The Dodgers’ Team Color Is Now a Deep Shade of Red

Sandy Koufax gets the strikeout. Steve Garvey digs out a throw at first base. Slugger Shawn Green clears the bases. Fans head for the parking lot in the seventh inning to beat the traffic. Broadcaster Vin Scully’s soothing voice resonates through the city on a warm summer night.

Through much of their 44 years playing baseball in Los Angeles, the Dodgers have been a model of predictability. For decades, the club churned out profits with the same ease that it fielded pennant contenders. As a business, the franchise was golden.

In the flush 1960s, the Dodgers may well have been able to turn a profit just on parking, sodas, Dodger Dogs, peanuts, pennants and bobblehead dolls.

“We could have made money letting people in for free based on a full house,” former General Manager Buzzie Bavasi recalls.

Now Dodger Blue gushes red ink. Where financial stability once reigned in Chavez Ravine, the club’s results now bounce around like beach balls in the bleachers.

The Dodgers’ $54.5-million deficit last year was baseball’s biggest. The team hasn’t turned a profit in nearly a decade. Despite higher attendance, a lower payroll and an improved on-field performance, the Dodgers this year expect to lose $41 million. That’s $13 every time a fan walks through a turnstile.

“I’m not proud of the fact the Dodgers lost money in 1994, ‘95, ‘96, ‘97, ‘98, ‘99, 2000, 2001 and they’ll lose money in 2002,” said Robert Daly, chairman and managing partner. “Nobody with the Dodgers is proud of that. Nobody in baseball is proud of that.”

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Payroll Only 1 Problem

How the franchise lost its fastball says a lot about the evolution of sports economics at the heart of baseball’s labor talks, which took an ominous turn Friday when players set an Aug. 30 strike date.

The Dodgers threw millions of dollars at marquee players without corresponding increases in revenue. In 1985, the Dodger payroll was $6 million when pitcher Fernando Valenzuela befuddled hitters with his screwballs. Today, first baseman Eric Karros and outfielder Brian Jordan, along with pitchers Darren Dreifort and Andy Ashby, make more. Pitcher Kevin Brown and outfielder Green make more than double that amount.

Player salaries gobbled up $8 of every $10 in team revenue last year. The team’s $113.7-million payroll was third-highest among baseball’s 30 clubs, behind only the New York Yankees and Boston Red Sox. It would take the Minnesota Twins two years to generate enough revenue just to cover what the Dodgers paid players.

But blaming payroll alone masks a series of other problems, including the upkeep of a beautiful but aging stadium and the nature of Los Angeles’ sports culture.

The Dodgers once had the undivided attention of fans here during the summer. Now the NBA champion Lakers’ seasons typically extend more than 10 weeks into the Dodgers’ seasons. The Dodgers also face the challenge of enticing young fans drawn to such active, edgy sports as skateboarding and surfing.

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No One Is Panicking

Although the Dodgers last year accumulated more financial losses than any team, no one is talking about the franchise going under or being targeted for a buyout by Major League Baseball. The Dodgers are owned by News Corp., a $15-billion-a-year media company whose subsidiary, Fox Entertainment, has used the team to build a lucrative cable television operation in Southern California.

If the $41-million loss the Dodgers expect this year seems intolerably large, consider that by some analysts’ estimates, Fox lost three times that much on the box-office bomb “Titan AE.”

Last week, Rupert Murdoch’s News Corp. announced it lost $6.3 billion in its fiscal year stemming from a bad investment in Gemstar-TV Guide International. It would take the Dodgers 154 years of losses to equal that number.

Murdoch, News Corp. chairman, acknowledged that he doesn’t spend a lot of time worrying about the Dodgers’ financial losses and is glad that the team is playing better. “I’m thrilled by the improvement in the team this year,” Murdoch said last week, “and by the big increase in crowd attendance and everything else there.”

Sports economists and players are skeptical about baseball loss figures, including those reported by the Dodgers, citing owner secrecy. They also contend that much of the value of a franchise owned by a media company does not show up on the team’s balance sheet but rather enhances the value of the parent company.

Murdoch realized the potential TV value of the Dodgers when he bought the team in 1998. Before he became the owner, he hadn’t set foot inside Dodger Stadium. On his first opening day, he ate a Dodger Dog, drank a beer and had some peanuts. More telling, he grilled executives on player contracts, expressing astonishment at baseball’s rules on guaranteed contracts, which assure that players who can’t perform are still paid.

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Tables Have Turned

Players began gaining the upper hand in the mid-1970s when they won the right to free agency, pitting owners against each other in signing top players. Before that, owners called the shots, save for a few occasional player holdouts. In 1966, Dodger pitchers Koufax and Don Drysdale refused to play until they were promised salaries of more than $100,000.

Bavasi remembers arguing with two players who demanded single rooms so they wouldn’t have to bunk together on the road. Bavasi called their bluff, saying he would grant their wishes on one condition: Their wives had to OK it.

“I never heard from them again about it,” Bavasi recalled.

Chasing big-name players not only left the Dodgers writing big paychecks, it left the club’s draft choices depleted through trades and because of baseball’s arcane rule requiring compensation for teams when others sign their players as free agents.

What top picks remained usually were busts. First-found picks like Glenn Davis and Ryan Luzinski never made it to the big leagues. Just one first-round Dodger draft choice in the 1990s, pitcher Darren Dreifort, is on the team roster. He hasn’t pitched in more than a year because of an injury. Top draft choice Paul Konerko was traded and emerged as an all-star for the Chicago White Sox. But that paled in comparison to the 1993 trade of a young pitcher named Pedro Martinez, who has gone on to win three Cy Young awards.

As a result, the Dodgers are having to spend big money to resuscitate the team’s once-stellar scouting and minor league system, which had fallen into disarray. The Dodgers see it as their only hope if they are to emulate clubs such as the Oakland Athletics and Seattle Mariners that have replaced high-paid superstars with young, less expensive players. This year, the Dodgers cut player salaries to $103 million. Daly hopes the strategy will allow him to shrink payroll to about $80 million.

Bad bets on expensive players cost a bundle.

Unlike most athletes in other professional team sports, baseball players enjoy guaranteed contracts. That forces a team to continue paying some players even if they’re playing for another team or not at all.

Last year, the Dodgers paid $10 million to three players who had moved on, with the bulk going to pitcher Carlos Perez. That money is enough to cover the salaries this year of catcher Paul Lo Duca, relief pitcher Eric Gagne, shortstop Cesar Izturis, starting pitcher Kazuhisa Ishii and center fielder Dave Roberts, while still leaving $8 million in the bank.

Even as players flexed their newfound muscle at the bargaining table, it didn’t seem to matter to the Dodgers and the team’s owners, the O’Malley family. Walter O’Malley moved the team west in 1958 from Brooklyn, getting 300 acres in Chavez Ravine and taxpayer-financed roads in a windfall deal. Using a sponsorship deal from the former Union Oil Co. as collateral for his loan, O’Malley built a $17.4-million stadium.

O’Malley and his heirs, son Peter and daughter Terry Seidler, ran the business paternalistically and profitably. They brought world championships to Los Angeles in 1959, 1963, 1965, 1981 and 1988. It was the family’s sole business and, for a while, a good one. Stanford economist Roger Noll in a 1985 study called the Dodgers baseball’s “Denver mint.”

But the profits and fun evaporated in the 1990s. Salaries were “rising by the hour,” as Peter O’Malley put it, and there was lingering animosity between players and owners after the 1994 strike.

It didn’t help that the Dodgers played badly on the field. Dodger players haven’t received World Series rings in 14 years, nor reaped the windfall from postseason play since losing in the first round of the 1996 playoffs. The 2001 World Series champion Arizona Diamondbacks added $13 million to their coffers from postseason play.

“Teams with high payrolls need to advance into the playoffs to keep up with the spending side of the equation,” said Jeff Phillips, senior vice president in the sports investment banking division of Houlihan, Lokey, Howard & Zukin.

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‘A Media Machine’

Staring at mounting losses and a stadium renovation bill likely to be at least $50 million, the O’Malleys sold the team to Murdoch’s empire. The price: $311 million for the team, $14 million to an O’Malley charitable foundation and an agreement to assume $25 million in debt. It was the biggest baseball sale at the time. Daly, a former Warner Bros. studio chief, later bought 5% and runs the team.

In an interview shortly after the sale, Peter O’Malley said Fox’s ownership would give the team an owner with “broad shoulders” that could weather baseball’s new economic dynamics and that would act like a showboat “dancing on the roof of the dugout, or in the clubhouse filling out the lineup card.”

Fox and News Corp. had become part of an elite fraternity of baseball owners less concerned with a club’s bottom line than whether its teams can be leveraged to build TV networks. To them, putting together a good team is like fixing an apartment building’s plumbing. It’s an investment the owner hopes will pay off when the asset is sold.

Said Daly: “Fox didn’t buy the Dodgers because Rupert Murdoch wanted to come out and watch every game here.”

Rather, it was because Fox needed to lock up rights to televise Dodger games on its regional sports cable network. That would checkmate Walt Disney Co., which needed the Dodger games to launch its since-scrapped ESPN West. Disney’s decision to pull the plug left Fox Sports alone with two regional sports cable networks in Southern California worth hundreds of millions of dollars.

“Murdoch did not view the team as a profit center,” said Andrew Zimbalist, sports economist at Smith College in Northampton, Mass. “He saw it as a cog in a larger media machine.”

He had good reason.

Attendance last year generated $50.7 million of the club’s $143.6 million in revenue. Another $50 million came largely from local TV, national TV, cable and radio. Still another $41 million stemmed from a host of miscellaneous things such as sales of Dodger Dogs, soft drinks, parking fees and the rights Budweiser paid to put its name on the scoreboard.

But a lot more flowed out than in--$189 million. Besides paying the players, $72.9 million went toward running the stadium, marketing, administrative costs, scouting and operating the club’s farm system, according to figures supplied to The Times by the Dodgers.

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An Aging Ballpark

Dodger Stadium, baseball’s fourth-oldest, is still popular with fans. But for the Dodgers, the 40-year-old park has become a financial burden.

The team is on the hook for all repairs, maintenance, property taxes, insurance and upgrades. The $67.5 million spent in the last three years on the stadium includes everything from $1.7 million to repave and stripe the parking lot to a $2-million sound system and a $750,000 escalator.

Stadium renovations also included the unfortunately timed installation of 33 luxury boxes. Priced at $270,000 to $300,000 a year, one-third of the boxes remain unsold. One reason, the team says, is that corporations are prime candidates for boxes. But the corporate headquarters of aerospace, oil, banking, newspaper and retail companies in Los Angeles washed away in the merger waves of the 1990s. Demand for Dodger boxes dried up.

It didn’t help that the Dodgers hit the luxury box market just after Staples Center sold 160 boxes to big-spending law firms and other potential Dodger customers, charging $197,500 to $307,500.

Another unexpected hit occurred when cable giant Adelphia, one of the team’s biggest sponsors, unraveled and filed for U.S. Bankruptcy Court protection. Adelphia’s scandal-tarnished name still adorns the Dodger Stadium restaurant. Adelphia owes the Dodgers $1.4 million.

Daly also says the stadium’s 56,000 capacity works against the team. Most ballparks seat about 40,000, which the Dodgers argue are easier to sell out because fans buy tickets early to guarantee that they will get one. The easiest place to trim seats at Dodger Stadium would be in the outfield, but Daly concedes that “people love the bleachers.”

Potential fan backlash has the club’s hands tied in other areas.

Daly said the club has no plans to sell to a corporation the rights to rename Dodger Stadium. And ticket prices remain relatively low: Team Marketing Report newsletter lists the Dodger average ticket price at $16.38, below the major league average of $18.31.

But despite overall sagging attendance for the sport, the Dodgers are drawing more, a testament to the team’s better on-field performance. The Dodgers project that attendance will rise by about 80,000, to 3.1 million, this season.

Stanford economist Noll said that while he would no longer label the team a “Denver mint,” the Dodgers’ situation is not as dire as it might seem. The team still shows consistent revenue growth and strong attendance, he said.

“The Dodgers are not as strong relative to other teams in baseball as they were in the past, but they still are strong,” he said.

While the Dodgers have been winning on the field, the losses in the offices upstairs raise the question: How patient will Fox be?

There aren’t many alternatives. Disposing of the team is frustrated by the dearth of buyers who have deep pockets or the desire to lose money. Forbes estimated the Dodgers’ value at $435 million. Like any public company, Daly said, Fox would sell the team to anyone offering a lucrative price.

“Would Fox sell the Dodgers?” Daly said. “I’m sure they would if the right price came along and the right deal came along. For anybody to ever say Fox would never sell the Dodgers is naive. I think they will sell the Dodgers someday.”

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(BEGIN TEXT OF INFOBOX)

The Blue Crew and Their Green

The average major league player is paid $2.4 million a year. A look at the Dodgers’ highest-paid players this season*:

Kevin Brown: $15 million

Shawn Green: $12.8 million

Darren Dreifort: $9 million

Andy Ashby: $7.5 million

Eric Karros: $6.5 million

Brian Jordan: $6 million

Marquis Grissom: $5 million

Mark Grudzielanek: $5 million

Omar Daal: $5 million

Hideo Nomo: $4 million

Paul Quantrill: $2.5 million

Adrian Beltre: $2.3 million

And a look at some of their bargains:

Odalis Perez: $625,000

Kazuhisa Ishii: $500,000

Paul Lo Duca: $380,000

Eric Gagne: $300,000

Dave Roberts: $218,000

Cesar Izturis: $215,000

The Dodgers also pay the balance of the $2.5-million contract for pitcher Paul Shuey, acquired in July from Cleveland, while the Indians pay the balance of pitcher Terry Mulholland’s $3-million contract; Lo Duca and Ishii get substantial raises next year. Dodgers amortize $2.8 million of the $11.26 million paid Japan’s Yakult Swallows for the right to negotiate with Ishii.