Ricketts Family Wins Cubs Bid

[hawkcub]

I'll be relieved to hear when a deal is final.

 

The Tribune began to figure things out during the last 5 years of their 25-odd years of ownership, but if any team is due for a change, it's the Cubs.

QFT

[DivineBovine]

 

I'm curious how this team actually turns a profit with the payroll where it is now. I'd be awful nervous to spend 900m for a team during this economic envirnonment.

 

Just doing some quick math, with 40,000 people going through the turnstyles at an average of $40 a ticket for 81 games, I calculate a little more than 129m in revenue. Sure, there are other means of income, and I'm probably not privvy to most, like merchandising. But, there are tons of other expenses in running a major league baseball franchise as well, like staffing, travel, equipment, meds, player per diems, taxes, farm systems, payroll/accounting, insurance, etc....

 

Is $40 a ticket way below the average price for a ticket to Wrigley? What other means of income do they generate outside of ticket sales? Vending services, parking, rooftops, advertising, merchandising, tv?

 

If $40 a ticket is about the average cost of a ticket, I would hate to have a team payroll that is more than what tickets generate. But, I suppose I had several billion dollars, maybe it wouldn't matter.

The Cubs really don't make that much money. The reason they're being sold for so much is because people are willing to pay that much to own a sports team.

 

 

That's really funny. Even a billionaire with money to burn isn't going to flush money down the toilet year after year just because he wants to own a sports team. Maybe there are better billion dollar investments out there, but no one is stupid enough to pay $900 million for a money losing operation because he's a fan who wants to own a team. One thing is clear, even with a $140 million payroll, the Cubs are making money. No doubt about it.

[cubfan]

 

I'm curious how this team actually turns a profit with the payroll where it is now. I'd be awful nervous to spend 900m for a team during this economic envirnonment.

 

Just doing some quick math, with 40,000 people going through the turnstyles at an average of $40 a ticket for 81 games, I calculate a little more than 129m in revenue. Sure, there are other means of income, and I'm probably not privvy to most, like merchandising. But, there are tons of other expenses in running a major league baseball franchise as well, like staffing, travel, equipment, meds, player per diems, taxes, farm systems, payroll/accounting, insurance, etc....

 

Is $40 a ticket way below the average price for a ticket to Wrigley? What other means of income do they generate outside of ticket sales? Vending services, parking, rooftops, advertising, merchandising, tv?

 

If $40 a ticket is about the average cost of a ticket, I would hate to have a team payroll that is more than what tickets generate. But, I suppose I had several billion dollars, maybe it wouldn't matter.

The Cubs really don't make that much money. The reason they're being sold for so much is because people are willing to pay that much to own a sports team.

 

 

That's really funny. Even a billionaire with money to burn isn't going to flush money down the toilet year after year just because he wants to own a sports team. Maybe there are better billion dollar investments out there, but no one is stupid enough to pay $900 million for a money losing operation because he's a fan who wants to own a team. One thing is clear, even with a $140 million payroll, the Cubs are making money. No doubt about it.

 

What part of "don't make that much money" means flushing money down the toilet and money losing operation? Making a choice to make less money than you could is different than choosing to lose money.

[KingCubsFan]

 

I'm curious how this team actually turns a profit with the payroll where it is now. I'd be awful nervous to spend 900m for a team during this economic envirnonment.

 

Just doing some quick math, with 40,000 people going through the turnstyles at an average of $40 a ticket for 81 games, I calculate a little more than 129m in revenue. Sure, there are other means of income, and I'm probably not privvy to most, like merchandising. But, there are tons of other expenses in running a major league baseball franchise as well, like staffing, travel, equipment, meds, player per diems, taxes, farm systems, payroll/accounting, insurance, etc....

 

Is $40 a ticket way below the average price for a ticket to Wrigley? What other means of income do they generate outside of ticket sales? Vending services, parking, rooftops, advertising, merchandising, tv?

 

If $40 a ticket is about the average cost of a ticket, I would hate to have a team payroll that is more than what tickets generate. But, I suppose I had several billion dollars, maybe it wouldn't matter.

The Cubs really don't make that much money. The reason they're being sold for so much is because people are willing to pay that much to own a sports team.

 

 

That's really funny. Even a billionaire with money to burn isn't going to flush money down the toilet year after year just because he wants to own a sports team. Maybe there are better billion dollar investments out there, but no one is stupid enough to pay $900 million for a money losing operation because he's a fan who wants to own a team. One thing is clear, even with a $140 million payroll, the Cubs are making money. No doubt about it.

I've bolded the part you need to re-read. For 900 million dollars, Ricketts could have found an investment that generates a higher profit. If it wasn't the Cubs, no one would have ever paid that much

[big_shooter17]

A big part of owning a sports team from an economical standpoint is the value of the team. Owners look at the investment not from a cash flow basis, but rather from the future value of the team at a point in time when they are willing to potentially sell. It is the appreciation of entities such as sports franchises that makes them attractive to billionaire investors.

[CubinNY]

The Cubs make plenty of money, it just depends on the scale one wants to use.

 

If I own a business and it makes $1,000,000 profit after paying all the bills, it doesn't matter much how much was invested to buy the business or how much was spent, a million dollars profit is a lot of money.

 

As private owners Ricketts et al. aren't obligated to make any profit on the team so long as they can pay the bills, but they will. One more thing, baseball is very good at hiding how much money a team makes so I'd imagine the teams are making a lot more than people think.

[UMFan83]

The Cubs make plenty of money, it just depends on the scale one wants to use.

 

If I own a business and it makes $1,000,000 profit after paying all the bills, it doesn't matter much how much was invested to buy the business or how much was spent, a million dollars profit is a lot of money.

 

As private owners Ricketts et al. aren't obligated to make any profit on the team so long as they can pay the bills, but they will. One more thing, baseball is very good at hiding how much money a team makes so I'd imagine the teams are making a lot more than people think.

 

But as someone pointed out before, it's better to make $60 million profit on a $40 million payroll, than to make $80 million on a $120 million payroll because there is a value to having that $80 million difference in payroll to invest elsewhere. Ricketts may be a Cubs fan, but he's also a businessman. I have no doubt he wants the Cubs to win, but no one would risk $900 million just to try to break even.

[CubinNY]

The Cubs make plenty of money, it just depends on the scale one wants to use.

 

If I own a business and it makes $1,000,000 profit after paying all the bills, it doesn't matter much how much was invested to buy the business or how much was spent, a million dollars profit is a lot of money.

 

As private owners Ricketts et al. aren't obligated to make any profit on the team so long as they can pay the bills, but they will. One more thing, baseball is very good at hiding how much money a team makes so I'd imagine the teams are making a lot more than people think.

 

But as someone pointed out before, it's better to make $60 million profit on a $40 million payroll, than to make $80 million on a $120 million payroll because there is a value to having that $80 million difference in payroll to invest elsewhere. Ricketts may be a Cubs fan, but he's also a businessman. I have no doubt he wants the Cubs to win, but no one would risk $900 million just to try to break even.

First, no it is not and second It's all hypothetical and probably does not work that way in the real world. It's an argument somebody made to be a contrarian.

 

Edit: Of course it is better to spend less and make more as a percentage of the investment. However, from a purely profit standpoint it is not better.

Edited January 26, 2009 by CubinNY

[cubbinalltheway]

But as someone pointed out before, it's better to make $60 million profit on a $40 million payroll, than to make $80 million on a $120 million payroll because there is a value to having that $80 million difference in payroll to invest elsewhere. Ricketts may be a Cubs fan, but he's also a businessman. I have no doubt he wants the Cubs to win, but no one would risk $900 million just to try to break even.

that's not true at all. you cant just assume that you'll make profit on the 80m that you're investing elsewhere.

[jersey cubs fan]

The Cubs make plenty of money, it just depends on the scale one wants to use.

 

If I own a business and it makes $1,000,000 profit after paying all the bills, it doesn't matter much how much was invested to buy the business or how much was spent, a million dollars profit is a lot of money.

As private owners Ricketts et al. aren't obligated to make any profit on the team so long as they can pay the bills, but they will. One more thing, baseball is very good at hiding how much money a team makes so I'd imagine the teams are making a lot more than people think.

 

 

That's pretty ridiculous.

[UMFan83]

But as someone pointed out before, it's better to make $60 million profit on a $40 million payroll, than to make $80 million on a $120 million payroll because there is a value to having that $80 million difference in payroll to invest elsewhere. Ricketts may be a Cubs fan, but he's also a businessman. I have no doubt he wants the Cubs to win, but no one would risk $900 million just to try to break even.

that's not true at all. you cant just assume that you'll make profit on the 80m that you're investing elsewhere.

 

There is a definite value to the money not spent. I'm no finance or economics guru, but I'm pretty sure spending $40 million to make $60 million is much better than spending $120 million to make $80 million.

[CubinNY]

But as someone pointed out before, it's better to make $60 million profit on a $40 million payroll, than to make $80 million on a $120 million payroll because there is a value to having that $80 million difference in payroll to invest elsewhere. Ricketts may be a Cubs fan, but he's also a businessman. I have no doubt he wants the Cubs to win, but no one would risk $900 million just to try to break even.

that's not true at all. you cant just assume that you'll make profit on the 80m that you're investing elsewhere.

 

There is a definite value to the money not spent. I'm no finance or economics guru, but I'm pretty sure spending $40 million to make $60 million is much better than spending $120 million to make $80 million.

It depends on how much money one has to spend.

[CubinNY]

The Cubs make plenty of money, it just depends on the scale one wants to use.

 

If I own a business and it makes $1,000,000 profit after paying all the bills, it doesn't matter much how much was invested to buy the business or how much was spent, a million dollars profit is a lot of money.

As private owners Ricketts et al. aren't obligated to make any profit on the team so long as they can pay the bills, but they will. One more thing, baseball is very good at hiding how much money a team makes so I'd imagine the teams are making a lot more than people think.

 

 

That's pretty ridiculous.

What's so ridiculous about it? We are talking about profit not investment.

[cubbinalltheway]

But as someone pointed out before, it's better to make $60 million profit on a $40 million payroll, than to make $80 million on a $120 million payroll because there is a value to having that $80 million difference in payroll to invest elsewhere. Ricketts may be a Cubs fan, but he's also a businessman. I have no doubt he wants the Cubs to win, but no one would risk $900 million just to try to break even.

that's not true at all. you cant just assume that you'll make profit on the 80m that you're investing elsewhere.

 

There is a definite value to the money not spent. I'm no finance or economics guru, but I'm pretty sure spending $40 million to make $60 million is much better than spending $120 million to make $80 million.

just looking at that sentence, and not knowing anything else, spending 120 to make 80 is a great move vs. spending 40 to make 60.

[jersey cubs fan]

The Cubs make plenty of money, it just depends on the scale one wants to use.

 

If I own a business and it makes $1,000,000 profit after paying all the bills, it doesn't matter much how much was invested to buy the business or how much was spent, a million dollars profit is a lot of money.

As private owners Ricketts et al. aren't obligated to make any profit on the team so long as they can pay the bills, but they will. One more thing, baseball is very good at hiding how much money a team makes so I'd imagine the teams are making a lot more than people think.

 

 

That's pretty ridiculous.

What's so ridiculous about it? We are talking about profit not investment.

 

You can't just decide that the money invested doesn't matter.

[CubinNY]

But as someone pointed out before, it's better to make $60 million profit on a $40 million payroll, than to make $80 million on a $120 million payroll because there is a value to having that $80 million difference in payroll to invest elsewhere. Ricketts may be a Cubs fan, but he's also a businessman. I have no doubt he wants the Cubs to win, but no one would risk $900 million just to try to break even.

that's not true at all. you cant just assume that you'll make profit on the 80m that you're investing elsewhere.

 

There is a definite value to the money not spent. I'm no finance or economics guru, but I'm pretty sure spending $40 million to make $60 million is much better than spending $120 million to make $80 million.

just looking at that sentence, and not knowing anything else, spending 120 to make 80 is a great move vs. spending 40 to make 60.

The idea is that the two are different and mutually exclusive. So you could spend 40 x 3 and make 180 vs spending 120 and make 80, but again it's just some hypothetical.

[CubinNY]

The Cubs make plenty of money, it just depends on the scale one wants to use.

 

If I own a business and it makes $1,000,000 profit after paying all the bills, it doesn't matter much how much was invested to buy the business or how much was spent, a million dollars profit is a lot of money.

As private owners Ricketts et al. aren't obligated to make any profit on the team so long as they can pay the bills, but they will. One more thing, baseball is very good at hiding how much money a team makes so I'd imagine the teams are making a lot more than people think.

 

 

That's pretty ridiculous.

What's so ridiculous about it? We are talking about profit not investment.

 

You can't just decide that the money invested doesn't matter.

It only matters from the standpoint of rate of return and not money in the bank.

[KingCubsFan]

If I own a business and it makes $1,000,000 profit after paying all the bills, it doesn't matter much how much was invested to buy the business or how much was spent, a million dollars profit is a lot of money.

So you're telling me if you had 1.2 billion dollars, you'd shell out 900 million for something that meant nothing to you if it only produced 1 million dollars a year? Especially when there are other things on the market that could give you more money? That doesn't make sense. He's buying the team because he's a Cubs fan and because he's betting the team appreciates in value.

One more thing, baseball is very good at hiding how much money a team makes so I'd imagine the teams are making a lot more than people think.

John Canning came to a class of mine and basically said, based on my interpretation, that he lost a lot of interest after examining the materials that were given to the interested bidders. He said a normal business generating that kind of money would not sell for that much. Considering his bid was rumored to be lower than the others, that makes sense. I'll believe him over you.

[Blue W]

All anyone needs to know is that the Tribune bought the team for $25MM and sold it for $900MM about 30 years later. That's a great return on investment to say the least. The Ricketts, no doubt are hoping lightning strikes again. And while it's doubtful that they'll see the precentage increases that the Trib Co. did, they will make hundreds of millions if they decide to sell the team in 20-30 years. In the meantime, they can operate at a loss a push or a gain. It really doesn't make much difference whatsoever. The value of the team is in the fact that it is an appreciating asset.

[UMFan83]

The Cubs make plenty of money, it just depends on the scale one wants to use.

 

If I own a business and it makes $1,000,000 profit after paying all the bills, it doesn't matter much how much was invested to buy the business or how much was spent, a million dollars profit is a lot of money.

As private owners Ricketts et al. aren't obligated to make any profit on the team so long as they can pay the bills, but they will. One more thing, baseball is very good at hiding how much money a team makes so I'd imagine the teams are making a lot more than people think.

 

 

That's pretty ridiculous.

What's so ridiculous about it? We are talking about profit not investment.

 

You can't just decide that the money invested doesn't matter.

It only matters from the standpoint of rate of return and not money in the bank.

 

Well it's not like you are not investing the other $80 million. Hypothetically its costing you $40 million to make the first $20 million in profit and then $80 million to make the next $20 million. That's diminishing returns.

 

I think what you are saying is that we can't be certain that investing your $80 million elsewhere is going to get you more than $20 million in profit, and that I can't answer because that's about as far as I can coherently use my economic knowledge in developing my argument. Maybe someone else either way can go further.

[jersey cubs fan]

All anyone needs to know is that the Tribune bought the team for $25MM and sold it for $900MM about 30 years later. That's a great return on investment to say the least. The Ricketts, no doubt are hoping lightning strikes again. And while it's doubtful that they'll see the precentage increases that the Trib Co. did, they will make hundreds of millions if they decide to sell the team in 20-30 years. In the meantime, they can operate at a loss a push or a gain. It really doesn't make much difference whatsoever. The value of the team is in the fact that it is an appreciating asset.

 

But a good deal of that appreciation has been irrational, so it's far from guaranteed.

[fibro]

in-stadium ad revenue, luxury boxes, tv contracts, etc.

 

I included all of that in my post. Although, the luxury boxes was calculated into the average cost of a ticket. Maybe I'm way off on the average cost of a ticket?

 

Clearly, Cubs brass feel like they can afford a $140m salary, so it must workout in the long run. But, I would have to imagine that's at the very top end of what they can afford and still turn a profit.

 

Do not forget what teams are making off MLB.com. I believe each team is getting around 30 million a year and I do not think that number is going anywhere but up.

Edited January 27, 2009 by fibro

[fibro]

Double post

[jersey cubs fan]

in-stadium ad revenue, luxury boxes, tv contracts, etc.

 

I included all of that in my post. Although, the luxury boxes was calculated into the average cost of a ticket. Maybe I'm way off on the average cost of a ticket?

 

Clearly, Cubs brass feel like they can afford a $140m salary, so it must workout in the long run. But, I would have to imagine that's at the very top end of what they can afford and still turn a profit.

 

Do not forget what teams are making off MLB.com. I believe each team is getting around 30 million a year and I do not think that number is going anywhere but up.

 

I do not believe teams are getting anywhere close to 30m a year from mlb.com alone.

[fibro]

in-stadium ad revenue, luxury boxes, tv contracts, etc.

 

I included all of that in my post. Although, the luxury boxes was calculated into the average cost of a ticket. Maybe I'm way off on the average cost of a ticket?

 

Clearly, Cubs brass feel like they can afford a $140m salary, so it must workout in the long run. But, I would have to imagine that's at the very top end of what they can afford and still turn a profit.

 

Do not forget what teams are making off MLB.com. I believe each team is getting around 30 million a year and I do not think that number is going anywhere but up.

 

I do not believe teams are getting anywhere close to 30m a year from mlb.com alone.

 

I thought I read that somewhere after searching for it I must have bee mistaken. It loooks like MLB.co revenue was around 380 million last year which is huge but obviously not 30 million per team. This was interesting though.

 

When team owners considered taking MLBAM public two years ago, initial public offering estimates by investment bankers ranged around $2 billion-$2.5 billion. Now that number approaches $5 billion — which would translate into more than $150 million per team — and only figures to continue growing.

 

"I don't think there's any thought at the moment of doing an IPO or a partial IPO," said Bob DuPuy, MLB's president and chief operating officer. "Clearly this is an asset that has real value, and that's taken into account when teams are sold."

 

http://www.usatoday.com/sports/baseball/2007-12-04-baseball-online_N.htm