Exorbitant sale cost has its downside for Dodgers

Economics say that the value of any item is what a person will pay for it. So I guess that makes the Los Angeles Dodgers somehow worth $2 billion.

But honestly, there's no way any sports franchise is worth $2 billion. Arash Markazi of ESPN.com quoted economists who contend that the group that includes Magic Johnson paid almost twice as much for the Dodgers than it's actually worth.

The biggest price tag for a franchise in MLB history was the $845 million that the Ricketts paid for the Cubs just three years ago. The Houston Astros were sold for $615 million last year. The difference between the two highest bids for the Dodgers was likely right around that $615 million, meaning that the Guggenheim Partners likely overpaid by as much as the entire value of the Astros. And oh, by the way, Dodger Stadium is overdue for some renovations as well that will cost in the hundreds of millions. Said Mark Rosentraub, a University of Michigan sports management professor, in the ESPN.com story:

"It's the craziest deal ever; it makes no sense. That's why you saw so many groups drop out. 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."

So why so much? It's almost a perfect storm. There was a bidding war, but even more importantly, the team also has a lucrative TV rights deal to make in the next two years. The Dodgers are banking on the promise that Fox and Time Warner will be in their own bidding war for exclusive Dodgers rights, as the team will leverage those bids against a possible plan to start their own cable network, as the Yankees and other teams have done. And that cost, no matter what happens, will almost certainly be passed off in the form of bigger cable/satellite bills for pretty much everybody in Southern California.

So if the Dodgers are worth $2 billion, what would the New York Mets be worth? That's another team in financial ruin right now.

"If I'm Fred [Wilpon], I'm selling tomorrow before everyone finds out these numbers don't work," a banker told the New York Times.

Two other amusing quotes about the deal:

• "Wonder if Jamie McCourt has any 2nd thoughts. Turns out the parking lot ($150M) was worth more than her ($130M)." - CBSSports.com's Jon Heyman, on Twitter.
• "If Frank McCourt's sale of the Los Angeles Dodgers to a group with Magic Johnson as the front-man holds up, he will become the most financially successful owner of a team in Major League Baseball history." - Mike Ozanian, Forbes.