Kevin Heckman is a long time "den-izen" who frequently provides insightful comments here, so I was happy to see that he used his business acumen to write this excellent piece on the much-talked about potential Cubs move to Rosemont.
Your Rosemont Cubs!! Or not.
By Kevin Heckman
There’s suddenly a lot of buzz about the Cubs leaving the so-called friendly confines for Rosemont, thanks to David Kaplan’s report that the mayor of Rosemont is interested in luring the Cubs out to the Northwest suburbs. On my way home from work I was treated to a chorus of call-ins to WGN saying what a no-brainer this move was and how much better it would be for the Cubs, for fans, for everyone to get out from under the oppressive city bureaucracy, greedy rooftop owners and self-serving aldermen in exchange for a brand new stadium a “mere” 12 miles away.
Not going to happen.
No doubt this will be used by Ricketts as a negotiating ploy with the city. And it should be. Businessmen use the tools they have at hand. But it is extremely unlikely that moving the Cubs makes sound business sense for the Ricketts. Even if they might be able to pick up some of the $73 million a year that Rick Reilly somewhat arbitrarily argues they are losing through the restrictions at Wrigley under which they presently operate.
To illustrate why, let’s look at revenue. There are a lot of expense-side arguments you could include in this discussion, but I think the revenue side dominates the argument.
Last year the Cubs drew 2.8 million fans, the first time they were under 3 million since 2003. Despite the drop they were still in the top 10 in attendance in the league. Their average ticket price of $46.30 was third highest in the league. That’s ticket revenue of about $130 million. Add in concessions: let’s say the average attendee buys a beer and a hot dog for $11. That’s another $31 million, roughly. Souvenirs? Harder to estimate, but let’s say another $10 million. That’s approximately $171 million a year in attendance-related revenue. The big question is: could the Cubs maintain that with a move to the burbs? To do so, either their fans would have to follow them, or they would have to pick up new ticket sales. Let’s look at their fan segments.
1. Hardcore: The so-called “true” Cubs fans would probably go out to Rosemont to see a game. Maybe some of the suburban fans would go more often. On the other hand fans on the North side and North Shore might find Rosemont to be a tougher trek than public transit to Wrigley. The Cubs surely know where their fan base lives, but I don’t, so let’s call this a wash. The hardcore fans stay on.
2. Corporate clients: This is probably a less-important segment than it used to be, since corporations are not buying sporting event tickets the way they once were. But if you had to impress a corporate client, would you be more inclined to journey from downtown to Lakeview or to Rosemont? If I’m the White Sox, by the way, I’m all over downtown corporate clientele if the Cubs move farther away, especially if they do it at a time when the Cubs are bad and the White Sox are at least competitive.
3. The Wrigley lovers: These are the attendees real Cubs fans hate – myself included – but their money still counts for the Ricketts. And if the Cubs move, then there’s no Wrigley. And no Wrigley means all the guys who want to get drunk in the sun in Wrigley will get drunk somewhere else – they’re sure not driving out to the burbs for that. And the tourists who want to see the historic field don’t come either.
So that’s one primary segment of ticket-buyers who don’t follow the Cubs to their new digs. The key question is what percentage of current fans are included in the overall numbers. Suppose with the move, the Cubs’ attendance reverts to the N.L. mean. That was about 2.6 million last year, which means a loss of revenue of $12 million. Suppose the Cubs really dive and end up at White Sox levels. That means about 2.0 million in attendance, which costs the Cubs almost $50 million a year. And this assumes that average Cubs attendance going forward is 2.8 million, when 3 million-plus seems very realistic. It also assumes that ticket prices remain unchanged, when it’s likely they would go down with this sort of a move in order to encourage fans to make the trek to Rosemont for the first time. Balance that against the possibility of making a deal work with the city. Which is the better gamble?
There are a host of other considerations here as well. How much to build a new stadium vs. renovate Wrigley? Does a move hurt the Cubs brand and therefore have ramifications for other revenue streams? The current city administration is a pain, but what headaches will come with the new location? Are any of these worth the risk of relocating one of the most visible sports franchises in the world out of the iconic place they play?
In the end, the real determinant is Ricketts’ attitude towards his property. He did not buy the Cubs as a distressed business. A distressed team, maybe, but not a distressed business. And that means he likes core enterprise, which is why he paid a premium to get it. Personally, I suspect Ricketts dreams of being the owner who brought a title to the Cubs, not the owner who, for all practical purposes, tore down Wrigley Field. All this adds up to an owner who is probably not inclined to take big risks with his property.
Also read Tom's take on The LoXas Factor here...
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