Loading ...

Recently Baseball Player Matt Kemp was handed an eight year $160 Million dollar contract by the Los Angeles Dodgers – a team that is definitely bankrupt.. Wondering how they could do such a thing?

In their issue dropping April 9th FORBES explains –

The cable companies, the TV networks and incoming team owners alike are taking some risk with the new TV economics of baseball. That’s why most of the regional sports networks have been structured with an equity component—they’re sharing the risk.

There is one group, however, that gets a sure thing from the local broadcasting windfall: star players.
Mega-television deals, after all, are based on the underlying assumption that the team will be competitive—or that, at a minimum, it has some drawing power. So marquee players, the kind that a team can use to *market itself, suddenly find themselves in a better position than ever.

That’s how the Los Angeles Dodgers–a bankrupt baseball team–gives a young star player, Matt Kemp, an eight-year, $160 million contract, even when he isn’t a free agent.

Kemp is a terrific player—the 27-year-old outfielder led the National League in numerous offensive categories last season and finished second in Most Valuable Player balloting.

For the bankrupt Dodgers, headed for sale at auction, a long-term contract with Kemp represented an asset rather than a liability. The team’s enormous valuation is predicated on the ability of the new owner to quickly negotiate a deal worth more than $3.5 billion over 20 years with a regional sports network. Locking up Kemp was an implicit guarantee that Dodgers broadcasts in the foreseeable future would be marketable and, one hopes, worth watching.
A similar rationale drove Arturo Moreno, owner of the Los Angeles Angels, to pay the biggest free agent on the market—Albert Pujols—$240 million over ten years, despite a recent drop-off statistically as *questions swirl about his actual age (remember: baseball contracts are guaranteed). No matter: Moreno now has a face for his franchise—and for Fox Sports West, which recently agreed to give the Angels $2.5 billion over 17 years.

“When rights fees and franchise values go up, so do the values of the players,” says baseball’s most aggressive agent, Scott Boras. “It’s the movie-house theory. The stars generate box office interest. The RSNs need the ratings for their advertisers.”

But it’s not just the stars. Wins are the best source of ratings, so the teams are ponying up for middling talent, too. Yes, the Texas Rangers forked over more than $100 million for Japanese superstar Yu Darvish, but they also signed Joe Nathan, a reliever coming off an injury, to a two-year deal worth $14.75 million. Moreno paired Pujols with a very good (but not great) pitcher named C.J. Wilson, who got five years and $77.5 million.

Matt is beyond excited of course. He told Forbes:

 “It’s great to know I’m going to be here for the next eight years,” says Kemp.

A $160 million guaranteed payday has a way of making a man feel like that.

Well I guess he might bring a lot of new fans of the female kind along with that fat contract…