Forbes has published an informative, but unfortunately named (“Chicago Cubs: Baseball’s Next Powerhouse” – that pretty much always winds up biting you years down the road) piece on the Chicago Cubs’ rebuilding efforts, primarily from the business perspective. Check it out when you have some time today, including the video interviews with Cubs Owner and Chairman Tom Ricketts, and President of Baseball Operations Crane Kenney. Each spoke a bit about the baseball plan, and why they still believe in The Plan, which is all well and good.
What really struck me, however, were their comments on the Wrigley Field renovation and development project, as well as on the upcoming TV deal. My thoughts/reactions on some of the more interesting tidbits:
- Tom Ricketts says the renovation of Wrigley Field, itself, is now estimated to cost upwards of $350 to $375 million. Previous estimates had that figure at $300 million. The investments outside the ballpark – primarily the plaza and the hotel – are expected to be in the $150 to $200 million range.
- Ricketts says the renovation and external projects are expected to generate $30 to $40 million in incremental revenue, and it will all go to baseball operations (because all of the revenue goes into a pot, pays expenses, and everything that’s left goes to baseball ops – so, any *incremental* revenue necessarily goes right to baseball operations).
- If and when the Ricketts Family sells a minority interest in the Cubs to generate some cash to help fund the renovation, the chunk sold is expected to be less than 25% of the team, according to Forbes. As expected, then, it’s merely a matter of taking a little off the top when you’ve got an appreciated asset, and converting that little bit into liquid cash.
- Kenney suggested that the Cubs won’t be getting a huge TV deal until 2019 approaches (which is to say, the Cubs may not be able to ink a deal now with a network to take the WGN games after 2014, and then take the full slate after 2019, but start the big payout now). Not a huge surprise there, but it was always a hope. Still is, I suppose, because Kenney’s not going to tip the hand on that without something to actually announce.
- Kenney went into a really interesting side discussion about content delivery in the TV market, noting the rapid proliferation of non-cable options for disseminating content, including Apple and Google recently indicating an interest in getting into the live sports delivery market. While it’s a fascinating discussion, and Kenney uses it as the predicate to say it is plausible that the Cubs could have the richest TV deal in the sport after the CSN deal expires in 2019, there are some significant hurdles there, including MLBAM currently controlling (at least that’s my understanding) the web/mobile-based delivery of MLB games. I’m not sure the Cubs could just say, “We’re inking a deal with Google to have our games available to subscribers on YouTube,” because of the competition with MLB.tv … but also because they’d have to pull out of MLB.tv, lest folks just go that route rather than getting the Cubs’ “channel.” I really like that there’s some thought being put into this, though, and maybe it’s yet another wrinkle to the whole TV question – a wrinkle that is slowing down the TV rights deal situation (remember, the WGN portion of the rights are up after this year, and we were expecting a deal to be announced over a month ago).
- The way Kenney talked about this entire issue sounded like someone who would like to have the ability to market his team’s games, individually, to the non-cable market (i.e. streaming – think CubsFlix). The Cubs, having a large national fanbase, would stand to benefit from that kind of system disproportionately from other MLB teams (they’d be in a group of about five or six teams in that category), and I can understand the allure. I’m not so sure it would be in MLB’s overall best interests, though. This is really something to think about, and I’ll admit, I’ve never really considered it as a near-term possibility, so a lot of this typing is first impression thinking out loud. I suppose the more likely near-term possibility here is that whatever network the Cubs partner with on an RSN (assuming they go that route) will have the right to stream games to subscribers, with the Cubs getting a cut. All of that would have to be negotiated now, and it’s complicated, because no one quite knows what content delivery is going to look like in five years. The Cubs are going to want to protect themselves as much as possible – preserving flexibility.
- If Forbes is right that, however it shapes up, the Cubs’ deal will fall somewhere between the Phillies’ recent mega deal, and the Dodgers’ recent mega-mega-mega deal (as they have said before), a lot of this is academic, in terms of how it impacts the on-field product. That’s because, even at the Phillies’ level of a deal, when combined with the renovation, the level of incremental revenue we’re talking about being added to the Cubs’ annual pool is going to be plenty to provide the team the ability to spend up to the luxury tax cap (I don’t really need to see them blowing past it annually) and still spend aggressively on the amateur/international side. Everything after that is gravy for someone other than the Cubs’ on-field product. Good for that someone, but it probably doesn’t impact the organization all that much.
- In other words: just get a mega TV/Internet deal in place – whatever form and rate – and get the renovation underway. Then, suddenly, all is well. Really well.