Monday, April 17, 2006

shopping the cubs

real hope for the chicago national league ballclub is emerging this season as the tribune company, with profits plummeting and stock price savaged, is finally being compelled to shop the club. michael sneed in the sun-times yesterday confirms that the eventuality is now materializing.

Sneed hears whispers Chicago Cubs management, whose paychecks are signed by Tribune Co., are shopping the team to consortiums interested in buying the North Side club. Hey! Hey! Holy cow! Buy me some peanuts and Cracker Jacks!

Is the formidable Tower of Truth, a k a the cost-cutting Tribune Co., responding to a suggestion in a recent Wall Street Journal article?

this follows on more comments in crain's and the tribune itself that have been assiduously reported by chuck over at ivy chat.

the sale is coming, for a lot of very valid reasons that this page has articulated. it's right to say that wishing does not make it so -- but, as evidence of pressure for an impending sale mounts, the wishing increasingly seems to be coming from the quarters of cubdom that fear the devil that they don't know more than the devil that they do.

some canards are frequently repeated by those who somehow believe a sale impossible, and this page would like to take a moment to address some of them now and begin a dialogue about them.

  • It would be retarded to sell such a cash cow.

  • this may seem counterintuitive to some, but the cubs are low-growth high-cash-flow asset. that is exactly what the tribune does not want. tribco needs to grow, and freeing value from assets like the cubs so that it can be invested more productively is exactly what people like john rogers jr. are talking about. this page is aware that most folks have little idea about how businesses are really run -- but, especially in media, it isn't on cash flow. it's on growth. the cubs are a wonderful sale candidate.

  • The sale of assets refers to albatrosses like the LA Times.

  • it is certainly true that a large part of tribco's troubles stem from the ill-fated purchase of the los angeles times. the trib could sell the la times in an effort to turn things around -- and maybe they will be forced to in the end. but what would they get for it? nearly nothing -- such a fiasco as that paper is at the moment would mean that they would have to dump it at a tremendous loss -- and, politically speaking, that would mean fitzsimons' head. he knows it, and he'll never do it. far better for the tribune to concentrate on what it knows best, spend the time and effort to turn the la times around and sell it later when the getting is much better.

    the cubs, on the other hand, are as valuable as they can be -- you'd get top dollar for them right now. tribco would be selling high, and that's what keeps executives employed.

  • Selling the Cubs would make no difference to the Tribune.

  • while it is certainly true that the cubs are a very small part of tribco, that does not mean their sale will not occur. this page would agree that selling the cubs by itself would not fix the tribune's problems. but their sale may well be a part of a larger divestiture or non-core assets that would represent a material move toward unlocking value for the company.

  • Selling the Cubs would so damage the Tribune, particularly WGN, that they wouldn't dare.

  • rather the inverse of the above argument, this page would argue as above that the cubs really are a rather small part of tribco. the "synergy" of a broadcast media owning its own programming once seemed a capital idea, paving the way for time warner, newscorp and disney to jump into the professional sports fray.

    in practice, this has turned out to be wrongheaded. teams turned out to be poor investments relative to new media ventures, the hype surrounding synergy turned out to be just that, and most of those media entrants into sports have since recognized the mistake and exited.

    the truth is that what the cubs provide tribco is programming for some few hundred hours annually on a few of its several dozen television stations -- programming that the company could very easily replace with offerings from its other sources. if the company for some reason felt the cubs broadcasting rights to be a necessary asset, they could negotiate them as part of the terms of sale to a new owner, guaranteeing the cubs to be on wgn for years to come.

    even if they didn't, it seems that many have forgotten that for decades prior to 1981 wgn purchased the broadcast rights to the cubs against other bidders. it didn't destroy the station, and wouldn't now.

  • What if the Cubs were sold to a Peter Angelos type?

  • this page is often accused of pessimism for attempting to recognize the flaws of the chicago cubs in the hopes of resolving them in public discussion. but it rarely assumes the worst of the situation to be the only possible outcome.

    to see an angelos as the only possible outcome is a truly pessimistic view. there is certainly a chance that a bill wirtz buys the cubs -- it can happen, and no one should deny it. but it would be just as foolish to refuse to recognize the promising probability involved -- something an inveterate optimist would be all over, some would think. there is a very significant probability that the cubs will get great, committed management as a result of the sale that will run this team something like the boston red sox are run. winning can be seen as a priority equal to profitability, and not always its ugly stepsister. such an ownership is no certainty -- but what is certain is that the trib will never manage the cubs in that fashion and will never build a consistent winner because of it (even if they get lightning in a bottle once). tribco has almost never spent what it takes to win, and there's a quarter century of evidence all around us.

    this is almost certainly a case where the devil you don't know is vastly better than the devil you do. even if the cubs are in the event sold to an unfortunate new ownership, this page fails to see how that is a loss from decades of abject futility that the tribune has done nothing -- absolutely nothing -- to mitigate. taking a chance on getting good ownership is more than merited by the immense gulf between the possible rewards and the certain gloom of the status quo.

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