Happy Labor Day! Regularly Scheduled Articles Will Resume on Tuesday, September 2.
December 4, 2012
From the Winter Meetings: An interview with Dodgers President Stan Kasten
Few recent club sales have altered the landscape in Major League Baseball as quickly as that of the Los Angeles Dodgers. Whether it was the unprecedented purchase price of $2.15 billion, the flurry of trades that including taking on over $163 million in contract dollars as part of the blockbuster trade with the Red Sox that included Adrian Gonzalez, Josh Beckett and Carl Crawford, or the media rights deal that the club is on the cusp of completing that is reported to be between $6-$7 billion, the Dodgers have become a juggernaut. The public face of the Dodgers now rests with Stan Kasten as their president and co-owner. On Monday we caught up with him at the Winter Meetings and asked him about his new position in LA; how the ownership group was assembled; what Magic Johnson brings to the table, and; how that massive TV deal factors into what the Dodgers do, not only now, but years to come.
Maury Brown: You’re about a year into your position with the Dodgers. How do you like the job thus far?
Stan Kasten: For a guy who does what I do it’s the coolest gig you could ever have. The opportunity to be in a market that big with a fan base that connected to a franchise… you don’t have to work to build up your fan base because they’ve been there. They’ve been loyal. They’ve been there for 50 years. This is the most fun I’ve ever had.
It’s very exciting to go in with my partners and have the resources—in both the marketplace and through our ownership—to rebuild the franchise from the ground up and do both things that are necessary. That is scouting and player development, as well as attracting free agents right now. The reason I say “right now” is it’s a market that deserves that kind of effort from ownership.
At the same time we’re being allowed to bring Dodger Stadium into the 21st century. We’re going to keep the magnificent tableau that we’re all familiar with when we go to Dodger Stadium… the bleachers and the palm trees and the San Gabriel Mountains behind it. We’re not going to fool with that, but we’re going to bring in things like cellphone service, which doesn’t exist right now in the ballpark. By Opening Day, we’ll be the most wired and heavily signaled ballpark in the league.
The ownership is committed to restoring the Dodger brand that was kind of sullied over the last few years for various reasons… and like I said, to have that opportunity to do what I do in that market place with that kind of brand is truly a dream come true.
Brown: In baseball you’ve now been president of the Braves, Nationals, and now Dodgers. What’s different about the Dodgers gig compared to the others?
Kasten: First of all, a lot of what I do is blocking and tackling that is done anywhere. But, there are some important distinctions between LA and both Washington and Atlanta. In Atlanta, when I got to the Braves, we had only had a negative history in baseball, We had not been very successful for years so our fan base was not very big or good. In Washington, we had no recent history, so we had to build it up from scratch. That’s a process that takes time and doesn’t happen overnight. The advantage there is you can really do the “slow build” with player development because no one is expecting you to be competitive overnight. The difference in LA is we have a loyal, deep fan base that is extraordinary. That means I don’t have to invent anything new, I just need to get the Dodgers back to where they once were. Articulating that is easy. Doing it is a little harder, but I know what the job is and the fans will follow; they’ve been here and never left. The difference is I can’t wait five years. I can’t tell the fans to wait while player development, etc. happens. We need to present a product now because they expect it and they deserve it.
MB: How did you, Guggenheim Partners, and Magic Johnson come together?
Kasten: When I left the Nationals, I told ownership 18 months in advance of my intention to leave at the end of my commitment, which was the end of the 2010 season. People in baseball knew that I was going to leave, and afterwards I decided to wait till the end of the year to decide what I was going to do. When that time arrived I began going around the country looking at not just baseball, but all sports, for potential opportunities. So in baseball, the club that was on the market at the time was the Astros. And, of all the people that I had met in discussions after leaving the Nationals, the best were the people at Guggenheim, who I eventually wound up partnering with. We looked at the Astros for a while, but then I started getting wind that there’s going to be something that’s going to happen with the Dodgers. Don’t know when. Don’t know what. Don’t know how. But, the Dodgers were going to be available if I was patient. So, I said to my Guggenheim partners, “Look, this could happen,” and we both had the same reaction: the Dodgers are so different than anything else that we could do, let’s just put everything else on the backburner and play this thing out. So, that’s what we decided to do.
So, I said to Mark Walter, the head Guggenheim, if we’re going to do the Dodgers there’s someone I want you to meet that will fit perfect into join our group and that was Magic. I had known him for many, many years from my time in the NBA, so we met, hit it off and decided to have us all come together. And, in doing so, the three elements that our group brought to the table was Guggenheim and all the resources they could provide. There was me with my experience in building baseball franchises, and then there’s Magic, who singlehandedly embodies winning and a dedication to fans in Los Angeles like no other human being on earth. So, we thought if we put those three things together we’d be a very strong combination.
MB: What does Magic bring to the table?
Kasten: What Magic represents to our customers is a credibility that we, as the new owners of the Dodgers, really care about winning—that we really care about the fan experience. Magic embodies that, not just with his time with the Lakers but also in business endeavors. Quality and success has always been associated with him.
With the team, he’s been in the clubhouse and told them, “I can’t tell you about baseball, but I can tell you about team. I can tell you about winning. I can tell you about dedication.” And, he does all those things, both explicitly, and implicitly as a living, breathing role model.
Let me give you an example of something that’s happened in the last year since we’ve been together. Waiting in their locker one day for each player, he had autographed two Magic Johnson Lakers jerseys. One was personalized to that Dodger player. One was signed for each player to donate to a charity of their choice. And, when these grown, professional, experienced, veteran major league players got to their lockers that day, they were truly excited and acting like any other fans. And that was the day that I made my speech to the team about getting out, being accessible, and greeting the fans at the gate. I said, “Guys, you know how you all felt when you got that jersey? I promise you, that’s how every customer feels when they get an autograph from you. It changes them, and makes a connection that is stronger than anything else we can do.” So, afterwards we had the players greeting fans dressed in uniform at the front gate, as we now do, and one of the players came up afterwards and said it was the first time that he’d really stopped to think and understand about that—to understand how the fans really feel and how we resonate with them. That’s what Magic does for us. He embodies how to conduct yourself as a player. How to conduct yourself with the fans. And, how to conduct yourself in community efforts that you can use after you’ve retired from the game. No one has ever done it better than Magic. So, just him being there imparts that to our players.
Brown: You’re on the cusp of an unprecedented media rights deal between $6-$7 billion that reportedly has some limits on how much of the revenue garnered from it goes to revenue-sharing. Do you foresee any changes in the next CBA as result of this lucrative TV contract?
Kasten: I don’t yet know what kind of TV deal we’re going to strike, but obviously everyone knows we are in discussions and we may have news on that soon. What comes out of that will be a function of the Los Angeles market and that makes it unique. As I said when people asked us about how much we spent to purchase the club, and is it going to raise the cost of other clubs I said, not necessarily. What was happening with the sale in LA was, once again, unique. Los Angeles is the second-biggest market in America. It’s the media and entertainment capital of the world. The Dodgers are an iconic, historic brand that has maybe been down on its luck a little recently. At the time that the media rights are up for bid, rights fees are exploding. All those things come together so I don’t know if it carries over to other franchises. I imagine that when completed, our media rights deal will be one of the largest for a very, very long time.
Now, CBA changes that come into play, that’s a very good question. I think not, and I’ll tell you why. The other aspect that made our purchase unique and not compliable to other franchise valuations is that we bought a club through bankruptcy and as part of that arrangement the league made special deals with the former owner and the bankruptcy court to smooth the workings of the sale. And due to that, our purchase is going to be governed by the bankruptcy court in perpetuity. So, nothing that happens in the CBA can affect us specifically. But, will a review of how we split up television money for revenue-sharing occur? That goes on all the time. But, nothing will happen with our deal based on governance of the bankruptcy courts.
Brown: A lot was made about the landmark sale price for the club at $2 billion, but the media rights deal was always pointed to as a way to offset that. Did you anticipate how large the TV deal would be to offset the purchase price?
Kasten: Well, everything in the deal factored in. We looked at everything from concessions, to ticket sales, to re-establishing the brand with our sponsors, but as we talked about prior with the uniqueness of this sale that we certainly saw the media rights factored into that.
Brown: You mentioned earlier that you can’t really wait to rebuild, and the Dodgers are certainly making that clear being highly aggressive in trades and signings. The end-of-year payrolls are about to be released just before the Holiday, and with it, some clubs will potentially break the Luxury Tax threshold. Will the Dodgers?
Kasten: This past season?
Kasten: No, but for next season there’s a good chance for that. We’re not done yet.
Brown: Do you have concerns about that?
Kasten: I have concerns about it, but I’m more concerned about building a winning franchise and where it needs to be.
Brown: You mentioned that the media rights deal isn’t completed, but it seems clear that it will be exceptionally lucrative. Do you expect the Dodgers to have this kind of aggressive payroll flexibility for years to come?
Kasten: I think we’re always going to be a club that has a lot of resources because of the size and nature of the Los Angeles market. Now, as I always say, smart beats rich. The big market teams that have been successful have been both smart and rich. And that’s what we need to become. We’re going to be rich because of our market, but unless we’re also smart we will not succeed. So, doing both will continue to be our mission.