Thursday, June 16, 2011

Tom Talks

Tom Ricketts must have finally had enough of people bitching that he doesn’t have a long term plan for the Cubs and the same people bitching that he should say something about it. So, Tom called an impromptu press conference and promptly admitted that he does have a plan and that it’s the exact plan that led to the 27-40 record the team has posted this year.

"I have 100 percent confidence in Jim. He's working very hard to do everything he can to get this season back where we want it to be."

Just where do you want it to be, Tom? And, while you’ve said, full stop, that you have confidence in Jim Hendry, can you tell us why that confidence is warranted?

"And I think Mike (Quade)'s done a great job. Mike's got those guys playing hard. You know they're not giving up, and there's a good spirit in the clubhouse. So those guys' (jobs) are fine."

Yeah, Mike's done about as can be expected with the talent Hendry gave him. He’s also kept a tight control on the clubhouse. No issues there.

"I think we're not going to wear (the "F**k the Goat" shirts) outside. Kind of the language in it, you've got to be careful. But I'm not too worked up about it."

If only there was a guy in the clubhouse who could police or even manage the players before they take the field.

"I've never bought into the [idea that] I should have a baseball guy to watch my baseball guy. And then what do you get? A baseball guy to watch the baseball guy who’s watching the baseball guy? I really haven’t through about an extra baseball guy. I'm not regretting not having an extra baseball guy."

While you don't regret having a "extra" guy, 27-40 suggests you might regret not having a good one.

"Obviously we don't believe it"s a dump."

Ah, faith. Wrigley Religion. Seen this many times before. Always annoying.

"In fact, Wrigley Field is the third largest tourist attraction in the state, generates $600 million for the business in the area. ... It's not a dump."

Using economic value to gauge the quality of a physical plant is not the correct comparative. Waste Management, National Waste Services, Flood Brothers, Recycling systems Inc. and a host of other companies combine to create a lot of business for the Chicago area, and far more jobs than the Cubs do. And those companies are literally dumps.

"That said, we know that it can be improved. We know we've got a lot of work to do to preserve it and improve it for the fans."

So, it is a dump. Thanks for clearing that up.

"There are a couple of factors (in lower attendance) – obviously the economy and obviously the weather. But the most important thing is I’m not worried about the attendance because if we win, we'll be full. And everything we’re doing is to win."

Didn't your dad say that you told him that they "sell out every game, win or lose"? Someone’s getting tee’d up by his father for Who You Crappin'!

What's becoming more and more apparent about the Ricketts' leadership is that he doesn’t really have a plan for the product on the field. He thought, and sold his family, on the idea that the Cubs were a cash cow that they could buy. They could use the cash flow from an inelastic demand for tickets to pay off the debt they incurred to buy the team over a period of 10 to 15 years, and then the family would have a terrific source of income for generations based in the third largest city in the US that would give them huge business and political connections. Hell, we even saw a guy become a US President after using his dad's money to buy him a baseball team.

What they failed to see was that the demand for tickets stopped being inelastic in about 2006, at least on the basis of quality of team on the field. They also haven't seemed to notice that their front office, that has been here for 17 years, can’t develop talent – a key function that the Ricketts said they needed to do. The failure to see what's really going on inside the business of the Cubs has created an environment where Tom Ricketts is the new Mike McCaskey in this town. That's a reputation that's going to be hard for him to shake.

There's a reason this page was nonplussed about the Ricketts owning the Cubs. That's because we had no idea what kind of owners they would be. At least with Don Levin and Mark Cuban, we fans had a basis for measuring their skills as an owner: The Chicago Wolves and Dallas Mavericks. Those two franchises have had solid runs of success.

That certainly is appearing less and less to be something we can expect from the Ricketts.

Friday, June 03, 2011

Much Ado About Nothing

With Cubs finances in the papers today, it's time to dust off Ivy Chat for a day. The story reports that the Cubs, among other teams, have too much debt:

(N)ine franchises (are) in violation of MLB's debt service rules, according to information presented in a confidential briefing at the owners meetings last month and confirmed to the Los Angeles Times by three people familiar with the presentation.

The Dodgers and Mets have been in headlines for their troubles and find themselves among the nine with the Cubs. Those three are joined by the Orioles, Tigers, Marlins, Phillies, Rangers and Nationals as teams out of compliance with MLB's rules, according to sources, none of whom was authorized to disclose the information.

Why are the Cubs on this list and what does it mean? Let's look at the rule they are in violation of first:

The rules, intended to ensure clubs have the resources to support their financial obligations, generally limit a team's debt to 10 times its annual earnings, although Commissioner Bud Selig has wide latitude to enforce those rules. Selig declined to comment for this story.

Earnings is used kind of nebulously here. Most likely what is meant here is operating revenues. This number is a company’s total revenues less its operating expenses (payroll, cost of goods sold, marketing expenses, etc.). MLB rules limit total debt to an amount capped at 10 times this number. If the Cubs generate $200 million in revenue, but only make $50 million after expenses, they would be limited to $500 million in debt.

OK, now we know the numbers, what does this mean for the Cubs?

Most likely nothing.

When we go back and look at the Cubs debt situation, we see that total debt is about $674 million. But of that amount, $175 million of the debt is funded by the Ricketts themselves. This debt is really equity, but was designed as debt to help the Tribune Corporation avoid paying taxes purposes on the sale. Another $74 million in subordinated debt might also be structured in such a way that the Cubs don’t have to actually make any cash payments on the debt for years.

The MLB debt calculation most likely includes all the debt and doesn’t distinguish between senior and sub debt. And sub debt is more like equity than a real loan.

One supposes that this story does serve as a reminder that the Cubs do have a lot of debt and that a reasonable person would expect much of the payroll runoff the next two years to not be re-spent. But is this story an alarm bell for anything? No.

In short, there's nothing to see here. Move along.

This page is powered by Blogger. Isn't yours?

Subscribe to Posts [Atom]