MLB Rejects TV Deal Between McCourt, Fox; Nullifies McCourts' Divorce Settlement
MLB late yesterday formally rejected the proposed TV deal between the Dodgers and Fox, setting up a potential legal showdown between team owner Frank McCourt and the league. MLB Commissioner Bud Selig was particularly displeased a pending divorce settlement between McCourt and ex-wife Jamie would have taken about $150M out of $385M in upfront rights fees from Fox and used it for divorce-related matters such as attorneys' fees, personal funds to Frank and Jamie, and a divorce court-monitored account. Such a pattern of using team-related resources for personal matters, to the league, essentially represented a continuation of the pattern of lavish spending that put Frank McCourt and the Dodgers in their current financial morass. "Critically, the transaction is structured to facilitate the further diversion of Dodgers assets for the personal needs of Mr. McCourt," Selig said in a statement. "Given the magnitude of the transaction, such a diversion of assets would have the effect of mortgaging the future of the franchise to the long-term detriment of the club and its fans." He went on to call the proposed transaction "not in the best interests of the Los Angeles Dodgers franchise, the game of baseball and the millions of loyal fans of this historic club." McCourt's attorney, Steve Susman, quickly fired back at MLB yesterday, calling the decision "extremely disappointing" and "potentially devastating" to the franchise and MLB. He went on to make a thinly veiled threat of a legal challenge to the league, vowing the pair would "explore vigorously our options and remedies." "As Commissioner Selig well knows, this transaction would make the Dodgers financially secure for the long term and one of the best capitalized teams in Major League Baseball," said Susman, who insisted McCourt met all league requirements for the Fox deal to be approved. The proposed TV rights deal, according to McCourt, was worth more than $3B over its full 17-year term. The MLB rejection also voids the pending divorce settlement between the two McCourts, and it is still not settled between them whether the Dodgers are exclusively the property of Frank or is considered community property (Eric Fisher, SportsBusiness Journal).
STRONG MESSAGE FROM SELIG: In N.Y., Thompson & O’Keeffe cite a source who has followed the McCourt’s divorce proceedings as saying Selig’s statement is the “biggest f--- you letter I’ve ever seen.” The source: “Selig made it clear this deal with Fox is not in the best interest of the baseball team. The issues include the valuation of the TV deal -- it was non-competitive bidding and didn’t reflect the true value of the deal.” Thompson & Keefe note if the deal had been approved, the McCourts’ divorce settlement “called for a one-day trial in August to determine if the Dodgers were considered community property, or if Frank McCourt was the sole owner.” If the court “ruled that the Dodgers were community property, the settlement called for the team to be sold" (N.Y. DAILY NEWS, 6/21). DAILY VARIETY’s Jon Weisman wrote because of Frank McCourt’s “distressed position, it is believed that Fox had negotiated favorable terms for itself to extend its hold on the Dodger television rights (and forestall the team from going off to form its own cable network, as the Los Angeles Lakers are doing in a deal with Time Warner Cable)” (VARIETY.com, 6/20).
WHAT'S NEXT? In L.A., Shaikin & Wharton in a front-page piece report there are “various possible scenarios” now that the divorce settlement is “'null and void’ because Selig rejected the television deal.” McCourt “could restructure the Fox deal or challenge Selig’s rejection in court.” He also “could take on a minority investor to ease the Dodgers’ cash crunch.” A source said that that is a “possibility he has raised with league officials in recent weeks.” However, any deal “would depend on McCourt’s winning full ownership of the team or getting Jamie’s approval,” and the league would also “have to approve the minority owner.” Meanwhile, McCourt could “file for bankruptcy and try to persuade the bankruptcy judge to order implementation of the Fox deal.” However, that “would require overcoming MLB bylaws that allow the commissioner to seize any team whose owner files for bankruptcy” (L.A. TIMES, 6/21). The TIMES’ Bill Shaikin cited a source as saying that McCourt “has not provided any names of prospective minority owners to MLB so that they might be cleared to see the team’s financial data” (LATIMES.com, 6/20).
OBSTACLES TO SEIZURE: ESPN L.A.’s Josh Fisher cited sources as saying that if MLB were to assume control of the Dodgers, ”significant sources of Dodgers revenue would not be available to Major League Baseball or another owner without McCourt’s consent.” Sources said that these include a $21M “annual lease obligation owed from the team to a McCourt entity for the club’s use of the parking lots surrounding Dodger Stadium and any ticket revenue in excess of the $6-7 million per year of service on certain McCourt debt” (ESPNLA.com, 6/20). In L.A., Tom Hoffarth in a front-page piece cites experts as saying that it is “not in Selig’s best interests to get into a court battle with McCourt, which could force the game to open its financial books as McCourt tries to prove he has been singled out among the other 29 team owners.” The MLB CBA expires after this season and “revealing financials could deeply hurt the owners’ leverage” in the talks (L.A. DAILY NEWS, 6/21).
ATTENTION SHIFTS TO PAYROLL: The rejection of the Fox deal heightens the drama around next week's June 30 payroll, which for the Dodgers balloons to roughly $30M in obligations due in part as deferred compensation to former players including Manny Ramirez. McCourt said last week he is confident the club's payroll obligations will be met, just as they have been at every point thus far this season. But significant doubt exists elsewhere in the game as to whether that is true. If McCourt fails to meet the payroll obligations, MLB could seize and begin efforts to resell the club. In the meantime, Tom Schieffer, the league-appointed monitor for the Dodgers, remains in place leading the club's day-to-day operations. And an MLB investigation of the Dodgers' finances also is continuing (Fisher). The L.A. TIMES’ Shaikin & Wharton note while McCourt has said he can meet the June 30 payroll, “others familiar with the team’s finances say he cannot.” Two sources said that Selig “does not plan to seize the team unless McCourt misses payroll,” at which point he “could suspend McCourt and put the team up for sale.” However, sources said that Selig “believes McCourt would respond by filing a lawsuit” (L.A. TIMES, 6/21). The HOLLYWOOD REPORTER’s Kimberly Nordyke noted Fox “has already advanced Frank McCourt money from the team’s current TV deal to help cover expenses” (HOLLYWOODREPORTER.com, 6/20).
TIME TO GET OUT OF DODGE: In L.A., Steve Dilbeck penned an open letter to McCourt, in which he wrote, “It’s time to let the Dodgers go. You say you love the Dodgers? Then do what’s best for the team and the franchise. Sell the club and move on.” Dilbeck: “I’m trying to visualize a scenario in which you think you actually come out victorious. … You lost this city and its fans a long time ago and it’s only going to get worse if you dig in” (LATIMES.com, 6/20). ESPN L.A.’s Tony Jackson writes, “The time has come for McCourt to do the right thing, to admit defeat, to do the franchise and the city and the league and the world a favor and step aside.” McCourt should “allow Major League Baseball to take control of the team and sell it.” He then should “take whatever is left of the proceeds, pay whatever debts remain, pay off his ex-wife and then go off somewhere and live the rest of his life in peace, out of the spotlight.” Jackson: “I now write directly to Frank to just please go away and leave us all alone. And, most importantly, leave this once-proud franchise alone. Forever” (ESPNLA.com, 6/21). A L.A. TIMES editorial noted McCourt “has long said that the commissioner has it out for him and is unfairly taking away his right to make a deal on behalf of a team he owns.” But Selig has “tremendous authority to take steps that he believes are in the best interests of baseball, and McCourt understood that when he bought the team.” The editorial: “If Selig is concerned that the McCourts’ personal travails are harming the Dodgers’ future, he has an obligation to take action to protect the franchise” (L.A. TIMES, 6/21). In L.A., Bill Plaschke: “Selig didn’t say he rejected it because it was a lousy deal. He said he rejected it because McCourt was a lousy owner. He didn’t say he rejected it because he didn’t trust Fox Sports. He said he rejected it because he didn’t trust McCourt” (L.A. TIMES, 6/21).
HAVING AN IMPACT: USA TODAY’s David Leon Moore in a sports section cover story writes the Dodgers are “one of baseball’s most successful franchises,” but their profile has been “drastically altered.” Attendance has “plummeted” at Dodger Stadium -- the team has averaged 35,846 fans through 35 home dates, down 8,390 fans from the comparable period last year. However, the “apathy among fans runs much deeper.” The Reds-Dodgers game last Wednesday drew an announced crowd of 30,443, but “veteran attendance-guessers projected actual people in the stands at maybe 18,000.” Dodgers manager Don Mattingly: “It feels empty some games” (USA TODAY, 6/21). The Tigers played the Dodgers at Dodger Stadium last night, and Tigers RF and L.A. native Brennan Boesch said, “What strikes me is seeing the empty seats. That’s not what I’m accustomed to seeing here” (DETROIT NEWS, 6/21). In L.A., T.J. Simers writes, “The most damning thing that can be said about the McCourts … is what they have done to ruin the Dodgers experience. None of this ownership stuff really matters to most folks. It’s the product on the field that grabs their attention, which currently is unwatchable” (L.A. TIMES, 6/21).