Magic Johnson and the Dodgers: A Marriage Full of Smiles and Benjamins

It’s been nearly 48 hours since word came out that the Guggenheim Group threw down $2.1 billion on the Los Angeles Dodgers. And 48 hours to decompress, analyze and theorize over the whole process, which is both good and bad.

First off, it’s a good thing that the Dodgers will have a face that the public respects. The fan base has gone from having to look up towards a tyrannical dictator, to suddenly being handed a leader with Barack Obama-type appeal, circa 2008. Not to get overly political, but you get the sense that the good vibes that surround the emergence of Magic Johnson are very similar to the coveage of Election Day in 2008, and that’s not even pertaining to the idea of race, despite the notion that both broke color barriers in their respective fields. Magic Johnson is LA’s rock star. It’s not Eddie Van Halen or Jim Morrison, this has been a town owned by Magic for the last thirty years, and to have a man of such local significance take over the Dodgers is just elating.

The next thing that comes to mind while processing the huge transaction, is the sum of the deal in itself. They spent more than $2 billion on the Dodgers. That’s more than Manchester United was paid for and more than Barcelona and the New York Yankees are worth. Are the Dodgers more of a global entity than those three franchises? Not at all. They can be, but they just aren’t right now. But despite the enormous sum paid for the Dodgers, the amount is really a statement on the theoretical value of the franchise and not the factual value.

The Dodgers will be getting a new television deal in the coming months, and it’s rumored to be as much as $3 to $4 billion, which essentially would clear of burden of the price. So while the Dodgers aren’t physically worth the $2 billion, it’s when you take into account opportunity cost that the number doesn’t so bad exactly.

Having said that, the Guggenheim Group won’t be flipping the Dodgers for a profit like Frank McCourt did. They’ll be hard pressed to more than quadruple their initial fee for the Dodgers like McCourt, because revenue streams in the future will be similar to what they are now. Digital rights have been on the market for years now, and a new television deal would lock the Dodgers in for a long, long time, considering that McCourt was wielding an offer for 17-years. Plus, ticketing can really only swell through inflation. With Dodger Stadium’s capacity at more than 55,000, the franchise will never have the economic luxury of raising prices due to an out of whack supply and demand curve, unless the Dodgers are selling out every single night, which is unlikely. They won’t have opportunities that the Red Sox and Cubs have, as those teams can raise prices due to demand, while exploiting found real estate, like the Monster Seats at Fenway Park.

That of course leaves the controversial parking lots, which according to ESPNLA’s Ramona Shelbourne, will not involve fans paying McCourt money just to park there.

"The joint venture between the ownership group led by Magic Johnson and soon-to-be former Los Angeles Dodgers owner Frank McCourt for land around Dodger Stadium will not allow McCourt to reap any profits from parking revenue, according to three sources with knowledge of the situation.The new ownership group, which entered into a $2.15 billion deal to purchase the Dodgers on Tuesday night, has control over the parking lots and land around the stadium. McCourt, the sources said, is only in line to see future profit from the land if it is developed in the future. However, according to two sources, there is no plan for development in the near future.In other words, when Dodger fans park their cars at Dodger Stadium, all of that money will go back to the team, not McCourt."

So let’s step back from the parking lot paranoia and enjoy the moment for a little while. The only way McCourt will benefit off of the Dodgers in the future, is the only way the rest of the city will benefit. For as dispible as McCourt is, that’s not the end of the world.

So now only one question remains: if you win the nearly $500 million Mega Millions, are you buying into the Guggenheim Group?