Dodgers Baseball Team, Research Paper Example

Executive Summary

The purpose of this paper is to study the Los Angeles Dodgers of recent years. There are two seemingly contradictory facts about the teams during these recent years. For one, the owner, Frank McCourt has been seen as one of the least popular figures in Los Angeles sports, as his divorce procedure lead to Major League Baseball seizing control of the team. He recently sold the team ending what had seemingly been a disastrous time for the franchise. Despite this, he made a profit of over one and a half billion dollars in under a decade of ownership. What has the franchise done right under his ownership to allow it to overcome this level of turmoil and still profit the way it has?

Introduction and Background

From 2004 up through the past month, the Los Angeles Dodgers were owned by Frank McCourt. McCourt developed his considerable fortune outside of baseball, working as a real estate developer largely in the Northeast United States. Before purchasing the Dodgers, he had made a big on another one of baseball’s historic franchises, the Boston Red Sox, with the plan to use his considerable real estate holdings in Boston as grounds for a new stadium. When this failed, McCourt financed his four hundred million dollar purchase of the Dodgers from Rupert Murdoch’s News Corp through debt and with land holdings (Associated Press). McCourt owned the team for seven years before recently selling it for approximately two billion dollars to an investment group (DeBord).

McCourt’s ownership of the team was turbulent especially in the latter years as McCourt and his wife, Jamie McCourt, went through divorce proceedings that impacted the team negatively. Major League Baseball took unprecedented steps to try and wrestle control of the team away from McCourt; actions that were tied up in court proceedings when McCourt and the investment group featuring Magic Johnson and Guggenheim Partners agreed to terms (Wharton). Despite these controversies, the team had as many playoff campaigns as losing seasons during his ownership, and a franchise value that almost quintupled in a short time.

The side McCourt bought and ran had one of the most storied histories of any Major League Baseball franchises. Originally they began playing in Brooklyn in 1884 as the Trolley Dodgers, a minor league outfit, before being given membership in the National League in 1890. At this point they were known as the Bridegrooms then briefly the Superbas and the Robins before finally settling on the Dodgers in 1932. They became one of the most successful franchises of the 1940s and 1950s, a beloved Brooklyn institution who often made the World Series only to be defeated by their cross town rival New York Yankees. During this period, the team was part of history when Jackie Robinson became the first African-American player to play in Major League Baseball for them in 1947. In 1955, they delighted fans by finally vanquishing the Yankees with a dramatic seven game victory (Dodgers Timeline).

However, those fans would be heartbroken a few short years later when the team moved across the country for Los Angeles after they were not allowed a new stadium in Brooklyn. Los Angeles realized it was possible for a team to move out there due to the advent of air travel and began courting the Dodgers due to their stadium trouble. There was an offer made to let the team purchase land in Los Angeles, which was not available in Brooklyn. After the 1957 season, the Dodgers left for California, bringing the New York Giants with them as they moved to San Francisco (Sullivan).

These simultaneous moves were amongst the most pivotal moments in the history of the business of baseball. Throughout the first half of the century, the top two leagues, the American League and National League did not go farther west than St. Louis, where the Browns and Cardinals played, respectively. In this vacuum out west, the Pacific Coast League was developing into a major league of its own for that half of the continent. It developed hall of famers such as Joe DiMaggio and Ted Williams, both of whom played for the San Francisco franchise during the 1930s. Yet, it was not just a feeder league as many remained on their native west coasts throughout their careers. The PCL developed agreements with the AL and NL that allowed them to secure their players more easily and the league seemed on its way to perhaps becoming a third major league.

However, the league was suddenly sent down to the minors at the end of the 1950s when San Francisco and Los Angeles began hosting National League sides. The top three sides of the Pacific Coast League all played in those two cities and they quickly scattered to avoid the competition, moving to Spokane, Phoenix, and Albuquerque. The American League saw the opening and granted an expansion franchise to Los Angeles, although after a few years of subletting from the Dodgers they headed to Anaheim. The damage was done to the PCL, which is now seen as a Triple A league, a full step down from the major leagues (O’Neal). The Dodgers moving to Los Angeles ended the last serious threat to the duopoly of the American and National Leagues.

One of the other legacies of this move was the new relationships state and municipal governments entered into with baseball and sports teams. Undoubtedly they enjoyed having these sides in their areas, for economic reasons as well as increased civic pride. Sports teams were keen to take advantage of this, often attempting to get the cities and states to chip in for the expensive stadia the teams needed. However, they had little leverage as up until this point, only unsuccessful franchises moved cities, hoping to try their luck in another city after failing in their current one. The Dodgers and Giants were both amongst the most successful teams in baseball at the time of their move and both beloved in New York. Seeing them move across country over a stadium dispute made cities realize their teams could leave if they did not support the team financially. Today, that means teams often threaten to move until tax dollars are kicked in to help with a new stadium. It is ironic that despite this legacy from the clubs, the Dodgers and Giants both play in privately constructed stadia, despite only four of the thirty baseball clubs holding this distinction (Diedrich).

It should not be said that the Dodgers’ influence all rests in their move from Brooklyn to Los Angeles. They remained a flagship team for the sport, making the World Series in their second year in Los Angeles and eight other times in their first three decades on the West Coast. The team secured five World Series titles during this time. Although they have not made baseball’s premier ever since 1988, they have remained a contender and never fallen out of the top half of the National League in attendance. In fact, in the fourteen seasons between 1973 and 1986, they lead the league in attendance twelve times, falling to third only in 1976 (Baseball-Reference).

It was perhaps due to this legacy that Bud Selig and the rest of Major League Baseball began to challenge Frank McCourt’s ownership of the team. McCourt’s money was largely tied up with personal proceedings, leading him to accept a heavily front loaded television rights deal. Essentially, he was mortgaging the future of the franchise to make sure he did not miss any payments immediately. Oddly, this deal was with Fox, owned by News Corp, from whom McCourt purchased the team. Major League Baseball did not want a franchise to be locked into a deal that robbed them of crucial television revenue for years and blocked the deal. With the Dodgers now short on cash, Selig put a Major League Baseball employee in charge of their finances early in the 2011 season. McCourt filed for bankruptcy a couple months later and the franchise preceded under this tumultuous situation throughout the season and offseason before being sold in late March of 2012 (Wharton).

Business Practices

Despite the disastrous ending to his ownership, Frank McCourt bought the team for about twenty percent of what he sold them for even though he was in desperate need to turn the team into liquid assets. Obviously something must have gone well in his operation of the team for such a drastic increase in club value. Major League Baseball teams have seen huge increases in the value of their television rights packages with the Texas Rangers receiving the largest contract in baseball history, with over one and a half billion dollars over twenty years. The value of the Dodgers was undoubtedly tied to the new owners expecting a windfall television contract. But, what else was McCourt doing successfully to help the Dodgers?

As a privately owned business, the Dodgers do not broadcast their business practices for the whole world to see, but some facts are known. The most expensive employees are those on the major league roster, including the twenty-five man active roster, and the fifteen players under team control on their forty man roster. Throughout the McCourt tenure as ownership, the team spent approximately one hundred million dollars a year on its players. Player decisions are largely up to the General Manager currently Ned Colleti, who replaced Paul Depodesta, the first man McCourt hired to run the team.

One prominent feature of the Dodgers has been their commitment to diversity in the organization. Due to their geographical location, the team has a great deal of Mexican-American fans. They have cultivated this specific fan base with Mexican stars such as Fernando Valenzuela. In the past few years, the club has shown a commitment to gender diversity in the front office. Jamie McCourt served as the team CEO, making her the first to hold that post in the history of Major League Baseball. The team also employed Kim Ng as Assistant General Manager, making her the highest woman in baseball operations in major league history (Gurnick). She was also given serious consideration to become the team’s General Manager before Ned Colleti was hired.

One of the challenges all baseball teams and sport franchises face is that the product they sell is not necessary for anyone. Teams make their money through ticket sales and television revenue. Essentially the more people willing to pay to view games in person and the more willing to devote hours to watching the game on television the more revenue the team makes. In a recession like the one that plagued the country during most of McCourt’s ownership, this is especially problematic as people will theoretically pass up spending on entertainment to secure more essential goods.

The solution for baseball and sports teams comes from Maslow’s hierarchy of needs. Baseball as entertainment does not register on the needs anyone has. It is in fact a desire people have that they can avoid spending on if need arises. However, if a franchise can create a sense of community between their fans, it ceases to be a relationship between producers and consumers of entertainment goods and becomes a way for fans of the team to get a sense of belonging in a fan community. Perhaps no franchise has been better at this than the Dodgers. The Brooklyn era Dodgers were stocked with players who lived in working class areas of Brooklyn, their fans were essentially the neighbors of the team members, creating a relationship that cannot be matched in the era of millionaire athletes. Since the team moved to Los Angeles, they have courted Hispanic players to appeal to the large population of them in their area. This continued under McCourt and the team also brought in players such as Hiroki Kuroda who undoubtedly appealed to the huge Asian American population of California.

The Dodgers also have the advantage of running their team through a strict structure that divides up responsibility. Under General Manager Ned Colleti, who runs the team’s baseball operations, the Dodgers employ Assistant General Managers in charge of scouting amateur players, developing their minor league players, and more. They also employ people in charge of their Dominican Republic scouting operations. This commitment to structure in the minor leagues means that the club has managed to develop such stars as Andre Ethier, Russell Martin, Clayton Kershaw, and Matt Kemp during the McCourt ownership era. Matt Kemp was runner up for National League Most Valuable Player in 2011 while Kershaw took home the Cy Young award for the league’s best pitcher. These two individual campaigns were highlights to a season hampered by the club’s ownership turmoil.

The structure has the important effect of adding consistency to the operations of the franchise. A club based on the talent of individuals will be reliant to the talent of individuals at the time, but through a strict structure of baseball personnel the teams can be consistent the whole time. A structure that develops baseball players well is especially important as the economics of baseball make team developed players especially lucrative as they are paid below a market rate for their first six years. This structuralism works for team development, but due to the nature of baseball talent a person like Ned Colleti needs to be in charge of acquiring the players they did not manage to develop. This is because the number of people who can successfully play at a major league level is incredibly limited and needs ad hoc acquisition processes.

Conclusion

No one will mistake Frank McCourt’s ownership for the glory years of the Los Angeles Dodgers. The team was dragged through disrepute during bankruptcy and divorce proceedings and struggled on field during his last two seasons. It is not clear if the new owners will be able to turn things around in time for the current season or even for their 2013 campaign. Yet, McCourt still found a way to drastically increase the franchise value relying on the business acumen he used to become a successful real estate developer. By appealing to fans in a way that brings them a sense of community and a strict structure and talent system that makes the team’s baseball system provides quality players.

References

DeBord, Matthew. “Guggenheim’s Mark Walter Clarifies the McCourt Parking Lots Deal.”KPCC. 28 Mar. 2012. Web. 07 Apr. 2012. <http://www.scpr.org/blogs/economy/2012/03/28/5289/guggenheims-mark-walterclarifies-mccourt-parking-/>.

Diedrich, Chrisoper. “Homefield Economics: The Public Financing of Stadiums.” Policy Matters, 2007. Web. 7 Apr. 2012.

“Dodgers Timeline.” Los Angeles Dodgers. Web. 07 Apr. 2012. <http://losangeles.dodgers.mlb.com/la/history/timeline.jsp>.

Gurnick, Ken. “Kim Ng Leaving Dodgers to Join Torre with MLB.” Major League Baseball. 8 Mar. 2011. Web. 07 Apr. 2012. <http://losangeles.dodgers.mlb.com/news/article.jsp?ymd=20110308>.

Sullivan, Neil J. The Dodgers Move West. New York: Oxford UP, 1987. Print.

“Vote Will Be Taken today.” ESPN.com. Associated Press, 29 Jan. 2004. Web. 07 Apr. 2012. <http://sports.espn.go.com/mlb/news/story?id=1719414>.

Wharton, David, and Bill Shaikin. “Major League Baseball Seizes Control of Dodgers.” Los Angeles Times. Los Angeles Times, 21 Apr. 2011. Web. 07 Apr. 2012. <http://articles.latimes.com/2011/apr/21/sports/la-sp-0421-mlb-dodgers-20110421>.