Despite reaching a bankruptcy settlement in 2011, the Los Angeles Dodgers have been spending money freely under a new ownership group that bought the team for $2.15 billion in April. According to Bloomberg, that's because former owner Frank McCourt reached a secret deal with MLB for a proposed regional television network.
Such a deal would have limits on the revenue-sharing the Dodgers must commit to smaller-market teams.
Much of that has to do with the television rights deal that has what Bloomberg sources called "special terms." The biggest of that comes in an $84 million per year cap on the revenue-sharing portion of the rights fee. With the rights fees expected to land somewhere as high as $225 million per year, that will give Los Angeles $141 million for itself.
Baseball rules require that big-market teams share 34 percent of regional network rights fees with small-market teams. Unlike National Football League franchises, which get equal parts of league-negotiated TV rights fees, MLB teams have widely disparate broadcast revenues. The 34 percent revenue-sharing requirement is meant to level the financial playing field a bit, though Cramer said accounting techniques often limit the tab for teams with part-ownership of a regional network.
A four-percent escalator is expected to be part of a rights fee deal for the Dodgers.
Since the Dodgers' new ownership group took control of the franchise, the team has paid out more than $400 million in contracts in deals for players including Adrian Gonzalez.