Very interesting news reported this evening by--who else?--the Times' Bill Shaikin. According to the article, Frank McCourt attempted to use the club's television rights as security for a $200 million loan from Fox. I'll pass the microphone to Bill for a moment:
Baseball Commissioner Bud Selig has rejected a proposal under which Fox would have loaned about $200 million to Dodgers owner Frank McCourt, three people familiar with the discussions told The Times.
McCourt would have used the Dodgers' cable television rights as collateral, extending the team's current contract with Fox by as many as four years if he did not repay the loan, according to the individuals, who were briefed on the proposal but who are not authorized to discuss it.
My initial reaction to this news was: $200 million is not a little extra cash to cover operating expenses during a tough stretch. It's a big, maybe-we-can't-make-this-work-after-all number. But I'm not sure it's quite as shocking as it seems at first blush, and here's why: a $200 million loan secured by the TV rights is a middle ground of sorts.
Everyone knows that the Dodgers' contract with Fox ends in a few years, and the assumption is that the club will either re-up with Fox or create its own network, Yankees/YES-style. So where would this financing have fit in? You probably recall that Fox advanced the Dodgers money on the existing TV deal a few weeks ago. Think of this potential financing as an advance on a deal that doesn't exist just yet. If the Dodgers failed to pay it back, they would essentially renew with Fox at a below-market rate, but would have the benefit of this $200 million up front. And if the Dodgers paid it back on time, they'd still have the freedom to explore the market.
What really grabs my attention is Bud Selig's role here. Neither he nor Jamie McCourt would allow Frank to simply sell a 20-25% stake in the team to raise this kind of cash, and now the commissioner has prevented Frank from engaging in an interesting financing arrangement which would have had the potential to devalue the Dodgers if and when the club reaches the market. By putting the kibosh on this innovative TV-rights-as-collateral deal, Selig sure looks to be showing his hand: for a number of reasons, he'd have trouble simply forcing Frank McCourt out of baseball. But he can sure as heck make it uncomfortable for him to stay around.