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12-18-2012, 09:08 AM
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Cubs TV deal and how it can impact spending

A Glimpse at 2015

News item: Dodgers are reported to be offered a six billion dollar/25 year contract from Fox Sports to broadcast all of their games. This works out to $240 million a year or nearly 1.5 million bucks per game.

Related: The Texas Rangers and the Angels each have broadcast agreements of $150 million or more a year.

Our Cubs meanwhile make $45 million combined from the WGN and Comcast television deals.

Tom Ricketts is on record saying that he intends to reinvest all the profit from the team back into the team. Let’s look at some of those projected profits. With the premium seats figured in, the average ticket price will be $49.00 next year. If the Cubs draw 3 million in attendance next year then $49 x 3,000,000 totals $147 million. Subtract the estimated payroll of 90 million and you have $57 million remaining from ticket sales alone in 2013. Remember that 57 million.

Then you have maintenance, front office salaries, taxes, minor league expenditures, etc. to pay. The new facility in Mesa is expected to cost $84 million and the Cubs are on the hook for whatever goes over budget and last I saw it is running 1 million under budget, so the cost right now is nada. Those TV deals that total $45 million a year I mentioned earlier are about the cost of 1 premium starting pitcher away from covering the $59 million in taxes the Cubs pay every year. I realize there are quite a few costs associated to running a ball club like minor league expenditures, front office salaries, maintenance, advertising, and those costs combined are considerable, but let’s assume they are offset by concessions, the MLB television contract, signage, the WGN deal, rooftop neighbors and revenue on sales involving the Cubs logo on caps, shirts and whatnot. The baseball academy in La Gina, DR is nearly complete and should be considered paid in full.

Once the WGN TV contract runs out, let’s say it’s at only $5 million per year because it’s always been a sweetheart deal, that will leave $40 million per year income from Comcast, so that leaves 5 years remaining at $200 million expected income, give or take. Remember that $57 million? If the Cubs bank that this year and next, that’s $114 million by 2015 toward a buyout. Now a buyout for an additional $86 million or so suddenly appears to be reasonable. I would think coming up with that amount of cash would be a simple thing for Ricketts and family, especially considering the increase possible with a new TV deal.

I sincerely hope Crane Kenney is working toward a buyout plan as well as an improvement plan for Wrigley. He needs to get a guy with TV startup experience on board, like Reinsdorf did with Eddie Einhorn. Kenney should be able to easily top the $150 million per year that Texas and the Angels currently have, and considering the broad national appeal the Cubs enjoy and with the rising costs of sports, the deal could conceivably begin to approach the $240 million dollar figure the Dodgers appear to have. This is the project that will leave Kenney’s mark on the legacy of the team.

The year 2015 is shaping up to be a banner year for the Cubs and this new deal should put the team way over the top of any of our expectations. Waves of talent from the minors should be ready to help the team if they weren’t there already. Theo and Jed should easily be able to fill any needs with nearly any available free agent and to acquire quality depth in pitching if needed. If the club somehow happens to end up with a huge payroll and a luxury tax the Cubs could simply consider it the price of doing business and laugh all the way to the bank. Ricketts also could easily leverage all that extra money and threaten the city to build a new ball park elsewhere in order to get the landmark status removed from Wrigley and do a good renovation or a total rebuild at Addison and Clark at the team’s expense. The money a new contract could provide should be enough to change the shape of the neighborhood, rerouting streets if necessary and building parking garages or even underground parking beneath Wrigley.

2015 should be a year to remember for us all.

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