From Forbes Magazine
http://www.forbes.com/sites/mikeozanian ... cago-cubs/Chicago Cubs fans, forget the five consecutive losing seasons. Discard the memories of being swept in both the 2008 and 2007 National League Division Series and the Steve Bartman game in the 2003 National League Championship Series. Erase 1908 from your mind.
Instead, think of Jon Daniels and the Texas Rangers. Daniels became the general manager of the Rangers in 2005 and soon after rebuilt the team by discarded expensive, older players (Mark Teixeira, Adrian Gonzalez, Chris Young) for younger players (Neftali Feliz, Alvis Andrus, Akinori Otsuka) and the Rangers invested heavily in their farm system.
The Ranges were bad from 2005 through 2008 and and had one of the lowest payrolls in the majors. But in 2010 the team signed a new television deal with Fox Sports Southwest worth $3 billion over 20 years. The deal does not begin until 2015, but the team received a upfront signing bonus from Fox in 2012.
Some of the money was used to boost payroll, or sign high-priced talent like Japanese pitcher Yu Darvish, and some of it was used to make renovations to Globe Life Park. Both types of investments paid dividends. The Rangers won at least 90 games from 2010-13 and made it to the World Series twice (2010, 2011), and the team is now worth $825 million, $232 million more than Ryan Baseball Express paid for the team for in 2010.
The Chicago Cubs have to a large extent followed the Rangers blue print since the Ricketts family purchased 95% of the team, Wrigley Field and 25% of Comcast SportsNet Chicago in 2009 for $845 million. I recently interviewed chairman Tom Ricketts, and Crane Kenney, president of business operations, for the YES Network’s three-time Emmy Award-winning show Forbes SportsMoney. In the video below, set up with interesting insight by my colleague Bob Lorenz, Ricketts and Kenney discuss in detail why they believe in their game plan for the Cubs.
The Cubs have cut their opening day major league payroll by $42 million since 2009, but have been spending more on player development, especially international players. The team has also poured a lot of money into a new spring training complex in Mesa, Arizona and a training academy in the Dominican Republic. The Cubs are the only National League team with two (Javier Baez, Kris Bryant) of the top eight prospects in the game, according to Baseball America.
The Cubs are also in the process of selling some shares in the team to investors–the new limited partners would likely own less than 25% combined–and want to use the proceeds to renovate Wrigley Field and develop nearby real estate. The cost of the Wrigley upgrades would be around $300 million and the cost of putting hotel and stores outside the ballpark would be about $200 million. The Wrigley upgrades—better amenities, more sponsorship opportunities–would generate an additional $30 million or so a year for the Cubs, according to Ricketts.
Perhaps more. This Cubs have among the most loyal fans in baseball and despite the team’s terrible performance on the diamond last season pulled in over 2.6 million fans at Wrigley Field. The power of the brand comes through in the graphic below, which shows the revenue-per-fan for each MLB team in 2013. This figure is calculated dividing local revenue (tickets, stadium concessions and merchandise sales, local media fees) by market size (half the market size is used for cites with two teams).
Team Revenue-Per-Fan $
San Francisco Giants 128
St Louis Cardinals 87
Boston Red Sox 82
Milwaukee Brewers 81
Cincinnati Reds 68
Cleveland Indians 56
Chicago Cubs 52
New York Yankees 51
Pittsburgh Pirates 50
Baltimore Orioles 49
Detroit Tigers 47
Minnesota Twins 47
Colorado Rockies 45
Oakland Athletics 44
Seattle Mariners 43
Los Angeles Dodgers 41
Kansas City Royals 40
Philadelphia Phillies 40
San Diego Padres 40
Atlanta Braves 38
Los Angeles Angels of Anaheim 36
Washington Nationals 35
Texas Rangers 33
Chicago White Sox 32
Tampa Bay Rays 32
Arizona Diamondbacks 28
Toronto Blue Jays 25
Houston Astros 20
New York Mets 20
Miami Marlins 13
The biggest cash haul will come from the team’s next television deals, which are currently with WGN and Comcast SportsNet Chicago. The two networks paid the team a combined $59 million last season tied with the Chicago White Sox at 7th place in baseball behind the New York Yankees ($105 million), Los Angeles Angels of Anaheim ($85 million), New York Mets ($75 million), San Francisco Giants ($70 million), Boston Red Sox ($66 million) and Atlanta Braves ($61 million).
The challenge for the Cubs in maximizing rights fees is that WGN deal ends after this season but the CSN Chicago deal does not expire until after the 2019 season. Based on television market size, and the $8.35 billion deal, 25-year deal the Dodgers inked with Time Warner Cable that begins this season and the $5 billion, 25-year deal the Philadelphia Phillies signed with CSN Philadelphia that starts in 2016, the Cubs total package should be worth somewhere in between the two.
On an earlier Forbes SportsMoney show, Scott Milleisen, Head of Sports Finance Group at JP Morgan Private Bank, discussed the Cubs next television deal with Bob Lorenz and I. You can get Melleisen’s take on this video.
But Kenney is even more bullish than Milleisen and I were a few months ago. He believes it is possible that when all is said and done the Cubs could have baseball’s richest local television deal given the prospects of over-the-top sports content and technology companies like Apple and Google getting into the delivery of live sports.
The revenue from a renovated Wrigley and far more lucrative television deals would mean the Cubs would not only have the money to keep their best young players into their prime, but also sign an occasional high-priced star–just like the Rangers.
and then they also have this
http://www.forbes.com/sites/mikeozanian ... cago-cubs/Warren Buffett Interested In Buying Piece Of Chicago Cubs
Warren Buffett, the world’s fourth-richest person, is interested in investing in the Chicago Cubs, according to a source who traded candor for anonymity.
The Ricketts family, which owns the baseball team, is reportedly pondering the sale of a small piece of the team to raise money for the renovation of Wrigley Field and development some nearby real estate. Forbes recently valued the Cubs at $1.2 billion, fourth-highest in MLB.
The Ricketts family hails from Omaha, the same city that is home to Buffett’s holding company, Berkshire Hathaway And for 21 years Buffett owned a minority interest in the Omaha Storm Chasers, the minor league baseball team he sold almost two years ago. The Ricketts are the largest individual owners of publicly traded TD Ameritrade, a securities brokerage firm with a market capitalization of almost $17 billion.
In addition to the Cubs and Wrigley Field, the Ricketts family owns 25% of Comcast CMCSA -0.22% SportsNet Chicago, the regional sports network that the city’s other sports teams–White Sox, Bulls, Blackhawks–and Comcast also own a piece of.
Aside from Buffett, it is unclear how many other potential investors have reached out to the Cubs. But interest in the team, one of the few baseball franchises with national brand recognition, is expected to be hot, according to my source.
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