SHUT OUTS

The season has not started by millions of baseball fans will be shut out.

NY Post reports the continuing saga of sports teams and cable operators over team license fees.

Cable operators are winning.

The head butt over broadcast rights fees continues at the start of the season by big carriage standoffs for regional sports networks in New York and Los Angeles.

The LA Times reports that Time Warner Cable sweetened its deal for SportsNet LA, the exclusive TV home of the Dodgers, but no deal has been come to pass.


The cable provider, which already cut the channel’s price by 30 percent for one year, offered pay-TV providers a new six-year deal to carry the regional sports net.

The first year would be at the lower $3.50-a-month introductory price with the rate ticking up in subsequent years, according to the LA Times, citing a source close to the talks.

So far, AT&T’s DirecTV and other pay-TV operators in Southern California have not responded to the latest offer, which means some 3 million homes in Southern California will miss out on Dodgers games for a third straight season.

The billion dollar Dodger cable network deal was based upon full coverage of the LA area. That has not happened, and it makes future megachannel deals unlikely for teams, including the Cubs.

The same situation is playing out in the New York area. YES, which airs Yankees games, has been blacked out on Comcast since November amid a carriage dispute with the network’s majority owner, 21st Century Fox.

The blackout affects about 900,000 Comcast subscribers who live in New Jersey, Connecticut and Pennsylvania.

Under its old contract, Comcast was guaranteed the lowest price because of a so-called “most favored nation” clause. It wants to continue that even though it lost its title as the biggest pay-TV provider to the combined AT&T- DirecTV.

YES NETWORK TOLD NO

Over the holiday weekend,  Comcast just dropped the YES network.



Putting together the pieces, the cable operator said it was too expensive to carry the network.

From reports:

 Comcast dropped YES Network, the television home of the New York Yankees, Brooklyn Nets and other programming, in Connecticut, New Jersey and Pennsylvania at midnight Wednesday.



The Yankees have a 20 percent stake in YES, while 21st Century Fox owns the remaining 80 percent. Comcast claims Fox's demand for a 33 percent increase in subscriber fees is too high for the network, which leans heavily on its Yankees programming for viewers.

The two parties' previous agreement expired earlier this year during the Yankees' season. Comcast and Fox agreed to temporary deals to keep broadcasting during the Yankees' playoff hunt.



However, now that the season is over and the Nets are one of the worst teams in the NBA, Comcast has hardened its line and Fox won't budge. The final midnight deadline passed, and YES Network was blacked out.



Comcast said in a statement:



YES Network carried approximately 130 baseball games this past season and well over 90 percent of our 900,000 plus customers who receive YES Network didn’t watch the equivalent of even one quarter of those games during the season, even while the Yankees were in the hunt for a playoff berth. Viewership of the network in the baseball offseason is even lower. FOX and the Yankees are asking all of our customers to pay them hundreds of millions of dollars over the next several years to continue receiving the channel. The price FOX and the Yankees are requiring from our customers is not acceptable given the Network’s minimal viewership, which is why we have decided we can no longer justify continuing to carry the Network. YES simply does not present an appropriate price-value proposition for our customers.



A Comcast spokesman declined to comment on whether negotiations would continue.



Comcast has 900,000 YES subscribers in Pennsylvania, Connecticut and New Jersey — the latter two states will be most affected by the loss of hometown sports broadcasts. Comcast is not currently franchised in New York, where YES will continue to broadcast.

 With the Yankees season over and the Brooklyn Nets off to a less-than-stellar start, losing nine of the last 10 games, the YES Network may not have much leverage on its side at the moment. Moreover, the network is the most costly regional sports network, according to SNL Kagan, raking in $4.89 a month on average per cable TV customer. YES Network is carried in more than nine million homes in the New York market.



>>>> Two key points from the reports: 1. YES Network was extremely expensive to pass on to cable viewers, which shows in that only 10% of Comcast customers carried the channel. 2. The YES network received about $53 million per year from Comcast, which is a huge revenue source.


This also bodes ill for the Cubs planned 2020 launch of the Cubs Network. New York-New Jersey-Philadelphia market is about double the Chicago television market. The YES Network wanted a 33% increase in its carriage fees. Now, cable operators have been losing subscribers for years, mostly from the high cost of sports channels that many do not want to have on their bills. Comcast made a business decision that puts approximately 225,000 Yankee-Nets fans in the dark.


If you try to tie down the projected Cubs numbers off the YES model, with a 10 percent saturation rate, the Cubs cable base would be around 450,000 paid viewers, at only $13.5 million in annual revenue. This is a far cry from the billion dollar Dodger network deal, which now seems like a total disaster for Time Warner cable, the Dodgers' partner.


ESPN has been the kingpin in cable channels, but its luck has turned for the worse.


A steep drop in subscribers over the last two years has resulted in a $900 million annual hit to ESPN's bottom line.Analyst reports and SEC filings indicate that between 2013 to 2015, ESPN lost about 7 million total subscribers, with the flagship channels ESPN and ESPN 2 each dropping 4 percent from a high of 99 million to 95 million subs today. Dropping most dramatically was ESPN Classic, which is down 16.1 percent to 26 million subscribers.


The launch last year of the SEC Network, which has around 63 million subs, has helped "mask" a huge drop in affiliate revenue from ESPN's other networks. Based on an average per-subscriber carriage fee of $6.61 for ESPN, $0.83 for ESPN2, $0.63 for the SEC Network and $0.22 for ESPNU, the national sports conglomerate is taking in around $650 million less each year in affiliate fees compared to two years ago.


Meanwhile, he estimates the resulting loss of advertiser reach has shaved off another $200 million to $300 million from ESPN's bottom line.


So the gold standard of cable sports channels is getting hammered by lower subscriber base and declining cable advertising revenues. If ESPN and YES have major problems with their sports networks, how can anyone in the Cubs business office think they can do better on a more limited product in a smaller market?

TAKING A TUMBLE

The Los Angeles Times reported late last week that the Dodgers local TV ratings have tumbled.

Badly.

The new TW-Dodger Channel is still not available in 70% of the LA market due to carrier fee disputes.

The Dodgers new owners signed a multi-billion dollar cable channel deal with TW which now seems to be a money pit disaster.

The Dodgers kicked off the 2015 season with two stadium sellouts and falling TV ratings.

Monday afternoon's opening day telecast on the team-owned cable channel, SportsNet LA, generated a .79 household rating and an estimated 58,146 viewers. That's slightly more than turned out at Dodger Stadium for the sold-out game that culminated with a win over the San Diego Padres.

The Los Angeles Angels of Anaheim, which were on the road Monday against the Seattle Mariners, generated a 1.35 household TV rating in Southern California and 88,415 viewers. The Fox Sports West cable channel carries the Angels' games.

The Dodgers and Angels both grew their TV audiences on rain-soaked Tuesday night -- the teams' first prime-time telecasts of the season. The Dodgers captured a 1.04 household rating and 81,670 viewers. The Angels notched a 1.65 household rating and 132,500 viewers.

Fox Sports West is carried by all of the major pay-TV distributors -- making it available in nearly 4.5 million homes in the region.

But because of a bitter fee dispute, Time Warner Cable, which distributes SportsNet LA, is the only major pay-TV provider that offers that channel in Southern California. Other providers have balked at the price that Time Warner Cable has been demanding to carry the channel, leaving more than 70% of the region without regular TV access to Dodger games.

The Dodgers' TV audience took a tumble on Wednesday. The game mustered a .58 household rating and just 35,000 viewers -- far fewer than showed up at Dodger Stadium for the sold-out game.

This is the new reality: that viewers will not pay "extra" for a team channel. Too many cable operators have been burned by these new deals, including Houston. If the Cubs are banking on a huge Cubs channel windfall in 2020, they are probably delusional since the entertainment distribution landscape is shifting dramatically.

THE BUBBLE BURST?

Ricketts and the Cubs are counting on a huge network-cable channel bonanza in 2020.

However, the landscape of television and consumer entertainment options is changing fast.

If the Cubs were counting on a Dodger-TW megadeal, think again.

Time Warner Cable is expected to lose $1 billion in its deadl involving the Dodgers television rights, according to the New York Post. 

The company acquired the right to air Dodgers' games on SportsNet LA in 2013. The reported contract was worth $8.35 billion over 25 years. Time Warner Cable believed providers such as DirecTV or Dish Network would pay to carry the channel, but that hasn't been the case thus far. 

 

Time Warner Cable hasn't lowered its demands, which means roughly 70 percent of Southern California households will be unable to watch games for the second year of the deal. The company is reported asking for about $5 per subscriber in order for providers to carry the channel.

That would make SportNet LA the third most-expensive sports channel in the United States, according to a survey conducted by SNL Kagan, a consulting firm. And, according to the Post at least, Time Warner would rather take a $1 billion hit than bring down its price:

Sources told The Post that the market rate for the channel is more likely $3 per subscriber per month, meaning the charge will be almost $1 billion when adjusted over the life of the contract or in the region of $700 million in present-day terms.

“Comcast will be made whole,” said the source, suggesting this mess had to be cleaned up as a condition of Comcast’s proposed deal to acquire Time Warner Cable.

“Unless the deal closes, there will not be another [Dodgers] season shown outside of Time Warner Cable. I don’t believe they’ll get carriage,” a source told The Post.

Time Warner Cable has reportedly attempted to rectify the situation in recent weeks, but there has been no progress, according to the Los Angeles Times. The company has also denied that it is facing such a massive loss. 

"Time Warner Cable has no plans to take a write-down in connection with its Dodgers contract," the company said late Tuesday in a statement.  "In fact, TWC does not carry an asset on its balance sheet related to the Dodgers and, therefore, there is no asset for it to write down now or in the future."

If Time Warner Cable were to "take a write-down" that would mean the company would have to admit that the rights to air Dodgers games is a declining asset. This would have a huge impact on their financial situation if the reported figures are true.

Another point to be made is that the Dodgers cable deal has caused the values of all baseball franchises to skyrocket. So much so that the Cubs have sold minority interests in the holding company - - - which is selling slices at peak prices (and before this latest news). One could argue that all baseball franchises are now substantially overvalued as no cable operator-TV partner in the future is going to make a similar Dodger-TW mistake.

BACK TO THE WELL

The Cubs have crawled back to WGN-TV to broadcast the last 45 games of their schedule,
through the 2019 season. The games will not be televised on the WGN America superstation.
The Tribune reports that last season, WGN-Ch. 9 paid about $250,000 per game and lost $200,000 per game because of weak advertising revenue, sources said. The new rights agreement is likely more favorable for WGN and could play out better than last year’s deal, sources said, despite a later start on ad sales.


Launching a regional sports network in 2020 could mean big bucks for the Cubs, who earned about $60 million last season as the team split its schedule between Comcast SportsNet Chicago and WGN-TV. 

 The loss of 45 games would equate to losing 27 percent of potential local broadcast revenues.  Even if the Cubs take substantially less (which WGN had previously offered only a "profit sharing deal" on game telecasts, i.e. meaning nearly nothing based on last season's poor ad sales), it is still better than losing fan interest.

The Cubs need the 45 games broadcast more than WGN needs to show them. People are still creatures of habit; if a fan does not have the opportunity to watch a non-televised Cub game, he or she will find something else to do. And if that something else is just as enjoyable, then he or she may stop watching games on TV in order to experience different forms of entertainment. This is the problem the Dodgers will face in 2015 after 75% of the their local fan base could not watch 2014 Dodger games due to cable operators balking at the Dodgers license fee demands. 

If the Cubs are going to launch their own network in 2020, it needs to keep its loyal base in tact and grow the Millennials.

 Millennials are defined as the generation of people born between the early 1980s and the early 2000s. Perhaps the most commonly used birth range for this group is 1982-2000. The Millennial Generation is also known as Generation Y, because it comes after Generation X — those people between the early 1960s and the 1980s. It has also been called "the Peter  Pan  or Boomerang Generation" because of the propensity of some of them to move back in with their parents, perhaps due to economic constraints, and a growing tendency to delay some of the typical adulthood rites of passage like marriage or starting a career.

Millennials have been characterized in a number of different ways. On the negative side, they've been described as lazy, narcissistic and prone to jump from job to job.  The 2008 book "Trophy Kids" by Ron Alsop discusses how many young people have been rewarded for minimal accomplishments (such as mere participation) in competitive sports, and have unrealistic expectations of working life.

Time magazine said polls show that this group demands flexible, unrealistic work schedules and  more 'me time' on the job, while needing nearly nonstop feedback and career advice from their managers.  In the story, "The Me Me Me Generation," it begins: "They’re narcissistic. They’re lazy. They’re coddled. They’re even a bit delusional. Those aren’t just unfounded negative stereotypes about 80 million Americans born roughly between 1980 and 2000. They’re backed up by a decade of sociological research."

A 2012 study found Millennials to be "more civically and politically disengaged, more focused on materialistic values, and less concerned about helping  the larger community than were GenX (born 1962-1981) and Baby Boomers (born 1946 to about 1961) at the same ages," USA Today reported.  "The trend is more of an emphasis on extrinsic values such as money,  fame, and image, and less emphasis on intrinsic values such as self-acceptance, group affiliation and community." The study was based on an analysis of two large databases of 9 million high school seniors or entering college students.

They have also been described in positive ways. They are generally regarded as being more open-minded, and more supportive of gay rights and equal rights for minorities. Other positives adjectives to describe them include confident, self-expressive, liberal, upbeat and receptive to new ideas and ways of living.

The next generation fan base is going to be a tough sell for traditional sports leagues. They do not crave escapism through sports fanaticism, since they view the world already revolving around themselves.

They may be more adapt at new technology and how to consume new forms of entertainment like short YouTube video content created by their peers, or streaming web shows on demand. Whether they have the patience to sit and watch a three hour baseball game is suspect.

THE END OF AN ERA

I still vividly remember putting a white 9 volt Emerson radio under my pillow to fall asleep listening to Jack Quinlan broadcast a Cubs-Dodgers game from LA. My parents would get upset with the high cost of batteries during the summer.

It is rare to have a life long constant. For generations, it was WGN radio and Cubs games.

Since 1925, WGN has broadcast Cubs games.

Many of us grew up with Vince Lloyd and Lou "The Good Kid" Boudreau. You'd take your transistor radio to the game to listen to their call. Boudreau was very good and "teaching" kids how to play the game, especially fielding and base running. The descriptions were clear enough to paint a real time picture of the action from the ball park.  And since we played baseball in the park just about every day, we learned the nuisances of the game by practice and listening to the radio.

The Cubs are moving their broadcast from WGN-AM to WBBM AM/FM. The simple reason was money. WGN was losing money due to the Cubs poor teams. WBBM is looking for more sports programming, and packaged the game broadcasts with other content/shows. Now, it is unclear whether the Cubs games may be rotating like TV broadcasts throughout the CBS radio stations, but that is probably the case since other sports teams will have contract priority over any broadcast conflicts.

Change is sometimes difficult for people to accept.

The radio change is minor as compared to the upcoming changes inside Wrigley Field. But it is still an end of a bygone era.

FULL STORY

Moving on: Cubs end a remarkable era on WGN Radio

by Ed Sherman

September 26, 2014

My latest Chicago Tribune column is on the end of an era in Chicago.
Consider this: If the Cubs stay on their new radio outlet, WBBM-AM 780, for as long as they were on WGN-AM 720, fans will be listening to games on that station in 2069. Assuming, of course, there’s radio and baseball.
From the column:
*********
Nothing lasts forever, but the idea of the Cubs leaving WGN-AM 720 seemed as unlikely Ernie Banks suddenly proclaiming that the Cardinals are his favorite team.
WGN and Cubs baseball have been such a fixture in fans’ daily lives that only first names were required. For one generation, it was tuning into “Vince and Lou”; for another it was listening to “Pat and Ron.”
This is a relationship that dates back to 1925, with WGN being the exclusive radio home for the Cubs since 1959, currently the longest-running association in baseball. Yet it all comes to an end with the season finale Sunday.
Next year, the Cubs will begin a seven-year deal to air their games on WBBM-AM 780. As usual, money is a prime factor for the switch. WGN exercised an out-clause in its contract after suffering heavy financial losses because of the Cubs’ recent struggles. While the station wanted to keep the Cubs, WBBM swooped in, offering more cash with a multi-platform package that goes beyond airing games.
Indeed, it is the close of a remarkable era in sports radio, and one that could be repeated on the TV side if the Cubs also leave WGN-9; negotiations are on-going for a new deal. The whole situation is hard to digest for Jack Rosenberg, who spent 45 years as sports editor for WGN Sports.
“I know money talks,” said Rosenberg, 88. “We can’t get around that. But I’m sorry to see this happen. WGN and the Cubs were supposed to be forever. It’s hard to believe it won’t.”
*******
If only the Cubs had similar talent on the field as they did in the radio booth. Dave Eanet, WGN Radio’s sports director, noted that Sports Illustrated recently did a long article lauding the Cardinals’ long run at KMOX-AM that featured Caray and Jack Buck.
“It’s hard to argue with those guys, but we’ve had a star-studded roster doing Cubs games here (Harry Caray, Vince Lloyd, Milo Hamilton, Jack Quinlan),” Eanet said. “It won’t be long before Pat (Hughes) is in the Hall of Fame.”

- See more at: http://www.shermanreport.com/moving-on-cubs-end-a-remarkable-era-on-wgn-radio/#sthash.E5pVwkTD.dpuf

FULL STORY

Moving on: Cubs end a remarkable era on WGN Radio

by Ed Sherman

September 26, 2014

My latest Chicago Tribune column is on the end of an era in Chicago.
Consider this: If the Cubs stay on their new radio outlet, WBBM-AM 780, for as long as they were on WGN-AM 720, fans will be listening to games on that station in 2069. Assuming, of course, there’s radio and baseball.
From the column:
*********
Nothing lasts forever, but the idea of the Cubs leaving WGN-AM 720 seemed as unlikely Ernie Banks suddenly proclaiming that the Cardinals are his favorite team.
WGN and Cubs baseball have been such a fixture in fans’ daily lives that only first names were required. For one generation, it was tuning into “Vince and Lou”; for another it was listening to “Pat and Ron.”
This is a relationship that dates back to 1925, with WGN being the exclusive radio home for the Cubs since 1959, currently the longest-running association in baseball. Yet it all comes to an end with the season finale Sunday.
Next year, the Cubs will begin a seven-year deal to air their games on WBBM-AM 780. As usual, money is a prime factor for the switch. WGN exercised an out-clause in its contract after suffering heavy financial losses because of the Cubs’ recent struggles. While the station wanted to keep the Cubs, WBBM swooped in, offering more cash with a multi-platform package that goes beyond airing games.
Indeed, it is the close of a remarkable era in sports radio, and one that could be repeated on the TV side if the Cubs also leave WGN-9; negotiations are on-going for a new deal. The whole situation is hard to digest for Jack Rosenberg, who spent 45 years as sports editor for WGN Sports.
“I know money talks,” said Rosenberg, 88. “We can’t get around that. But I’m sorry to see this happen. WGN and the Cubs were supposed to be forever. It’s hard to believe it won’t.”
*******
If only the Cubs had similar talent on the field as they did in the radio booth. Dave Eanet, WGN Radio’s sports director, noted that Sports Illustrated recently did a long article lauding the Cardinals’ long run at KMOX-AM that featured Caray and Jack Buck.
“It’s hard to argue with those guys, but we’ve had a star-studded roster doing Cubs games here (Harry Caray, Vince Lloyd, Milo Hamilton, Jack Quinlan),” Eanet said. “It won’t be long before Pat (Hughes) is in the Hall of Fame.”

- See more at: http://www.shermanreport.com/moving-on-cubs-end-a-remarkable-era-on-wgn-radio/#sthash.E5pVwkTD.dpuf

THE PUSH BACK

The Tribune repeats in a business article this week on the plight of the Cubs in trying to leverage their wayward local television broadcast rights after opting out of the WGN deal.

WGN was happy to get out of the deal early, because reports indicated that WGN-TV was losing money on every game because of poor ratings.

The team currently has no 2015 deal for the WGN portion of its 70 or so games.  According to sources, WGN, which is losing an estimated $200,000 per game on the current deal because of sliding Cubs ratings,offered the team a continuation deal, but at a much lower license fee. The Cubs rejected the idea. Tribune also suggested a "revenue sharing" partnership, which the Cubs also rejected.

Comcast, the team's cable partner for the rest of the telecasts, has stated that it has no programming room to add 70 Cubs games to its schedule. 

The Cubs continue to play hard ball on the their over-air broadcast games. The Cubs make the case that the team can be ratings winners, as evidenced in 2008.  But that evidence of their potential to deliver big ratings was with a successful, competitive team. The Cubs have slid to the bottom of the NL Central. Ratings have slid even further.

But the Cubs hang their hat on "hope" for the future. There was evidence when Javier Baez's debut on Tuesday did a 2.0 rating (92,000 homes), up 43 percent for the Cubs' season average on CSN. However, it appears that that ratings spike was short lived, like Baez's batting average.

WGN and the Tribune are well aware of the Cubs' rating "potential," but the sting of baseball programming as being a lost leader in a highly revenue channeled industry like television will get executives fired for incompetence. The Cubs losing track record is the only thing any television operator can use to reasonable predict the next few years of Cubs baseball interest.

As the Tribune has reported previously, the Cubs also are looking at the possibility of airing their non-cable games on a multicast station, which is a sub-channel for local over-the-air broadcast stations. That would provide the Cubs the opportunity to start some sort of a team-branded channel. The Cubs would produce the telecasts and sell and keep all the advertising revenue. It might be their only option beyond WGN because the Cubs are locked in for their cable games with CSN through 2019. However, this option requires the Cubs to invest a great deal of capital to build out their own television production team. And, by all indications, Ricketts is adverse to spending money other than on redeveloping the real estate around Wrigley Field.

The Tribune reports that the team is looking to partner with a Texas private equity firm "to maximize" local broadcast rights. However, the blueprint for creating a Chicago version of the Yankees YES network is trying to lock the barn door after the horses have fled to greener pastures. Comcast is the predominate cable provider in the Chicago metro area. It is not likely to give a new Cubs channel access on its system prior to 2020, if at all. Subscribers have balked on paying additional monthly fees for new sports channels, such as the Dodgers in the LA market. This option also seems to be DOA for 2015.

Which brings the team back to crawling back to WGN. I don't think the business side of the Cubs have the stomachs to crawl back on WGN's terms. The lone alternative is Fox, which owns Channel 32 (a network O&O) and Channel 50 (a UHF station). The Cubs are not a priority for local Fox station as it has to run national programs (including its weekly Saturday baseball package).  Channel 50 does not have the marketing sweep of a WGN, so the license fee would be smaller than what WGN would offer the Cubs.

Without a broadcaster for 70 games next year, the Cubs are probably losing $14 million or more in gross revenue. The new signage and advertising deals at Wrigley is not going to make up for this lost revenue. The Cubs have painted themselves into a corner with the prospect of 42 percent of their games not being broadcast in Chicago. With ratings so low, fans may not even notice the missing games. But you have to realize that $14 million is equivalent to a front line starting pitcher.

IN THE DUMPS

The Chicago Tribune's sports media columnist, Ed Sherman, recently reported on how bad the Cubs ratings have fallen since its 2008 peak. He wrote that the Cubs ratings have declined 72 percent from a peak local rating of 600,000 households to around 50,000.

This report appears to verify WGN's claims that the Cubs poor ratings made it reopen its contract with the Cubs because the station was losing allegedly $200,000 per broadcast.

By comparison, the current viewership is around what the entire Blackhawk fan base was during the dark era of William Wirtz, when home games were not televised and the team was not very good. But winning championships turned around that hockey franchise into a premier NHL club.

It is one thing that fans don't come out to the ball park and spend hundreds of dollars in tickets, parking and concessions. It is another thing that fans could watch games at home for free, but feel that spending three hours in front of the TV set is a form of cruel and unusual punishment. Bad teams and the drumbeat of losing will eventually turn off even the most die hard fan. Other media reports indicated that the Cubs were tagged with 0.0 ratings during the end of last season. That is Houston Astro bad.

The Cubs cannot get a new unified local radio-TV deal until 2020 when the exclusive Comcast cable deal expires. Until then, local TV games that used to be shown on WGN are up in the air. Other local stations are not going to pay and invest large sums of money to produce a program with minimal ratings. The Catch-22 for the team is that the Cubs have been so bad for so long, the recent ratings do not correspond to what the team wants to get for its broadcast rights. Stations cannot get advertisers to pay premium fees for poor viewership. Without advertisers, there is not profit incentive. Media conglomerates are getting squeezed by various alternative entertainment platforms. They are more cautious than ever in paying for programming.

50,000 followers may be a great figure for an internet web channel, but not for a professional sports team in the third largest television market.

The team may be forced to "buy" local airtime like those weekend information programs in order to show next year the 50 or so WGN telecasts. That means the team has to pay for the production costs, the talent, and get the advertisers and sponsors for each game lined up in advance. If some question whether the Cubs have the intelligence to run their own network, the only Exhibit of competence so far is the zig-zagging Wrigley Field renovation project, its fumbles and delays.

Perhaps it won't matter until 2020. The team may not be ready to compete by then, so if no one watches the Cubs, nothing will be lost (or gained). The theory is that once the team begins to win again, the fans will come back in droves - - - willing to pay any price to jump on a championship bandwagon. Consumers, especially for non-essential items like entertainment, are going to be a harder sell in the future because a) the economic picture is still poor; b) millennials are more negative toward their prospects and opportunities; c) people are actually saving more income than spending it; and d) baseball may not be as popular as it once was as the new American immigrant base is more passionate about soccer.

POOR RATINGS

Jon Greenberg of ESPNChicago has some facts to back up the open secret that Chicago baseball television ratings have been tanking like the teams.

Greenberg quotes information from Sports Business Journal on the state of cable ratings for the two clubs, on Comcast Chicago.

Both the Cubs' and White Sox's local cable ratings at the All-Star break are in the bottom five of the 29 U.S.-based teams, according to a Sports Business Journal study of Nielsen ratings for regional sports networks.
The last-place Cubs rank No. 25 with a 1.48 average rating, that's down 7 percent from this point last season and 8 percent overall. The White Sox rating is up 16 percent from this point last season and 24 percent from last year's final numbers, but that's only good enough for a 1.39 rating, and only two teams are lower. 

Last season, the Cubs ended with a dismal 1.6 rating, while the White Sox were essentially last with a 1.14. Only Houston, which had major carriage problems with its RSN, CSN Houston, was lower.
Comcast SportsNet Chicago senior director of communications Jeff Nuich told ESPN Chicago that Sox ratings are up 30 percent, compared to 2013 final numbers, in the key adults 25-54 demographic. The Cubs are down 11 percent in that demographic.

The two teams' household averages are stunningly close, 52,000 for the Cubs and 49,000 for the White Sox, Nos. 21 and 22, respectively, in baseball.

It's not like everyone's flocking to the ballparks either. The Cubs are down slightly (179 fans) from this point last season, averaging 32,469 in paid attendance, while the Sox are down around 1,700 fans per game from this point last season, and are the third-worst draw in baseball at 20,657.

It didn't use to be this way. In 2009, the year after both teams last made the playoffs, Cubs' ratings were a hearty 4.18. Their household average was 145,000, the fourth-highest in baseball. The White Sox actually had a 2.28 rating with 80,000 households tuned in. 

The Cubs are locked into their Comcast partnership through the 2019 season. The local broadcast rights are in flux, with WGN bowing out of both radio and television deals. In a recent Chicago Tribune article, contributor Ed Sherman wrote that WGN is losing a reported $200,000 per game because of low ratings. He also reported the Cubs could put those "70 to 75" WGN games on a multicast channel, a "sub-channel for local over-the-air broadcast stations," for a few years until they can put all their games on one branded network. 

It is hard to sell any new television partner, let alone advertisers, that the Cubs are a valuable broadcast property when fan and viewer interest is waning dramatically. If one counts the no-shows to the Wrigley attendance figures, the numbers are much worse, down so far approximately 300,000 from stated paid attendance figures at the All-Star Break.  

Nielsen, the ratings giant, states that the Chicago media market is third in the nation with 3.95 million viewers.  The Cubs are drawing around 1 in 100 viewers. That is not enough to generate a billion dollar megadeal to create a new Cubs channel in 2020. Even if one uses the Dodger demand of $4 per cable subscriber to carry games, a new Cubs channel would only gross $16 million per season or perhaps $320 million over a 20 year contract in the Chicago metro area. 

The baseball rebuild has created a very bad team that is losing attendance at Wrigley Field and turning off fans from watching the Cubs on television. In the past, whether the team was good or bad, fans continued to support the club. But clearly, this has changed. The public's entertainment choices continue to expand and the prospect of the premium pricing to watch losing baseball teams is not to appealing to fans.


The Cubs are entering their own perfect storm. The team may be bad for so long that it permanently turns off their fan base. As a result of lack of interest, and the changing dynamics of entertainment media, the Cubs will not be able to create their own billion dollar a year Cubs channel. Without that huge influx of new money, the Cubs will not be able to spend for quality free agents to make a championship caliber team. The Cubs do not become the current Dodgers, but the current Astros.

STRANGE DECISIONS

Ed Sherman recently reported in his Tribune column that the Cubs are trying to find a "multi-channel" solution to their WGN-TV contract woes.

WGN re-opened the broadcast deal, allegedly claiming it was losing $200,000 per telecast because of poor ratings. The Cubs counter that they are not getting paid enough (around $250,000 per game). So the team is exploring options.

One problem is that the Cubs partnership with Comcast prohibits porting the 75 WGN telecasts to another cable outlet. Comcast SportsNet already carries the majority of Cubs and White Sox telecasts.

So the Cubs brain trust is thinking outside the box to go inside the digital box to start its own mini-Cub channel.

Remember when the FCC mandated that all analog television signals change to digital? People got government coupons to pick up television set converter boxes. These boxes would convert new digital over-the-airwaves signals for older television sets. One of the advantages of the new digital air signals is that a broadcaster can split it into several different channels. The old UHF stations used that technology feature to create four channels in one signal (ex., Channel 23.1, 23.2, 23.3 and 23.4)

Now, most television consumers have basic cable service in their homes, or have sat TV dishes on their roofs. So the real audience for these over-the-air only broadcasts is fairly limited (even though some cable operators simulcast them in the triple digit cable channels). Since the Cubs cable contract does not allow a secondary cable channel, the Cubs new mini-digital network would have a tiny footprint in the Chicago metro area.

The problem is that the big four network stations are affiliates with national programs to run. WGN is the one big independent station, but whose management now wants to create its own network programming for national distribution (without the Cubs games). That leaves only the small, independent UHF broadcasters as potential partners in a short term broadcast venture (Comcast's partnership ends after 2020).

So why would the Cubs try to start their own network from scratch and run it on a low signal broadcast outlet for five years? If the WGN-TV numbers are true, the Cubs would be running higher deficits on their own because there is less audience for advertising. But the Cubs are on a quest to get more revenue, apparently at any cost.

This appears to be another strange decision in a line of odd choices the Cubs "business" side has been making in the past few months.

THE NEW RADIO DEAL

The new Cubs radio deal is not "ground breaking," even though the Cubs brass tout it as modern tablets from Mount High.

But what the deal shows should put a shiver down the spines of Cubs fans.

The centerpiece of the deal was not the Cubs. Read that sentence again. Not the Cubs.

What was stressed at the press briefing was the "50-50" deal on putting on concerts at Wrigley Field, Crane Kenney said. The Wrigley concert business is not included in baseball's revenue sharing agreement, so the Ricketts want to maximize this revenue stream. Rumors had it that the Cubs were looking for an all-cash component, but the radio deal includes more than just the team.

"There is a cash component, there's also a joint venture on the music side that is truly a 50-50 partnership between them controlling talent and promotions and we controlling the venue. And there's the marketing aspects. To have access to this platform in this market, even before carrying our games, they cover 65 percent of our market, that's power we've never had to promote tickets and everything else we do here. So this was a multi-layered agreement with all sorts of elements to it. But cash is obviously important, too," Kenney said.

The new deal has unknown amount of cash for the broadcast rights, plus a revenue sharing agreement with CBS for concerts or ticket sales. 

Take a moment to digest the last part of the deal. CBS is not a talent agency. CBS is not a booking agency. CBS is a local AM and FM radio conglomerate, which plays a variety of music on its airwaves. The Cubs marketing department must have wet their pants with the possibility of "free" advertising across all the CBS radio "platforms." But that barter concession does not necessarily equate to new revenue.

There still are night concert restrictions at Wrigley Field. Again, in the land of miscommunications, the Ricketts and Cubs management may think their new plan will amend those restrictions but no one in the city has acknowledged that request. Ricketts does want to skirt the field concert restrictions with "plaza concerts" in the triangle area (complete with open beer sales). How one is going to control plaza concerts with ticket sales in the middle of public streets is going to be impossible. One could stand across Clark Street and hear the concert just as well as person near the front gate at Clark and Addison.

CBS had the same ratings books as WGN did in proposing their bids. WGN was losing money (reportedly $6 million per season). Some games last season got a ZERO rating. So, no radio executive worth his position would bid more for radio rights that trend toward low, unprofitable ratings and demographics. So, one can comfortably assume the Cubs will be receiving less in radio broadcast rights under this new deal.

But what about the concert revenues? That goes to the Cubs, too? It does not. Wrigley Field is owned by a separate legal entity. The Cubs are merely a "tenant" at Wrigley Field. Ricketts is looking for more revenue to pay for his non-Cubs projects, like the commercial-hotel complex across the street. The concert revenue has nothing to do with the Cubs.

This deal reinforces what I have been saying for years that Ricketts main purpose now is to transform Wrigley Field into a year round entertainment venue. The Cubs are merely one act in this venue. The new revenues are going to go to the new real estate ventures and not into the Cubs payroll and operations.

END OF AN ERA

Crain's Chicago Business reports that the Chicago Cubs and WGN Radio are ending one of the longest broadcasting partnerships in sports history, dating back to 1924.

The Cubs will announce a new seven-year agreement with WBBM-AM/780 to air the team's games beginning in 2015.

The new deal will put the Cubs, Bears and White Sox all under the CBS Radio banner. CBS-owned WBBM and WCFS-AM/105.9 air Bears games, while WSCR-AM/670 airs White Sox games. Since the Cubs are coming late to the CBS party, its broadcasts will take a back seat to other existing sports contracts, such as the Bears. Normally, a professional team would want a "flagship" station to focus its entire attention on the team broadcasts, including during the off-season. WBBM, a news station, continues to fill its schedule with live sports programs.

"The economic terms just don't make sense for us,” WGN Radio President Jimmy de Castro media columnist Robert Feder. “So it's really not us saying we don't want them anymore. It's the Cubs saying that the economics they need are much greater than what we think they're worth or what we'll pay. They chose to go another way economically and made a decision to move on.”

It had been previously reported that the WGN was losing money on Cubs broadcasts because of broad industry changes and fewer advertising dollars rolling in for poor Cubs baseball.

Advertisers typically pay for ads before a season starts based on the most recent ratings, but they can claim free air time when stations don't live up to promised ratings. That has decimated WGN's margins for airing Cubs games.

In addition, WGN parent Tribune Co. is set to spin off its newspaper group later this year from its broadcast operations. CEO Peter Liguori recently announced the company's intention to stop televising Chicago sports nationally on WGN America as it converts it from a superstation to a basic cable channel.

Still to be determined in the months ahead for the Cubs is the fate of the 70 games per year televised by WGN-TV/Channel 9, which will generate far more revenue for the team.

The Cubs last year opted out of their TV deal with the network, giving it a chance to either pay more for broadcasting rights beginning in 2015 than it currently does or lose the games to a rival network.
Those negotiations continue while the team shows few signs of promise on the field and while local TV ratings remain in a slump. There is a problem that no other local station has the air time or coverage that WGN did. Some speculate that the 70 games may be rolled into the current Comcast Sportschannel contract (which the Cubs are a partner until that deal expires in 2020.)

WGN Radio, meanwhile, still has deals to carry Chicago Blackhawks games through 2018-19 and Northwestern Wildcats football and basketball through the 2015-16 season.

OUT TO PASTURE

The Dodgers put broadcast legend Vin Scully out to pasture. No, Vin is still doing Dodger games, but most of his fans cannot listen to him.

When the new Dodger ownership partnered up with Time Warner Cable to launch the new Dodger channel, the team got more than $8 billion in licensing fees. Meanwhile, the channel got stuck in neutral. The new channel wanted to extract $4 or more per subscriber per month from every cable and sat-tv operator in Southern California. That is premium ESPN carriage charges.

DirectTV and other cable systems balked at the fee structure. So, the Dodgers have basically blacked themselves out of their own local market. Only 3 in 10 Dodger fans can get Dodger games this season. It is quite the broadcast boondoggle.

But someone should have seen it coming.

Cable bills have skyrocketed in the last decade, mostly due to the increased costs in carrying sports and specialty channels. As a result of higher bills and a soft economy, more and more subscribers have cut the cable cord and dropped service. Many youngsters are now using their mobile devices as their entertainment platform of choice, so the cable industry is losing a key, long term demographic.

Just because a team has a product it thinks is a valuable commodity, you may not be able to sell it or distribute it.

So when the Cubs are counting on their new cable channel in 2020, and the expected revenue windfall, that can only be described as mere speculation. There may not be cable as we know it in 2020. It may be an a la carte subscription service which means expensive sports channel fees will evaporate. The market may have moved on to total mobility. Or baseball itself may be on the viewership decline. Or television advertising, the driving force behind big money deals, may also have bitten the bust.

The Dodgers have reached a stalemate with the cable companies. Neither side wants to give an inch. So, a majority of fans who thought getting rid of Frank McCourt as owner would have been a godsend for the franchise are getting bitten. The new owners did spend money like the Yankees, but now don't have the long term cable partnerships to sustain it. And the fans who want to watch the expensive superstars in the home white and blue, are left out in the cold. Bitter and angry. And missing Vin.

A BAD TREND

For the first time in history, online advertising revenues have exceeded traditional TV broadcast advertising revenues. CNET reports online ad revenue for 2013 at $42 billion vs. $40.1 billion for traditional TV outlets.

Some will say that this was a trend that is not surprising; the new media was going to catch the old media at some point in time.

However, it is a bad trend for those who keep to the old business revenue models.

The Cubs grand rebuilding plan centers on getting rid of its existing broadcast contracts in 2020. The Cubs would then form their own network to televise their games and promote all things Wrigley Field Rickettsland. But this is the old Yankees model, which, if you haven't heard, is not going so well in LA.

The Yankees were the first to create their own regional cable channel, the YES network. It generated more than a billion dollars a year into the Yankee coffers. It gave the Yanks a huge competitive advantage, especially overspending on free agents. But even the Steinbrenner kids saw the trend coming recently by selling off part of their network stake to other investors.

The new Dodgers ownership group decided to create their own network. The team partnered with a cable operator to create a regional sports network. The Dodgers reportedly will receive $8.35 billion over 25 years under the deal. The team used that windfall to restock its major league roster with expensive talent.

However, the Dodgers new network has hit an major roadblock as most cable distributors and satellite dish companies refuse to pay the $4 per subscriber per month charge the Dodgers channel wants as carriage fees. The cable operators have balked at paying such a high charge for a specialized sports channel. In fact, many cable operators have seen their consumer rates rise by the cost of ESPN channels alone. As a result, the industry has been averaging more than a million subscriber cancellations per quarter. It was also recently reported that the cable industry had it's first negative month where cancellations exceeded new subscribers by more than 100,000.

People are cutting their cords with traditional telephone and cable companies. This trend is clear. People are finding the alternative entertainment media of Netflix, YouTube and internet streaming a cheaper alternative to expanded cable.

The Dodgers current network can only get to less than a third of the metro LA households. Ratings are down because of the lack of traditional free television (paid advertising) stations. (It is not as bad as the Astros regional cable network which recently had a 0.0 rating for a game last week. The Astros network gets into less than 500,000 homes, but since the team has been bad for so long, game telecasts easily get beat by old syndicated reruns.)

Ricketts' plan is to have a Cub network cash money machine by 2020. There is no reason that consumers will be willing to pay for such a channel. The Dodgers and the Astros are prime examples of how the old revenue model is no longer the great game-changer.

FALL OFF

The Chicago Tribune reports the stark numbers:

Cubs local broadcast ratings on Ch. 9

2010: 3.8

2011: 3.2

2012: 2.6

The Cubs pulled the option to renegotiate the sweetheart Tribune deal with its radio-TV divisions. The Cubs apparently receive around $246,000 per local TV broadcast from WGN. The Cubs get around $350,000 per telecast from Comcast (which the Cubs are a part owner). So if we are talking about another $100,000 per telecast, we are talking only a bump of $7 million in revenue.

But every penny seems important to Ricketts these days.

Declining attendance at the ball park is a factor of a) a poor team and b) high prices.

Declining ratings on television is a more troubling factor. In just three seasons, Cub ratings have dropped 31.5 percent. Almost a third of the fan base don't watch Cub games anymore. That is a staggering fall off.