Among the many questions about the big new Cubs TV network, Marquee Sports Network, the dollars and cents are probably right up there with “am I gonna be able to watch the Cubs?” Of course, the two things are actually deeply related, because the better the Cubs do marketing their channel to cable and satellite operators, the more money they’re going to bring in, and the more coverage the fan base is going to see.
For much more on the TV deal, what we know so far, and all that kind of background, I’d encourage you to read this earlier piece and the links therein. What follows will presuppose you already know all that stuff.
On the revenue side of things, how much can the Cubs actually expect to take in from Marquee in the near and long-term? How much of it will find its way into baseball operations? That’s what you really want to know. I do, too!
And although we’ve got a data point to share, it’s not going to really answer the question. I’ll explain.
First, the data point:
Sinclair CEO Christopher Ripley says in earnings call the Cubs’ new Marquee Sports Network is projected to generate for the company “about $40 million to $50 million of free cash flow [per yr] and it is a model for other partnerships going forward.”
— Eric Fisher (@EricFisherSBJ) February 27, 2019
In other words, Sinclair is telling its shareholders (usually pretty accurate, barring a titanic shift in the market (which, hey, does happen sometimes)) that it expect its share of the profits from Marquee to be $40 to $50 million annually starting in 2020, the first year of Marquee’s operation.
But … what does that actually mean to us right now? Very little!
Remember, heres how a traditional RSN is set up: the team partners with another entity (Sinclair, in this case) to create the new network. They share that network in some proportion – it doesn’t have to be 50/50 – but we don’t know what those proportions are for the Cubs and Sinclair in Marquee. If Sinclair owned only 1%, for an exaggerated example, then HOLY CRAP they’re projecting Marquee to generate a buttload of revenue!!! … but if it’s closer to 50%, then things are more modest.
Even then, it’s more complicated than that. Because in a traditional RSN deal, the new entity pays the team for its broadcast rights. I read Sinclair’s latest financial disclosure to confirm that this is how the new network will be set up, too. So Marquee – the entity – is going to pay the Cubs annually for their game rights, just like NBC/ABC/WGN used to.
From the Cubs’ perspective, the goal would be to get a huge annual rights fee from Marquee, then help Marquee generate enough revenue (advertising plus carriage fees) to cover that expense AND generate a profit, which would then be split with Sinclair. Since Sinclair is projecting a pretty substantial profit already, I suspect a couple things: (1) they might actually own a really big chunk of Marquee, and (2) they must feel really good about getting carriage on cable and satellite providers.
Since the rights fee deal is already signed – and those figures are already known to the parties – I’d love to get my hands on those numbers. They are not in Sinclair’s report. We know that the Cubs previously were seeing upwards of $700,000 for each of their games, but the hope was that they could get something in the middle of what large market teams saw in recent years (Dodgers got nearly $2 million per game, which is nuts; Angels and Phillies got closer to $1 million per game). If they do net something in that $1.3 to $1.5 million range, we could be talking about a $60 to $70 million bump in revenue annually for the Cubs.
Then, if the Cubs owned – just for example – 50% of Marquee, and if Marquee itself were generating enough profit to send Sinclair $4o to $50 million in cash flow, the Cubs would be seeing the same, on top of the rights fees.
Summing up: we don’t really know any particular numbers here, because we don’t know enough about the underlying relationship just yet, and we don’t know enough about the Cubs’ rights fees deal. But we do know that apparently Sinclair believes Marquee is going to do very well.