Could Launching Their Own Network Actually Cost Cubs Bryce Harper?
The more I think about the Cubs’ new regional sports network (RSN), the more I am convinced they will not sign Bryce Harper. As many Cubs Insider readers probably know, the Cubs are expected to partner with Sinclair Broadcasting for an RSN named Marquee. A formal announcement could come at the Cubs Convention later this month.
By choosing to form their own RSN, the Cubs are taking on additional risk in exchange for the potential of additional reward. Their previous TV deal insulated the Cubs because no matter how bad the team — and by extension, the ratings — were they were guaranteed the same fixed amount of money from the broadcast rights.
That’s because the various television networks assume the risk that they can profit by selling ads during the games and charging carriage fees to cable providers. As a very brief primer, carriage fees are what cable providers like Comcast pay individual channels for broadcasting rights. So the food chain is: Consumer pays Comcast, Comcast pays NBC Sports Chicago, NBC Sports pays the Cubs. So when the Cubs did better than expected, that risk translated into extra profit for the networks while the team made the same money.
Marquee, however, will be owned by the Cubs, who will be choosing to sacrifice a guaranteed revenue stream in exchange for the potential of these extra profits. The better the Cubs do, the more money they make.
I welcome this change because it aligns the interests of management and fans. The Cubs will never be tempted to field a losing team because they’re not recipients of revenue sharing [cough, Miami, cough] and won’t have the luxury of guaranteed broadcast revenue. Instead, the Cubs will always be incentivized to put a quality product on the field.
So why do I think this deal makes it less likely the Cubs sign Bryce Harper?
The short answer is because while Harper would absolutely make the 2019 Cubs better, I am not sure he would make them more money. Signing a major free agent generates lots of excitement for an upcoming season. Yet the Cubs already sell out every home game and, as mentioned above, cannot make any extra TV money in 2019. So the incentive to spend on Harper this year is minimal from a financial standpoint.
The risk, however, is substantial. Marquee goes on the air in the 2020 season, at the conclusion of which most of the pitching staff hits free agency. The year after, the Cubs’ dominant infield of Bryant, Anthony Rizzo, and Javy Baez will reach free agency as well. That is a lot of talent that will need to be re-signed or replaced at free agent prices. Meanwhile, several of the expensive free agents that were supposed to supplement this core have underwhelmed, particularly Jason Heyward and Yu Darvish.
If Harper were to also underperform a huge contract, the Cubs would likely be financially unable to field a playoff-caliber team beyond 2021. They would be forced to start rebuilding in 2022, in just the third year of the new network. Not only would that cause ad revenues to plummet, but the fear of such a rebuild could make cable companies skittish about signing long-term carriage-rate deals.
From a purely financial standpoint, it makes more sense for the Cubs to make a big splash next offseason to coincide with the new network. Signing Nolan Arenado or Chris Sale ahead of 2020 would provide a jolt to both carriers’ and consumers’ resistant to the a carriage fee projected to be $6 per subscriber. The increased ratings resulting from that shiny new free agent would also directly benefit the Cubs via increased advertising revenue on Marquee.
The Ricketts are Cubs fans in addition to being owners and they have shown the willingness to sacrifice some money to win. They surely recognize that Harper could result in extra 2019 playoff revenue. Also, I may be completely wrong about the incentives. For example, it is possible most long-term carriage deals will be signed in the next few months, during a Harper-fueled spring training euphoria. But I suspect the incentives to wait a year before signing a major free agent exist.
Personally, I remain convinced waiting is a mistake. There are no other free agents like Harper available in 2020. Only one other 26-year-old former MVP has ever hit free agency, so the Cubs will not get another chance like this for years. And, of course, it is not my money.
