L.A. Dodgers sale the biggest in sports history

The Los Angeles Dodgers’ $2 billion price tag is the richest ever in professional sports, and it more than doubles the next highest MLB franchise price, the $700 million paid by the Ricketts family for the Chicago Cubs in 2009.

I spoke with several baseball historians to put the sale in perspective, and John Horn, Major League Baseball’s official historian, who put it best.

“When you realize that the Yankees sold for $18,000 in 1903, these big sales like the Red Sox, Cubs and Dodgers seem stunning, especially for greybeards like myself,” Thorn said. Thorn was born in 1947, the same year the St. Louis Cardinals sold for $3.5 million.

Historical baseball franchise sale prices, even when adjusted for inflation, are a fraction of what current ownership groups pay. The 1947 Cardinals price would be roughly $35.7 million in 2012 dollars, according to the U.S. inflation calculator. As my colleague Christopher Smith noted, cable television revenue and equity stakes in regional sports networks have helped drive prices upward.

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In Pictures: The biggest MLB franchise sales

Still, the Dodgers sale stands out even when compared to the most recent MLB team sales. Baseball teams are traditionally sold at a multiple of annual revenue, and the last five MLB franchise sales closed at roughly three times each club’s yearly revenue. By comparison, the Dodgers’ price is 8.7 times greater than its 2011 revenue. The attached slideshow includes price-to-revenue ratios for the last five MLB franchise sales.

John Siegried, an emeritus professor and sports economics expert at Vanderbilt University, told the Los Angeles times, “Don’t dismiss the hypothesis the buyers made a mistake. It happens.”

The 260 acres surrounding Dodgers Stadium in Chavez Ravine will also help the ownership recoup losses, especially if the group builds a residential and commercial center comparable to AEG’s LA Live in downtown Los Angeles. David Carter, executive director of the USC Sports Business Institute, told the LA Times he believes the Guggenheim group bought the Dodgers in order to develop the real estate and then sell the entire property one day for a lump sum profit.

That theory has roots in the team’s history. Walter O’Malley, who moved the team from Brooklyn in 1957 and negotiated the stadium land purchase that same year, envisioned a World Fair-type setting for the stadium, complete with restaurants a cathedral of trees and Disney Land-style tramway.

Dodgers Stadium at Chavez Ravine, shown Feb. 28, 1962, during construction.
(AP)

While the grand plans never came to fruition, O’Malley’s packaging of the land with the stadium, Thorn said, set the table for the future.

“Walter O’Malley would throw his shoulder out patting himself on the back because of the brilliance of that real estate deal,” Thorn said. “He’s reviled in Brooklyn to this day, but with every passing decade he seems to be the Johnny Appleseed who formed the model for how baseball franchises would work in the coming decades.”

Michael Haupert, a baseball historian and associate professor of economics at the University of Wisconsin, La Crosse, gave me a list of historical team sales. Haupert, who is working on a book on the history of baseball salaries, said he obtained the numbers from primary documents at the Baseball Hall of Fame as well as through newspaper clippings and financial records.

In the following table, I’ve included a handful of Haupert’s historical MLB franchise sale prices, as well as the modern value adjusted for inflation. Finally, I’ve included each club’s modern day value as a percentage of the Dodgers’ $2 billion sale.

The list:

1. Los Angeles Dodgers, 2012 ($2 billion)
2. Houston Astros, 2011 ($610 million)
3. Texas Rangers, 2010 ($593 million)
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Updated Friday, Apr 6, 2012