Ricketts Not Cheap, Probably

Ricketts Not Cheap, Probably

On Wednesday afternoon, Twitter’s favorite Cubs reporter Gordon Wittenmyer took another swing at the Ricketts family in his article “Ricketts’ answers don’t explain Cubs’ lower payroll spending”.

Wittenmyer took a skin-deep look at the Cubs’ spending trends under Ricketts, bemoaning the fact that Cubs payroll is $60 million lower in 2014 than it was in 2010. This, quite obviously, does not begin to tell the whole story.

The Cubs’ payroll under Ricketts' ownership hit a maximum of over $145 million in 2010. At the time, Tom Ricketts was quoted as saying such spending was “unsustainable.”

Payroll has come down significantly since then, as has attendance, but spending on the team has increased in other areas. In fact, the money being put into others areas has increased enough to largely erase the spending gap between 2010 and the years since.

Before we get to the numbers, I’d like to share the assumptions I’ve made to do this mini-study.

First off, I am not with Forbes and I am not privy to the Chicago Cubs’ financial books, so I’ve had to simplify some things. I’ve calculated ticket revenue based off of total attendance and average ticket costs (according to Forbes).

This is an incomplete method, but the Fan Cost Index is a little difficult to apply to the Cubs because the Cubs make very little off of parking sales, which are factored into the FCI.

Secondly, I’m assuming that the largest changes in Cubs revenue have been from changes in attendance. This might not be totally true, but the Cubs do not have the types of revenue streams other large market teams do.

While teams like the Dodgers pull in upwards of $200 million from their new TV deal alone, the Cubs local media deals come to about $50 million. With MLBAM revenue sharing coming in around $24 million prior to 2014, the Cubs pulled in roughly $74 million in media money.

If Cubs debt services are indeed $35 million, as Wittenmyer claims, a lot of the Cubs media revenue is going straight to debt service, and has been since Ricketts bought the team. More still will be lost to MLB’s revenue sharing programs, which costs large-market teams like the Cubs a lot money. This is all pre-tax, too.

Altogether, the Cubs non-attendance revenue has been largely stagnant and much of it is being canceled out by a variety of non-salary costs. As such, we’ll be looking at team spending through the lens of how it compares to estimated gate receipts.

How Has Attendance Changed?

Attendance Change

As attendance and gate receipts are likely the most important part of Cubs income, it’d be wise to look at the attendance trends first. And man, are they ugly. For two seasons now, the Cubs have seen their revenue from paid attendance fall.

This trend is expected to continue, as Wittenmyer reports the Cubs think they may be losing another $22 million in attendance-related revenue this coming season.

It's tough to believe that so few fans showed up to Wrigley in 2013, but this may be the beginning of a new reality for the Cubs, or at least for the next few years. With an economy that is still down and a team that is still quite bad, it's tough to imagine the days of 3 million fans coming back any time soon.

How Has Spending Changed?

Attendance Change

There is a famous Tom Ricketts quote that essentially states that all revenue will be reinvested in the team. Some took this to mean MLB payroll, but it was generally agreed upon that this would cover all facets of the organization.

If you take this broader definition, Ricketts has actually spent quite a bit of money as the owner of the Cubs.

Since 2010, the Cubs have greatly increased their non-salary spending. They’ve stepped up their spending in the draft (though only 2011 was truly of their own volition) as well as their international free agency spending.

The Cubs have also greatly beefed up their front office, spending just under $4 million a year on Theo Epstein and presumably near $2 million a year on Jed Hoyer (which probably cancels out what Jim Hendry was making).

In addition to the two head honchos, they’ve nearly tripled their front office staff and have hired Bloomberg Sports to create a custom statistical analysis program. I’ve estimate new, non-Thoyer front office spending at $3 million/year. Also included in the “other” column below is the $8 million Dominican baseball academy.

How Has Spending Changed in Relation to Attendance Revenue?

spending change

Simply put, it has changed by relatively little. The difference in total team spending and estimated ticket revenue compared to peak 2010 values has never been greater than $16.4 million, and has been as low as $3.7 million. In other words, team spending has fallen at a rate quite similar to ticket revenue.


This, to me, looks like evidence that the Cubs actually have reinvested as much revenue into the team as they can. As public confidence that the Cubs will eventually spend money with the creation of new revenue streams dwindles, this is the table that gives me hope.

Furthermore, if you look at the total team spending charts and think, “but what if they’d signed Anibal Sanchez in 2012?” like I do, then the chart looks like this:


Yes, that’s the Cubs actually spending more than what they spent in 2010. In the face of declining attendance, Ricketts was still willing to spend more than what he’d deemed “unsustainable” in 2010.

This may be because this was the exact type of pitcher the front office wanted to spend on, so we don’t know if Ricketts was willing to spend that money elsewhere (given that they barely spent on any other players outside of Jackson, this seems likely).

The Cubs have been handicapped by the Tribune Company’s failures to maximize TV and radio deals in the past, their failures to modernize Wrigley Field, and their failures to construct a team built for long term success.

If they can generate as much revenue through renovations and new TV deals as we all hope, I believe the Cubs will be spending quite a bit of money to place proven players around their home-grown talent.


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  • fb_avatar

    Great post, even if a little esoteric. So in reality now we are a small market team, relatively speaking.(that is until they get a better TV contract)

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    Wow, Tommy, that's some good stuff. I was aware that the doom and gloom spending talk was a little off-base, but I appreciate you putting the actual numbers out there.

  • Is there a specific reason why you're leaving out non-ticket stadium revenues? Concessions, etc. tend to account for another 75% of team revenue, meaning "stadium revenue" should be something along the lines of $190 million ($110 for tickets, $80 for stadium revenue). If you accounted for it, feel free to correct, but I can't find it in your analysis.

  • In reply to caryatid62:

    The reason teams used to give out promotional tickets (haven't seen it in decades, though) was that concessions income covered it. I'm sure that the reason Bud got the exclusive was not just to put a sign in right field, or show off the "bottoms up" dispenser in the party deck once a year when Len and whoever were doing the game from there. Similarly, the broadcast team didn't go in the bleachers once a year just to chomp on Levy nachos, but to promote them.

  • In reply to caryatid62:

    Yeah, I decided to leave it out for a few reasons. One, due to some of the unique features of Wrigleyville (namely, it's not miles of asphalt parking in ever direction around the stadium), it's tough to get an accurate-ish number for what the Cubs are making per consumer. FCI and the like include parking/transportation.

    Second, I had trouble finding what the Cubs make off of concessions. I know some (most/all?) stadiums rent out their their concession stands for a fee, and take some small percentage of revenue from them. I cannot find what the Cubs' structure looks like in that regard. It's entirely possible they rent out concessions as well, and if that's the case, not all of the FCI concession revenue is going directly to the Cubs.

    Finally, given the number of empty seats I saw last season, the Cubs probably saw far, far fewer people show up to games than bought tickets. So applying an FCI per ticket sold would probably greatly overestimate ticket-related revenue. I guess I'd rather err on the low side if I'm forced to be wrong one way or another

  • In reply to Tommy Cook:

    To ignore concessions, merchandise, etc., though, is hugely problematic to your argument, insofar that it (even if dramatically under the number I quoted) would account for $20-$30 million of extra revenue. While the FCI might be problematic, the answer shouldn't be to assume zero revenue from those items.

  • In reply to caryatid62:

    OK, so I guess I should've been more clear on this in the post, and I will amend it to mention this.

    I don't think it matters whether or not the $20-$30 million is included because for the most part I'm not interested in what the overall ticket revenue is. I'm interested in how the change in ticket revenue may be affecting the change in spending. My main thesis in the piece is that spending is sensitive to changes in attendance revenue. If I add $20-30 mil to each of those revenue numbers, the change in yearly attendance revenue is going to stay mostly the same.

    I may rewrite a few sections here to make this more clear

  • Also, in your initial chart, I'm unsure as to how you came up with the $110 million number based upon the 2.34 mil (roughly) in attendance for this year. Given last year's average ticket prices of $50, revenue would be roughly $117 million, not $110.

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    In reply to caryatid62:

    I'll have to let Tommy address the figures he used specifically, but I addressed the ticket costs and such here:

    Tommy made specific mention of the trouble with utilizing FCI data, though I did use it in mine. Based on that, the average FCI ticket price for the Cubs in 2013 was $44.55, but that does not include premium seating. So that would increase the average cost; then again, there will only be 21 games at the "marquee" level of the dynamic pricing structure, as opposed to 26 last year. Based on the $110MM figure and the projected attendance, that's about $47/ticket, which would make sense when factoring in at least some of the premium seating and the decrease in marquee games.

  • In reply to caryatid62:

    The $110 million comes from Wittenmyers article, where he states the Cubs fear losses of $22 million from declining attendance this coming season

  • In reply to Tommy Cook:

    ...but we don't know if that $22 million is in gate receipts alone or in total losses (merchandise, concessions, etc.). You're assuming that to be the case, and I don't think it's necessarily likely. The number is more likely to be somewhere in the realm of $14-15 in gate receipts, $7-8 in concessions.

    Between sponsorships, concessions, merch, etc., the numbers you're quoting seem incredibly low on the revenue side. There's likely a lot more money coming in for which you're just not accounting.

  • In reply to caryatid62:

    I replied above, but wanted you to know that I see this too.

    I am not counting a lot of ticket-related revenue, but I believe the vast majority of it is proportional to how many fans are buying tickets.

    If anything, adding these numbers would make the year-to-year loss in attendance-related revenue greater, but I'd rather not include a total guesstimate that makes the losses even greater every year.

  • In reply to Tommy Cook:

    Even if the loss would be proportional, it would mean that there is a much larger total revenue from which to pull, meaning it would be more likely that there is revenue that's not being put back into the team. Your ultimate conclusion is a ratio of income to debt (in the form of debt services, renovation/building projects, and player/executive payroll) in 2014, for which we'd have to know exactly how much they have TOTAL, rather than just from ticket sales. If they have 40-80 million more in total 2014 revenue (regardless of how much it dropped over the last 3-5 years), that would mean that money is not getting put back into the baseball operations. That would seem to disprove your entire conclusion, no? If I'm misinterpreting your numbers, please let me know.

    Here's what I'm seeing: Concessions make up roughly 75% of additional revenue each year. Since there were a number of no-shows last year, let's be conservative and say that the Cubs only made 35% on concessions last year. That would be an extra $46 million in revenue for 2013. For 2014, using your projections, that would be 38.5 million extra in revenue. That would belie the argument that "all profits are going back into the baseball operations."

    Furthermore, it doesn't take into account the Target, Toyota, and Budweiser deals the team has struck, which has brought further revenue into the organization.

    Ultimately, I agree with your conclusion--I don't think the Ricketts are being cheap, either. However, I do think there is more money being pulled out of the baseball side of the operation than the fans are privvy to. As far as the Ricketts as an ownership group goes, the jury's still out. However, thus far they have proven to be much less impressive businessmen/women than they were billed as when they purchased the team. This has been an incredibly disappointing 5 years.

  • In reply to caryatid62:

    ***I forgot to edit out my sentence about your conclusion being disproven. I see that you're arguing that it's about ratio over time, rather than at a fixed point. The existence of that extra income doesn't, on it's face, disprove that. My bad.***

  • While one has to spend money to make money, Ricketts's question has to be whether the money maybe having a payback in 5 years is worth tanking now. Not much different than ads for "Get on the Bulls Waiting List" during the Michael years, to "please buy a ticket" until the Derek years, when the Waiting List ads came back until he hurt both knees. But at least that team is still better than 75% of the Eastern Conference.

    And while you mention the disadvantageous deals with WGN, what new deal are they going to draw if the team stinks this bad? WGN radio terminated that deal, not the Cubs. How much money are the Cubs going to get if WGN decides to bid on the basis that the radio will be on WGWG (supposedly 87.7, but really temporary analog TV6, and probably not on most radio dials) or WGN TV isn't interested in putting them on WGN America. You mentioned the Dodgers' deal but on the cable side, the Cubs are locked into their ownership stake in CSN Chicago until 2019, and even when McCourt was bankrupt, he didn't put this bad of a team out there.

  • In reply to jack:

    I was told the FM station, The Game, would not be a factor in Cubs radio deal. They would stay on AM 720 if anything.

  • In reply to Tom Loxas:

    If all sports talk is being taken off 720, the cross promotional opportunities will be severely limited. I don't see Cubs fans Bob Sirott and Marianne Murciano (or even Pete McMurray) leading their audiences into the Cub game interruptions in the programming schedule.

    But I also don't understand why WGN has put many of its nonsuperstation games on The U, unless the little girl CW programming is drawing better, which would also be an indication of baseball's value to the station.

  • In reply to jack:

    The Cubs are locked into their deal with WGN's TV side through this season, but roughly half their games are up for grabs in 2015 and beyond. Tom can provide a much better rundown of what that's might look like, but to paraphrase him and others:

    There's a hope that whoever wants to eventually pay for the full Cubs slate, or help set up the possible Cubs Network, are basically going to be forced to pay up now. That's a lot of extra revenue that could be here next season.

    Also, once the stadium renovations begin, you're looking at revenue from the scoreboard, signs, and other new facilities that should start making their way back into the Cubs' payroll

  • In reply to Tommy Cook:

    Yeah, had heard some talk that they were trying to get FOX to pony up the advance for the future. Just don't know if that is even kosher or realistic. I will try and reach out to my FOX contact today and get an update.

  • In reply to Tom Loxas:

    I doubt that it is realistic that any broadcaster would pony up now for something they won't get until 2019. We'll have to see how the Olympics do, but the Cubs aren't the Olympics. One also has to consider when WMVP refused to renewthe Bulls/Sox deal after suffering through the post-Michael years.

    The real issue is that any broadcaster is only willing to pay what AB, your local Chevy, Ford, Chrysler, Honda, Toyota or Kia Dealer, and the Illinois Lottery is willing to pay. Is Fox going to risk that five years in advance?

  • In reply to Tommy Cook:

    On your last paragraph, delayed at least a year from the former plan. And, of course, someone has to pay the mortgage on the hotel and other parts of the hundreds of millions slated for those projects.

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    In reply to jack:

    "But at least that team is still better than 75% of the Eastern Conference."

    Yes, and what does that get you? Nothing! It means you have no chance at a Lottery pick and an improved chance to get a true 2nd superstar that you will need in order to win a title. So being better than 75% of the league just means your not good enough to be a Champion, but too good to land the best talent in the draft. That is how you stay locked into mediocrity for a long time. And with the Bulls current salary cap situation, the draft is probably the only place they have to land another true star, but hey, at least they are better than 75% of the teams.

  • I was told there would be no math when I became a Cubs fan. However, that's the reality now. You need to pay attention to biz side if you want the on field product to produce.

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    So how many more years are the Cubs obligated to service the debt at $35M per year?

  • In reply to sleepy1:

    Get out your spreadsheet and use the mortgage calculations. Supposedly there is $500 million owed to the banks, at an unknown interest rate. The other $300 million is supposedly owed to the Ricketts themselves, and was part of a tax dodge for Tribune Company that didn't work when the bankruptcy wiped out their obligation on Cubs obligations, small as it was.

  • In reply to jack:

    This is true. It's a really weird setup, and I believe Zell is being sued/prosecuted over trying to do the same thing with another company in New York

  • Tommy - great job my man! I came into your article skeptical but you flat out did the math, really appreciate you pressure-testing some of the assumptions folks are throwing around as facts.

  • It's not the Cubs resources that are the problem, it's their lack of resourcefulness.

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    Good article Tommy. Unfortunately Gordo and many Cub fans just want the Cubs to spend, spend, spend! I sometimes wonder if Whittenmeyer is a tool for Boras as they seem to both be stuck on the same theme that the Cubs are cheap. Sooner or later fans need to come to grips and understand how the new CBA works. It has made it a lot harder to bring in free agents, unless you are willing to overpay for guys who may give you two good years out of a 6 or 7 year contract. I don't know who of this years free agents everyone wanted the Cubs to spend their money on.

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