Dodgers’ payroll plans are detailed
The Dodgers could seek to keep their player payroll below last year’s level through 2018 while the average ticket price and club revenue could nearly double, according to confidential financial documents included in a court filing last week.
The documents, submitted by former Dodgers chief executive Jamie McCourt in divorce proceedings against owner Frank McCourt, offer a rare glimpse into the finances of a major league club.
The documents -- prepared by the McCourt management team in May to solicit Chinese investors for a partnership that could have included the Dodgers, a soccer club in Beijing and another in the English Premier League -- show that the Dodgers spent $128 million in player compensation for their 40-man roster in 2007, then spent $123 million in 2008.
They spent $132 million last season, according to figures from the commissioner’s office, which included in its accounting deferred payments to Manny Ramirez and Andruw Jones.
The projections show the Dodgers planning to cut it to $107 million this year, with slight annual increases thereafter. In 2018, player compensation is estimated at $125 million.
The document anticipates a significant rise in club revenue, from $295 million in 2008 to $529 million in 2018, and in the average ticket price, from $29.40 in 2007 to $53.50 in 2018.
Dodgers attorney Marshall Grossman, asked via e-mail what the club would tell fans wondering why the rise in revenue might not be accompanied by a similar rise in the player payroll, responded with an e-mail that noted financial plans are subject to regular revisions.
“It is prudent for a well-run business to engage in ongoing financial modeling and planning,” Grossman wrote. “When the Los Angeles Dodgers have financial information relevant to the public and the fans, it will be made public by the Dodgers.
“The Dodgers’ commitment is to operate on and off the field as a premier baseball organization, for the benefit of the fans and the Los Angeles community. The Dodgers continue to honor that commitment.”
The Dodgers spent 46% of revenue on player compensation in 2007 and 42% in 2008, according to the documents. The projections call for that percentage to fall to 25% by 2013 and remain at about 25% through 2018.
Commissioner Bud Selig encourages teams to spend about one-half their revenue on player compensation, according to two high-ranking major league executives contacted by The Times.
“That’s Bud’s rule of thumb,” one of the sources said.
The sources spoke on condition of anonymity because the Dodgers have not released the documents.
On the day he took control of the Dodgers six years ago, Frank McCourt said he would maintain a player payroll among the top one-quarter of major league teams.
The Dodgers ranked seventh in player compensation last season -- behind the two New York clubs, the Chicago Cubs, Boston Red Sox, Detroit Tigers and Philadelphia Phillies -- but that ranking probably would fall dramatically if the projections were to hold.
In 2014, the Dodgers projected player spending at $115 million, a level reached by five clubs in 2007 and eight apiece in each of the last two years.
“That’s not going to do much five years from today, especially in a big market,” one of the executives said.
In 2018, the Dodgers projected player spending at $125 million, a level reached by three clubs in 2007 and seven apiece in each of the last two years.
McCourt would face “incredible pressure” to raise the player payroll, even if revenue did not rise significantly but especially if it did, one of the executives said.
“Player payroll does not stand still,” the source said. “It doesn’t work that way.”
However, even if the Dodgers did not raise the payroll beyond the projected figures, the club still might spend significantly more than 25% of its revenue on player compensation.
One of the sources was skeptical that the Dodgers could generate $500 million in annual revenue within eight years, even with the English and Spanish “DTV: Dodger Television” channels McCourt has considered launching in 2014.
In the absence of a new stadium, the Dodgers would need the most lucrative television deal in baseball, the source said, “And there’s no way they could do that in a market half the size of New York.”
McCourt has publicly ruled out a new stadium.
In the documents, the Dodgers project selling 3.8 million tickets every year through 2018, noting “strong demand for the Dodgers’ product” has led to record attendance despite increased ticket prices.
“Currently, the Dodgers’ ticket prices are relatively inexpensive and there is substantial room for prices to increase without resulting in a decline in attendance,” the document read.
The Dodgers’ average ticket price last year ranked eighth in the majors, behind the two New York clubs, the two Chicago clubs, the Boston Red Sox, Philadelphia Phillies and Washington Nationals, according to Team Marketing Report.
“Management has re-priced the seating bowl and will continue to increase pricing to be in line with other large market franchises,” the document read. “However, the increase in average ticket prices will be driven primarily by higher premium seating prices, as the Dodgers are committed to keeping seats affordable for their diverse fan base.”