NEWSLETTER
[Ed. Note – All things TV deal make for a complicated, lengthy, but important digest of information if you tried to include all the notable bits in every post. Rather than do that again, I’ve peppered this post with links, where appropriate, to our previous work on the topic.]
Today, the Chicago Cubs announced Michael McCarthy, formerly the president of the MSG Network, as the new General Manager of their own forthcoming regional sports network, Marquee Sports Network. McCarthy, prior to MSG, worked as the CEO of the St. Louis Blues, as well as the COO of the Milwaukee Bucks. He has been consulting with the Cubs on the Marquee deal since August of 2018.
From a team release:
“We’ve had the pleasure of getting to know Mike and his proven ability to drive results over the past several months at Marquee,” said Crane Kenney, president of business operations for the Chicago Cubs. “With his combined sports and media background, Mike is the right person to bring our network online and deliver unprecedented Cubs coverage for our fans.”
“I’m thrilled to be a part of the launch of the first independent regional sports network for the Chicago Cubs,” said McCarthy. “The recent transformation of this iconic brand is incredibly impressive and the next big effort to better serve Cubs fans is the launch of Marquee. For years, I watched the Cubs become a nationally recognized brand. For that reason, I’m honored and intensely motivated by the confidence the Ricketts family, Sinclair and the Cubs have placed in me to add to the incredible broadcasting experience enjoyed by fans for the past 70 years.”
The new Cubs network is scheduled to launch next year for Spring Training, and although carriage details are still being worked out, the odds remain good that most (or even more) Cubs fans will get the network on their current provider, thanks in no small part to having the distribution weight of Sinclair Broadcasting behind them. Sinclair is inarguably a controversial partner in many quarters, but it is also pushing aggressively into the RSN space and the Cubs have been clear that they are a partner on the distribution side, not the content side.
To the extent the Cubs do work out significant carriage deals – in both dollar amount and volume of households – they could see organizational revenues climb dramatically in the years ahead. That’s because of the way RSN deals are structured: generally speaking, the team’s owners (and potentially the team itself, depending on the nature of the organization) partner with a cable or distribution company to create the new network (Marquee, in this instance). And that new network pays the team a rights fee to broadcast their local games (much like NBC/WGN/ABC are currently paying the Cubs). The network, in turn, looks to make its own money – offset those fees and turn a profit – by selling advertising on its broadcasts, and, most importantly, getting carriage fees from the various cable and satellite providers that have to pay to carry that new channel. If your new RSN is a big hit, and providers and subscribers are happy to have it, then the RSN can be very profitable – and, in turn, some of that profit can head into the sports organization (historically not subject to MLB revenue sharing, either).
To that end, Cubs President of Business Operations Crane Kenney spoke with Patrick Mooney at The Athletic in a piece you’re really going to want to read if you’re at all interested in this side of the game:
With Bryce Harper in town, an inside look as the Cubs begin to launch their Marquee network:
• When baseball ops will get some new TV money
• Who should run the station
• How Sinclair is taking a more hands-on approach
• The future of Len and J.D. https://t.co/JAgudORx7S— Patrick Mooney (@PJ_Mooney) May 21, 2019
One eye-popping info drop by Kenney was his indication that the broadcast rights piece of the puzzle is already a known quantity, and the rights fees paid to the Cubs (by Marquee) for their games are going to be “significantly higher than what they’re receiving today,” and that immediate increase is going to give the baseball organization “more resources next year than they had today.”
The Cubs, you’ll recall, already have one of the largest baseball operations budgets in the league, and although it was always the hope that a new TV deal, in whatever form, would significantly increase that budget. But, given the massive disruption in the cable TV model, it has been far from a sure thing that would actually happen.
So, that is to say, I am fascinated to learn that the broadcast rights deal is already known (or perhaps even already in place), and is “significantly higher” than what the Cubs receive right now.
We can play with the meaning of those words a little bit to provide you additional context, even if we don’t yet know the particulars on the deal.
Currently, per Bruce Levine’s sources, the Cubs receive about $750,000 per game on NBC Sports Chicago (83 broadcasts, $62.25 million total), about $200,000 per game on WGN-9 (45 broadcasts, $9 million total), and about $200,000 per game on ABC-7 (25 broadcasts, $5 million total). On the whole, that should get them close to $76 million in local broadcast rights fees.
Other deals signed by major market clubs in the last five years suggest $1 million per game, even in a depressed environment, is not impossible for the Cubs. Could be more. Could be less. But we’re on the back of the napkin right now, so let’s call that an aggressive estimate. For 153 local games, that would mean $153 million in rights fees per year from Marquee, or a nearly $80 million increase in revenue for the Cubs organization. Yes, I would definitely call that “significantly higher”.
The interview with Kenney is, as I said, a must-read if you’re curious about how the partnership with Sinclair will work, how Sinclair’s ambitions in buying the other FOX RSNs will impact Marquee programming, just how much content the Cubs want to build out right away, and on and on. I’m actually still digesting everything that’s in there.
