LA Dodgers

This morning, I heard on the radio that the L.A. Dodgers are in danger of being unable to make payroll this month. According to this article on MLB.com, the L.A. Times has reported that this is indeed the case. I guess MLB will have to bail out the team like they did for the Texas Rangers last year.

Obviously, Frank McCourt (owner of the Dodgers) is having problems. He's in the middle of a very public and nasty divorce, and that is expensive. Even before the divorce proceedings started, it sounds like his wife was expensive. He has an expensive mansion, an expensive private jet, and many other expensive things that he must pay for.  He has a very large debt load, which is pretty expensive as well.

But, even so, I'm not sure how the L.A. Freeking Dodgers get into so much financial trouble.

According to this article on forbes.com, the L.A. Freeking Dodgers are worth 800 million dollars.  Only the Bo-Sox ($912 million) and the Yankees ($1.7 BILLION) are worth more.  L.A. Freeking Dodgers' debt to value ratio is 54%, which is high, but not anywhere close to teams like the Chicago Cubs (75%) or the Texas Rangers (66%).  The same article says that the L.A. Freeking Dodgers have the 4th largest revenue in the league ($246 million) behind only the Cubs ($258 million), Red Sox ($272 million), and Yankees ($427 million).

According to this USA Today.com article, the 2011 salary of the L.A. Freeking Dodgers is $104,188,999.  There are 11 teams above them in total payroll.  Some teams with higher payrolls are the world-champion Giants ($118,198,333), the perennial pathetic Chicago Cubs ($125,047,329), the Phillies ($172,976,379), and of course the New York Yankees ($202,689,028).  So, the L.A. Freeking Dodgers pay a bunch in salary, but compared to the rest of the big boys in the league, not too much.

As far as operating income (earnings before interest, taxes, depreciation, and amortization), the L.A. Freeking Dodgers are ranked 3rd in the league at $32.8 million.  I have no idea how much profit the L.A. Freeking Dodgers make after paying off debt interest and pay their taxes, but their high operating income (compared to other teams) makes me think that the Dodgers should at least be doing OK.

If the L.A. Dodgers are in such financial difficulty that they cannot make their May payroll, some teams I would be more concerned about are:

• The Chicago Cubs: who have a 75% debt to value ratio and "only" have $23.4 million in operating income, and an annual payroll of $125,047,329.
• The Texas Rangers: who have a 66% debt to value ratio and "only" have $22.6 million in operating income, and an annual payroll of $92,299,264.
• The St. Louis Cardinals who have a 53% debt to value ratio and "only" have $19.8 million in operating income, and an annual payroll of $105,433,572.

And of course what about:

• The Boston Red Sock: who lost $1.1 million before interest, taxes, depreciation, and amortization.  Their annual payroll is $161,762,475.
• The New York Mets: who lost $6.2 million before interest, taxes, depreciation, and amortization and have a real high debt to value ratio at 62% and an annual payroll of $118,847,309.
• The Detroit Tigers: who lost $29.1 million before interest, taxes, depreciation, and amortization and have a real high debt to value ratio at 55% and an annual payroll of $105,700,231.

One team we don't have to be worried about is the New York Yankees.  As I stated above, they are worth $1.7 BILLION.  Their debt to value ratio is a tiny 4%.  They have a ridiculously high payroll at $202,689,028, but even with that huge expense, their operating income is a pretty healthy $25.7 million.

So, I guess the point of this blog post is for all you baseball fans out there to beware.  If the L.A. Freeking Dodgers can get to the point of not making payroll, it seems like there are an awful lot of other teams that could expect the same fate. Don't forget that the MLB uses revenue sharing to help the smaller market teams survive.  According to this article on bizofbaseball.com, the total redistibution of wealth was $404 million in 2010.  If teams like the L.A. Dodgers can't pay their fair-share of that total, I'm not sure what will happen to those teams that receive that count on those dollars to remain "open for business".

But, even so, at least the MLB isn't in as much trouble as the NBA.  (according to Forbes.com, over half of the NBA teams are losing money). The MLB is also not in as much trouble as the NHL (see this article on Forbes.com more than half of those teams are losing money as well).

Sort of makes you wonder why the NFL is having such a hard time figuring out how to divide up its money ... doesn't it?

Happy Cinco De Mayo, everyone!