NEWSLETTER
Unless you’re new around these parts, you know that I tend to pay an inordinate amount of attention to the Chicago Cubs’ impending TV broadcast rights situation, as well as the impact of TV deals around baseball (and the shifting landscape for the cable TV model, and its implications for mega-TV contracts for baseball teams). The last two big market deals – in Los Angeles and Philadelphia – will pay the Dodgers and Phillies approximately $300 million and $100 million (plus equity stake) annually, respectively. They are enormous deals that completely change the financial outlook for those teams (which we’ve already seen in spades for the Dodgers). The hope is that the Cubs will eventually be able to cash in on a similar deal.
In a recent video on Forbes.com, a handful of sports/business/TV experts discussed the soon-expiring Cubs’ broadcast rights (WGN after 2014 for about 70 games, CSN after 2019 for the rest of the games). In that discussion, when comparing the anticipated Cubs TV deal to those secured by the Dodgers and Phillies, the head of JP Morgan Private Banking’s sports group, Scott Milleison, said that he thinks the Cubs’ situation actually looks more like the Dodgers’ than the Phillies’, thanks to the larger market and the better overall brand. Be still my heart.
The LA television market is considerably larger than the Chicago TV market (5.67 million TV homes versus 3.53 million TV homes, per Forbes), but the Chicago market is nearly 20% larger than the Philadelphia market (2.96 million TV homes). Expecting the Cubs to get more than the Phillies – at least post-2019 – is not unreasonable. Saying that the Cubs are closer to the Dodgers’ situation than the Phillies’? I don’t know if I agree, but, hey, this guy is the expert. Even splitting the baby between the Phillies’ approximately $100 million annual deal (plus equity stake) and the Dodgers’ approximately $300 million annual deal, you come up with $200 million. That’s nearly a $130 million increase in revenue over what the Cubs are getting today. Think about that. Be still your heart.
Something to keep in mind when considering these comments: it sounds to me like these gentleman are not speaking from a perspective of specific inside knowledge about the Cubs’ TV deal plans/negotiations/etc. That is not to say that their thoughts are not worth discussing, but you don’t want to take the “like the Dodgers” comment too far. But they do understand the market, and their thoughts in that regard are worthwhile (and exciting).
The really good news here – and it’s not specific to this analysis, but this serves as a reminder – is that the new TV deal is going to happen. This is not a matter of a prospect maybe becoming awesome or a game strategy maybe working. The Cubs are going to receive a significant infusion of found money, and the money available to be used on the baseball side is going to explode. Hell, the increase is likely to be so large that even if the Ricketts Family wants to keep some profit for themselves at that point, we’ll all be too happy to see them have it – because when the TV money is flowing, and the team is better (so the gate revenue is way up), and the Wrigley renovation is underway/completed, there’s going to be so much money coming in the doors that the Cubs won’t really be able to spend it all (as is the case with the other big boys around baseball). For my part, I just want to see the Cubs have enough revenue that they can spend up to the luxury tax cap ($189 million) if they want to. Having a huge TV deal as suggested by this Forbes piece will give the Cubs plenty of flexibility to do just that (and that’s just the TV deal).
If you perceive in me some giddiness there, you are correct. The TV deal (and the Wrigley Renovation) are, to me, the most squeal-worthy stories in the Cubs’ world – and that’s even after considering the fantastic stable of young prospects – because of their ability to change the Cubs’ long-term outlook so dramatically. Obviously there’s a couple catches here, as there always are with something good that might happen to the Cubs. First, the Cubs have to cash in before the TV rights bubble completely pops (though it seems likely to steadily deflate over the coming decade, rather than burst into nothingness). Second, the Cubs have to deal with their rights’ availability being staggered between two networks and split by five years.
On that latter point, I still strongly suspect that the reason we haven’t heard anything on the WGN rights front so far (most teams announce their deals way before a year in advance of the deal kicking in) is because the Cubs have been hard at work trying to negotiate a long-term deal with a partner whereby that partner will get the WGN games starting next year, and then the full slate after 2019. The Cubs, I’m guessing, would like to lock in that kind of deal now, rather than merely negotiating a bridge agreement for the five-year gap, and then having to cross their fingers that they can get something good in five years.
