Sticker shock in store for WGN over Cubs TV rights

Winding up for Cubs-WGN showdown

(First of a two-part series)

It’s like an earthquake rattling up from the depths, a seismic shift could rock many corners of broadcasting and production in Chicago.

The Cubs not on WGN-TV anymore after serving as ancestral programming since the station first signed on in 1948?! That possibility is looming as a 2015 reality now.

The tipoff to the possibility of a WGN without the Cubs came when TV analyst Bob Brenly came to terms on a new deal to continue in the booth during the off-season. He was about to celebrate when a contract glitch came up at the last second.

The Cubs and WGN apparently could not guarantee the contract beyond 2014, when the present agreement between the team and superstation expires.

Cubs chairman Tom RickettsThe simple fact is: Cubs chairman Tom Ricketts is cash-hungry. He’s got debt service on his family’s $845 million purchase of the Cubs in 2009 and a need to make back the $300 million he vows to put in renovating Wrigley Field.

Ricketts needs every last dollar. He has not overruled his deputies to slash the cost of overpriced Wrigley Field tickets despite the intentional crash of the franchise to start the rebuilding process, and the resulting blocks of empty seats.

Suffice to say there won’t be any relationship or hometown discounts when the Cubs negotiators dicker with WGN to dramatically increase rights fees demanded for a new video deal.

The talks will be nothing but sticker shock for WGN when they begin in earnest soon. Both 21st Century and historic economic factors weigh heavily in the coming boardroom battle.

Cubs rights woefully undervalued

WGN reportedly pays the Cubs $20 million annually to telecast about 70 games, less than half of what the station aired in the 1970s prior to the cable era. Comcast SportsNet Chicago
 ,of which 25 percent is owned by the Cubs, carries 80 games.

That’s a trend that began nearly 15 years ago when the Tribune Co.-owned Cubs cut its first cable deal with CSN Chicago predecessor, Fox Sports Net Chicago, and steadily moved games off WGN.

The Cubs’ TV revenue is dwarfed now by the mega-millions garnered by the team-run YES (New York Yankees) and NESN (Boston Red Sox) networks. The granddaddy deal of them all is a reported 25-year, $7 billion Time Warner Cable rights deal with the Los Angeles Dodgers.

If these big-market teams’ television arrangements seem over-inflated, the Cubs-WGN marriage has been dramatically under-valued in contrast. WGN was the de facto co-owner of the Cubs while gum magnate P.K. Wrigley ran the franchise like it was a family heirloom. 

The station had an automatic profit center of beer, gasoline and other big-name sponsors as they corralled the Cubs’ rights for a song.

Unlike most other sports owners, Wrigley believed in exposing his product via the airwaves. He merely followed the philosophies of his father, William Wrigley, Jr. and team president William L. Veeck (Bill Veeck’s father) in promoting the Cubs via rights fees-free access on radio.

At one point in 1931, seven Chicago radio outlets simultaneously broadcast the Cubs without charge.

WGN benefited from low-to-no rights fees

In 1949, P.K. Wrigley not only permitted three of the four Chicago TV stations on the air at the time to televise the Cubs, but also shelled out $100,000 to build new broadcast booths and camera positions around Wrigley Field.

Cubs chairman P. K. WrigleyThe stations paid no rights fees. Their only cost was $5,000 apiece to contribute to the construction of the new broadcast facilities.

By the time WGN had the exclusive Cubs TV deal in 1952, Wrigley’s rights fee was a mere pittance. In 1962, the White Sox reported annual broadcast rights fees totaled $1 million. The Cubs were $600,000 with more telecasts than the Sox on WGN. Such low costs guaranteed automatic profits for WGN and Tribune Co.

When William Wrigley III decided to sell the heirloom in 1981 to meet a $40 million inheritance-tax bill, his business partner, Tribune Co., quickly moved in to snap up the Cubs to protect the valuable broadcast rights. No other purchasers had a chance to bid for the team or the broadcast rights in the private, closed deal between corporate blue bloods. 

Tribune Co. was worried about a possible move by Field Enterprises-owned WFLD/Ch. 32 (now Fox-32), or even the nascent pay-cable SportsVision service started by Jerry Reinsdorf, Eddie Einhorn and the Wirtz family.

Then, in upcoming years under the same corporate umbrella, the Cubs and WGN split the profits after the game production costs were met. Interestingly, WGN chief Dennis FitzSimons, later Tribune Co. chairman, said in 1988 a prime-time movie typically drew better ratings than a new-fangled night game at Wrigley Field.

The bottom line is just that. Ricketts wants to bring the 65-year-long Goldilocks deal (for WGN) up to modern sports rights-fees standards, and maybe then some.

The question is whether Tribune Co., fresh out of bankruptcy with a new, admired broadcast division chief in Larry Wert, will want to cut into profits to pay the piper.

(Part 2: If WGN doesn’t carry the Cubs, then who?)

George Castle is a longtime Chicago-based sportswriter, author and radio talk-show host.