So a short time ago, the Dodgers were sold to an investment group fronted by Magic Johnson for $2.15B. It seems that Time Warner cable just inked a deal to air their games for a rumored $7B-$8B. Why wouldn’t they have just bought the team outright of they thought the right to air their games was worth more than 3x the asking price for the team?
Good question. My understanding is that the $7 billion is Time Warner’s commitment to a new local sports network over the next 25 years. So perhaps the team doesn’t get all of that money? (But perhaps that ridiculous sum will encourage the cable companies to offer a la carte pricing, so that those of us who don’t watch the sports network aren’t forced to pay for them. ESPN, for instance, costs over five bucks per cable customer per month.)
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The commitment is over 25 years, so TWC doesn’t have to come up with the cash tomorrow.
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TWC isn’t in the baseball team business.
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They stand to make a lot more money selling airtime and rights to the games than they ever would selling tickets and doing concessions at Dodger Stadium.
Moved to the Game Room.
Colibri
General Questions Moderator
True, but I would imagine the purchase of the Dodgers was financed on some level, meaning that TW could have likely done the same.
True, but neither were Magic Johnson and Guggenheim Capital. But that is a fair point.
But they would just hire people to do that stuff. Ultimately, the Dodgers should be making a profit on their own, so owning the would be a net benefit in TW’s case.
They saw what happened when CBS bought the Yankees.
The Net Present Value of $7 billion paid out over 25 years at a 10% discount rate is about $2.5 billion. At an 8% discount rate about $3 billion. This assumes constant payments each year, but in fact it is likely the payments are escalated at a common rate each year, which would likely bring the NPV close to the selling price.
As a third-generation Giants fan, I’d love to see the Dodgers bought by a clueless media empire that aggressively manages the franchise into the cellar. 
Sports teams should be owned by those who know what they’re doing, even if their participation is limited to writing checks to the right people.
shakes fist
We’ll get you yet!
I’m not a baseball fan, but I once read a stat that said that the all time win/loss records between our 2 teams are within like a few dozen of each other, despite the fact that we’ve played literally thousands of games. I wish I could find that again.
Wikipedia says:
“Since 1901, the Giants and Dodgers have played more head-to-head games than any other two teams in Major League Baseball. In their 2,356 meetings (seasons 1901 through 2012),[1] the Giants have won 1,190 games and the Dodgers have won 1,166”
1190 Giants to 1166 Dodgers 17 Ties, Including all the various renamings and relocations of both teams.
It really is one of the most amazing rivalries in sports, trumping even Yankees-Red Sox. (I say so even though I now live in BoSox territory; I just can’t work up any real rah for the games.)
Just, you know, too bad it involves the Dodgers.
Or when Fox bought the Dodgers.
… or when Disney bought the Angels.
Or when Time Warner owned the Braves… Maybe they learned their lesson.
1901 is an arbitrary cutoff though, as both teams were founded in the 19th century.
The Cubs and the Tribune Company is another fine example of why media companies should stay away from baseball ownership.
Off Topic:
The Dodgers/Giants history compelled me to look up similar data for the Cardinals/Cubs. Amazingly, over 2306 games all-time (Cubs lead the series 1173-1114) the Cardinals have scored 13 more runs than the Cubs. 13 runs over 121 years of baseball.
Probably true.
Magic Johnson had owned a piece of the Lakers. And they wanted to get into that business while Time Warner doesn’t.
I don’t think the Dodgers are making money right now. Or at least Walter said he was not worried if the team was not profitable right away. Over the longer term I assume they will. But even if the were profitable, that doesn’t mean it would be a good deal for Time Warner. Maybe it’s less profitable than their other businesses. Maybe they’ll recoup a bigger profit from the network than they would by owning the whole team. Maybe buying the Dodgers would would tie up too much of their money in a way that would affect their business. Or maybe they just aren’t confident that they would do a good job making money from the team.
Is it worth 5 billion dollars for them not to get into that business? Seems sort of bizarre. If Magic Johnson has some crazy sports-team owning skills Time Warner feels they can’t get elsewhere, I imagine they could hire him to help them for much much less then 5 billion dollars that they would’ve saved by buying the team outright rather then just paying for the TV rights.
They just made 7 billion dollars.
But they obviously feel the TV rights alone are profitable enough to pay 7 billion for them. As long as the rest of the business isn’t haemorrhaging billions of dollars, its hard to see how buying the whole team wouldn’t be more profitable, even if the rest of the business just broke even.
How?
It would tie up negative five billion dollars.
Again, with the money they save they could hire just about anyone to run the team. They could presumably pay the people who actually bought the team to run it, if they wanted to. There aren’t many people in the world who have a price higher the five billion dollars.
I don’t think anyone’s put forward a particularly convincing answer to the OP’s question.
I don’t know if you saw my earlier post, but $7 billion over 25 years is not much different then $2.15 billion right now. There was no huge savings to be made.