March 29, 2012
ESPN Sports Business Editor Analyzes Impact of Magic Johnson’s Dodgers Deal
On March 28, it was announced that the Guggenheim Partners, a group that includes Earvin “Magic†Johnson, would purchase the Los Angeles Dodgers from owner Frank McCourt at a record $2.15 billion, the largest sum ever in sports history. Economists are clamoring about the deal and whether it was financially sound but in sports nothing is certain until the players hit the field. BlackEnterprise.com tapped Keith Reed, Senior Sports Business Editor at ESPN magazine, to discuss the details of the landmark deal and what type of influence Magic can truly have on the Dodgers.
What does it mean for Magic to make this deal in Los Angeles?
I have to guess if it weren’t the Dodgers he probably wouldn’t be doing this deal. Him owning the Dodgers is as close to a homecoming as you can get for Magic. He spent the height of his fame and celebrity in Los Angles and they welcome him like a son and a native in that town. He represents an excellence in Los Angles that not even Kobe Bryant can match. Magic is everything to the fans there.
What are the pros of having Magic own the Los Angeles Dodgers?
Right off the bat, the level of credibility for the team’s ownership has increased. Before Magic, the fans had no confidence in the McCourts and little confidence in a team that had shown poor financial management coming into this sale. As iconic of a figure as Magic is in business, sports and in Los Angeles, he is like a hero coming in to save the day by lending the ownership instant credibility. Along with his leadership comes community support and most importantly sponsorship. His presence will undoubtedly change the perception of the team and boost morale in the locker room.
Being that Magic is only a minority owner in this deal, what type of influence do you think he will have in the day-to-day?
If you know anything about his work you know Magic will have a significant influence on the way this team is run; maybe not on the field but certainly in the front office. He is not a baseball guy but he is a very astute sports guy and that’s where his expertise will lie in this ownership group.
Also, a lot of running a team is what you are doing to sell sponsorships and when it is time to sell, Magic will be their ace in the hole. They have this firepower they didn’t have before. I’d be surprised if the Dodgers didn’t use Magic in every pitch for sales or corporate box seats.
What are your thoughts on the Dodgers’ $2 billion price tag, the largest in sports history since the $1.47 billion deal for English Premiere League’s Manchester United in 2005?
I’m shocked at the astronomical price because it far exceeds the previous largest price spent for a team by more than a half billion dollars. Soccer is popular worldwide and one of its most notable teams didn’t fetch a price more than an American MLB team that will never have world play. The sticker shock on the price also lies in the fact that the Dodgers weren’t doing well on the field, this goes all the way back to Manny Ramirez‘s contract and them still not getting any value out of it. Then there’s the front office, which was in dismay with the McCourt divorce. This team went from total shambles both on the field and in the front office to such a high price tag that it’s a total shock. It makes you wonder what the plans are going forward.
Although it’s sports, at the heart of every team it’s business and the Guggenheim Partners have to have some sort of business plan to make this work. In business, you don’t buy something for more money than you think you can make from it. Magic and his group have to do something that can bring them enough revenue to keep the team financially successful and keep it competitive in order to make it worth more that the $2.15 billion they spent.