As I’ve said for quite a while now, the twin financial stories facing the Chicago Cubs – the renovation of Wrigley Field and securing a new long-term TV contract – are the biggest stories in their world as we look to the future of a long-term competitive North Side club. For that reason, the recently-inked TV rights deal in Philadelphia remains a tremendously important comparison to follow.
… but we still don’t quite know how much the deal is actually worth. It was reported as $2.5 billion over 25 years, plus a 25% equity stake in the regional sports network (RSN) and a share of the advertising revenue. Reactions/estimations of the value range from something below $100 million per year (because of the revenue-sharing bite), up to $200 million (but that’s from Scott Boras), or somewhere in between. As I’ve said before, once you get into the $150 million range, together with other typical big market revenue, you’re going to be able to easily support a payroll that tickles the luxury tax cap in the long-term. More than that, and the owners are doing very well for themselves (not that there’s anything wrong with that).
When Wendy Thurm writes about business or law in baseball (well, or pretty much anything else), it’s worth reading. In a piece for FanGraphs, she has written about the Phillies’ new TV deal, and places that deal within the context of the changing television marketplace. The lower guaranteed payout, together with an advertising share and an equity stake, suggests RSNs are finally concerned about recouping those huge guarantees, given the trouble some are having in getting cable systems to pay commensurately huge carriage fees (see the situations in Houston and San Diego, for example). Future deals – including the Cubs’ deal – may have to include hedges that make the deal massively profitable to the team only if it’s also massively profitable for the RSN.
One big thing to take out of all of these pieces? Having an equity stake in the RSN exposes the team to potential losses and reduced upside in the form of a smaller guaranteed payout … but the equity is not subject to revenue-sharing. Something for big market teams like the Cubs to consider.
In the end, if the Cubs can match the Phillies’ deal long-term – especially sooner rather than later, given the fact that the full slate of Cubs games doesn’t become available until after 2019 – it probably wouldn’t be a bad thing, in terms of their ability to field a top-level competitive team. So, I guess that means the Phillies deal was good for the market.