The Cubs confirmed yesterday that the negotiation window now is open for the 70 or so games that air on WGN. Like the Los Angeles Dodgers, Los Angeles Angels, Houston Astros and others, owner Tom Ricketts wants to cash in on the massive money grab for local TV rights.
From Paul Sullivan in the Chicago Tribune:
Cubs Chairman Tom Ricketts is always looking to increase the team’s revenue sources, and now it appears likely the team will wave goodbye to their longtime TV home when its contract ends after the 2014 season.
Ricketts declined to address their plans on Sunday, except to say a discussion on rights fees will begin in 2013.
“Obviously local media rights have been increasing in value,” he said. “Hopefully at some point we will be able to get more value for our media rights. It’s just something that’s playing out over time.”
According to Robert Channick in the Chicago Tribune, WGN pays the Cubs $20 million per year, an average of $400,000 per game. That’s more than a few ticks off the $1.8 million per game the Dodgers will average with their new deal with Time Warner in Los Angeles.
All told, the Cubs make about $60 million per year between their deals with WGN and Comcast Sports Net Chicago. Again, that’s below market value compared to the new TV deals signed by other teams. Yes, Mr. Ricketts has noticed.
It’s hard to see WGN making a big-money offer to keep the Cubs since the station is in flux with Tribune Co. only recently emerging from bankruptcy. Larry Wert, who was just brought in to run Tribune broadcasting, has a big decision to make there.
Regardless, the key for the Cubs will be establishing leverage for the games. It could happen in a couple of ways.
1. The Cubs simply move a majority or all of those WGN 70 games to its cable outlet, Comcast SportsNet Chicago. The Cubs are part owners in the network. Cable provides the multiple revenue stream of advertising and subscriber fees, which translates into more money.
2. The Cubs bring in Fox to help them launch their own network. The team’s deal with CSN runs through 2019, meaning it won’t be until 2020 at the earliest before Chicago could see the Cubs version of the Yankees’ YES Network.
However, Fox could lay the foundation by acquiring the 70 WGN games and placing them on WPWR-Ch. 50, a local station it owns in Chicago. Fox and the Cubs then bide their time and plan for the new network in 2020.
Fox has demonstrated a healthy appetite to buy local sports cable outlets. The network probably got a bit hungrier after losing out for the Dodgers deal in Los Angeles. It could turn its attention to Chicago and tap into the potential of the Cubs.
Indeed, it isn’t the greatest time for the Cubs to throw their games open for bid. While (crazy?) Cubs fans still bought nearly 2.9 million tickets in 2012, mostly to attend the shrine that is Wrigley Field, a 101-loss season produced a massive tune out on the TV side. The team’s local average rating dipped below a 2, the lowest in recent memory. You only can watch so much bad baseball.
Yet if Theo Epstein can work his magic and build the Cubs into a contender, those ratings will soar in Chicago. The faithful will come out of hibernation and park in front of their TVs. The Cubs definitely have a passionate fan base to sustain a team-owned network.
The key for the Cubs in maximizing TV revenue could be whether Fox becomes a player in Chicago. Given what the network has done elsewhere, it seems to be a strong possibility.