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Cubs Have New Idea For Team TV Network

The Cubs are only three months away from having their WGN-TV deal expire. They need to figure out where those games are going, and soon. They've got a creative new idea. Will it work?

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The WGN-TV portion of the Cubs' TV contract expires at the end of 2014, as you surely know, and reports have had the club considering various options for the next five years. Why five years? Because after 2019, the CSN Chicago contract expires and the Cubs could take their entire package somewhere. One of those "somewheres" has been rumored to be a Cubs TV network.

As I have written before, the cautionary tale to a Cubs TV network is the current experience of the Dodgers, who can't get their new cable channel, SportsNet LA, carried in most of the Los Angeles market. Up to 70 percent of Dodgers fans can't watch their team this year even if they want to pay for doing so, because other than Time Warner, who ponied up big bucks for the Dodgers TV contract, other cable systems in the LA area won't carry SportsNet LA. That might happen to a new channel in Chicago, too. In the Tribune, Ed Sherman writes that the Cubs are considering a different idea for a team TV channel:

Launching a version of a Cubs network on a multicast station, according to sources familiar with the situation.

This takes some explaining.

A multicast outlet is a sub-channel for local over-the-air broadcast stations. They became more prevalent with cable and satellite providers converting to digital platforms in the last decade. On Comcast's channel guide, most of the multicast stations are bunched in the mid 300s. Currently, these stations mostly air classic TV shows such as "Bonanza" and "The Brady Bunch," or syndicated programming such as cooking shows.

The Cubs reportedly are eager to start their own network. They currently can't do it on cable because of terms of their deal with Comcast SportsNet, which runs through 2019.

However, the multicast stations aren't considered cable; they are broadcast because they are transmitted over-the-air. That would provide the Cubs the opportunity to start some sort of a team-branded channel. The Cubs would produce the telecasts and sell and keep all the advertising revenue.

If you live outside the Chicago area but in Iowa, Indiana or downstate Illinois, you've probably seen some of the Cubs games televised by WCIU in Chicago, on a "sub-channel," one of these:

Springfield/Decatur/Champaign, WCIX 49.2; Peoria, WAOE 59.1; Des Moines, WHO 13.2; Quad Cities (Davenport/Moline), WQAD 8.2 or 8.3; Ft. Wayne, WANE 15.2; South Bend, WMYS 69; Rockford, WTVO 17.2; Cedar Rapids-Waterloo-Iowa City-Dubuque KCRG 9.2

All of the Chicago over-the-air broadcast channels have "multicast" outlets such as these; as Sherman notes, they're generally broadcasting shows that few watch. Creating a Cubs network on one of these channels would certainly bring in more viewers and more money than whatever currently airs on those channels, and wouldn't be subject to the Dodgers' issue, since these are over-the-air channels. I flipped through a few of these "multicast" channels on my TV this morning. I live in Chicago and have service via Comcast, and one thing I noticed immediately: Not one of these channels is broadcasting in HD, as far as I could tell. That'd be an issue. Further:

The Cubs would incur production costs to air the games; probably in the $25,000-35,000 range per game plus studio shows. They also would have to pay a fee for time on a multicast outlet.

Unlike cable, it seems highly unlikely the Cubs would earn much in the way of subscriber fees for a multicast station from the cable and satellite companies, according to industry sources. That would leave advertising as their main source of income. If advertising revenue is down for WGN, why would it be any different for the Cubs on a multicast station?

Also, the Cubs would lose viewers because a multicast station doesn't have the reach of WGN. Currently, AT&T doesn't have multicast stations and DirecTV and Dish almost never carry them, according to industry sources. The Cubs also would have to negotiate deals one-by-one with providers outside of Chicago in Downstate Illinois, Iowa and Indiana, areas that are considered their local territory.

I listed some of those outside-of-Chicago channels above; that would be a lot of work and expense for potentially not-very-large return, and also:

WGN, which pays the Cubs in the neighborhood of $250,000 per game, reportedly is losing as much as $200,000 per telecast because of record low ratings in recent years. The station wants to continue its long relationship with the Cubs, but also is anxious to stem some of the financial bleeding. Sources say WGN has offered the Cubs a new deal that would include a small rights fee and a revenue sharing component. Fees would remain low for poor ratings during the rebuilding process, but they could be much higher if viewers return in droves for a contending team.

According to sources, Kenney isn't eager to sign a deal that would give the Cubs considerably less in guaranteed money, especially at a time when the Dodgers are doing a multi-billion dollar local TV contract.

One industry insider said it would be "tough for Crane to go back to WGN for less than what he had originally had."

I added the boldface in that quote because it amplifies a point I've made here in the past regarding rights fees. TV rightsholders aren't going to pay for "hope." Sure, if the Cubs become a better team over the next few years, more people will watch on TV, increasing potential advertising revenue. But a TV channel isn't going to pay upfront for that, and if WGN is losing $200,000 per game now, what local channel is going to pay more for five years' worth of "hope?" They simply won't. The Dodgers got their huge deal because at the time it was signed, they had just been sold for a record price, and new ownership let it be known that they'd spend whatever it took to create a playoff-caliber team. (NOTE! I am not suggesting the Cubs do this, largely because they can't at the present time -- only pointing out that's why the Dodgers got their $7 billion deal.)

Sherman's article also says the expiring WGN-TV portion of the contract won't be picked up by CSN Chicago:

The WGN games can't be shifted to CSN, because its menu is full, and the network reportedly isn't interested in using spillover outlets. There had been speculation Fox might become involved in some way, laying the foundation for a partnership in a new Cubs network in 2020. However, all appears to be quiet on that front.

So the Cubs are really in somewhat of a bind here. They'd like to cash in on the galloping local TV rights dollars before the current "bubble" bursts, but there doesn't seem to be an easy way to do that. The "multicast channel" idea is creative, I'll give the Cubs that, but unless they turn into a winner very quickly, it's not likely to result in the huge dollars they're looking for.