The Dodgers’ New TV Deal is Going to Be Worth Five Times the Cubs’ Deal

In a story that seems particularly appropriate in light of the Evan Longoria extension – or vice versa – word is spreading about the Los Angeles Dodgers’ upcoming new television deal. It is … robust.

Recall, when the Dodgers were sold for an unbelievable $2.15 billion, folks said, “well, there’s a big new TV deal on the way, so that’s a part of why the price is so inflated.” And then when the Dodgers traded for guys like Hanley Ramirez, Carl Crawford, Adrian Gonzalez, and Josh Beckett, folks said, “well, there’s a big new TV deal on the way, so that’s a part of why they’re willing to take on those crazy contracts.” And then when the Dodgers were attached to every notable free agent, folks said, “well, there’s a big new TV deal on the way, so that’s a part of why they’re just going to buy every player.”

Well … there’s likely a big new TV deal on the way. Really big.

From the L.A. Times:

Fox Sports could pay at least $6 billion to retain the Dodgers’ television rights, three parties familiar with the negotiations said Sunday.

The deal could be worth three times what the Dodgers’ new owners paid for the team and almost 20 times the value of the Dodgers’ current television contract.

The deal is not done, the parties said, speaking on condition of anonymity because of the ongoing negotiations.

If the two sides do not strike a deal by Friday, the Dodgers would have until the following Friday to present Fox with a final offer, according to the team’s current contract. Fox would then have 30 days to accept or reject the offer.

In the absence of a deal, the Dodgers would be free to open talks with Time Warner Cable SportsNet or launch a team-owned cable channel ….

The Dodgers’ deal, proposed for 25 years, would average $240 million per year at $6 billion, or $280 million per year at $7 billion.

Let that marinate. The Dodgers’ current deal paid them an average of $29 million per year. Their new deal, in whatever form it ultimately takes, is likely to pay them 10 times that amount.

Your head should immediately be going where my head did: what does this mean for the Cubs’ TV rights? Well, it might mean something, but not for a little while. The Cubs are currently under contract with WGN for a little less than half of their games through 2014, and with CSN for most of the rest of the games through 2019. From a variety of sources, I’ve been able to glean that the total revenue for those rights, annually, is estimated at a little less than $50 million per year. That’s not a terrible rate for the past 10 years, but, with the direction the dollars are going, it’s hilariously and comically low.

So, what can the Cubs do about it? Well, they can obviously sell the WGN rights when that contract comes up in two years, but that’s just a portion of the games, and they’d undoubtedly be able to get more of a premium for the whole lot. They could try and leverage the available chunk against a price bump from CSN to take over the full slate of games, but I doubt they could get into that $250 million annual range, given that CSN would still have five years left on their deal at a far reduced rate. They could try and buy out the CSN games at that time (the Ricketts family does own 25% of CSN Chicago, so maybe there’s some play there), but that may not be possible.

In other words, there’s a lot of ways this could play out, but it likely won’t play out for another two years at the earliest. TV rights could continue to escalate between now and then, and the Cubs could actually be better for having to wait. Or, the TV rights bubble could bust, and the Cubs could have missed out on their window.

One thing is abundantly clear: for large market clubs, TV rights deals are going to be a huge, huge, huge chunk of the revenue pie, and if the Cubs want to be able to act like one of the big boys, financially, they’ll need to get a better deal. Soon.

Brett Taylor is the editor and lead writer at Bleacher Nation, and can also be found as Bleacher Nation on Twitter and on Facebook.

48 responses to “The Dodgers’ New TV Deal is Going to Be Worth Five Times the Cubs’ Deal”

  1. DarthHater

    They could try and buy out the CSN games at that time (the Ricketts family does own 25% of CSN Chicago, so maybe there’s some play there), but that may not be possible.

    My suggestion for Ricketts at a future CSN Board meeting:

    http://www.youtube.com/watch?v=QHH9EYZHoVU

    1. DarthHater

      Before anybody sends the FBI after me, please note that the above is a joke. :-P

      1. MichiganGoat

        You joke? Nah, never you are always serious.

        1. DarthHater

          That’s why I was worried. ;-)

  2. bbmoney

    This issue is HUGE. For a while new ballparks were the “it” thing for raising revenue. Now it’s TV deals. It’s an issue that could potential hamper the Cubs for years to come if they can’t work something out. I mean not compared to the Royals, but compared to the teams they should be competing against financially.

  3. ETS

    25 year deal? That’s alot of inflation by the end of it.

  4. Rice Cube

    I’m not a lawyer or executive or whatever, but since Cubs fans love WGN…what would it take for the Cubs to just buy WGN and use that as their Cubs network?

    Not saying it would happen, but just throwing that idea out there.

    1. DocPeterWimsey

      Under that model, aren’t the Cubs paying to have their games broadcast? The Cubs (and every other team) are looking to get paid by the broadcasting station(s)!

      1. hansman1982

        It wouldn’t be much different than the Cubs starting their own network, just here you would already have all of the mechanicals in place.

        I guess the Ricketts family could buy out WGN and then they could pay themselves the entirety of whatever Cubs broadcasts make, however, this puts all of the risk on the Cubs.

        1. Rice Cube

          Yes, I agree with this, but you have the national audience already in place and then you can set your own advertising fees etc. Don’t ask me for details because I suck at economics and business :D

  5. Kyle

    Think about how many prospects the Dodgers will give us for our star players in 8 years when we can’t afford them. So many prospects!

    1. MightyBear

      The Cubs can afford them now, they simply choose not to.

    2. cjdubbya

      I couldn’t help but think of Step Brothers – the scene where they’re building the bunk beds so they have so much more room for activities!

  6. MightyBear

    Television is going to be very interesting for the next 10 years as teams try their own networks like the Yankees, the networks and sports networks try to retain teams rights and the internet and streaming ala mlb.com because the word on the street is that baseball is going to push toward having tv rights under one big tent that is major league baseball.

  7. Patrick W.

    I would actually try to extend the WGN rights immediately for 3 more years for around $100M per year. Then in 2018 you can go to CSN or somebody else for total rights.

    Another option:

    Have CSN buy out the rest of the WGN rights at a premium for WGN, then negotiate a lucrative 10-15yr extension with CSN. Or vice-versa.

  8. Boogens

    Looking for some opinions on this thought…

    Is it fair to think that all the additional money will eventually do is drive up the salary of the major league ballclub? Since teams are capped on draft and international spending for talent with the new CBA the money’s just going to be spent at the major league level. Aren’t we looking at a situation where we could end up with a lot of over-priced and non-productive players if we’re not extraordinarily careful?

    Side question… is this what Reinsdorf really wanted when he was hawkish on implementing a draft & international cap? It’s going to bury his team.

  9. MikeCubs

    The luxury tax penalty (soft cap) will deter most teams from spending all of the increasing tv revenue on MLB salary. That provides a viable reason (or excuse) for owners like Reinsdorf to line their pockets.

    1. Cubbie Blues

      Is making money a bad thing?

    2. Boogens

      Yes, I can see that happening to an extent, but won’t the MLB cap increase because so many teams are getting lucrative TV deals? By 2019 when the Cubs deal with Comcast expires an even greater number of teams will have their own new lucrative deals in place. So doesn’t it lead back to my original question about just causing an inflation in major league salaries? How does this help the owners that lobbied for a cap to draft and international spending?
      (I’m not arguing with you, MikeCubs, I just don’t see how that new piece of the CBA helps curtail real spending/saves the owners money.)

      1. Boogens

        I should have included this assumption in my response…

        Not entirely certain, but I believe that MLB’s soft cap is driven as a percentage of “baseball” revenue. If the local TV deals aren’t part of the revenue sharing calculation then my original question is moot and MikeCubs’s response is entirely on point.

  10. FFP

    Wow. This is huge. Baseball just changed a little.
    I feel the earth that MLB is built on moving. The new B-wave’s siesmic center is, no surprise, where all that rumbling this summer was coming from. It’s the LA fault.
    I feel a little motion sickness. Hang on.

  11. baseballet

    The Cubs are like the prospectors in the Deadwood gold rush who showed up too late to get in on the best claims. Maybe they’ll get lucky and strike it rich in 2020.

  12. fromthemitten

    sadly I’ve read that the bubble’s going to burst on this market… here’s to the Cubs moving quickly to get what’s theirs before it does

    1. hansman1982

      Ya, this just screams bubble popping deal kinda like housing being flipped for 100% profit in 30-days back in 2008.

      1. fromthemitten

        the dodgers ruin everything

  13. fromthemitten

    They’re the Scott Baio of baseball

  14. Spriggs

    This bubble will pop before the Cubs make it to the trough. I like the idea of Ricketts/Comcast negotiating a buyout with WGN right NOW and then extending with Comcast at a premium. Could get a little complicated with the dual role of Ricketts.

  15. MikeCubs

    In a quick internet search, I am unable to find any credible desciption of exactly how MLB calculates the luxury tax threshold, only that it’s been established at $178M for 2013 and $189M for 2014-2016. It would make sense that the number is re-assessed periodically to account for a number of factors. Does anyone know exactly what those factors are? Is it a simple function of MLB payroll?

  16. EvenBetterNewsV2.0

    These deals are great for the teams getting in early, but what happens if they aren’t as successful as anticipated? Are the Cubs more valuable than most because they are somewhat of a national brand? Is the only way the Cubs get a comparable deal, is for the Dodgers to be successful?

    1. Pat

      Correct. If the Dodgers, Angels, Rangers, etc. deals start looking bad then stations will stop offering those types of deals. Right now live sports is some of the only programming that doesn’t stand a good chance of being tivod and the ads skipped. The stations are betting that not only will this continue, but that advertisers will pay increasingly more for that positioning. If either one of those things fails to happen, deals like this one will stop.

  17. Fastball

    I can’t believe the Cubs would have contracts with WGN and Comcast that didn’t have a buyout or early termination clause built into them. I hope they have it in place. I don’t like the CSN taking all the games approach. The Cubs lose too much national coverage. Unless CSN can go to all the media companies and have a Cubs channel on every company, Comcast, TW Cable, Charter, Direct TV, Dish etc. or a Chicago Sports Channel and let the Bears and Bulls get it on the TV deal as well. Screw the Whitesox nobody watches them anyway. Maybe the Bears games can’t be broadcast live because of the NFL agreement. But a 24 hour a day Chicago Sports Channel that is nationwide like Yes Network in NY.
    I don’t think WGN has the money to buyout Comcast CSN Chicago. One could say CSN is already there. Well if you want to pay for CSN Chicago as part of a Sports TV package then its there. I have UVerse in Ohio and I can’t get the CSN broadcasts even if I do pay for the Sports Package because it’s not a local game to my tv market. If I am Ricketts I buy out WGN TV then make it a public company sell shares. Then upgrade all the programming so people actually watch it when the Cubs aren’t on. Then sell a boat load of Advertising Deals then buyout CSN at 75% of the buyout cost because he 25%. The simplest way is to probably get FOX to come in and have them negotiate the contract terminations for both companies and give the Cubs the deal they need. I personally would have FOX take on all the hassle. The ROI on the Cubs wouldn’t be the same as the Dodgers but it’s still a strong cash deal for Fox they just have to look at a 5 yr wait before it goes positive for another 15.

  18. matt

    I’m sure this will mean the MLB ticket on Directv will be priced out of the range of the “average fan”. So congratulations to MLB, and the Dodgers, but eventually the prices for all of this will become too much for the average consumer, and nobody will watch.

  19. cubfanincardinalland

    Come on you Debby Downers, this is great news and a great situation for the Cubs. When Jed was talking about the changing finances in baseball a couple weeks ago, I could almost see the drool dripping from the side of his mouth.
    And when you look at the division, what a great advantage this will give the Cubs over teams like the Cardinals, Reds, Brewers and Pirates. On the Cardinals message board on the Post today, there is a whinefest going on about how unfair this is for the Dodgers, and baseball needs to do something about it. Big markets is where you want to be.

  20. Patrick W.

    From what I understand the Cubs own 20% of CSN, with the Blackhaws, WhiteSox / Bulls owning 20% each, and NBC owning 20%. Did that change?

    To get a big deal for the Cubs, it would take the other three owners to agree, and I don’t see the WhiteSox agreeing to a huge Cub deal without a sweet deal for themselves. Jerry Reinsdorff owns 40% of that network. With Rocky Wirtz the swing vote there, how likely is a huge deal with CSN?

    Extend WGN for 3 years then have the whole lot of rights to sell off in 2018… should be being negotiated right around the Cubs 2nd pennant drive.

  21. gutshot5820

    The Cubs better get their deal in place for the stadium before they renegotiate a new tv deal. If they get anything near what the Dodgers are receiving, there is no way the City/State is going to give them any money at all. ZERO chance.

    In a way, they have to be prepared for the possibility that they will receive no help from the City/State and they are keeping payroll intentionally low to partly offset the costs of the renovation. I suspect they will keep payroll low right until 2014 when they renegotiate a new tv deal. OF course this is my opinion, but I believe any billion dollar business has to have alternate plans and a way to budget for worse case scenarios and I believe our payroll currently reflects that.

    1. Pat

      If that’s the way TV deals are going, then there is no way they should receive any help with the stadium. I think the current payroll is more a reflection of the debt service they have, which the Trib did not. That’s gotta be a least thirty million without paying off the principal.

  22. FFP

    such forces at play in L.A….should bring music to the ears not only of Greinke and slugger Josh Hamilton but to all free agents with impressive resumes

    1. FFP

      MLB article predicts ‘ripple effects’

  23. Lance White

    So anyone want to bet the Dodgers win 2 Championship before the Cubs even sniff the playoffs…….

    The Dodgers ownership is so much better then the cubs ownership..

    It can make one very jelous

    1. Joey Jo Jo Junior

      That’s silly. Dodgers ownership/management has made bad trades and overpaid. They have a huge financial advantage that they are doing their best to throw away.

  24. arta

    Jealous!