NEWSLETTER
It’s mid-June 2014, and we still don’t know what the Chicago Cubs are going to do with half of the TV rights to their games next year. We finally got word on the radio deal for next year, and we know that WGN America (the cable channel, as opposed to local WGN 9) won’t be carrying Cubs games after this year. But what about the 70-some games that used to be on WGN-TV, which don’t currently have a home from 2015 to 2019?
It’s long been expected that the Cubs would try their hardest to put those games on a network like Fox, with which the Cubs could then partner after 2019 – when their full slate of games becomes available – on a new regional sports network. In that way, the Cubs could lock in their huge post-2019 dollars, while also maybe significantly increasing their take on the WGN games in the next five years.
We can’t know for sure whether the Cubs are having trouble in that arena – it sure is late in the game, though – but Ed Sherman reports that the Cubs are considering a creative new option: just go ahead and start your own network already.
You’re going to want to read Sherman’s report for the particulars, because it’s a little complicated, but the gist of the possible approach is this: the Cubs would use “multicast stations” to build their own network, starting next year, to be home to the games formerly on WGN (CSN would still have the other 80/90 games through 2019). These multicast stations are basically those digital over-the-air substation things that people without cable would recognize as 25-2, or 36-5. On cable, if they’re included in your package, they’re way up there in the 100s/200s/300s range. Not super easy to find, but they would allow the Cubs to basically own the broadcast and do whatever they want. The Cubs wouldn’t get rights fees – which tends to be the big money – but they would get to keep all of the advertising revenue (in theory, that’s more than the rights fees if you’ve got a compelling product).
This is just an option, but it seems like a high risk, high reward approach. If the Cubs are good over these next five years, then they’ll reap the benefits of increased ad dollars (and then can ink a huge rights fee deal five years down the road). If the Cubs stink and nobody watches, the Cubs might actually wind up making less than they were making on WGN.
The Cubs currently get about $250,000 per game from WGN – far, far under the conservative market price for Cubs games, which is probably closer to $1 million per game – so there’s not a ton of financial risk in trying this new approach. If the Cubs can make only, say, $200,000 per game on their own, they only lose $3.5 million in revenue from where they were before. The upside might be worth that risk. And, in the interim, the Cubs develop expertise in running their own network, and maximizing broadcast value. If I’m a potential long-term partner after 2019 – when the real money is available – I sure like to see that.
Most folks around the web are making jokes about the Cubs being on fringe channels, which is fair. This is pretty out there. But I like to see that they’re exploring creative solutions to the revenue problem, optics be damned. As is my usual baseline, I’m going to reserve judgment until rumors on this front heat up in the extreme, or something actually gets done. I tend to think the Cubs are just keeping their options open.
The downside here, obviously, is the potential that the Cubs won’t be able to increase revenues at all on the TV side over the next five years. That would absolutely suck. The hope was that the Cubs could increase the take on their WGN games from $250,000 to at least $500,000, which would be an increase in revenue of $17.5 million or so. That could do some nice things.
