Determing fair market for Cubs TV/radio rights

5/20/2009 5:57 AM CDT

Posted by Ed Sherman on Chicago Business

It’s always been difficult to get a handle on what the Cubs received for their local television and radio rights. With Tribune Co. owning WGN-TV/Channel 9 and WGN-AM 720, the number seemed to be whatever best fit the books.

Well, that won’t work anymore. According to Crain’s reporters Ann Saphir and Mike Colias, the broadcast value of those contracts could be holding up the sale of the team to the Ricketts family.

I also had heard some rumblings to that effect. The Crain’s story says the Cubs and WGN inked a new deal last fall.

“(It) might have been set too low, given that the broadcaster and the sports team have been owned by the same parent: Tribune Co.,” the story said.

Do you think? Are we to believe Tribune drove a hard bargain against itself?

If I’m Tom Ricketts, I probably don’t want to accept a broadcast deal that was essentially an in-house negotiation. Especially if it might be as much as a 10-year deal, as has been speculated.

The Cubs’ television and radio rights probably rank behind only the Yankees, Mets and Boston Red Sox in terms of value. Again, it is hard to pin a number on the TV side because of the various complexities, but safe to say it is in the $50-million neighborhood.

That neighborhood is upwardly mobile. Perhaps if you’re Mr. Ricketts, you want to take some of those WGN-TV games and move them to Comcast SportsNet, a channel in which you’re a co-owner. There’s a double revenue stream on cable with advertising and subscriber fees. It would make fiscal sense for Mr. Ricketts to increase CSN’s inventory of the Cubs from 80 to 100-110 games.

It certainly can be used as a bargaining chip with WGN.

Also, if Mr. Ricketts is thinking of launching a Cubs cable station down the line, would it be in his best interests to have games tied up with a long-term deal with WGN? I would think not.

As for radio, the Cubs have been on WGN-AM 720 since seemingly the beginning of time. It’s been a profitable arrangement, as the team has made WGN one of the top-billing stations in the country.

One local radio insider said the Cubs’ radio rights could be worth in the range of $15 million per season. By contrast, WSCR-AM 670 pays the White Sox only an estimated $3 million.

Former WMVP-AM 1000 General Manager Bob Snyder thinks the figure is lower because of the economic downturn. However, he still thinks the Cubs’ radio rights could command $12 million to $13 million if put out on the market.

But Mr. Snyder added, “Spending that kind of money rules out a lot of people these days.”

Mr. Snyder said he thinks his former station, which is owned by ESPN, could have the resources to be a player. WBBM-AM 780 might be a contender, but Mr. Snyder questions whether the station would take the financial jump.

“It’s very possible somebody could write a big check,” said Mr. Snyder, who operates his own consulting company, Beason Broadcast Partners. “But to spend $12 million to chase $13-$14 million is a tough proposition these days. What if the economy gets worse?”

Yet having said that, Mr. Snyder said the Cubs’ presence would have a tremendous impact on all of a station’s programming, going far beyond the game component. Listeners tune into the games and stick around to hear the morning show, etc.

So it makes sense for Mr. Ricketts to ensure he is receiving fair market value on both fronts. It is just the latest twist in the deal that can’t seem to get done.

http://www.chicagobusiness.com



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