Cubs looking to cash in with next TV deal

Cubs looking to cash in with next TV deal
January 13, 2014, 5:00 pm
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The Cubs believe they have found the stars to make must-see television and fill year-round programming. Think 162-episode blocks with Javier Baez, Kris Bryant and the kids who’ve never played in the big leagues – but will still be the headliners for this weekend’s Cubs Convention.

Behind the scenes, sources say the Cubs are in talks with Fox about their broadcasting future, working on a deal that would end the WGN connection that built the team’s national brand and potentially lay the groundwork for a second regional sports network in Chicago.

The Cubs are locked into WGN for one more season, and Comcast SportsNet Chicago has exclusive cable rights through 2019. So one concept being discussed is a bridge deal that would put X-number of games on a local Fox affiliate during that five-year window, before taking the full schedule to a new channel in 2020. 

While speaking in broad terms during last month’s winter meetings, president of baseball operations Theo Epstein mentioned “there are ways to perhaps try to activate it sooner and take advantage of it.” But the sense is it’s not yet in the advanced stages where the Cubs would have already used it to create a war chest for 25-year-old Japanese ace Masahiro Tanaka.

The industry has been buzzing about Fox, which launched a national sports network last summer, hoping to challenge ESPN. Being aggressive is part of Rupert Murdoch’s image and News Corp.’s DNA. The Cubs could become part of the overall portfolio.

In 2012, Fox acquired a 49 percent stake in the YES Network as part of a $2 billion deal with the New York Yankees and their partners. Fox Sports has bankrolled the arms race in the American League West, where the Texas Rangers and Los Angeles Angels have capitalized on the new media landscape.

“If you track the dollars spent in free agency, you can pretty much just match them directly back to the TV deals,” Epstein said on “SportsTalk Live” last month. “If you have the huge TV deal, you spend huge dollars in free agency.”

Outside of getting involved in the Tanaka sweepstakes, the Cubs have been quiet all winter, getting ripped for not acting like a big-market team. And the club negotiated a long-term deal with the rooftop owners that has stalled Wrigley Field construction.

[MORE: Next moves for Cubs after jumping into Tanaka sweepstakes]

One skeptical cable official put it this way: The Cubs can’t put up a Jumbotron, and they want to start their own TV network?

The Cubs won’t have the same leverage or pressure points as the Los Angeles Dodgers, who used their market to make a 25-year deal with Time Warner Cable reportedly worth between $7 billion and $8 billion.

But the Cubs will get paid, even if that means ending a relationship with WGN that stretches back to 1948 and once featured Harry Caray selling Wrigley Field and day baseball in living rooms across the country.

“The story of the journey of the Chicago Cubs towards their first world championship in over a century is compelling,” Epstein said. “It’s going to be on your TV screen every day.

“The biggest factor in all this is that there’s less and less content on TV that you need to see each day without DVR-ing. So what makes baseball attractive to TV networks is the fact that you have to watch it each night if you’re a fan. You can’t tape a game and watch it two weeks later. It’s already outdated. You can’t speed through the commercials. It’s daily content. And what’s better content than the Chicago Cubs crawling their way to a World Series title?

“You would want to buy stock in the Cubs’ TV rights.”

The Cubs already have an ownership stake in Comcast SportsNet Chicago and will have to deal with other market forces. They have to hope that the cable bubble doesn’t burst. They have to hope that the federal government doesn’t force a la carte programming (which is believed to be an unlikely scenario).

[Theo gives a State of the Cubs on SportsTalk Live: Part I | Part II | Part III]

The Philadelphia Phillies recently cashed in by agreeing to a deal with Comcast SportsNet and NBCUniversal that will reportedly run for at least 25 years and be worth around $2.5 billion. Beginning in 2016, the Phillies will also own 25 percent of Comcast SportsNet Philadelphia. Comcast has a corporate headquarters in Philadelphia and dominates cable distribution in that market.

As the Cubs weigh their next media plays, it’s also worth pointing out the risks taken by the San Diego Padres and Houston Astros. Fox Sports San Diego and Time Warner Cable have been locked in a carriage dispute for two seasons, blacking out Padres games for roughly 25 percent of the market. The Astros reportedly drew a 0.0 Nielsen rating for a game last September and the franchise has been involved in a bankruptcy case with Comcast SportsNet Houston.

Still, Cubs executives are confident their business/baseball plans will come together. Declining attendance has become a big story at Wrigley Field, where it was impossible to ignore all those empty green seats as the big-league team lost 197 games during the first two years of Epstein’s rebuild. But the time is coming where you should think of Clark and Addison as more of a TV studio.

“Looking retrospectively, I think the Cubs have been more dependent on gate revenues than I expected,” Epstein said. “It seems like our revenues ebbed and flowed with attendance a lot and I think that will really switch with the new TV deal.

“Once you get the TV deal that you should have in a market like this, those local revenues will be largely fixed. I don’t look at inter-market competition. I really just look at what we’re trying to do on the baseball side, and that matches up perfectly. There’s no way I can make our business side happier than by putting a winning team on the field.”