UTK Special 12/2/24

The Dodgers Secret Weapon

In a conversation with a former GM, now working in a different role, some things finally clicked for me and I think I figured some things out, but I’ll warn you up front, I may just be overcomplicating it. My varied interests in finance, team ownership, and baseball overlap sometimes, but just because the Venn diagram puts something in the middle doesn’t make it so. So keep that caveat in mind.

The statement my source made came after the Dodgers signed Tommy Edman for a very reasonable four years, $61 million with a club option for the fifth. There’s a sizable signing bonus ($17m) and some deferrals, as has become standard for the Dodgers. His statement: “do the Dodgers have some secret pile of money they’re coming into in ten years or are they just going to let the next owner figure things out?”

The Dodgers’ ownership doesn’t seem like sellers. Instead, they’re investing in their product and seeing a return. They just bought an F1 team (and maybe more racing inventory if rumors are true.) They own a major English soccer club. They are not cash poor, necessitating deferrals, as they’ve shown with large signing bonuses on both the Blake Snell and Edman deals.

But what if there is a secret pile of money that the Dodgers think might be coming, perhaps one that might not only refill the Scrooge McDuck vault they must have under Dodger Stadium, but take care of some of the tax issues as well? There just might be, if things play out in a specific but plausible way.

The biggest impediment to a full MLB rights deal is the long term deal the Dodgers have in place with Sportsnet LA.* Charter/Spectrum, Sportsnet’s owner, has a 50 percent interest with Guggenheim holding the other half. The deal was worth over $8 billion when signed back in 2013, but let’s keep this a round number for ease. That’s $320 million a year and having started with the 2014 season, eleven seasons have passed, or almost halfway.

Let’s call it four billion left on the deal. Could MLB or a broadcast partner simply buy that deal out? Given suggestions of how much the NBA and ESPN paid to make DWB’s lawsuit go away, the answer is yes. Since the Dodgers would be getting a buy out and would be getting paid on the other side of a rights deal, they likely wouldn’t get the whole thing, while Charter would likely get a very sweet deal on the other side if possible. In other words, if it’s a big enough deal, this wouldn’t be a deal breaking amount of money.

Of course, it’s not just Sportsnet. NESN and YES exist and other teams have contracts and financial interests. It won’t be easy, but the NBA’s deal and post-negotiations show a path.

The Dodgers aren’t dumb either. They not only know what’s going on in MLB’s own work to prepare, they’ve been up close on other negotiations. Magic Johnson might seem like a mascot at times, but his connections are often quite useful. If they think a buyout might be on the horizon, it might make some of their money moves a bit more interesting. Could they negotiate a change in the tax or does the tax calculation change in the next CBA? Quite possibly and the next big TV deal would come almost hand in hand with that.

Which isn’t to mean that the Dodgers will simply buy out those deferred payments. Guggenheim has a lot of business in annuities and are likely being creative with how those are funded just as they are with the tax calculations. What the Dodgers will do is figure out what works best given rules they’re very likely to be involved in negotiating.

Then again, as I said up top, the Dodgers might just be happy taking $320 million a year for the next 13 years, which takes care of payroll over that period by itself, even when the deferred payments hit, with a built in margin for baseball’s version of inflation. A deal could get done without the Dodgers and while it wouldn’t feel complete, it would certainly be better than the fractured landscape of the last few years.

*Yes, it’s Spectrum Sportsnet LA currently, but recent moves by Braves owner Liberty Media might make Charter/Spectrum into a whole new company.

More below on team sales, potential new MLB owners, and why Juan Soto is not Bryce Harper. Subscribe and get everything!