December 7, 2013

LONG TERM

The reason why the Mariners have suddenly become a big money player in a small market city is that the team just hit the gold mine with a new $2 billion broadcast deal.  As a result, the Mariners have a significant new source of revenue to spend on elite free agents.

The Mariners attendance has dropped from 3.2 million to 1.8 million. The Mariners play on the West Coast. There is little national attention paid to the team. Until, Cano was signed last week.

The Cano signing is all about the new television money.

While other teams are playing catch-up with the Yankees, ironically, the Yankees are paring back on their television network (selling part of the Steinbrenner's stake in the YES Network). The Yankees are also actively reeling in their payroll. In some ways, they are bucking the trend they started years ago.

The big fuel for rebuilding franchises now appears to ride on a new team network deal.

The Cubs are in a cornered position. As being formerly owned by a broadcaster, the Tribune Company negotiated a bad TV deal with itself in order to increase overall profits within the conglomerate. Ricketts did not renegotiate those deals as part of the purchase agreement with the Tribune. So the Cubs are stuck with a cable partnership that runs through 2019 season. That means the Cubs cannot find a television windfall like the Mariners until 2020.

That is a long time to sit and rely upon a lesser than market value local broadcast license fees. But that is the position the Cubs are in today. So, if revenue is not going to dramatically increase, the team has to cut costs. The biggest cost is the major league payroll, which currently stands at approximately $59 million for 2014. Arbitration player contracts will probably boost the payroll to around $75 million. This would continue the payroll decline since Ricketts ownership.

It also parallels the drops in attendance at Wrigley Field. Theo Epstein admitted that the Cubs are highly dependent upon the gate as a revenue source. That is why the Cubs are not going to be a big money free agent player this year, and for the foreseeable future.

The team emphasizes the youth movement, but won't say when the rebuild will be complete. But if the other teams did not dive head first into the free agent pool without a new billion dollar TV deal, then the Cubs will be watching from the sidelines for the next 7 years.