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The Biz of Baseball :: Business of Sports Network
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Lance Gurewitz Article Archive
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Written by Lance Gurewitz
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Friday, 29 July 2011 08:16 |
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The legal war for the Los Angeles Dodgers has officially begun. When the Dodgers filed for bankruptcy on June 27, sparks flew between the public faces of the two sides—Dodgers owner Frank McCourt and MLB Commissioner Bud Selig. McCourt accused Selig of “knowingly and intentionally … [exposing] the Dodgers to financial risk” while Selig declared that the bankruptcy filing “does nothing but inflict further harm to this historic franchise.” How can one make sense of these and the other accusations flying back and forth? Here’s a primer on the past, present, and future of the litigation.
The Background – Proceedings to Date
The Dodgers need money. Unable to meet payroll on June 30, the Dodgers filed for bankruptcy to prevent Major League Baseball from seizing the team. To maintain control of the Dodgers, McCourt must take out a $150-million loan that will let him pay the team’s creditors and submit a business plan that shows how he will maintain the team’s financial stability. McCourt wanted to finance that debt with a loan from hedge fund Highbridge Capital Management instead of the one MLB offered.
The dispute over the Dodger’s financing was the subject of last week’s hearing, which The Biz of Baseball’s Maury Brown detailed here. The two biggest takeaways from those proceedings were that U.S. Bankruptcy Judge Kevin Gross is focusing only on the Dodgers’ finances, not their controlling interest, and that the Dodgers must negotiate a loan with MLB, not Highbridge.
Now, McCourt has eight court dates over the next six months to obtain the court’s approval of a plan to reorganize the Dodgers. The first of those hearings will take place on August 16.
What happens now? – August through December
By all accounts, the key to Frank McCourt bringing the Dodgers out of bankruptcy is his attempt to auction off the Dodgers’ future cable television rights. Currently, Fox Sports West is under contract through 2013 and maintains exclusive negotiating rights through 2012. The Dodgers sought to extend that deal, and the two sides agreed in principle to a 17-year extension worth $3 billion by McCourt’s valuation. However, MLB valued the deal only at $1.6 billion, a startling undersell, leading Bud Selig to reject it by the power of the MLB Constitution, which all team owners must ratify. Selig then reprimanded McCourt for sacrificing a wealth of long-term revenue in order to secure an immediate $385 million payment that would have kept the team out of bankruptcy and in McCourt’s control.
Now McCourt must argue that he can legally auction off the television rights to the highest bidder. There is a sequential set of points that he would have to legally prove to achieve this. First, McCourt would have to show that the only way he can make the money to pay the creditors is by selling the TV rights. Then, he would have to show that the exclusive negotiating rights belonging to Fox are null and void due to the Dodgers’ bankruptcy. This would allow McCourt to sell the television rights to the highest bidder, meaning he would have to attract cable giants like Time Warner Cable, DirecTV, and Viacom to compete with Fox. Finally, McCourt would have to actually execute the sale, which MLB would likely still oppose since the deal would favor short-term over long-term benefit. The question at that point would be whether bankruptcy law supersedes the MLB Constitution.
The Future – 2012 and Beyond
The scenario detailed above can best be described as a longshot. There seems to be little reason to believe that bankruptcy law would override either the Fox contract or the MLB Constitution, let alone both. In the event that it does happen, though, McCourt would be able to successfully take the team out of bankruptcy with significant long-term cost.
Even in that case, though, Frank McCourt will not maintain control of the Dodgers for much longer. If he manages to bring the team out of bankruptcy court, he will still have to spar with Jamie McCourt in divorce court. The result of that case is highly predictable. In California, which is known as a community property state, all jointly owned property must be split 50/50 in the event of a divorce. Since the Dodgers cannot be split in half, Frank would have to sell the team and give half of the money from the sale to Jamie, bringing new ownership to the L.A. franchise.
In the more likely scenario, however, McCourt’s attempt to sell the television rights will fail. In that event, since Major League Baseball is financing the Dodgers, the league will have the opportunity to use its own business plan to bring the team out of bankruptcy. This would entail selling the Dodgers, paying off the creditors, and returning the remaining money from the sale to the McCourts. This would be a faster road to a new Dodgers owner, but regardless, time appears to be running out for Frank McCourt.
Even when the Dodgers are sold, though, Frank’s legal war may continue. As this Dodgers organization chart shows, McCourt has created a company—Dodgers Tickets LLC—that sells the tickets but is not a part of the Los Angeles Dodgers. Similarly, McCourt also controls the land surrounding Dodger Stadium separately from the actual team, so he would retain control of it even after a sale of the Dodgers. MLB and the Dodgers’ new ownership will need to engage in some degree of further litigation to resolve these conflicts and prevent McCourt from unduly controlling any part of the Dodgers.
It is no secret that Frank McCourt will cling to convoluted litigation for as long as he can. At the end of the day, though, he will almost certainly be forced out one way or another—either by MLB in bankruptcy court or by Jamie in divorce court. The basic framework of the next several months is now in place. It is now just a matter of time until the lawyers determine which procedure will give the Dodgers franchise a fresh start and a chance to restore its former glory.
Lance Gurewitz is an undergraduate at The Wharton School of the University of Pennsylvania, Class of 2014. He has served as a sales/marketing intern at ESPN 760 AM Radio and as a residential team adviser for the inaugural Wharton Sports Business Academy, a summer program designed to introduce high school students to the business of sports. His primary interest lies in the critical analysis of athletes and their contributions to winning team sports, particularly baseball.
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Free Agency, Trades, and Signings
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Written by Joe Tetreault
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Sunday, 22 January 2012 10:54 |
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Dan Shaughnessy, who long ago did his heel turn, had already blasted the club’s ownership for the penny pinching ways, when Red Sox GM compounded the complaints with a text book salary dump sending designated starting shortstop Marco Scutaro to the Colorado Rockies for righty Clayton Mortensen.
The move perplexes Rob Neyer. And the overall tenor of the offseason has largely upset legions of Red Sox Nation. The acquisition of Andrew Bailey being the primary positive among a sea of head scratchers.
But the tactics are not designed to construct a playoff roster. They are designed to avoid the newly sterner luxury tax penalties as spelled out in MLB’s new collective bargaining agreement. The Biz of Baseball’s Maury Brown touched on this topic when the new CBA was announced in November:
The Competitive Balance Tax (CBT), or as it’s commonly known as the Luxury Tax that has been part of MLB, stopped at the end of the season. It’s back in the new agreement, with some undefined tweaks. In a sign that the players are happy with where the model currently is, the soft cap for the league will see no changes in the threshold from the 2011 season -- $178 million based on end-of-year salaries
The quiet offseasons that both the Red Sox and Yankees have overseen suggest both clubs find the new provisions onerous enough to pull back from their free-spending ways. The Yankees big splash came in two pieces just over a week ago. First they dealt Jesus Montero and Hector Noesi for Michael Pineda and minor leaguer Jose Campos. Then they announced an agreement with Hiroki Kuroda on a one-year contract for the budget conscious price tag of $10 million.
Still, the Red Sox and Yankees both face the prospect of exceeding the tax threshold in 2012. The Yankees certainly will. Boston is working like crazy to prevent that.
Speculation centers around Roy Oswalt. The Red Sox would not have been able to sign the veteran right handed starter, even at his reduced salary demand of one-year and $8 million unless they moved some salary. Thus exits Scutaro.
Among the agida inducing activities Cherrington continues to deal with is the club’s full slate of players facing salary arbitration. And with David Ortiz seeking $16.5 million the Red Sox were looking at an even greater cash crunch.
They settled one of their cases last night, with an announcement sent out minutes after the trade was officially announced. Right-handed reliever Daniel Bard agreed with the team on a one-year deal for the $1.6125 million. The two met int he middle between Bard’s asking price of $1.825 million and the club’s offer of $1.4 million. The contract represents a raise of 219.3% over his 2011 salary. He qualified as a Super Two player.
Bard is a candidate to start for the Red Sox in 2012 after serving as the club’s primary set up for Jonathan Papelbon since joining the team in mid-May of 2009. He and Alfredo Aceves, who is also poised to go to an arbitration hearing, are both looking to shift from the pen to a starting role. Picking up Oswalt would ensure one, if not both, would be back in the bullpen next year.
Joe Tetreault is a contributor to the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He can be contacted here through The Biz of Baseball
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Rob Smith Article Archive
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Written by Rob Smith
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Wednesday, 07 March 2012 12:23 |
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It's common knowledge that Evan Longoria is the Tampa Bay Rays' best player, but he's about to get even better.
That might be difficult to believe considering Longoria is coming off a 31-homerun, 98-RBI 2011 season, which he memorably capped with a walk-off homerun on the final day of the regular season to send the Rays to the playoffs for the third time in the past four years, but it's true.
In addition to the obvious misfortune of dealing with injuries last year (Longoria missed 29 games), he was also a victim of having terrible luck when he put the ball in play. The BABIP (Batting Average on Balls In Play) statistic illustrates this point.
BABIP has grown in popularity due to its ability to diagnose anomalous individual seasons that a player may produce. An unusually high BABIP tends to be followed by a regression, while an extremely low BABIP indicates a rebound season is forthcoming. Longoria's 2011 is a prime example of the latter.
The league average BABIP typically lands between .290 and .310. This means that for every hundred at bats in which a hitter makes contact, about thirty will result in base hits. Predictably, the better players usually have a high BABIP by virtue of consistently making solid contact. Until last year, Longoria had been one of those players. In his first three big league seasons (2008-2010), Longoria posted BABIPs of .309, .313 and .336. In 2011, his BABIP fell to .239.
In trying to keep this as simple as possible, BABIP is often influenced by the proportion of ground balls, line drives and fly balls a player hits. Fly balls produce more outs than ground balls, which produce more outs than line drives. So, the more line drives and ground balls a player hits, the better his BABIP is likely to be. Considering Longoria's BABIP fell nearly 100 points from the 2010 season to 2011, one would assume that he was hitting a lot more fly balls while producing fewer ground balls and line drives. Statistics reveal that was not the case. Although Longoria hit more fly balls in 2011 (44.7%) than in 2010 (43.1%), he also hit more grounders, too (36.6% in 2010, 37.3% in 2011). His line drive rate decreased from 20.3 percent to 18, but that is nowhere near drastic enough to explain such a large drop in BABIP.
Notwithstanding Longoria's fluky bad luck in 2011, there are other reasons to expect 2012 to be his best season to date. Despite playing in 18 fewer games than he did in 2010, Longoria drew 80 walks (his previous career high had been 72). His increase in plate discipline and power explains why Longoria's wOBA suffered only a marginal decrease (from .376 in 2010 to .365 in 2011) despite such a horrid BABIP. Further, Longoria lost 10 to 15 pounds this offseason in hopes of avoiding the muscle injuries that have sidelined him in previous seasons.
So, if Longoria's BABIP returns to even a league average figure in 2012 ( it will likely be higher), and his leaner frame allows him to play a full season, we can expect the Rays' franchise player to produce the MVP-caliber season he's capable of.
Rob Smith is a contributing writer for the Business of Sports Network. He can be reached on Twitter @RobSmithUSF or on his personal blog, http://smithersports.blogspot.com/
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Pete Toms Article Archive
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Written by Pete Toms
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Monday, 27 February 2012 18:03 |
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This week in “Last Week in Bizball”, dynamic pricing and the secondary market, worldwide draft update, plus tidbits.
DYNAMIC PRICING & THE SECONDARY MARKET
Seemingly every week I mention that another team has either implemented, or expanded their use of, dynamic pricing of tickets. Another subject that I frequently bring attention to is the challenges that the secondary ticket market pose to many MLB franchises. Despite the reported approximate $60 million annually that BAM earns from their formal partnership with StubHub, and the avalanche of qualified sales leads it generates, many clubs believe that secondary ticketing is killing their primary sales. My piece from December on MLB and secondary ticketing included this quote (courtesy of SBJ) from Braves Executive Vice President of Sales and Marketing Derek Schiller, “I don’t believe there is any bigger obstacle or issue, any bigger threat to the professional team sports marketplace and industry as a whole…This is the single biggest issue facing our industry….The amount of dollars at risk is growing near exponentially. And we absolutely as an industry — and not just baseball — need to manage it.”
The Giants were the first MLB franchise to implement dynamic pricing, using it on a limited basis for the 09 season. This season, 17 teams will use dynamic pricing. 10 of those teams will use dynamic pricing to set the price of all single-game tickets. Initially, the motive behind dynamic pricing was both to increase the number of tickets sold and the average sale price. More recently, clubs are also implementing and expanding the use of dynamic pricing to limit the amount of ticket inventory resold on the secondary market. LWIB Danny Ecker reported on the Cubs decision to use dynamic pricing this season for 5,000 bleacher seats. According to the piece, “Expanding that model to the entire ballpark could mean recouping as much as $11 million a year from resellers.” And, “Teams are looking at (dynamic pricing) to capture some of that secondary market that they're not capturing,” says Colin Faulkner, the Cubs' vice president of ticket sales and service…”
WORLWIDE DRAFT UPDATE
January 9 was the date of the first meeting of the International Talent Committee. The co-chairs for the committee are MLBPA ED Michael Weiner and MLB’s senior executive on labour matters, Rob Manfred. According to the press release, “…the International Talent Committee is responsible for examining a number of areas related to the procuring of international players including but not limited to the exploration of the possibility of an international draft, improving the education and acculturation programs of Clubs at their international academies and the development of appropriate country-by-country plans for playing and development opportunities for players prior to draft eligibility.” This committee exists as a direct result of the new CBA, which contemplates either an expansion of the Rule 4 draft, or the introduction of a wholly separate “international” draft. (The Rule 4 currently includes Canada and Puerto Rico). After years of attempting to control club spending in the Rule 4 via his office’s “slot recommendations” commissioner Selig succeeded in the last round of negotiations in implementing fundamental changes to the acquisition of amateur talent. Beginning this season, clubs exceeding spending limits in both the Rule 4 and international free agent market will be severely penalized by MLB. In addition, MLB foresees the implementation of a draft in the Dominican Republic as part of its ongoing efforts to reduce age/identity fraud and bonus skimming there. LWIB, commissioner Selig commented to Baseball America on the much discussed worldwide draft, "It is inevitable. I would like to see it. We have made some significant progress to that end. When we went to the draft in 1965, it was to create a more level playing field. We've done that, and the same thing will have to happen internationally." Josh Leventhal added that there is plenty of opposition to a worldwide draft, both within, and outside of, MLB.
….many front-office officials have said they neither want an international draft nor are confident that MLB has the ability to pull it off.
The Dominican Republic, Venezuela and the other Latin American countries all have their own issues with laws, player registration and investigations that would need to be worked out. Then there are agreements with Asian baseball governing bodies that would have to be worked out, including Japan, Korea and Taiwan, all of which have their own professional leagues.
Some major league club officials think an international draft will penalize teams that work hard in Latin America and have invested more resources into scouting the region. However, many teams, trainers and agents have seen the writing on the wall the last couple of years that an international draft was behind MLB's efforts to reform Latin America, even if MLB didn't always explicitly frame it that way.
Also LWIB, Zachary Levine examined how the Astros attempt to greatly increase the quality and quantity of players they recruit in Latin America is being impacted by the aforementioned changes in the CBA.
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Matthew Coller Articles Archive
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Written by Matthew Coller
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Friday, 06 April 2012 00:00 |
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This is part five of the series on Matt Antonelli. See Matthew Coller's article archive for parts 1-4.
Matt Antonelli remains one step away from returning to The Show.
After spending most of spring training with the major league club, the Baltimore Orioles have assigned Antonelli to triple-A Norfolk. While his goal was to make the opening day roster, the former first-rounder is much closer to his ultimate goal than he was one year ago. Last April, returning to the major leagues seemed merely a pipe dream.
To begin the 2011 season, Antonelli was stuck in extended spring training. He was recovering from yet another injury while trying to sort out a rust-riddled swing.
At that time, the newest member of the Norfolk Tide was in camp with the Washington Nationals, who had signed him after he was released by the Padres following the 2010 season. During the spring he received few chances to show the Nats what he could do – and the chances he did get did not go so well.
Antonelli had only played one game in 2010 and just 59 in 2009 – all while battling a broken hamate bone in his wrist. Last year, his wrist was healed, but swing timing was out of whack.
It turns out hitting a 90 mph fastball isn't at all like riding a bike.
“I learned a lot about staying positive,” Antonelli said via email last spring. “When nothing seems to want to go your way. If I had given up after my first surgery didn't work, I wouldn't be playing right now. I've learned a lot about being patient and staying determined in the face of adversity.”
In addition to regaining his swing, Antonelli pulled his hamstring near the end of the spring. When he finally began his 2011 season, the Nationals assigned the him to their double-A affiliate Harrisburg. The injury gave Antonelli time to recover his swing. When the season finally began in mid-May, he hit well and was quickly moved up to the Nationals' triple-A team the Syracuse Chiefs.
In Syracuse, finally feeling like the same player who was a star at Wake Forest University and hit 21 home runs between high-A and double-A in 2007, Antonelli picked up where he'd left off before his wrist injury. In 86 games, he hit .297 with a .393 on-base percentage and eight home runs.
No matter his performance, the Nationals placed another barricade in his road back to the show, electing not to call him up in September.
He entered the off-season wondering if he'd gone from top prospect to four-A. From once called the “best prospect at second base” to a triple-A lifer, bound to drift from club to club Crash Davis style.
But one thing Mr. Davis didn't benefit from when Bull Durham was released in 1988 was sabermetrics. While Antonelli was headed back to his Massachusetts home – worried more about asking his girlfriend to marry him and buying a house than where he'd play next year – former Red Sox general manager Dan Duquette was being hired by the Orioles. (His girlfriend said yes, by the way)
Duquette got busy playing catchup with the behind-the-times O's. He hired financial and statistical analysts and often noted new stats as being “accepted in baseball.” That was good news for Antonelli, whose specialty – drawing walks – is highly regarded by statisticians.
When Duquette signed Antonelli to a major league contract in late November, the team's press release noted his impressive on-base percentage and OPS (on-base plus slugging) numbers in the minor leagues.
“My coach in college used to yell at me,” Antonelli said last week from Orioles camp in Sarasota, Fla. “I would always take the first pitch and it would drive him nuts. I don't know why, but I've always had this ability to work walks.”
From the moment he arrived at spring training with the O's, everything was different from the year before. This time, he wasn't feeling his way around like a kid on his first day of school. He was confident he could make the big club instead of being hopeful to just stay healthy.
“This time around it doesn't feel strange at all,” he said over the phone, likely with a smile on his face. “I felt like I was an experienced veteran at switching teams even though I'd only done it once before.”
Unlike Nationals' camp last year, Antonelli was given significant time with the big club. He started off hot, getting on base 12 of his first 25 plate appearances.
But over the last week, he went 0-for-9 without a walk and the Orioles elected to assign him to triple-A. Of course, there were other circumstances that caused the big club to send him down. The O's had picked up another infielder Ryan Flaherty in the Rule 5 draft. Under Rule 5, the player has to make the 25 man roster or be sent back to his old team – which in Flaherty's case is the Chicago Cubs. Flaherty performed well and gave the Orioles little choice.
“I learned a long time ago that it just isn't up to you,” Antonelli said. “I used to drive myself crazy thinking about whether I would be the next guy called up. I would think, maybe if I get a couple hits today or whatever. I've learned to just play my game and let everything else take care of itself.”
Where Antonelli's career goes from here? In the minors, you can hit, hit, hit and never see a call. He knows how the business works, but understands he's much closer to his dream than he was one year ago.
“One of the reasons I came to Baltimore is that I thought I'd have an opportunity hopefully at some point to play in the majors,” he said. “Whether it would be at the very beginning or whenever to be contributing at that level. That's my goal. Hopefully all the things I did last year will give me a chance this year, that's really all I'm looking for.”
Matthew Coller is a senior staff member of the Business of Sports Network, and is a freelance writer. He can be followed on Twitter
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