The Dodgers’ new owners could reap hundreds of millions of dollars in benefits from the confidential terms of a U.S. Bankruptcy Court settlement between former owner Frank McCourt and Major League Baseball.
The terms can be enforced for up to 40 years, with final authority over distribution of the Dodgers’ television revenue granted to the court rather than to MLB, according to two people familiar with the sale process but not authorized to discuss it. As a result, the Dodgers’ new owners could retain millions each year that otherwise would be shared with other teams.
McCourt took the Dodgers into bankruptcy last year, after Selig rejected a proposed television contract with Fox Sports. That contract called for the Dodgers to receive a minority ownership stake in Prime Ticket and annual rights fees starting at $84 million, with an annual increase of 4%.
The league takes 34% of each team's television revenue and distributes it to other teams via revenue sharing. The league can assess an additional charge if it determines a team-owned television outlet is paying an annual rights fee under fair market value.
Under the confidential terms of the settlement with McCourt, the league agreed that the annual rights fees in the proposed Fox contract represented fair market value, according to three people familiar with the sale agreement.
Guggenheim Baseball, the Dodgers’ new owners, can negotiate a new television contract as soon as this fall, with Fox Sports, Time Warner Cable and perhaps CBS expected to bid. If the Dodgers accept an annual rights fee, they would simply pay 34% of whatever money they receive into the revenue-sharing pool.
However, the Dodgers are expected to pursue a regional sports network, on their own or in partnership with Fox, TWC or another television outlet. Guggenheim could establish a media company separate from the Dodgers, then have the company pay the team in accordance with the proposed Fox contract and keep the remaining revenue.
The difference could be tens of millions each year, according to media analysts.