TEAR DOWN

 Part of the MLB Trade Rumors live chat from December 29:

Cubs (Comment)

2:01

Seems they just gave away Darvish. Also are Cubs in rebuild now.

 

Steve Adams (Response)

2:03

They pretty much did. They're a worse team now with Davies than with Darvish and Caratini, and no one else they acquired will help them before 2023. This team won the division and went to the playoffs -- and despite the fact that no one else in the NL Central is trying, the Cubs are content to just deliberately get worse. I'd be furious if I were a Cubs fan.

 

 "I'd be furious if I were a Cubs fan."

The Cubs are not in a rebuild. They are in a tear down. Epstein left early because he did not want the terrible job to trade away or cut his "friends" (players he signed). One commentator said of the Darvish deal, he did not realize that Jed Hoyer was still working for the Padres.

It does send an awful message to Cub Land.

It was reported that the Cubs lost $200 million in 2020. However, if you look closely, that is an exaggeration. And most of the losses were self-inflicted by ownership.

The Cubs biggest problem was its television deal. Or lack of one. The Marquee Network was a first year failure. Comcast did not pay the Cubs network until October.  The national TV revenue was probably cut to a third. The Cubs current radio rights deal is very small when it burned itself by leaving WGN in a bumbling fashion. The Cubs probably had total broadcast revenue of $25 million.

But the Cubs payroll of $214 million was prorated down to $71 million. Plus, the Cubs saved on not funding any minor league affiliates. Plus, early in the year, the Cubs laid off most of its scouting and development staff. In reality, the "baseball operations" may have lost $50 million in 2020.

But the Ricketts biblical horror has to do with the fact no fans came to games. They claim that 67 percent of their revenue comes from fans attending games. Again, there is no way to know if that is true.  But the argument is mixing apples and oranges as a great portion of Ricketts family revenue comes from non-baseball operations. Wrigley Field is a separate revenue entity. Ricketts lost all extra concert revenues. The bars and restaurants in Gallagher Way had no thirsty fans to spend big money pre and post games. There were several tenants in Ricketts buildings that went out of business, including Joe Maddon's restaurant, meant that rental revenues were seriously down. The hotel was closed for the entire year, so no revenue from that property. The other ancillary businesses, such as the parking lot revenue, also evaporated. But part of the problem of Ricketts financial cries is that they overbuilt the neighborhood, relied on public support at inflated prices, and bombed at creating their own cash cow network. If Ricketts lost $200 million, it is fair to guess that most of it is from bad ancillary business operations.

As it stands today, the Cubs projected 2021 payroll is $122 million. If the Cubs trade of Darvish is any indication, the pending free agents of Bryant (owed $18.6 M), Rizzo ($16.5 M) and Baez ($11 M) are also trade targets (but at much lesser value than Darvish). You might as well add Hendricks ($14 M) to the fire sale bargain bin. If you trade those players, Ricketts lops off another $60.1 million in payroll. NOW, YOU CAN BOAST you are at $62 million, small market level which means you may be able to break even on the baseball side in 2021.

It is obvious that Ricketts and the front office do not care about the fans. The Cubs WON the division this year. The Reds and Brewers already signaled that they were giving up on 2021. The Pirates are already in the early stages of a complete rebuild. The Cardinals lost veterans and seem to be willing to stay pat this off-season. The NL Central is going to be a weak and crappy division that the Cubs could win again if the team stayed as is. 

To say that Davies, Mills, Alzolay and Rea are just as good as Darvish, Lester, Chatwood and Quintana is an insult. The Cubs currently only have TWO outfielders listed on their 40 man roster. It speaks to the fact that the 2021 roster will be filled in with cheap, journeymen players at the end of their careers. It stinks like the teams Epstein pulled together during his rebuild (the ones he wanted losses from to get high, no risk first round draft picks).

The one elephant in the room that the Ricketts cannot see is that the great Cub fandom is not going to pay premium prices to watch a crappy, tear down AAA team play at Wrigley Field. Fans do not have to - - - they have their World Series Championship and those memories. The Cubs lost their "lovable loser" badge in favor of dynasty championship franchise. The latter did not materialize even though the Cubs did make the playoffs. The bitter taste is that the young core that has aged out underperformed (sat on their laurels) with only one World Series appearance.

This tear down will be brutal and further be financially destructive to ownership who still thinks owning the "Cubs brand" is like printing money. The pandemic may not be under control until July, 2021 when the vaccines will be readily available to the general public. The middle class that lost their businesses due to lock down closures, bankruptcies and lack of employment opportunities is not going to be season ticket holders or even cable subscribers as the season starts. 

No one is going to shed a "tear" for ownership during the tear down because the Ricketts are not very well liked in Chicago. The family politics and relationship with Sinclair still irks some fans. People will not pay premium dollars for an inferior product when there is a young and exciting baseball team on the South Side of town.

OFF-FIELD BALK

 Major League Baseball and all 30 of its teams are suing their insurance providers, citing billions of dollars in losses during the 2020 season played almost entirely without fans due to the coronavirus pandemic. But the vast majority of business cases involving the pandemic (contract clauses, payment issues, insurance claims) have failed to give aggrieved parties any relief.

The suit, filed in October in California Superior Court in Alameda County, was obtained Friday by The Associated Press. It says providers AIG, Factory Mutual and Interstate Fire and Casualty Company have refused to pay claims made by MLB despite the league’s “all-risk” policy purchases.

The league claims to have lost billions of dollars on unsold tickets, hundreds of millions on concessions, tens of millions on parking and millions more on suites and luxury seat licenses, in-park merchandise sales and corporate sponsorships. It also cites over a billion dollars in local and national media losses, plus tens of millions in missed income for MLB Advanced Media. It says all of those losses should be covered by their policies.

Since COVID-19 sparked government-ordered shutdowns in March, judges have dismissed more than four times as many business-interruption lawsuits as they’ve allowed to proceed, according to a preliminary analysis by the University of Pennsylvania Law School.

Industry executives say pandemic-related losses may be their biggest ever, and business-interruption claims will likely be part of that, even though many insurers added virus waivers to policies over the past decade following the SARS outbreak in 2003.

The Insurance Journal reports most of the cases tossed out so far had virus-exclusion clauses. When policies don’t have the exclusion, insurers are arguing COVID-19 can’t cause the physical damage or loss required for a business-interruption payout, like from a tornado or flood. And the industry is winning dismissals with that argument, according to the Insurance Information Institute.

“Business-insurance policies are meant to cover physical things,” said Sean Kevelighan, the chief executive at the institute, which has more than 60 insurance company members. “There’s a ways to go” in the legal battle over coverage, but “the beginning of it is encouraging,” he said.

A September win by Farmers Insurance Exchange in California typifies how some judges interpret “physical loss or damage.” A federal judge concluded a barbershop chain couldn’t show its business suffered a “distinct, demonstrable physical alteration.”

Other businesses have also struck out in trying to persuade judges to allow their claims to go to trial over policies that had virus exclusions. A federal judge in Arizona ruled Nov. 13 the Class AA Chattanooga Lookouts and more than a dozen other teams couldn’t overcome the exclusions.

LICENSE TO KILL

 Brew Crew Ball posts:

It’s been a while since we’ve seen a minor league baseball game. The 2020 MiLB season was lost because of the ongoing COVID-19 pandemic, and the status of 2021 is still uncertain as the pandemic continues. However, planning for the minor leagues is still underway. Earlier this year, MLB announced their decision to take control of the minor leagues and restructure them. Small pieces of information have been coming out since then, but nothing substantial has been confirmed yet. That could come as early as next week, as J.J. Cooper of Baseball America reports that MLB is nearing their decision on the minor league teams.

Though the full details are not known, the structure of the leagues appears to be set. There will be the same four top levels, with leagues in each level. Here’s how the Baseball America report breaks down the leagues:

• Triple-A: East and West
• Double-A: Central, South, and Northeast
• High-A: Mid-Atlantic, Midwest, Northwest
• Low-A: California, Florida, Carolina/South Atlantic

News from Fresno situation confirms major changes will happen. Fresno was a AAA team. Under MLB's plan, it was told to change to Class A or fold. Fresno, like most other minor league cities, has a municipal ball park and associated public debt. No team, no lease payments. The strong arm tactic worked. In addition, Fresno and the team owner had to sign off on a legal waiver of claims against MLB as part of the deal. This foretells there will be litigation on the horizon.

Part of the agreement reported on the Fresno deal was that the Fresno team could apply "for a license" to operate a minor league team from MLB. This is another significant change. In the past, each minor league team was an independent business entity or organization. It has "affiliate" agreements in which major league teams would pay money and assign player contracts to the clubs. Players without a major league contract could be bought and sold.

Major league owners through the league somehow believe they "own" the sport. To "license" intellectual property means you own a brand, a product or a service. Baseball itself is in the public domain. But to "license" a team is different than the first rumor that MLB would "franchise" minor league teams. A franchise is a security regulated by state laws. A license agreement is not; it is controlled under contract law. Even though MLB can put in restrictions in these new license agreements, new club owners probably will have little recourse.

Minor League players already have a class action pending against MLB for unpaid wages under federal law. MLB's new minor league plan would eliminate 40 clubs and 1000 players. The cut clubs and players will not be happy with MLB's strong arm tactics. The cities and towns affected by the loss of their minor league teams will be upset. Anyone with a long term view of the sport needs to be troubled because minor league baseball is still one of the major ways to hook young kids into being baseball fans.

It is clear that MLB owners want to save money. They do not think they are getting enough value for the millions spent on minor league development system. It is surprising that the owners finished the short 2020 season with a 35 man taxi squad/minor league practice team. That model makes one wonder if that may be the next minor league contraction (similar to the small NBA development league).