Brett's take on Cubs finances

[SouthSideRyan]

http://www.bleachernation.com/2014/03/19/the-chicago-cubs-financial-story-the-payroll-the-debt-and-the-syncing-of-baseball-and-business-plans/

 

Debt structure and buyouts isn't really my area of expertise, so would appreciate others opinions outside of the usual "best blog ever" going on in the comments there. Seems thorough, but Brett's shift towards FO mouthpiece over the last year leave me somewhat...leery?

Edited March 19, 2014 by SouthSideRyan

[Guest]

http://www.bleachernation.com/2014/03/19/the-chicago-cubs-financial-story-the-payroll-the-debt-and-the-syncing-of-baseball-and-business-plans/

 

Debt structure and buyouts isn't really my area of expertise, so would appreciate others opinions outside of the usual "best blog ever" going on in the comments there. Seems thorough, but Brett's shift towards FO mouthpiece over the last year leave me somewhat...leery?

 

Here I was hoping you would be the one to pick it apart (seriously) with some feedback

[Guest]

It's hard to pick apart. It's pretty throrough. It does make the Ricketts family look like they wanted to buy the Cubs no matter what. Also makes Cuban's comments since the sale not seem so much like sour grapes.

 

2019 !!!!!

[davell]

What's said is quite a bit of what Wittenmeyer has said, but with a positive voicing of it, instead of a negative one. The Cubs would have needed to be a really good team in order for it to make sense still spending at the higher levels of payroll.

 

That said, since your EBITDA can certainly be fudged, more attendance would have helped and maybe we could be looking at a higher payroll currently and for the last few seasons as well.

 

It's a great breakdown honestly, but I hate saying it-People are still going to look at what numbers they want to and construct things in the way they would have done it.

 

Still, if anything, it absolutely makes it feel to me that a total direction would have needed to be decided on from the beginning, or else you just wind up in limbo for a long time. I think Ricketts made this decision PRIOR to Theo and Theo is here to carry things out. Which lends credence to Kyle bringing up Theo wanting to pursue doing a complete rebuild. But it also lays it out there that Theo wasn't even the one making THAT decision, he's just following through. As an owner(as much as I've voiced my dislike of Ricketts) I do agree with the long term thought process. But I'm still in total "show me" mode when it comes to spending at some point. Unfortunately, there's just no way for Brett to know that answer.

 

Great work though, I'm glad someone put in the legit effort. Thanks Brett.

[Brett]

Thanks for the kind words, and for sharing/discussing.

 

The thing about being considered a "mouthpiece" for the front office or for ownership is one of those double-edged swords, especially as it relates to a piece like this. I spent so long researching it, talking to folks - both inside and outside the Cubs' organization - and writing it up, that it was impossible not to come out of it without a really strong position on the front office and on ownership. And the short version was that I was really impressed by what they've done in spite of some very real limitations.

 

So the write-up, then, is going to have a positive gloss. I really don't know if that makes me a mouthpiece. If I'm supportive of something because I actually believe in it, that's something different, right? That is to say, I'm not speaking out in favor of the FO/ownership because I'm trying to get anything out of it (and I certainly don't). I just happen to think they're swell.

 

And that's all probably been reflective of how I've written about the team over the past few years. I just think what I think, and it happens to be mostly good stuff.

 

Sorry for the tangent, but Ryan's comment gave me an opportunity to reflect in a way that I don't always get in the comments at BN.

[jersey cubs fan]

And the short version was that I was really impressed by what they've done in spite of some very real limitations.

 

I do not understand what they have accomplished in spite of limitations.

[davell]

And the short version was that I was really impressed by what they've done in spite of some very real limitations.

 

I do not understand what they have accomplished in spite of limitations.

Kind of a loaded statement. The organization is unequivocally in a better position right now than it was in 2009. Even with the understanding that its easier to build one with high draft picks.

[SouthSideRyan]

http://www.bleachernation.com/2014/03/19/the-chicago-cubs-financial-story-the-payroll-the-debt-and-the-syncing-of-baseball-and-business-plans/

 

Debt structure and buyouts isn't really my area of expertise, so would appreciate others opinions outside of the usual "best blog ever" going on in the comments there. Seems thorough, but Brett's shift towards FO mouthpiece over the last year leave me somewhat...leery?

 

Here I was hoping you would be the one to pick it apart (seriously) with some feedback

 

Unfortunately leveraged buyouts and their ilk aren't my area of financial analysis. That coupled with the pure size of the piece made my head spin a bit.

 

My first take reaction is a concern that 2019 is when the payroll will be back to where it was in the past as MLB salaries continue to balloon

[Guest]

And the short version was that I was really impressed by what they've done in spite of some very real limitations.

 

I do not understand what they have accomplished in spite of limitations.

Kind of a loaded statement. The organization is unequivocally in a better position right now than it was in 2009. Even with the understanding that its easier to build one with high draft picks.

 

I don't, but I think a lot of people will disagree with you here.

[SouthSideRyan]

And the short version was that I was really impressed by what they've done in spite of some very real limitations.

 

I do not understand what they have accomplished in spite of limitations.

Kind of a loaded statement. The organization is unequivocally in a better position right now than it was in 2009. Even with the understanding that its easier to build one with high draft picks.

 

But is that an "accomplishment?" They could've traded everyone away after 09 and racked up top 5 picks and the organization would be in an even "better position"

[jersey cubs fan]

And the short version was that I was really impressed by what they've done in spite of some very real limitations.

 

I do not understand what they have accomplished in spite of limitations.

Kind of a loaded statement. The organization is unequivocally in a better position right now than it was in 2009. Even with the understanding that its easier to build one with high draft picks.

 

None of what has happened did so in spite of limitations. The only thing they did was stop spending and/or concerning themselves with the present. It's the inherited patience of the customer base for the brand that has allowed them to suffer only miniscule short-term financial consequences, something no other pro sports team could absorb so easily.

 

Had the timeframe been shortened, or had they won more games, of if they found an outsized number of hugely valuable pieces via a lower cost than others, that could be impressive. But they've only improved the system with very high picks they got from sucking so bad for multiple years.

[SouthSideRyan]

What's said is quite a bit of what Wittenmeyer has said, but with a positive voicing of it, instead of a negative one.

 

So my question is what makes wittenmeyer so negative while Brett is so positive? Is it cynicism vs optimism? Disliking ricketts on a personal level vs liking him? Not getting the entire story?

 

I'll take the easy way out and guess that it's a combination of the 3 factors AND that the truth is somewhere in the middle of their viewpoints. Not that I don't trust that Brett is quite a bit smarter than Wittenmeyer, but on the other hand hand gordo had the information first.

 

And what exactly have the other writers in this town been doing to not utter a word about this?

[Guest]

What's said is quite a bit of what Wittenmeyer has said, but with a positive voicing of it, instead of a negative one.

 

So my question is what makes wittenmeyer so negative while Brett is so positive? Is it cynicism vs optimism? Disliking ricketts on a personal level vs liking him? Not getting the entire story?

 

I'll take the easy way out and guess that it's a combination of the 3 factors AND that the truth is somewhere in the middle of their viewpoints. Not that I don't trust that Brett is quite a bit smarter than Wittenmeyer, but on the other hand hand gordo had the information first.

 

And what exactly have the other writers in this town been doing to not utter a word about this?

 

Half of them think this is "the right way" and the other half think it isn't, but think Theo totally truthfully thinks it is.

[Guest]

And then there's Kaplan who usually just says whatever the Cubs want him to say.

[Guest]

Reading this confirmed a bit what my train of thought has been for a while, that there's a plausible, middle of the road explanation for the way that spending has moved in the way that it has that doesn't make the Ricketts family out to be Snidely Whiplash or extremely incompetent. For someone who's not all that interested in doing even 1/100th of the research on the financial inner workings of the team, that's enough for me.

 

It is a bit of a blow to the idea that payroll will spike hard in the short term, even if things like the renovations or TV deals get inked. That's less important to me than the relative confirmation that payroll won't need to swan dive further though, given the current state of the organization,

[davell]

Mooney has talked about it some. No one else though, other than a few one liners from Levine.

[davell]

And the short version was that I was really impressed by what they've done in spite of some very real limitations.

 

I do not understand what they have accomplished in spite of limitations.

Kind of a loaded statement. The organization is unequivocally in a better position right now than it was in 2009. Even with the understanding that its easier to build one with high draft picks.

 

None of what has happened did so in spite of limitations. The only thing they did was stop spending and/or concerning themselves with the present. It's the inherited patience of the customer base for the brand that has allowed them to suffer only miniscule short-term financial consequences, something no other pro sports team could absorb so easily.

 

Had the timeframe been shortened, or had they won more games, of if they found an outsized number of hugely valuable pieces via a lower cost than others, that could be impressive. But they've only improved the system with very high picks they got from sucking so bad for multiple years.

Again, reading thru Brett's article, it seems to me that with this type of debt structure, the decision was made immediately to scale back. What if they hadn't? It would have taken being right immediately on a few FA to stay remotely competitive, while also aging and not having enough money to keep spending. I honestly do think it would have been prolonging the inevitable.

 

If you look at it from Ricketts viewpoint, long term is much more important than grasping at the immediate. Like I've said til I'm blue in the face-I am not sure he'll spend the way we want him to, but if it were a decision made prior to Theo even getting here, I agree with the overall premise.

[davell]

The biggest question I have, which Brett didn't really get into, but Wittenmyer has somewhat.....Is why, if they were the only group willing to buy under these conditions, did they accept them? Would we STILL be in total limbo currently, with Zell still running things? Or would they have softened their stance and landed a bit more rough. It seems they got exactly what they wanted here(Trib/Zell).

 

In the grand scheme of things, so did Ricketts. He got the Cubs. But with a bit more patience, could he have had them under different circumstances that were more amenable to putting money back on to the field quicker? Would the price have gone up THAT dramatically, under normal sales conditions? If so, wouldn't it just cancel out quite a bit of the debt structure payments?

 

I mean, if you're servicing 30-45 mill in debt per year for a decade, would it have been worth it to someone to offer 500-600 mill more in a normal fashion after it was known nobody would bite under the conditions that went down. Maybe we just didn't have the right groups involved. We needed a "straight cash homie" buyer to emerge that just didn't.

[Soul]

It's a good article. Definitely got a lot of info I didn't have before.

 

Some of you can probably dissect all of this better than I can, but it still seems to me like the $40 million/year they are saving on payroll isn't really yielding all that great of a result, given what they are now losing in receipts/concessions -- plus you've got to take into account the lost momentum in the community, TV deals, kids maybe choosing another team to follow, etc. There are a lot of "soft costs" to being a terrible team for a decade -- which, if you're saying 2019 is now when "the plan" is able to be fully unveiled, then you've got to also acknowledge essentially bad/mediocre baseball for the most part, for a decade.

 

So, a lost decade of Cubs baseball to save debt payments money.

 

I don't know - to me they are still doing half the job. Not the full job. I really, really hope the Cubs just come to life and make my day. Right now though, the pit of despair that is our Summertime on the North Side just trumps all.

 

Glad Tom Ricketts has a bottom line that works for him, though.

[Guest]

The biggest question I have, which Brett didn't really get into, but Wittenmyer has somewhat.....Is why, if they were the only group willing to buy under these conditions, did they accept them? Would we STILL be in total limbo currently, with Zell still running things? Or would they have softened their stance and landed a bit more rough. It seems they got exactly what they wanted here(Trib/Zell).

 

In the grand scheme of things, so did Ricketts. He got the Cubs. But with a bit more patience, could he have had them under different circumstances that were more amenable to putting money back on to the field quicker? Would the price have gone up THAT dramatically, under normal sales conditions? If so, wouldn't it just cancel out quite a bit of the debt structure payments?

 

I mean, if you're servicing 30-45 mill in debt per year for a decade, would it have been worth it to someone to offer 500-600 mill more in a normal fashion after it was known nobody would bite under the conditions that went down. Maybe we just didn't have the right groups involved. We needed a "straight cash homie" buyer to emerge that just didn't.

 

I've brought it up before, but if they were the only buyer willing to do this, don't you think that's a huge trump card vs having to bid against 4 or 5 others (or whatever number it was)? and maybe they knew they didn't have the wherewithal to outbid those others on an even playing field. who knows? (certainly not me, if it isn't obvious)

[mul21]

The biggest question I have, which Brett didn't really get into, but Wittenmyer has somewhat.....Is why, if they were the only group willing to buy under these conditions, did they accept them? Would we STILL be in total limbo currently, with Zell still running things? Or would they have softened their stance and landed a bit more rough. It seems they got exactly what they wanted here(Trib/Zell).

 

In the grand scheme of things, so did Ricketts. He got the Cubs. But with a bit more patience, could he have had them under different circumstances that were more amenable to putting money back on to the field quicker? Would the price have gone up THAT dramatically, under normal sales conditions? If so, wouldn't it just cancel out quite a bit of the debt structure payments?

 

I mean, if you're servicing 30-45 mill in debt per year for a decade, would it have been worth it to someone to offer 500-600 mill more in a normal fashion after it was known nobody would bite under the conditions that went down. Maybe we just didn't have the right groups involved. We needed a "straight cash homie" buyer to emerge that just didn't.

 

I think the fear of not getting the team if the structure of the purchase was to be more favorable was a bigger factor for them than having more agreeable terms. I'd bet that there would have been more potential buyers if the debt structure had been relaxed a bit.

[Soul]

The biggest question I have, which Brett didn't really get into, but Wittenmyer has somewhat.....Is why, if they were the only group willing to buy under these conditions, did they accept them? Would we STILL be in total limbo currently, with Zell still running things? Or would they have softened their stance and landed a bit more rough. It seems they got exactly what they wanted here(Trib/Zell).

 

In the grand scheme of things, so did Ricketts. He got the Cubs. But with a bit more patience, could he have had them under different circumstances that were more amenable to putting money back on to the field quicker? Would the price have gone up THAT dramatically, under normal sales conditions? If so, wouldn't it just cancel out quite a bit of the debt structure payments?

 

I mean, if you're servicing 30-45 mill in debt per year for a decade, would it have been worth it to someone to offer 500-600 mill more in a normal fashion after it was known nobody would bite under the conditions that went down. Maybe we just didn't have the right groups involved. We needed a "straight cash homie" buyer to emerge that just didn't.

 

I think the fear of not getting the team if the structure of the purchase was to be more favorable was a bigger factor for them than having more agreeable terms. I'd bet that there would have been more potential buyers if the debt structure had been relaxed a bit.

 

Then I think I'd just have to go back to what I originally felt when Ricketts bought the team: I wasn't all that excited about him then, and still not.

[SouthSideRyan]

I'm fully with the thought that Ricketts anticipated just about everything breaking a different way.

 

-He expected the city to help finance renovations and expected them to allow them to do lost whatever they want with it.

-He expected cubs fans to show up no matter what crappy product was put on the field

-He expected Theo to be able to come in and make the team good almost instantly on spite of the financial restrictions he gave him.

 

And of course none of this to excuse his ownership. You enter into an agreement on really dumb assumptions then you don't get a pass, and you certainly don't get my benefit of the doubt going forward. For all I know this doofus is expecting the all prospect roster to make its debut some time in late 2015 helping to roll those savings into renovations and other things daddy won't pay for.

[Guest]

The biggest question I have, which Brett didn't really get into, but Wittenmyer has somewhat.....Is why, if they were the only group willing to buy under these conditions, did they accept them? Would we STILL be in total limbo currently, with Zell still running things? Or would they have softened their stance and landed a bit more rough. It seems they got exactly what they wanted here(Trib/Zell).

 

In the grand scheme of things, so did Ricketts. He got the Cubs. But with a bit more patience, could he have had them under different circumstances that were more amenable to putting money back on to the field quicker? Would the price have gone up THAT dramatically, under normal sales conditions? If so, wouldn't it just cancel out quite a bit of the debt structure payments?

 

I mean, if you're servicing 30-45 mill in debt per year for a decade, would it have been worth it to someone to offer 500-600 mill more in a normal fashion after it was known nobody would bite under the conditions that went down. Maybe we just didn't have the right groups involved. We needed a "straight cash homie" buyer to emerge that just didn't.

 

I think the fear of not getting the team if the structure of the purchase was to be more favorable was a bigger factor for them than having more agreeable terms. I'd bet that there would have been more potential buyers if the debt structure had been relaxed a bit.

 

Then I think I'd just have to go back to what I originally felt when Ricketts bought the team: I wasn't all that excited about him then, and still not.

 

You weren't excited about him because he did what he felt he had to do (and bit the bullet he felt he had to bite) in order to get the team?

 

I get not being excited about him, but that just struck me as an odd response to what you were responding to.

[Soul]

The biggest question I have, which Brett didn't really get into, but Wittenmyer has somewhat.....Is why, if they were the only group willing to buy under these conditions, did they accept them? Would we STILL be in total limbo currently, with Zell still running things? Or would they have softened their stance and landed a bit more rough. It seems they got exactly what they wanted here(Trib/Zell).

 

In the grand scheme of things, so did Ricketts. He got the Cubs. But with a bit more patience, could he have had them under different circumstances that were more amenable to putting money back on to the field quicker? Would the price have gone up THAT dramatically, under normal sales conditions? If so, wouldn't it just cancel out quite a bit of the debt structure payments?

 

I mean, if you're servicing 30-45 mill in debt per year for a decade, would it have been worth it to someone to offer 500-600 mill more in a normal fashion after it was known nobody would bite under the conditions that went down. Maybe we just didn't have the right groups involved. We needed a "straight cash homie" buyer to emerge that just didn't.

 

I think the fear of not getting the team if the structure of the purchase was to be more favorable was a bigger factor for them than having more agreeable terms. I'd bet that there would have been more potential buyers if the debt structure had been relaxed a bit.

 

Then I think I'd just have to go back to what I originally felt when Ricketts bought the team: I wasn't all that excited about him then, and still not.

 

You weren't excited about him because he did what he felt he had to do (and bit the bullet he felt he had to bite) in order to get the team?

 

I get not being excited about him, but that just struck me as an odd response to what you were responding to.

 

Sorry. I meant if a little waiting might have produced better terms on the sale, and that might have also put better owners in the mix, then I wish that would have happened rather than what actually did happen.