NEWSLETTER
Just as we would look upon what the Detroit Tigers were able to get in trade for Doug Fister (yuck) for guidance in what the Cubs could get for Jeff Samardzija, we can look at the recent Phillies TV deal for guidance in what the rights fees market is bearing for similar teams in similar settings. That’s not a perfect parallel, of course (the player trade market is a much more walled-off system, far less subject to idiosyncrasy, politics, regulation, viewing market, etc.), but it’s similar enough that it’s a worthy exercise.
We heard on Friday that the Phillies had nailed down their big money TV deal, but we didn’t hear the price. Now we have, per Matt Gelb: it’s “more” than $2.5 billion over 25 years. That’s “only” $100 million per year (starts lower, and grows over time), or just $617,000 per game (in a 162-game season, though some of those games are owed to the national contract, we stick to 162 for comparison purposes). Compared to the Dodgers’ new deal which nets them more than $2 million per game, did the Phillies just get Fistered? And are the Cubs screwed by a rapidly falling market?
… nah. Setting aside the indication that the deal is for “more” than $2.5 billion, Gelb reports that the Phillies are getting a share of the advertising revenue during games (a nice hedge both for the network and the team), and the Phillies will get a 25% equity stake in the network. It’s impossible to say how much annual value that will provide to the Phillies (if the broadcasting of their games is a success, they’ll do very well – if not, they won’t do as well, but the $100 million is a baseline (minus any equity hit)). It appears to be a very nice deal in balancing the attractiveness of live sports programming with the possibility of erratic performance over the 25-year span of the deal. And it’s probably worth a heck of a lot more than $100 million annually.
Unfortunately, in the end, I don’t know that this deal provides a whole lot of guidance for the Cubs, partly because a lot of the value in the deal is obscured to us, and partly because of the Cubs’ unique TV rights situation (as discussed Friday).
Throw in the fact that the Ricketts Family already owns 25% of CSN Chicago, and things get even more complicated. The nearest equivalent here would be a long-term deal with CSN Chicago to take on all of the Cubs’ games, plus an advertising split, with the per-game rate and advertising split being a bit higher to reflect the fact that the Cubs wouldn’t be taking any additional equity stake. Or maybe the Cubs/Ricketts do take on a higher equity stake? Who knows. Like I said, it’s a unique situation. (To that end … do the Ricketts use the revenue from their 25% ownership of CSN* Chicago to operate the Cubs? Are the “Phillies” really getting that ownership stake, or are the “owners”? That doesn’t really matter for most teams, but given the Cubs’ reported spending restrictions tied to Cubs revenue, I think it really might matter in this case, at least in the near-term. Yes, I have more questions than answers. So it is with the Cubs’ financial situation right now.)
Long story short: the Phillies got paaaaaid, despite the headline number not looking as enormous as we might have liked to have seen. The impact the Cubs in their TV deal search is probably neutral.
*(When the Ricketts Family purchased the Cubs, all reports had them taking a 25% stake in CSN Chicago. Subsequent descriptions of CSN’s ownership have indicated it is just 20%.)
