Magic Johnson knows he's always welcome as an owner in this league. He's been a part owner in the past of the Los Angeles Lakers, and he's always welcome and a close friend of the NBA family.
The Dodgers charged $8 billion for broadcast rights to their games, knowing full well that pay-TV companies would have to pass along this sky-high cost to all customers.
By David Lazarus
May 1, 2014, 5:16 p.m.
A troglodyte of a team owner got his comeuppance this week for making incredibly stupid comments about race. But let's be clear.
Racism isn't widespread among sports team owners.
Exhibit A: The $8 billion charged by the Dodgers for broadcast rights to their games knowing full well that pay-TV companies would have to pass along this sky-high cost to all customers.
Time Warner Cable is the Dodgers' partner in crime. It paid that whopping sum for exclusive rights to distribute the Dodgers channel to other pay-TV companies, assuming, like the team, that it would get away with sticking both fans and non-fans with an extra $4 to $5 fee every month.
That's an extra $48 to $60 per year from practically everybody in Southern California (not me, though, I don't have cable), whether they watch the Dodgers or not. And baseball is a pretty boring sport to watch on TV, at least until the games matter in October. When I was a kid, Dodger games were a pleasant thing to have Vin Scully on the radio while you were outside doing chores or whatever, but sitting in the dark watching seems ...
... This is why DirecTV, Dish, Verizon and AT&T have balked at adding $4 to $5 to people's bills for a Dodgers channel.
So, as I mentioned earlier in the week, 70% of Southern California Dodger fans who have cable TV haven't been able to see the first month of the Dodger's season. The local cable companies are worried that raising their fees will drive their fans who don't like sports to start cutting the cable and turn to Netflix-like alternatives for movies and shows. I don't have cable, but the only sports I feel like I really want to watch are the Olympics, the Masters, the U.S. Open, maybe the British Open if I get up early enough, a few baseball playoff games, and maybe some college football. Most of that's available on broadcast. The cable companies are worried about pushing more people to follow me.
Clippers owner Donald Sterling is paying the price for being a narrow-minded jerk.
Why should the Dodgers' owners get a pass?
Of course, there's an irony here: the public face of the new Dodger ownership team that's stiffing its fans is that "ultimate cleanser in sports," Magic Johnson.
One reason the new Dodger ownership is stopping Dodger fans from seeing their team on TV in their game of chicken with the cable companies is because they overpaid so badly for the franchise in 2012. From the NYT in 2012:
PRIVATE EQUITY | DEALBOOK COLUMN
By ANDREW ROSS SORKIN APRIL 9, 2012, 8:59 PM 76 Comments
When the numbers don’t seem to add up, it’s worth asking some questions.
For the last two weeks, I’ve been puzzled by the announcement of a $2.15 billion deal to buy the Los Angeles Dodgers by Magic Johnson and a group of financiers.
Of course, Johnson got most of the attention. But his celebrity has obscured a drumbeat of questions about the businessmen behind this headline-grabbing sale, which doubled the record for the price tag of an American professional sports team, set by the Miami Dolphins when it was sold for $1.1 billion in 2009.
The winning bid was led by Mark Walter and his firm, Guggenheim Partners, which most people in sports — and frankly, even on Wall Street — know very little about. (Peter Guber, the film producer behind “Rain Man” as well as Stan Kasten, the former president of the Atlanta Braves, are also involved.)
A quick background check and some back-of-the-envelope math raises an obvious red flag: how on earth can this group of individuals afford to pay $2 billion in cash?
The answer is that they probably can’t — at least, not by themselves.
Mr. Walter, along with his colleague Todd Boehly, Guggenheim’s president, appear to be living out a childhood fantasy using other people’s money, some of whom may not even realize it.
In addition to their own cash, Mr. Walter plans to use money from Guggenheim subsidiaries that are insurance companies — some state-regulated — to pay for a big chunk of his purchase of the Dodgers. Guggenheim controls Guggenheim Life, a life insurer, and Security Benefit, which manages some $30 billion, among others.
Using insurance money — which is typically supposed to be invested in simple, safe assets — to buy a baseball team, the ultimate toy for the ultrarich, seems like a lawsuit waiting to happen. ...
The transaction seems even more questionable when considering Mr. Walter’s own words to The New York Times two weeks ago: “I don’t want to realize a return on investment on buying the Dodgers. I want to have a multigenerational relationship that changes my life, Magic’s life, Magic’s grandchildren’s lives and all of our lives.”
So let’s get this straight: Mr. Walter, who has a fiduciary duty to the firm’s policyholders, plans to pump their money into a baseball team, even though he says he’s not seeking to realize a return on the investment. And he is seemingly wildly overpaying by some $500 million more than the next highest bidder — he outbid Steven Cohen, the hedge fund manager, among others — so that he can be the league-designated owner of the Dodgers.
“Paying $1.5 billion or $1.6 billion — I can get there. But anything after that is pure ego,” said a longtime sports banker who worked for a rival bidder for the Dodgers. “We’ve done the math. At that price, it just doesn’t make any sense unless you want to be the king of Los Angeles.” ...
On the other hand, if you can bully your way into adding $55 per year to the annual bill of every cable TV subscriber in the five-county area of 17 million people ...
Guggenheim Partners started relatively recently, in 2000, by a great-grandson of Meyer Guggenheim, the patriarch of the famously philanthropic family. It now manages some $125 billion for the very wealthy — including Michael Milken — and has proved itself to be a skilled risk manager. Under Mr. Walter, the firm has grown beyond money management into insurance and recently hired Alan D. Schwartz to run its advisory practice. Mr. Schwartz is the former C.E.O. of Bear Stearns, who sold it as it was collapsing to JPMorgan Chase.
Johnson has been a part of the Sterling story from the beginning. It was pictures of Sterling’s girlfriend with Johnson on Instagram that set Sterling off on his racist rant. Johnson and his financial backers, Guggenheim, are interested in buying the Clippers, according to Yahoo’s Adrian Wojnarowski. If interested, the Johnson group is the clear favorite. The NBA would love to bring Magic into the fold. He is royalty in NBA circles. The Johnson/Guggenheim group blew other bidders out of the water paying $2 billion for the Dodgers. Guggenheim would also love to get its hands on the Clippers for TV purposes. The Dodgers’ rich price tag was fueled by an expected local TV deal with Time Warner Cable, which eventually climbed to $8.5 billion. TWC is having trouble getting carriers to pick up the Dodgers’ new regional sports channel, but adding another team to the mix would make the channel more valuable.