The Chicago Tribune reports details on why its parent company, Tribune Company, is having difficulties getting to the closing table on selling the Chicago Cubs. The hang-up is in how to value the broadcast rights contracts that the Cubs have with Tribune’s radio and TV outlets.
After Tribune Company CEO Sam Zell disclosed that the $900 million sale of the Cubs to the Ricketts family was in trouble, the company’s flagship newspaper began digging into what’s gone wrong. According to the newspaper, the dispute is over the value of the broadcast contracts between the Cubs and three outlets where Tribune has a financial interest. WGN-AM and WGN-TV are 100% owned by Tribune Co. and it has a 25% stake in Comcast SportsNet Chicago. The latter is for sale, but Tribune has no plans to divest either WGN station.
Three former Tribune Co. executives told the newspaper that the Cubs and WGN split ad revenues 50/50, so the Cubs get less from their game broadcasts than most other Major League Baseball teams. WGN-TV carries about 70 games a year and WGN-AM all 162 Cubs games.
Because they would inherit the unfavorable broadcast rights contracts, the Ricketts are said to be seeking a price reduction of $40-50 million from their successful bid of $900 million. The Chicago Tribune story said they have lined up $400 million in bank loans and will get the rest by selling stock in TD Ameritrade Holding Corp., the online brokerage company founded by Joseph Ricketts. His son, Tom, is leading the family bid to become a Major League Baseball team owner.
RBR/TVBR observation: There are clearly advantages to common ownership of a big league sports franchise and local radio and TV. However, those advantages don’t convey when only one side of the equation is sold.