The Cubs’ reported financial limitations, along with what may be precipitating them, have been the focus of a good deal of offseason conversation to this point. Speculation on the root of the “frugality” — the Cubs currently have MLB’s highest projected payroll — has centered on a new TV deal that may not be quite as lucrative as initially anticipated. There’s also the notion that the abbreviated postseason may have diminished the return on the Ricketts family’s Wrigleyville investments.
But even if all that is true, recent developments should result in significant windfalls for every MLB team. It was announced Thursday that the league and Fox Sports had agreed to a new TV rights deal that is worth a reported $5.1 billion over seven years. That’s an increase of around 50 percent in total value and 36 percent per year over the current deal that runs through 2021 and pays $525 million annually.
In a subsequent announcement, it was revealed that MLB had agreed to a three-year, $300 million live digital rights deal with streaming service DAZN. Subscribers to the service will have access to a nightly whip-around show that will offer live look-ins of games and highlights of rallies and important events, similar to the NFL’s RedZone Channel. There will also be on-demand content and weekly wrap-up shows.
In more Cubs-specific news, the team announced Thursday that ticket prices would be increased by an average of 2.6 percent for the coming season. Some renumbered sections will actually see decreases while others will have no change, but the important thing here is the overall upward trend.
Based on the previous average price of $58.57, this modest bump will net the Cubs about $4.8 million in additional revenue if they match 2018’s attendance of approximately 3.18 million. The DAZN deal is worth $3.3 million per team per year and the Fox extension should net each club an additional $6.8 million annually. All told, it comes to somewhere in the neighborhood of $14.9 million in additional revenue for doing nothing.
Huh, that’s almost enough to offset any overage penalties the Cubs would incur from exceeding the highest threshold of the competitive balance tax. For instance, adding Bryce Harper and his presumed $35 million AAV contract to their current obligations would cost something like $20 million in penalties. That’s a pittance in the face of what ownership has spent in and around the park already, but lopping $15 million from it makes the penalty almost an afterthought.
Of course, the additional revenue in question is also roughly equivalent to the remainder of Cole Hamels’ $20 million extension after removing Drew Smyly’s $5 million from the books. But it’s not like we’re talking about found money here. Unless Tom Ricketts just learned about the broadcast deals and ticket increases Thursday like the rest of us schmoes, he’s been well aware of the bigger financial picture for quite some time now. Which is to say this money may not be immediately allocated to payroll one way or the other.
I suppose we should also note here that the new Fox deal won’t kick in for another few years and can’t really be counted as extra income right now. Except that, you know, we’ve long been operating under the assumption that the Cubs would spend based on future income from their own broadcast deal, so the idea of operating on credit has been around for a while.
So what does this all mean? I don’t know, maybe nothing. While the Cubs are well within their competitive window, the one for broadcast and streaming rights may have closed on them. Oh, they’ll still make plenty of bank and won’t have to split any of it with their Chicago brethren as is the case with NBC Sports Chicago, but the beaucoup-billion bubble may have burst. So as cool as that extra $15 million is, it’s nowhere close to the amount they’ve likely missed out on at this point.
Not that anyone is going to take my account as gospel, but I must point out that some of these figures are estimates and are subject to change. I also want to make very clear that I’m not excusing the Cubs for not spending loads of money on payroll, nor am I trying to justify their financial decisions one way or the other. This was merely an attempt to paint a rudimentary picture of what Thursday’s announcements could mean for them.
Assuming my math is not woefully incorrect — I took off my socks and used my toes to count, so I’m pretty confident in it — we’re not talking about franchise-altering money. At the same time, it could be enough to push personnel decisions in a different direction. How do you view it? Is this a difference-maker or just maintaining the status quo?