster as Dodger Stadium turns 50, new owners plan to woo Hollywood with a glitzy makeover and business deals that could make that $2.15 billion purchase price actually pay off.
Peter Guber didn't want to buy the Dodgers. He had considered it once before, and it didn't work out. Guber had been approached in the early 2000s and declined to join Boston businessman Frank McCourt in his effort to purchase the team from News Corp. So when three different groups asked Guber last fall to help try to buy the Dodgers from the embattled McCourt, he turned each down flatly. After all, the former head of Sony Pictures -- he greenlighted such hits as Sleepless in Seattle and A League of Their Own -- figured he already had his hands full overseeing his six minor-league baseball teams and the NBA's Golden State Warriors, which he had bought with a partner a year earlier.
But when longtime friend and business partner Earvin "Magic" Johnson called Guber to discuss the Dodgers, things were different. The two had worked together in the 1990s when Sony partnered with Johnson to launch his eponymous chain of movie theaters, and the former Los Angeles Lakers great is a co-owner of Guber's minor-league baseball club in Dayton, Ohio, that has sold out 897 consecutive games, a record for professional sports.
"Magic called and he said, 'Come on, we've been so lucky together, we've been so good together, let's do it, let's do it, let's do it,' " says Guber. So after meeting with Johnson, Guggenheim Partners CEO Mark Walter and others in the ownership group, Guber decided to join the team that would make the $2.15 billion winning offer, which more than doubled the previous record price for a North American sports franchise: "I said, 'F-- it, OK,' and my wife thought it was absolutely insane. She said, 'Are you crazy?' "
On a hot, cloudless June afternoon, Dodgers president Stan Kasten stands in a chilly Dodger Stadium office having a lively conversation with Peter O'Malley, the team's much-loved former owner. At issue: the eight variations of Dodger blue that now adorn team merchandise.
"The shade of blue has changed," notes O'Malley, 74, whose father, Walter, moved the team from Brooklyn to Los Angeles in 1958 and who remains for many fans the strongest link to the organization's storied history. "Wherever you can, you ought to try and make it the same."
Kasten agrees it would be good to winnow the blue hues to one. The detail might seem small, but the fact that O'Malley, an infrequent visitor to Chavez Ravine during McCourt's rocky seven-season tenure, is now involved in these kinds of discussions says a lot about how much things have changed in the short time since Guggenheim Baseball Management took over the team.
The transition hasn't been perfect -- the new owners have yet to explain their plan for the stadium, and many have cited a recent Forbes valuation of the team at $1.4 billion as evidence that Guggenheim overpaid. But as Dodger Stadium celebrates its 50th anniversary, many longtime observers say the team is primed for a resurgence. Matt Kemp, Clayton Kershaw and Andre Ethier, the franchise's marquee players, have been signed to new contracts, television rights deals for professional sports continue to explode in value, and the Dodgers' current TV arrangement expires at the end of the 2013 season. So while the $2.15 billion spent to acquire the team is extraordinary, it's also reflective of opportunities in baseball ownership that might not have existed a decade ago. Plus, the Dodgers have a mystique -- the sort imbued by a history of six World Series titles and transformational players like Jackie Robinson, Sandy Koufax and Fernando Valenzuela -- that has generated a diverse fan base with strong support from Latinos. Now, with Kemp and Ethier as the pinup-ready faces of the organization, the team is poised to solidify its place as the West Coast's answer to the New York Yankees, subject to the same intense attention and scrutiny.
"What we do in this business -- everything is in a fishbowl, everything is under the magnifying glass. It's just part of this business," says Kasten, a baseball veteran who has a small stake in the team; other owners alongside Johnson and Guber are Todd Boehly and Bobby Patton of Guggenheim. (New York- and Chicago-based Guggenheim is co-owner with Pluribus Capital Management of Prometheus Global Media, the parent company of THR.)
Already, sports-business insiders have speculated whether the Dodgers will score the richest TV deal ever in pro sports. According to a study by independent consultancy Desser Sports Media for THR (see sidebar), should the team follow the path of the Yankees and start its own network, during a 20-year initial term, the Dodgers could generate $8.5 billion in TV revenue. "[The valuation] goes a far distance to explain the actions of various parties," says Ed Desser, who led the study. "There is certainly no question that there is substantial value there."
Even if the team doesn't start its own network, a bidding war for TV rights is expected between Fox Sports, which now airs games along with L.A'.s KCAL 9, and Time Warner Cable, which signed the Lakers to an agreement last year that could be worth $5 billion over 25 years. Kasten says the organization enjoys a good relationship with Fox Sports, though if a deal cannot be struck, the team would "start talking to other people. There are a number of alternatives that work in different places, and it remains to be seen what the perfect or the best plausible answer is here." Starting Oct. 15, Fox Sports will have an exclusive 45-day negotiating period, though sources say preliminary discussions already have begun. The company declined comment.
Well before the team's TV deal expires, a remodel of the well-worn Dodger Stadium is expected to begin. The iconic 56,000-seat venue that has been the site of countless historic moments -- from Koufax's 1965 perfect game and Kirk Gibson's dramatic home run in the 1988 World Series to visits from Pope John Paul II and The Beatles -- is in need of changes big and small. During the off-season, the team is expected to upgrade the stadium's water and power systems and improve mobile phone service by adding WiFi to the notoriously technology-unfriendly ballpark. To that end, on Aug. 6, the Dodgers hired Janet Marie Smith, an executive who has worked for teams including the Baltimore Orioles and Boston Red Sox, to oversee upgrades to the stadium.
Bigger changes include a potential $100 million-plus renovation that might add more kid-friendly amenities, new restaurants and a Dodgers museum. "I think more and more, fans expect, and fans are better served by, additional things in ballparks," says Kasten. But Guber, CEO of Mandalay Entertainment Group, cautions that the new owners won't rush to jump into a redevelopment plan: "All of us made our money the old-fashioned way -- we've earned it hard, so we spend it carefully."
Then there is the Dodger Stadium land, which long has captivated developers. The stadium is set on 300 prime acres, much of it flat asphalt parking lots. O'Malley tried to put an NFL stadium there, and in 2008, McCourt announced a $500 million retail development plan. Current ownership has said there are no immediate plans for the lots (or to build a new stadium, as some have proposed), but long-term, many believe the team will build shops, eateries and bars around the ballpark.
"I think Dodger Stadium is one of the great L.A. experiences, but there is an opportunity to expand that experience," says architect Dan Meis, who designed Staples Center and several other professional sports venues. "It has some unique aspects to it, but that's where the opportunity is -- to really develop it and give people a reason to circulate around it."
Certain stadium improvements also would better court and serve the team's Hollywood fans. Stars such as Jason Bateman, Larry King and Alyssa Milano are regulars; showbiz attorney Howard Weitzman has season tickets; and the Zanuck family shares seats with manager-producer Michael Sugar, among others. (Dodger Stadium is a star itself, appearing in such films as the first Naked Gun movie and Moneyball in part because it can pass, for better or worse, as a generic baseball stadium.) Observers say the team could better the experience for VIPs by improving terrible traffic conditions at the stadium and adding more premium seating. These days, the $400-a-seat Dugout Club, which is situated behind home plate and includes an indoor dining room and bar, is considered the celebrity-worthy section.
Indeed, Kasten suggests that Guber's relationships in Hollywood could help market the team, similar to how the industry's embrace of the Lakers has burnished that team's brand worldwide. Jeanie Buss, executive vp business operations for the NBA team, says a franchise needs to produce a winning team as well as make celebrities comfortable if the stars are to stick around. "Dr. Buss, my boss [and father], has always had the philosophy of being friendly toward celebrities so that they would feel comfortable at your event. But I've also been at events that weren't the Lakers, and you can invite celebrities and be very kind to them, but they aren't going to show up if it isn't a great event."
The new ownership group is nothing if not diverse. In Johnson, 52, the franchise has an L.A. sports icon and experienced businessman who observers say has already helped the Dodgers win back fans who grew disillusioned amid Frank and Jamie McCourt's well-publicized divorce and the vicious parking lot beating of San Francisco Giants fan Bryan Stow on Opening Day in 2011. In Guber, 70, the organization has a sports mogul and slick Hollywood insider. And the executives of Guggenheim, a private-equity company with more than $160 billion under management, offer financial savvy and deep pockets. It has staked an undisclosed but substantial share of the purchase price.
"This is what the right ownership group should look like," says CAA Sports co-head Howard Nuchow. "I think they did this perfectly. You have serious investors who understand what it is to unlock value, and you have experienced operators."
Johnson has said his focus within the organization will be on sponsorships and marketing and that he will have the ability to sign off on personnel moves. Guber's role is multifaceted: He says he will do everything from introducing people in the Dodgers organization to Hollywood influencers to suggesting ways the fan experience can be tweaked. For instance, Guber shared an idea for deploying what he calls a "daylight spot" -- lighting equipment he says is used at sporting events in China -- to highlight certain players on the field. "No one uses it [here]. It tells you exactly what to look at," he says.
Such changes are often not welcomed by baseball purists, so the new owners will need to walk a fine line.
"What can we do to make the experience better?" says Nuchow, who for a decade ran Guber's Mandalay Sports Entertainment, the entity that oversees the mogul's minor-league teams, before leaving for CAA in 2007. "That will be the question they answer. Where is the line on tradition and just fun?"
After years of McCourt neglect, the organization's commitment to the on-field product has been apparent. In June, the team signed star right fielder Ethier to a five-year, $85 million contract extension, joining Kemp, who before the season inked an eight-year extension worth $160 million. The Dodgers were major players in the lead-up to the league's July 31 nonwaiver trade deadline, making moves for two-time All-Star Shane Victorino and former National League batting champ Hanley Ramirez. And on Aug. 3, the Dodgers claimed star Phillies pitcher Cliff Lee off waivers. Although the team did not work out a deal with Philadelphia for Lee, who is owed more than $90 million over the next three seasons, the move signaled further willingness to spend big. The Dodgers have been flirting with first place in the National League's Western Division all season.
"That's where it counts, down on the field," says Vin Scully, the team's announcer since 1950. "All the other statements were very nice -- you know, a new look. But they did something, and that has made a huge impression in the sports community in L.A. They've come to play, but they've come to win."
The moves are even more surprising considering that only a year ago, the Dodgers were being dragged through the ugly McCourt divorce. Court documents revealed the team was $433 million in debt by 2009, and last year the payroll sank to 12th out of 30 major-league teams. While Frank and Jamie were tightening the Dodgers' purse strings, the organization paid the couple handsome salaries ($5 million for Frank, $2 million for Jamie) and forked over hundreds of thousands of dollars to two of their sons for what was reported to be a modicum of work. Meanwhile, the McCourts owned side-by-side Malibu residences they purchased for $46 million and another pair of mansions in Holmby Hills they acquired for $28 million. They employed a $10,000-a-month full-time hairdresser, and Jamie belonged to six country clubs. In all, court documents revealed that from 2004 to 2009, the couple took $108 million in personal distributions from the franchise.
McCourt eventually put the team into bankruptcy when it couldn't meet payroll. "Times were tough, and you've got Frank McCourt using the funds allegedly for not the right things, and that was a turnoff for us," says comedian George Lopez, a longtime Dodger fan. "He'd sit out there -- dude never wore socks. He'd go around pavilions shaking hands with people -- nobody wanted to shake his hand. It was more about him than it was about the Dodgers."
The team drew 3.76 million fans in 2009, best in the majors, but dropped to third in 2010 with 3.56 million and by 2011 mustered only 2.94 million, a 22 percent drop in just two years. Plus, the Dodgers failed to reach the playoffs the past two seasons. Says Ethier, "Maybe some of that was a byproduct of the lack of commitment and the lack of direction that was being shown by the previous ownership and the lack of moves they could make."
The McCourts reached a divorce settlement in October, the terms of which included Jamie waiving her rights to the team and receiving $131 million and properties worth about $50 million. A few weeks later, Frank and Major League Baseball announced that they had agreed to a court-supervised sale of the team. "It had to happen -- people were tired of the old ownership," says Jaime Jarrin, the team's Spanish-language broadcaster for the past 54 seasons. "There is new electricity here." (Frank McCourt declined comment; Jamie McCourt's representative did not respond to requests for comment.)
That sale process, run by financial-services firm Blackstone Group, snared a diverse group of prospective buyers, including hedge-fund billionaire Steven Cohen and L.A. biotech billionaire Patrick Soon-Shiong; St. Louis Rams owner Stan Kroenke; Dallas Mavericks owner Mark Cuban; developer Rick Caruso and former Dodgers manager Joe Torre; and L.A. investor Stanley Gold and the family of the late Roy Disney. But Guggenheim trumped them all with its record-setting offer, blowing away the previous baseball record of $845 million paid in 2009 by the Ricketts family for the Chicago Cubs.
"It sent shockwaves with the value -- some people say they overpaid," says Jeff Marks, managing director of Santa Monica-based sports consultancy Premier Partnerships. "I think at the end of the day, they paid the market [price] because they got the team."
People were surprised, says Johnson, that given his iconic status in the basketball world, he'd want to get involved in baseball. But his answer was simple: "I've always been a baseball fan." And a stake in the team is a feather in the cap for a businessman whose interests range from Aspire, a cable network aimed at African-American families, to a private-equity fund run in partnership with Ron Burkle's Yucaipa Cos. that targets underserved markets. For Johnson, success with the Dodgers could secure his legacy as the leading African-American businessman of his generation.
Guber's involvement flowed naturally. His friend Pat Riley, then the coach of the Lakers, introduced the studio head to Johnson in the early 1990s, and the two hit it off. Johnson's theater company was created through a partnership with Sony's retail entertainment group and predominantly served African-American communities. (Says Guber, "We made a bundle of money.") For Johnson, Guber is "the real magic man," a trusted friend Johnson says he always calls to talk business. "I really love Peter."
Despite the good vibes, several key financial issues remain unclear, including exactly how much each co-owner has invested in the Dodgers. The team was unwilling to discuss the structure of the group in any detail, though Kasten, who previously ran the Atlanta Braves and Washington Nationals, says Walter, as the "controlling owner," has "100 percent of the vote of all of the partners." But Kasten and others declined to reveal what each person contributed and the size of his stake. (During a May 2 news conference, Johnson told reporters his piece is about 3 to 4 percent.)
In addition, Johnson, Kasten and Walter were hammered with questions May 2 about whether McCourt has an economic interest in the team or the property surrounding the stadium. Walter said McCourt's involvement would be limited to potential financial benefit from the possible development of the parking lots. But the questions kept coming. At one point, Johnson admonished reporters: "We are not going to talk about Frank McCourt anymore."
A May 4 Los Angeles Times story said the new owners would pay $14 million a year to lease the parking lots from an entity half-owned by McCourt. "The former ownership isn't involved in any way, shape or form with the current operation [and] management of the Dodgers. Period!" Kasten says now. "Or anything having to do with the fan experience in any way." Johnson, who promised at the news conference that he would be a regular presence at the stadium, also has been criticized for, well, not being one. His commitment as an ESPN basketball analyst during the NBA playoffs kept him on the road earlier this season, and he took a lengthy European trip. "Sometimes you have the best intentions, and it doesn't work out," Johnson told the Times recently about his absence.
As the Dodgers barrel toward what looks to be a classic pennant race with the Giants, things appear to be returning to normal at Chavez Ravine. A handful of smaller, immediate changes that the new owners have made, such as lowering the price of parking from $15 to $10, have boosted fans' morale. And attendance is on the rise this season -- the team has drawn the sixth-most fans of any team this year.
On a recent Saturday afternoon, former Dodgers manager Tommy Lasorda surveyed the team from the dugout, watching batting practice. As players streamed out of the clubhouse toward the diamond, they'd stop when catching sight of Lasorda, who guided the club to two world championships in the 1980s. The gregarious 84-year-old paused during an interview with THR several times to exchange pleasantries with the players, offering a "Como esta?" or a "Good to see you" to each that stopped to shake his hand. While the athletes' admiration for the old skipper was clear, his reverence rests in a different place -- with the fans.
"The game doesn't belong to the owners, this game doesn't belong to the players, it belongs to the fans," says Lasorda. "You can have the best stadium, the best team, but if nobody goes through those turnstiles, you are going to have to shut the doors down. That's why we owe the people. We've got the greatest fans in all of baseball, and we owe them a winner."