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Beyond the Ivy - A Cubs Rooftop Partner

The Search for Revenue

Friday, December 3, 2004

For the un-initiated fan, you may be asking yourself why the Tribune company is always searching for new revenue streams. To this I reply: The Cubs must keep up with the Joneses to remain a viable franchise. Player salaries tend to keep pace with revenue growth, leaving a fairly constant profit margin for the teams who can grow revenue at the league average.

So, the Cubs must keep increasing their revenues to stay ahead of the league average, thus preserving their profitability and franchise value. Also, they must keep up their revenue growth so that they can continue to field competitive teams... enabling them to grow their revenues.

In the last weeks, the Cubs have made three public moves to increase revenues. They increased ticket prices, and announced that they will be adding a rotating advertisement board behind home plate. They have also announced a desire to begin hosting concerts.

Excerpt from: Cubs have bit more in mind than just baseball
By: Gary Washburn, Chicago Tribune Dec. 1, 2004

The Cubs are exploring the possibility of hosting a concert at Wrigley Field for two days over next year's Labor Day weekend, officials said Tuesday.

Team executives have broached the subject with Ald. Thomas Tunney (44th) and, though no artists have been signed, they have floated the name of musician Jimmy Buffett as a possible choice.

"If the Cubs are not in town, Labor Day weekend is normally a quiet weekend" in the Wrigley area, Tunney said. "On the positive side, there would be some economic [benefits] to the community. On the negative side, quality of life issues would be compromised."

Any accord would have to include "significant give-backs to the community," Tunney said.

As part of any agreement, some of the proceeds from the concerts could go to local schools or parks, sources said.

"If we did anything, and it's a big `if,' there are a lot of questions we need to answer first," said Michael Lufrano, Cubs vice president of community affairs. "We would need to make sure we did it in cooperation with our community. We would need to make sure we did it in a way that doesn't harm the field for baseball."

...

Gregg Kiriazes, chairman of the Neighborhood Protections Committee of the Lake View Citizens Council, said he has an open mind about limited use of Wrigley for concerts as long as community concerns about crowd and congestion control and other potential problems are addressed.

A concert next year would set a precedent, Kiriazes said. "Any of us would be foolish to say it doesn't. [But] it is a great venue, a great neighborhood and it's a natural. I am surprised something like this hasn't come up before."

...

On another front, Cubs officials are studying the possible use of trolleys or shuttle buses to help reduce congestion on game days, Tunney and Lufrano said.

Under consideration is possible service between a nearby Metra station and the ballpark and between Michigan Avenue-area hotels and Wrigley.

You think the trolley's gonna be free? Yeah, Sure. Now, it looks like the Cubs are gonna tick off cab drivers.

Excerpt from: Cubs propose placing ads behind home plate
By: Gary Washburn, Chicago Tribune Nov. 29, 2004

The Cubs would install an electronic advertising sign behind home plate at Wrigley Field and add 32 seats to a temporary seating area that would become permanent under a proposal that will be considered by the Commission on Chicago Landmarks, officials said Monday.

The 10-by-3-foot sign would be in the frame of the typical television camera shot that takes in the pitcher, catcher and batter.

A total of 80 permanent seats would be installed in an area adjacent to the dugout on the right field side of the park where there have been 48 folding chairs, said Peter Scales, a spokesman for the city's Planning Department. A chain-link fence around the area would be replaced by a brick wall, he said.

"These plans balance the historic preservation of the park with the operating needs of the Chicago Cubs," Scales said. "Therefore, the Planning Department is recommending that the Landmarks Commission approve it."

Because the ballpark is an official city landmark, all proposed changes must undergo commission review. Wrigley Field and the Cubs are owned by Tribune Co., which also owns the Chicago Tribune.

The sign would produce $3 million to $5 million in ad revenues annually. For at least the 2005 season, team officials won't accept any advertising for tobacco products or hard liquor, said Michael Lufrano, Cubs vice president of community affairs.

Between the concert and the ad board, the Cubs could recognize probably about $6 million in revenues.

If the Cubs add 80 seats to Wrigley, the new seating capacity would be 39,638 (it is currently 39,558, but this number does not include the 48 folding chairs.)

Assuming the Cubs charge the same price for the new seats as the 213 dugout seats they added last year, the Cubs would have an extra $1,104,000 in revenue from ticket sales.

  • 6 value dates x 80 seats x $50/seat = $24,000
  • 35 regular dates x 80 seats x $100/seat = $280,000
  • 40 prime dates x 80 seats x $250/seat = $800,000
Arithmetic

$6 million from concerts & ad-board + $1.1 million from new seats + $2 million from XM radio contract + $3.5 million from expected gain on sale of expos = $12.6 million in new revenues.

In other news, the Astros started the Carlos Beltran bidding at $13.5 million per year... only $.9 million to go.

Moreover, the Cubs ticket sale revenue was about $90 million last year. They raised ticket prices 17.5%, so thats another $15.75 million.

So, please do not tell me that we cannot afford Carlos Beltran. We can. The question is, how bad do we want him?

Posted by Byron at December 3, 2004 1:25 AM | Bookmark and Share | BallHype: hype it up!
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3 Comments

You should inquire into the revenue which the Cubs derive from their TV Rights. The Yankees generate approx. 120 Million from TV. The Cubs about 10 Million. Why? WGN, is owned by the Tribune as are the Cubs. If the Cubs were to sell their TV rights to the highest bidder I would guess the additional revenue would be more than enough to pay for Beltran along with any other player they wished to sign.

Yeah, but if they sold their rights, how many people would actually get to watch the game is they sold it to, let's say, Fox Sports Net? Not a lot of people would get to watch the games because the fans around the rest of the country would get the channel because they serve out the FSN channels regionally. That's what someone in the Bay Area gets Giants games on their FSN and it's why I get the FSN Southwest and all they run is the Asstros and the Rangers. But if the Cubs are still on WGN, the fans get more games because every channel package on cable and satillite includes WGN.

And who says they need Beltran? Ok, everyone, including me, but what if they succeed just fine without him? Longshot, but it could happen.

The thing about the TV revenues is that they are a transfer item for the Tribune Company. As far as the Trib is concerned, they could charge $1, or $1 billion, it wouldn't really matter to them. If WGN pays the Cubs $1 billion, then it is an expense for WGN and a revenue for the Cubs. Either way, the Tribune Company ends up with the same amount of money.

So, the Cubs don't worry too much about the value of the TV deal with WGN because it all evens out in the end. The reason they keep it so low is to make the Cubs look less profitable. Which makes for convenient moaning and groaning about revenue difficulties.

I am sure, if Andy McPhail is worth anything as a business executive, he is getting a fair deal within the TribCo's internal accounting. What I mean is this: If the fair market value of the contact is $100 million, but the transfer price is $10 million, then the Cubs are getting some other considerations. I would love to see the Cubs books, but those are kept pretty tightly. However, the TribCo demands profitability from all of their units, and the Cubs are no exception. However, the TribCo doesn't care whether the Cubs books actually show the correct numbers. They have their own internal books, and I'm sure the Cubs are making out just fine.

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