THE WRIGLEYVILLE WAR
53. Fidel Zell
54. Feast of Pigs
55. Civil War
56. Game Over
57. Double Header
58. It's Over!
59. Fine Print
60. Poster Boy
61. New Shots
62. Season of Sorrow
63. The Off Season
February 24, 2008
It was the Las Vegas of the Caribbean. A playground for the rich and famous. But when poverty wedged between the working classes, a man came in to topple the status quo under the guise of reform and wealth for all of his people. Fidel Castro took over Cuba more than 50 years ago. Instead of prosperity, his island nation stagnated and rusted in a time belt from the 1950s. The moral of the story is sometimes you don't get the person you think you are getting to change things.
The man who led the coup at the Chicago Tribune was Sam Zell. Who exactly wanted him to take over the Tribune media conglomerate is becoming murky. At first, the Chandler family demanded the Board to cash them out, sell the company, or break it a part. Investment bankers looked at the Tribune businesses and passed on taking the company private or selling off the pieces for a profit. Almost all of the Tribune divisions, cable, television, newspapers, magazines, were struggling with revenue losses from declining advertising and recessionary fears. The whole print newspaper industry was under attack from the free internet information age. There were a few people who poked with a stick around some of the Tribune pieces but in the end, the Board decided to get rid of the Chandlers as fast as possible. The Board needed a white knight to put together a deal. Enter, Zell.
In a transaction that still has bankers and investment brokers scratching their heads, Zell took on billions of new debt on top of a debt heavy company bleeding red ink in order to gain control of the Tribune's assets. Before the deal close, the new alleged owners, the employees, objected to the lock-up of their stock plan burdened with the company debts and the lack of any participation in management. The unions were not happy with a private company with a heavy debt load because that would mean serious cuts - - - i.e. union jobs - - - on the horizon. The bond rating companies looked at the prospects of a chairman with no media experience running a media conglomerate as being junk, as in lowering the Tribune's bond ratings to three levels below junk status. Since the deal closed, the value of the Tribune's bonds have tanked which a sign on how the market believes the deal will end. Badly.
It was the existing Tribune Board that made the decision to sell out to Zell. In the end, they gave him not a seat on the board of directors, but a self proclaimed dictatorship. Zell made the rounds to his major newspaper newsrooms and conducted foul mouthed, insensitive and bizarre interaction with his professional staffs. He treated them like dish washers in a prison cafe. One day he said that he would go forward and make each unit dependent (so it could guide itself to profitability) but then the next week announce huge staff cuts.
Zell is scrambling to raise cash. He wants to auction off Cub field box tickets to squeeze quarters in the big picture. He wants to increase circulation figures to boost ad revenue. But in a strange marketing campaign, readers have the opportunity to get home delivery of the Sunday Trib for 99 cents, or Wed-Thur-Fri-Sun delivery for $1.00, or full weekly delivery for $2.75. The pricing structure makes no sense; Mon-Tue-Sat editions are worth $1.75, more than the Sunday edition? And the end of week editions are worth only a penny. Morale must be low in the newsrooms with a business plan that makes trivial certain editions of the newspaper.
But that what happens when Zell begins to surround himself with his people. A former shock-jock radio programmer and a former executive at a rental car agency are Zell's new lead dogs. He is consolidating control like a boa constrictor on its prey. The open question is still why. Why is Zell so charging on taking total control over the Tribune when in the end he put in none of the $350 million (his part of the initial deal stake; he got that from other private investors). He has nothing at risk. He is not accountable to anyone. The employee pension stock is frozen in a trust which Zell controls. So why is Zell taking charge? What is it (profit) for him besides the power and ego of being a Fidel-like dictator? He made his money in real estate, so the only real link left is that his real intent is not to run the papers as a white knight, but to get final control over the Tribune's trophy real estate properties. Otherwise, this exercise in corporate takeovers makes no common sense.
See, also CARTOON MONSOON: FUKUDOME.
FEAST OF PIGS
May 25, 2008
The Tribune has been in bog of quicksand ever since Sam Zell came to alleged rescue. Zell continues to hire ex-radio people to run a newspaper-television business (some say into the ground). The Tribune continues to lose advertising dollars, revenue and asset value at a faster rate than its peers. The garage sale has begun with the sale of Newsday to a cable operator. The Chicago Cubs have been on the block for almost a year but there has been no movement because of utter greed.
Zell has the notion that the Cubs franchise is worth a billion dollars. It is not. Forbes magazine estimated its value in the $650 million range (or less if a new owner factors in Zell's own comments that Wrigley Field needs $150 million plus in repairs). The Red Sox were sold for $650 million, and Fenway Park was in better shape. There is no reason why the Cubs would command a huge premium in a tight credit and recessionary economy.
Zell sought to split Wrigley Field from the Cub franchise; hoping that he could get more from the parts than as a single package. The people who wanted to bid for the Cubs were not happy with that move. They were bidding for the Cubs and the ball park. It would make no sense to overbid for the franchise to be at the mercy of a new landlord. There was also some doubt whether major league baseball owners would approve such a transaction.
But since greed was in the air, in Illinois the political pigs will come sniffing around to see if they can profit from it. The idea that the State of Illinois should buy Wrigley Field, repair it, so the Cubs would remain in Chicago for the next twenty years made absolutely no sense. First, there was not even a hint that the Cubs or potential bidders were going to buy the team and move it out of town. (The only reason that could possibly occur is if the new team owner did not own Wrigley Field.) Second, the Cubs operation is supposed to be highly profitable, with sell-outs at Wrigley for the past decade. There is no reason for the State to own a piece of property that is functioning well in the private sector.
Why this was brought up was because Zell could not sell the field to a private party for the price he wants. Credit markets have squeezed and potential real estate investors never materialized. So the state power brokers, like former governor Thompson, figure that they could control this revenue producing property to their advantage, at taxpayer expense.
Thompson or Zell could never tell the public what the complete deal was for the State acquiring Wrigley. These secret deals are the worst kind. First, it was touted that the deal would not cost the taxpayers a dollar. Zell would sell Wrigley to the State for $1. The State would then sell bonds ($150 million to a final figure of $450 million) to renovate the stadium. The bond amounts made no sense if Zell was giving Wrigley to the State. He never was because that item was merely a PR scam. Zell wants the State or anybody to pay him hundreds of millions of dollars for Wrigley without any credit for cost of repairs. Also, Zell originally wanted to keep the new naming rights revenue (tens of millions of dollars in a twenty year annuity). In the end, the State tried to say that ticket revenue and naming rights would be enough to make the deal work. But in any bond deal, the taxpayers would be on the hook for a default. And the default was real because of the amount of money being borrowed exceeded the amount of revenue Wrigley could generate. By putting a huge burden on the new owner through a long term lease would plunge the value of the Cub franchise. Modern professional teams need to control all revenue streams of their home stadiums in order to survive and compete. The whole State ownership idea runs contrary to modern professional sports business plans. Then, when confronted with the reality of the situation, Thompson sought to divert one percent of the city sales tax to pay for the State bond obligations. Mayor Daley flipped out and said no, there would be no sales tax sharing with Wrigley Field. So the final State gasp at corralling Wrigley was a political fundraiser's claimed patented funding method of selling seats to fans in order to pay back the bonds. However, this was merely a syntax diversion for a long term personal seat license. Who would be willing to spend $100,000-$300,000 per seat for the privilege of buying expensive game tickets? It made no economic sense. But it did not have to because it was being proposed by politicians who have no concept of a real dollar because they never spend or risk their own on any project. The public treasury has been a bottomless well of money. In this final deal, Thompson and his friends would probably try to squeeze the contracts and divert revenue streams to themselves through licensing of this seat-license idea to the State for a percentage of the gross.
In the final comment, the Tribune flatly rejected this State plan for Wrigley Field. The Tribune thought the plan lacked legal and economic merit. It was too risky to succeed. So the Tribune was now willing to package the team with Wrigley. Immediately after the rejection, Thompson proclaimed that the State was still negotiating with Zell. This calls into question why Thompson and the State sports facility board is so desperate to get another piece of property to control with public funds. Let the sinister motivation speculation begin.
SEPTEMBER 21, 2008
Current and former Los Angeles Times staff members have sued the Tribune, Sam Zell and his minions. The lawsuit alleges that Zell and others breached their fiduciary duty to the employees of the Tribune corporation through alleged self dealing, mismanagement and malfeasance. A review of the allegations finds fault with the actual structure of the Zell taking the company private by using a new employee pension plan (ESOP) to acquire all the common shares of the public company. However, the employees through their ESOP had no control over the new Tribune company or its management. Zell was in charge.
The problem with the lawsuit is that it is a hindsight damnation of the Deal. The deal was disclosed in SEC filings (the suit alleges no securities fraud or misinformation in the transaction), and voted upon by a major of shareholders of the public corporation. The massive amount of debt being used by Zell to acquire control of the Tribune was also disclosed, and some investment bankers at the time were troubled by the prospect of repayment of such an amount of debt in a soft economy. But the deal went through. And as a result, Zell hired failed radio executives to seize the wheel at the Tribune ship, and as the poor staffers now acknowledge, run the ship aground. Massive layoffs, cutting the news hole, insane email rants by the alleged innovation executive, steep revenue declines. The Tribune assets, including the newspapers, were profitable; but no profitable enough for Zell's debt service. So assets had to be sold, including newspapers and real estate. But the massive burden of the corporate debt has choked any value from the employee's pension fund.
What should have happened was an investigation into Zell and the specifics of his deal PRIOR TO the actual shareholders vote. The idea of a non-media person being the chief executive of a media empire in time of crisis makes no management sense. The actual numbers of the new debt service should have been placed side by side by the projected revenue (and revenue declines) to show that it is not feasible transaction in the long run. Remember, private parties and investment banks looked at the Tribune company before the Zell deal, to buy the company as a whole or to buy it and sell off all the pieces to make a profit. Those professional dealmakers all passed on the Tribune. But current major shareholders, the Chandler family, were pressing Tribune board to buy them out quickly. In a rush to get the Chandler civil disruption out of the Tower, management threw in with a perceived guardian angel, Zell, at the last minute. That last minute has turned into the longest hour for Tribune employees.
April 24, 2009
The Tribune has been attempting to sell the Chicago Cubs, Wrigley Field, and its stake in a local cable sports channel for two years, ever since real estate mogul Sam Zell took the corporation private through a complex ESOP Trust deal. There had been a rush of potential bidders for the Cubs, but Zell attempted to play them all like Jack Benny's violin, giving the groups only piece meal information, and his high billion dollar expectations of a purchase price. The prize is a rare commodity, a major league baseball club. But as time went on, the purchasers did not waive their due diligence. They wanted to see the books, the real baseball operations ledgers, to see what the Cubs and Wrigley Field generated in cold, hard cash. After several rounds of bidding, the final bidder, Thomas Ricketts, the financial and brokerage tycoon family, allegedly bid $900 billion.
But before this transaction was even announced, Zell attempted to sell Wrigley Field to the State of Illinois. Then Governor Blagojevich, a big Cub fan, pounced on the idea that the State buy Wrigley Field so any new buyer would not move the team from Wrigley Field. That was an insane concept because part of the value and charm of the Cubs is the ball park, Wrigley, the second oldest venue in major league baseball. No bidding group wanted to bid without the park. But Zell wanted to get as much money as possible for his properties, so he wanted the State to buy Wrigley at an inflated price, and then saddle the new owner with a lease to pay back the State for the cost of the bonds needed to finance the purchase. The deal was so weak that the State's spokesman wanted the City of Chicago to waive its sales tax collection at Wrigley - - - which the city scoffed as insane. The State kept hyping the fact that Wrigley needed $250 million, then $300 million, then $400 million worth of repairs. At the same time, Zell was telling his bidders that Wrigley Field was in pristine shape, no repairs needed by the new ownership.
The State purchase of Wrigley Field quickly came to an end when Governor Blagojevich was arrested for public corruption charges on December 8, 2008. The most surreal charge was that the Governor was allegedly selling Obama's senate seat to the highest bidder. But also part of this criminal complaint was a charge that Blaggo demanded the Tribune management fire Tribune newspaper employees critical of the governor in exchange for the State buying Wrigley Field. It was alleged and reported in the Sun Times, that Zell was personally involved in these discussions. (Zell has refused to comment to the press on the allegations, including to his own flagship paper, the Chicago Tribune, even as his management has continued to fire partners left and right.) So when the Blagojevich trial begins, it is apparent that Zell will be at the very least, a witness for the prosecution.
The Tribune has been bleeding red ink since Zell took over management of the corporation. He brought in some radio consultants to run the paper, and they have been seen as jokes by industry trade press. In the end, the Tribune filed for bankruptcy protection in December, 2008 because it could not raise enough cash to make huge debt payments. The whole ESOP structured deal has turned the Tribune Corporation into a zombie company, one feeding upon the cash and red ink in a newspaper and media recession.
But things have gotten worse for the Zellites. The U.S. Bankruptcy Trustee has objected to the bankrupt Tribune continuing to use a consolidated accounting system with non-bankrupt entities like the Cubs. The Tribune system of vouchers, consolidated cash deposits, and intercompany debits-credits may mask the exact reality of business enterprise.
Early in 2009, the media reported that Ricketts and Zell were still negotiating the final purchase price, so the sale and transfer of the team would not occur by opening day. Opening Day came and went with no news. Then, buried in the schedules filed in the bankruptcy court, we have found that part of the Cubs sale impasse could be the fact that the bankrupt Tribune owes the non-bankrupt Chicago Cubs $770 million. A Trib spokesman alluded to the fact that the parties were discussing closing credits, but in reality, a buyer of a business or real estate would demand credits for accounts payable and/or repairs needed to the ball park. If the final purchase price was $900 million gross, the buyer would want the $770 million credited back from the Tribune otherwise the Tribune gets $1.67 billion in value. The buyer would also want some cash for the alleged repairs the State railed about in its bid for Wrigley. When you start talking about those size credits, Zell's billion dollar sale expectation suddenly turns into $230 million final purchase price, woefully inadequate to pay the next $800 million bond payment in June, 2009.
It gets worse for Zell. Ricketts family raised $405 million from their own resources. But the banks have failed to give them adequate credit to finalize any deal. So Ricketts recently floated the idea of a private preferred stock sale to raise another $100 million. One could assume that the purchase price for the team, Wrigley and cable stake is under $500 million (a buyer needs to have adequate capital beyond the purchase price in order to meet payroll, operating expenses, etc.) The deep recession and financial credit crisis has made leveraged purchase transactions rare. So it appears that the Ricketts bid has stalled and will possibly fail to materialize.
So the Cubs would stay the property of the Tribune, and a potential asset of the bankruptcy estate. Zell and his managers have not proposed any plan of reorganization to show it can be a viable company. Creditors can object and move to liquidate the Tribune to pare their losses. If that occurs, Bud Selig and the baseball owners would cringe . . . the bankruptcy court could sell the Cubs like it did with the Orioles, without any major league baseball approval.
It still gets worse for Zell. Ex-employees continue to sue Zell and the ESOP Trustee for alleged fraud and breach of fiduciary duty in the transaction that brought Zell to power. The Tribune employees stock in the ESOP is basically worthless since the bankruptcy filing; the Tribune owes billions more dollars than the value of their assets. There is also a federal investigation into the complex structure of the Zell transaction. And if the US Bankruptcy Trustee has reservations about the Tribune book keeping system, there will be other investigators who will seek to unravel the books in order to determine if there are other potential criminal or civil cases to be prosecuted.
Zell admitted recently on a cable business program that the private purchase of the Tribune was a mistake. Both current and ex-Tribune employees knew it was a mistake before that deal was finalized.
July 13, 2009
The first half of another disappointing season for the Cubs has concluded at the All Star Break. A lone Cub at the All Star game for a team just keeping a float in the NL Central.
The front office is in worse shape. The Tribune sale to the Ricketts family has taken more twists and turns than a season of LOST. One week ago, it was announced that the sale had been finalized and the agreement sent to MLB ownership for approval. Less than 24 hours later, the story was that no final sales agreement was signed, but an outline, called a term sheet, was sent to the commissioner's office to review a few unusual aspects of the proposed deal. This is highly unusual. Ownership usually receives a completed sales contract, and buyer's financials with a business plan to determine if the sale is to viable. The last thing the MLB team owners want is a club to go bankrupt. In 1993, the Orioles owner went bust and a bankruptcy court sold the Orioles without the consent of MLB to Peter Angelos, the highest bidder at an open auction.
Then less than 48 hours about the term sheet agreement surfaced, the Tribune acknowledged that it was considering a second big from the Utay group. This put the whole matter really back to square one. Ricketts and their advisors have been stuck for months on the valuation of the Cubs, especially the broadcast rights paid by the Tribune's WGN TV and radio. Complicating the matter is that the Tribune does not break a part its subsidiary units financial statements so it is hard to determine quickly how well an operating unit is doing. Further complicating the matter was a filing by bankrupt WGN, which listed a potential $100 million owed to the Cubs for unpaid or uncredited broadcast fees. This apparently is in addition to the %770 million Tribune credit due the Cubs from the Tribune's central accounting ledger. Those two credits equal or exceed the alleged bid price for the team, Wrigley Field and a quarter stake in a local cable channel. (The Tribune bankruptcy filings do not clearly state an opinion on whether the Cubs are actually owed the money, but it leaves open the suggestion that it could if the team was treated as a separate entity.)
So you go from one alleged winner of the blind bidding process after 18 months, to two bidders six months later after some more financial information is disclosed during the final contract negotiations. Zell and the Tribune have conducted the sale in such a strange and secretive fashion that it raises more questions and concerns to a potential buyer. Zell wants to keep a stake in the new Cubs to avoid capital gains tax on the sale. Zell wants to load the new Cubs up with debt to lessen capital gains tax on the sale, even though MLB has strict policies against large debt burdens on clubs (to avoid the owners fear of a team bankruptcy and loss of oversight and control.)
Today, another new twist. The Cubs could file its own bankruptcy in order to facilitate the sale. This would have to upset MLB owners to no end: bankruptcy courts can approve asset sales without league approval. It is a strange twist because the Cubs were making approximately a $30 million profit at the end of the 2008 season. However, a weak economy plus back loaded player contracts will take a financial toll on the club in the next few seasons. So why file bankruptcy?
In bankruptcy, a debtor can void executory contracts. Those are contracts whose performance and obligations are for future events. A baseball club could use the bankruptcy process and attempt to void long term, bad player contracts (Soriano, Bradley, Fukudome, Zambrano) and take off more than $200 million in obligations for the new owner. The bankruptcy court could also eliminate contingent or pending liabilities or contract breaches of the old Cubs, such as the agreement with the City of Chicago for the parking and retail development next to the ball park which is now more than five years overdue. But the most powerful tool a bankruptcy court has is to sell off assets to the highest bidder at a court auction, without major league approval.
The Tribune's own bankruptcy required that its creditors and the court approve any sale of the Cubs since it was wholly owned by the Tribune. However, that court and US Trustee have been strict in compliance with the technical rules and objections to the Tribune so far. The Tribune has yet to file a plan of reorganization. There is no business plan, with or without the sale of the Cubs, for creditors or the court to consider whether the sale of the Cubs would truly be in the best interest of the creditors, most of whom have been stayed from collecting any money for more than seven months.
The reason for a possible Cub bankruptcy would be to guarantee that the new owner would not have any contingent liabilities of the Tribune bankruptcy attached to the assets being sold. However, the Tribune's current bankruptcy case could provide that protection in the approval order. It smacks of judicial forum shopping. Further, there was a report that Zell may have used the Cubs as collateral for the loans he took to take the Tribune private. If that is true, then the secured creditors who have the Cubs as collateral, would be paid from the sales proceeds, and not the general unsecured creditors in the Tribune case. As such, those creditors would most likely file objections and seek the most money possible in order to see some recovery on their claims.
The long nightmare of the Cubs not winning a World Series is now beginning to pale in comparison with the long, strange, winding road of the Tribune's handling of the team and its potential sale.
August 22, 2009
In two weeks, the Cubs have fallen from first place to 7 games behind the Cardinals. When the Cubs starters pitch quality starts, the Cubs offense cannot get a hit. The team is in total free fall. And so is the Cubs management.
The Sun Times reported that the conclusion of the sale came after prolonged negotiations in which the Ricketts family and Tribune Chairman Sam Zell maneuvered for advantages. The negotiations bogged down as credit markets locked up because of the recession and a dispute arose over Tribune's evaluation of the Cubs broadcast deals with Comcast and Tribune-owned WGN-TV and radio. The Sun Times believes that the broadcast contracts with those stations will continue. And as part of the sale, the Cubs will file for a voluntary Chapter 11 bankruptcy. The parent corporation, Tribune, is already in a floundering Chapter 11 reorganization which has gone no where for the past nine months.
New Ownership of the Cubs will be a joint venture between the Ricketts' and Tribune, with the family having management control. Sun Times sources said Ricketts is providing about $450 million and raising $350 million in debt from bankers. The law firm McDermott Will & Emery, representing Tribune, said the company will get $728 million in cash.
Zell and the Ricketts family may believe they have a deal. But there is a LONG ROAD to hoe in order to get approval. As stated previously, the Tribune is under the microscope in three federal investigations. Tribune creditors have been so impatient with the progress of the Tribune and the declining fortunes of the industry that they have asked the bankruptcy court to hire a Washington D.C. law firm with experience in fraud and breach of fiduciary duty litigation to uncover issues in regard to Zell's ESOP privatization deal.
Here are some of the major stumbling blocks to the approval of the Cubs sale:
1) MLB owners and their counsel should have a major fit about the Cubs filing for bankruptcy protection, separate from the Tribune. The idea is to wipe out any contingent liabilities the Cubs may have back to the Tribune or Trib creditors, but the Real News review of the limited bankruptcy financial filings so far indicate that the Tribune owes the Cubs $800 million in internal accounting vouchers. The Cubs have their own creditors, including the family suing the Cubs for wrongful death in the wall case, plus the players, the league, and maybe more important, the City of Chicago who brokered the bleacher expansion in exchange for improvements that the team never started (so a huge breach of contract claim and bad blood).
a) In any bankruptcy, the court must approve any sale of assets after NOTICE and hearing of creditors or interested parties. A Cubs bankruptcy will need just as much scrutiny as the Delaware Tribune bankruptcy review of the sale. For example, in an $800 million sale, why is the Trib only netting $728 million when there is no mortgage or debt attached to Wrigley? What is the basis for $32 million credits against the purchase price to Ricketts LLC? Ricketts raised $405 million from stock sales so I do not know if those figures are quite accurate. However, Zell's opinion of franchise value of a billion dollars was way off. Forbes was right on with its $700 million valuation last year.
b) In any bankruptcy, the debtor must be insolvent in order to qualify bankruptcy relief. The Cubs appear not to qualify. If the team did qualify, (more liabilities than assets), then the bankruptcy judge will have a duty to marshall open bids for the team sale to maximize the amount payable to general creditors (MLB owners still cringe at the Baltimore Oriole sale nightmare that brought Angelos into the MLB country club).
c) By attempting to leave any bad debts in the Old Cubs corporation by selling the assets to Ricketts LLC, may have the backlash effect on the Tribune bankruptcy estate. As indicated, the Tribune and WGN financial statements show they owe the Old Cubs $800 million. For some unknown reason, every Tribune statement filing comes with a three page disclaimer on what any of their information means, including whether non-bankruptcy entities have claims for those pooled funds. One could assume that yes, the Old Cubs corporation would have a claim against the Tribune for those funds. Which means the Tribune's net proceeds of the Cubs sale could be LESS THAN the amount owed to the Old Cubs corporation! It may be a circular argument, but it is not totally clear who owns the Old Cubs corporation. When the Tribune bought the Cubs from Wrigley, it kept the 1879 corporation (it purchased the stock). Just before the Trib went bankrupt, Zell shifted the Cubs corporate assets into a new corporation or LLC. This smells fishy since there was no need to create a new corporation in order to sell the team, unless, underhandedly, the ownership of the New Cubs is not 100% Tribune.
d) by the Tribune retaining a 5 percent ownership stake in Ricketts LLC, creditors including the IRS could attempt to force the sale of that 5 percent stake in order to pay tax levies or other creditors. That means the bankruptcy court, having full power to sell an asset, even joint assets, at public sale, could unwind the Ricketts deal. A forced sale of the minority interest i) would trigger the juicy capital gains tax to a cash hungry federal government (a cool $60 million), ii) the prospect of Ricketts losing control of the team unless they re-bid, and iii) creating a default with the new secured lender. For example, husband and wife own a house together in joint tenancy. Husband goes bankrupt, wife does not. The bankruptcy court has the power to sell the joint house, paying 50% of the proceeds to non-bankrupt wife and 50% of proceeds of Husband to his trustee and creditors. That is why I would have never recommended Zell keeping any stake in the New Cubs organization.
2) Cubs fans should worry about the new ownership and the immediate need to increase revenue. As everyone is aware, the Cubs have tapped out every dime from Wrigley Field, merchandising, etc. With the deal keeping WGN in sweetheart contracts, there is no new revenue source from broadcasting to tap. That means it comes down to increasing fees to the consumers. Ricketts will need at least $45 million in new cash just to pay the Bank. (MLB owners hate the idea of a bank, a secured lender, being able to foreclose on a team or stadium in case of default.) In the only statement on the profitability of the Cubs we are aware of, after 2008 season, the Cubs may have made a profit of $12-15 million. That means Ricketts tenure will start at least $30 million in the hole in 2010.
a) The probability of season ticket holders having to pay $20,000 personal seat license fees to keep their tickets was floated yesterday. In this economy when corporate marketing departments have no budgets, to pay $40,000 to $100,000 just for the privilege of buying overpriced baseball tickets will not go over well. The individual family season ticket holders will drop out, too because that is college tuition for a year or two. People are hoarding cash today, not spending like drunken sailors to watch a bunch of losers stumble around a park playing a child's game.
b) It is absolute that ticket prices will have to increase in order to satisfy the lender that payments and cash flow will be sufficient to pay back the loan. That is $15 on every ticket for every game. For season ticket holders, that is another $1,215.00. Again, current ticket prices are at the breaking point for the average fan. Adding another $30 to $75 for a family to go to a game may just be too much.
c) I do not think the loan covenants will allow major outside the ball park expansion plans. We suspect any capital budget will be for renovation and maintenance of Wrigley Field and not the past due Triangle annex (car wash property development of parking, retail shops, Cubs museum). We suspect Ricketts may have to sell the Triangle property in order to raise cash to meet operating expenses, because the Cubs may not draw 3 million fans next season (based on the economy, ticket prices and the major disappointment and unlikeability of the 2009 squad). If the White Sox go far in the playoffs, the Cubs will draw even less.
d) The first priority of Ricketts is to increase revenue from Wrigley fast. Steve Stone once hinted that if he owned the Cubs, he had a plan to reconstruct the center field scoreboard. It is speculated that he meant that he would leave the outer shell, create a huge jumbo tron in the middle for advertising, and new center field skyboxes in the lower portion. The only other means of expanding revenue inside Wrigley is i) increase concession sale prices, ii) pay toilets, iii) expand the grandstands up and out toward the field to add seating, or iv) deck the bleachers (like old Tigers stadium) which would obstruct the roof tops and probably violate city ordinances. Since the bleachers are mostly a summer tavern, Ricketts could open the stands when the Cubs are not playing, sell beer to the yuppie scum, who don't watch the baseball games anyway. More concerts, corporate outings, tours . . . will all find neighborhood objections.
3) Richie Rich Syndrome. If Ricketts does get the franchise, what type of owner will he be? Writer Steve Rosenbloom was on the radio this morning and he went through the rogue gallery of stupid, inane, dumb Cub presidents, including Stanton Cook, McDoogie Houser, and Crane Kenney . . . saying that each of those dopes did nothing but impose themselves on the team without creating any value . . . that basically in lieu of a retirement watch, the Tower directors would send their executive losers to be President of the Cubs. Crane Kenney's last few weeks have been a nightmare, bringing friends to picnic in centerfield during batting practice to going into the players locker room, copping food from the buffet table, and trying to force himself into the situation. What for? Because he is the team president and had nothing to do. Tom Ricketts has the same potential problem of being an interloper: son of a rich financial magnet, now without a job at Ameritrade because the family sold its majority stake in that firm; he will have nothing left to do but be Cubs owner/president. He may have to do a Rocky Wirtz and axe all the old man's cronies in layered management to set the new tone.
The current Cubs management style was to be over kill in positions without any real responsibilities. Kenney has been lobbying HARD to retain his position with the Cubs. We'd kick his ass out the door. Ricketts will need to fire all vice presidents from field boss up the chain (just to save some money) and bring in his own people to broom sweep out the rat's nest of the Hendry baseball operations. Hendry signed himself to a long term deal, but we would kick him to the curb anyway. The one possibility if the Cubs do file for bankruptcy in order to wash liabilities, the new Cubs ownership may NOT WANT Hendry's contract or the Old Cubs in bankruptcy could VOID any executory contract (one with future performance) such as Hendry and management's sweetheart deals, and could include ill-timed, expensive dead weight player contracts like Soriano and Bradley (but the Players Union would have a riot if that occurred and the CBA talks would go nuclear.) But that is an option in bankruptcy court.
Sun Times reports manager Lou Piniella wants back for his last year, but that is not his call (club $5 million option). There are other, cheaper managerial alternatives. I believe Ricketts will not retain Piniella, but instead promote Sandberg to be his first manager, with Jody Davis as his bench coach. I would then reach out to G reg Maddux to be pitching coach (or if declines, spring training instructor to keep him in the organization until he wants to be a pitching coach).
So no matter how the newspapers report that the Cubs transaction is a done deal, it is far from true. Angry creditors, and IRS looking deeply into Zell's financial transactions, and the US Trustee's office suspicious of all the Tribune's accounting systems all have the firepower to de-rail this proposed Cubs sale. Also the fact that Zell keep beefing to the media that he was going to get a billion dollars for the Cub assets, and now feebly takes $728 million cash, those creditors waiting since December for a billion dollar loan payment or two may want the bankruptcy judge to really open the bidding to everyone in a bankruptcy sale auction. Also, MLB owners may also balk at the prospect of the Cubs being a heavily debt ridden franchise, with no real business model to increase revenue quickly to meet obligations. The owners cannot afford to bail out its members in this economy. The bottom line is that it is never over until it really is decided in the bankruptcy court.
September 26, 2009
The most un-reported aspect of the Chicago Cubs sale is contained in Exhibit F-4 to the proposed contract, under Certain Cubs Excluded Liabilities:
Any obligation, liability of Loss, whether civil, criminal or otherwise, of any Tribune Party of any of its Representatives related to or resulting from any discussion, communication, understanding or agreement between any Tribune Party and any state, city or other Governmental Authority in the State of Illinois, including the Governor's office, the Illinois Finance Authority and the Illinois Sports Facilities Authority, or any official or Representative thereof regarding the sale, lease, disposition, renovation or financing of Wrigley Field and any matters related thereto or resulting therefrom. Tribune Company has fully cooperated with the relevant authorities in connection with the matter and, as previously publicly disclosed, Tribune Company continues to believe that the actions of the company and its executives and advisors working on such matter were appropriate at all times. Further, there have been no material developments on this matter with respect to any Tribune Party over the past several months.
The corruption in the State of Illinois has been so bad that the US Attorney in Chicago has been pumping out indictments as fast an auto manufacturer produces cars. The Tribune and Sam Zell got caught up in one of the state power broker's public money plays when Zell was allegedly contacted by ex-Governor Blagovich representatives about selling Wrigley Field to the State in exchange for firing critical Tribune editorial employees. This pay-to-play scheme seems outrageous to outsiders, but it appears that anything and everything was for sale by public officials. Even admissions at the University of Illinois were run through the cess pool of clout, with unqualified students getting into the school over qualified candidates because of connections in the political leaders.
Buyer's counsel and advisors must be well aware of the sinkhole that the Tribune has positioned itself when dealing with the inner circle scum. In the realm of possibility is that the Tribune, its executives and/advisors could be indicted as co-conspirators in a scheme to use Wrigley Field in some sort of insider transaction, pay-to-play, dishonest government kickback scheme. Supposedly, Zell was interviewed by federal agents about the contacts he had with the ex-governor's office on selling Wrigley to a state sports facilities board. However, it is unseemly that Zell has never once talked to his own newspaper reporters to give his side of the story!
Just because there has been no criminal investigation reported in the past several months, does not mean the US Attorney investigators have dropped the case. The tanglement of public power and private gain is such a mess that it takes time to unravel the players, their motivations and their profiteering prospects. The kicker in the Wrigley sale to the state was that the price would have been inflated, paid by public dollars which more would be diverted to insider state contracts for renovation or management, while Zell raised desperate amounts of cash for the bankrupt Tribune coffers.
The worst case scenario would be that the foundation of a criminal enterprise was the sale of Wrigley Field to the state agencies. As a criminal enterprise, forfeiture laws could lend themselves to allow the federal government to seize Wrigley or other assets that were used as part of criminal scheme. However, even though the Wrigley deal never went through, an alleged conspiracy to commit illegal activity in itself is a crime.
The Ricketts bid of $845 million had to insure some sort of liability acknowledgment on behalf of the Tribune. But it may be hollow. The Tribune is still bankrupt, with no viable re-organization plan adopted by the court. In addition, one cannot contract away criminal or civil liabilities against law enforcement actions. If the US Justice Department wants to make an example of the alleged slimy dealings, it could put the Buyer of the Cubs in an awkward position of holding property that was part and parcel of an alleged criminal enterprise to defraud the public (and the teams' own taxpaying fan base.)
But this criminal investigation is not all the fine print in the pending deal. The Internal Revenue Service is in the process of auditing the Tribune, whose accounting system is Enron-like at best, with intercompany accounts and vouchers that have yet to be understood and fully explained to creditors. In addition, several tax experts call into question the structure of the Zell-Ricketts deal as one to avoid the Tribune's capital gains tax if it was a straight sale. If there was no sale, Zell could have mortgaged the Cub assets and received a substantial sum of money. In a provision that only tax lobbyists would love, if a company reorganizes its assets by transferring them to a new legal entity, maintains at least 5 percent ownership, and borrows against those assets and the mortgage proceeds is returned to the asset giver, so long as certain requirements are met (like keeping an ownership interest in the new company for five or more years), then no sales capital gains tax is due. Ricketts is putting in $400 million for 95 percent ownership, Tribune is putting in the Cubs assets for 5 percent ownership of New Cubs company, and it will borrow $425 million, and afterward, Tribune is pulling out $745 million (the net sales price). It sure smells like an arms length sales transaction. But the Tribune points out that it is an owner of New Cubs, and it guaranteed the New Cubs debt so it meets the requirements of the tax break. But critics point out that the Tribune's guarantee of new debt is worthless: the Tribune is insolvent and in bankruptcy!
So, the Cubs assets are subject to a criminal investigation, an IRS bankruptcy audit, and possibly an IRS tax lien on the sale, there is still more fine print that Cubs fans may never understand fully until the finances of the New Cubs falls down faster than Wrigley's deferred maintenance. In the business plan, it appears that after the Cubs sale is approved, the New Cubs organization will be at least $425 million in debt (principal) and another $35 million (capital working line of credit). The New Cubs will have $460 million worth of debt to repay quickly, in the 5 to 7 years at standard commercial note rates and terms. It could conservative mean debt service of at least $53 million per year. Now, it was reported that the Cubs only made a profit of $12-15 million in the 2008 season, when Cubs revenue and attendance was at its peak. With a gloomy economy and the 2009 season falling flat with a disliked team of underachievers and misfits, Cubs revenue would appear to be falling in the next few years. Expenses, especially the back loaded player contracts the Tribune approved (because it was selling the team) will rocket payrolls from $160 million to $200 million. The cash crunch on the 2009 Cubs was clear when the team could not add any player without equalizing the salary by moving other players to keep the payroll in balance. Just simple math shows that the 2010 Cubs will probably be operating at a loss of $40 million. In addition, the $35 million line of credit is woefully insufficient to pay the reported $100-300 million in renovation and repairs needed to Wrigley Field and the adjoining triangle parcel redevelopment promised to the city years ago.
Major league baseball owners still have to approve the Ricketts deal. MLB owners are fearful of two things: teams going bankrupt and IRS audits. Both are huge risks in this Cubs sale: the New Cubs company will be saddled with a large debt burden, slowing revenues and increasing costs (especially payroll). The New Cubs could be considered on paper insolvent from day one. If the New Cubs goes bankrupt, then the bankruptcy court could auction the team to the highest bidder, and another Baltimore Orioles sale to an unwanted person could happen. If the New Cubs team defaults, then the secured creditors could force a sale of the team which would cause additional chaos and management issues. If the IRS finds that there was a tax avoidance scam, it could level the tax and huge penalties and interest on the parties, and could collect by a levy against New Cubs assets. There appears to be no deep pockets as the Ricketts liquidated most of their shares in Ameritrade to raise the cash to buy, and the Tribune has no money to re-invest in the Cubs.
Then there is the concern of the Ricketts owning the team going forward. It was reported that Ricketts would retain all current Tribune-Cubs management, including GM Jim Hendry, whose off season signing of free agent Milton Bradley, for three times the market rate and for three years, would have gotten any other business executive fired for wasting $20 million in company funds. One would have expected Ricketts to have gathered up his own baseball expert advisors before he made his bid for the club. And those advisors would replace the existing management, so they would be loyal to the new owner. If Ricketts keeps the current management, then it is an endorsement of the marketing over baseball intelligence for the team; keeping the lovable losers has worn thin in the fan base whose expectations are now high after two playoff runs (and post-season collapses). The country club home team clubhouse culture needs to be changed at Wrigley. If Ricketts is merely a rich kid who needed a cool job, then he is no different that the Tribune executives who were booted out of the Trib Tower and into semi-retirement as President of the Cubs.
The new combination of Chicago Cubs and Ricketts creates the Chicago Cricketts, a potentially loud and obnoxious pest, much like right fielder Milton Bradley has been for the entire season until his suspension by the club (with pay).
Cubs right fielder Milton Bradley, left, played most of the season like an old man lost at sea. His potential new replacement, right, may be the new team mascot, a loud, annoying crickett.
March 13, 2010
Long time fans are uneasy after the Cubs sale was finalized with the Ricketts family. The family vowed to pour the profits of the team back into operations. However, they never said that they would be putting any more of their own family fortune into the club. With the massive debt load of the sale on the books, the Cubs realistically have to extract another $25 per fan per home game in order to break even. Ricketts said that the Cubs payroll would be the same as last season; but Hendry's contract overpayments for stars in the decline years, signing free agents before arbitrations completed, and trading garbage for some one else's garbage has left the roster bloated, inflexible and over budget.
Carlos Silva is the 2010 Cubs Poster Boy. He was horrible with Seattle last season. Injury plagued. Overweight.
Signed to a big fat contract to match his girth. The Cubs were so desperate to trade failure Milton Bradley, they had to take back Carlos Silva in return. Now that Number 2 starter Ted Lilly is on the mends from surgery (and could be out to May), and Rich Harden is gone, the Cubs rotation is short three players. The bullpen was a reconstruction project, too. Now Angel Guzman, whom Lou Piniella said was the key to the bullpen set up role, is lost for the season due to shoulder injury. Overpaid lefty John Grabow is not a closer if Carlos Marmol fails. There may be three rookies in middle relief before camp breaks at the end of the month. The Cubs bench is also very weak. Hendry signed out of work, beyond their prime candidates of Chad Tracy and Kevin Millar, who tried to score from third on a single last evening. He was slower than frozen molasses. He made Keith Moreland look like a track star. He was thrown out at the plate by such a wide margin that the catcher had time to balance his check book. But Millar appears to be a player without a position who will probably make the club because he has gray hairs like the manager.
It is shaping up to be one of those P.K. Wrigley teams. Several popular players, day light baseball, a nice day in the park, cold beer, a nice day in the park . . . and questionable prospects for the post-season. Now, considering that ticket prices have gone up dramatically this off season, and the team trying to squeeze every penny from fans (including a premium fee just to buy single game tickets early), the only improvements to the ball yard of note is that every single corner space is now going to serve beer. Yes, beer apparently is the business model for the Ricketts family. Sell more beer at the north side's largest tavern, Wrigley Field. More beer, more drunk fans, the push for more non-Cub use of the park for concerts will lead to more friction with the neighbors and other local businesses.
May 1, 2010
The season started with a scalping in Atlanta by the Braves. Carlos Zambrano, the ace of the staff, faltered worse than normal. It was an unknown precursor for a flat April that will probably cost the team any playoff hopes and their manager his final season swansong to glory. Cub pitchers, including Carlos Silva, rolled off a league leading measure of quality starts, but the Cubs offensive was still in hibernation or extended spring training. The Cubs could barely scratch .500 before falling back again and again.
The team came home to a disgruntled neighborhood. The new owners, the Ricketts, have decided that since they put in an alleged $10 million in repairs and maintenance to Wrigley Field, the people of Chicago should bow down to their new royal status. However, it is certain that most of that money went into revenue producing areas in the park. A new $28,000 per season ticket suite club from unsold luxury boxes. More beer vendor stands in every corner of the ball park. A new restaurant under center field with gourmet food prices and plexi-glass of the batting cages. And the move to have these new interior venues being open 365 days per year.
In addition, a new casino sponsor on the roof top across the street from the left field fence brought the anger of the new owners. They vowed to cover the left field fence with plywood. And just before the season started, they wanted a large Toyota sign be erected in the middle of left field. Ricketts thought the sign would be an easy sell and easy new revenue because since purchasing the club from the bankrupt Tribune has been finding as many money streams as quickly as possible. Freeze payroll. Squeeze more dollars from each fan. Add more competition to the neighborhood taverns and restaurants.
The city balked at the sign so it was not up and generating profits by opening day. The roof top owners across the seat were not happy with an obstructed view. In a fuming bitterness, Ricketts does not understand how landmark status means that outsiders have final control over any structural changes to his ball park. This may be the first time that Ricketts was told to take his seat and be quiet. The rich man's son has a long learning curve about running a noisy business in a residential neighborhood. Ricketts wants more summer concerts, and events during the winter months like Northwestern football.
Ricketts did not hire true baseball people to review the Tribune-Zell sales sheets. If he did, he would have known that he overpaid for a franchise that maxed out on revenue (with sweetheart locked in broadcasting rights through Tribune properties). The back loaded payroll is coming back as a ticking nuclear device. Hendry thought the new owner would open up the checkbook in the post closing euphoria of owning a franchise to spend, spend, spend just like the Tribune did not care to spend the new owners' money by signing Soriano, Zambrano, and others to outlandish contracts. Now, Hendry is trapped by his own freewheeling drunken sailor spending spree since Ricketts said he would put all the revenue back into the club (but more importantly, not put another DIME of his own money back into the club.) This expensive hobby must now sink or swim on its own revenue and expenses.
To further stick it to long term fans, Ricketts promised to move the spring training quarters from Arizona to Florida if Mesa and the state did not meet all of his public financing demands for a new facility. When the Naples equity ball park complex was announced, there was little doubt that Ricketts would make a decision solely on how much additional money he could get out of some snowbird city. With Arizona lawmakers balking at the taxation and development bonds needed to make the proposal work, the odds now shift away from Cub fans in Arizona to the Florida investors.
It has been a rocky opening month for the Cubs. The team's play has been as sporadic as their owners' vision for the team.
SEASON OF SORROW
September 5, 2010
It will be the September not to remember.
True Cub fans knew the season was over when the Braves scalped and burned the fort on opening day, 16-5. Moderate Cub fans knew the season was over when Carlos Zambrano imploded then wound up suspended due to mental problems of anger management. Casual Cub fans knew the season was over when manager Lou Piniella quit, and the team's farewell was another tomahawk loss to the Braves, 16-5. The Cubs have been giving up football scores to opponents all season long. Yet, GM Jim Hendry foolishly proclaims that he is only three moves away from the post-season. Yet, the 2010 Cubs were a sorry excuse for a professional ball team.
No one from the front office has apologized to the fans for the Cubs horrible season. It was clear that even though the emphasis from the new owners was to win a championship, the wave of expectations would not break the levy of top heavy payroll to put real players on the field. Ricketts said from the beginning that his family would not put in any more money into the team; it had to sink or swim on its own balance sheet, revenue and expenses. The Tribune management which stayed on with Ricketts blamed the old management (themselves) of the dead money contracts that will choke the club to death for the next five years. The only concern of the owners were more revenue sources: more advertising, more beer vendors, more expensive food venues.
Piniella knew the team was going no where. His bullpen was filled with overhyped underachieving minor leaguers that Hendry had acquired over the years. His prized prospects were all 88 mile per hour flat fast ball pitchers. Interchangeable batting practice pitchers is what the opposition found most of the time. Adding insult, the position veterans laid down and slept through the season: Soriano, Ramirez, Lee - - - dreadful seasons. The pampered veterans of the club house did not care as the hot days of summer came upon their woeful record. And Hendry avoids controversy by not having any minor league talent ready or able to compete for a starting job. Only 19 year old Starlin Castro displaced a more expensive player, Theriot, at short stop. Platoon outfielder Tyler Colvin spent most of the first half of the season collecting splinters on the bench because of the $30 million disasters of Soriano and Fukudome being showcased for other non-buying teams. The team began losing attendance at double digit rates in August . . . which hits the top line revenue number hard. So hard that Hendry was forced to trim $4.5 million in payroll (Lee, Lilly, Theriot, Fontenot) for mostly marginal low level prospects.
Owner Tom Ricketts was unsure about a raise in ticket prices for 2011. He said revenue is the key to what happens with the club going forward. The Cubs already have the highest average ticket price in the major leagues with one of the most inferior, frustrating products on the field. It is not even entertaining anymore. Fans came not to like the players on the team. Indifference has turned into hatred. They are tired of 3B Ramirez playing matador on routine grounders to third base; they are tired of the fundamental base running mistakes; they are done with hairpulling when pitchers cannot throw a simple strike; they are upset that the team cannot manufacture a run to save their own lives. How ownership can go to the well again and raise ticket prices will really tick off the seasonal base.
The real problem with the team may be with the new ownership. They just don't seem to realize what it takes to run a baseball team. And it appears they are tight wads in putting in any new capital. If they are cheaper than P.K. Wrigley, then the team is doomed. But at least Wrigley had the sense to apologize after a dreadful season.
THE OFF SEASON
October 31, 2010
Ryne Sandberg did more than any Hall of Famer was ever asked in order to prove that he was major league managerial material. He spent four years in the Cubs minor league system. At every level, he produced; his teams won. He was developing talent. He was respected by the prospects. He had the credentials to have authority over his teams and earned the respect of his peers by being named PCL Manager of the Year.
So when Lou Piniella retired, it was thought that Sandberg had completed his apprenticeship and would join the big league squad. But GM Jim Hendry put third base coach Mike Quade at the helm for the end of the season. With no pressure, the Cubs reverted to a winning record - - - which Hendry used to convince the new owner to let Quade continue to manage the team.
It is no secret that Hendry never wanted Sandberg to manage the Cubs. He never thought that Sandberg would go manage Class A ball in Peoria. But what really burns fans the most is that Hendry's insecurity led him to keep Sandberg under contract during the interview process so Ryno had no opportunity to seek employment in Seattle, Toronto or any other club that started their searches at the end of the season. It seems like a petty dig at Sandberg to justify not hiring him by saying to the world look, no one else hired Ryno to manage. But true fans will realize that Ryno would not get a job easily because Hendry blocked him from the winter job market.
It is going to be a bitter pill to swallow for naive Tom Ricketts. Those empty bleachers in August and September may turn into empty bleachers in May, June and July next year. Quade has been in the professional baseball profession for 17 years. And the Cubs are the only team during that entire time frame that interviewed him for the top spot. And it turns out that Quade is part of the LSU connection of Hendry and Asst. GM Randy Bush. The old boy network was at work again, and this time Sandberg was the punching bag.
In a macabre way, Hendry got his friendly club house spy to sooth his own ego. Quade looks like Uncle Fester from the Addams Family. It will only be a matter of weeks next season when the Cubs country club clubhouse returns to form, as high priced veterans in the decline of their careers refuse to put out any extra effort since they do not have to . . . they are dead money payroll with no trade contract clauses. It is like early retirement in a party town. And the sitcom mentality is on the season ticket holders, who will get stuck with more premium game prices. For example, next season a prime bleacher ticket will cost $81! Oh, well . . .
August 14, 2011
There may have been some causation between the arrogance of the engineers and crew of the Titanic and their ultimate fate in the history books. Likewise, when Cub general manager Jim Hendry said he was only two or three pieces away from a championship team this spring, little did we know that the three little pieces were only PITCHING, OFFENSE and DEFENSE. Other than those three areas, the Cubs are fine.
Before the Tribune sold the Cubs, Tom Ricketts took his father to a rooftop for a game. He told his father that the Cubs were a great business; that the team sells out whether they win or lose. The fans continue to come out to have fun. Ricketts made those naive observations at the peak of the Gen X bleacher party days in a heady economy that was just about to burst. Ricketts believed that Cub fans were perennial sheep; they would continue to come to Wrigley Field, their baseball church. They would continue to buy overpriced season tickets. They would continue to support the team. They were hypnotized by the Lovable Losers from their collective youth.
But the Cubs started off poorly, again. The excuses poured out like the constant thunderstorms that plagued the Midwest this year. Even normally quiet Marlon Byrd ripped the fans when they started booing his poor play. He got into a long, loud argument with a fan. The players have been in their own country club lounge cocoon for years. There has been no accountability so there was no pressure to really give 100 percent on a daily basis. The new coaching staff were minor leaguer rookies for whom the players had little to no respect. The inmates continued to run the asylum not realizing that the fans were demanding more from them.
Cub management thought that the rubes from Iowa, the large group bus trips, would continue to flock to see the team even in the worst of times. Those corncob fans would take a full section at a time during summer homestands. But this year, one could see the last section in the lower bowl empty; and complete sections in the upper deck collecting dust. The Cubs did not forecast the rough economy, high gasoline and food prices, and a very unlikeable team. The groups stopped buying large blocks of tickets. A game sell-out is now a rarity. Once a seat goes unsold, that money is lost to ownership.
In panic moves, management has tried to bring more fans into the park. Massive email advertising through MLB. Bleacher giveaways of food or beverages during night games. Tours of Wrigley by ex-players to drum up more interest and a few more dollars. By the time school was out (and not excuse was gone), a Wrigley vendor said that he was selling around half the amount of beer trays he used to do. Even when people are coming to the park, they are not spending the anticipated $50/head in concessions that Ricketts had been counting on. Saddled with huge deadwood no trade contracts, a heavy debt load from overspending for the team, the new ownership has to be losing money from club operations. And since old man Ricketts said at the beginning, the family would put no more capital into the business, the Cubs had to be self-sufficient. The team is not. That is why Ricketts made a blunderous attempt at getting the state to pay from Wrigley renovations in a another crazy tax swap scheme. It was blown out of the water faster than a hungry shark in JAWS.
The mistakes from the Zell-Tribune era remain with the current Cubs because Ricketts refused to spend any money on hiring his own baseball people to give him independent guidance. Ricketts insulted the intelligence of fans when he said he did not believe in hiring a baseball guy to oversee a baseball guy to oversee another baseball guy. But that belittled the point: the Tribune executives that remained with the club were not qualified to run a baseball team as a business. President Crane Kenney was a Tribune suit who has convinced Ricketts that he is important as they pal around to out of town venues. Hendry has been around for a dozen years and it shows that he is not qualified to judge, draft, develop or assemble talent year in and year out like other organizations. He traded away the system's four best prospects to the Rays for starting pitcher Matt Garza who has struggled in the National League. And when the Cubs promote prospects, rookie manager Mike Quade, Hendry's yes-man on the bench, refuses to play them at the expense of veterans.
Cub fans have changed from being passive to downright angry. The team's lack of hustle, lack of fundamentals, lack of leadership and lack of vision have turned the majority of fans into harsh critics. Lifelong fans have been imprisoned by the promises of hope and change with each passing spring training. But this season has been a non-stop train wreck. And the excuses fell flat. Hendry said that the Cubs got hit with significant injuries at the beginning of the season. But other teams had their share; including the lowly Pittsburgh Pirates who had 10 opening day players on the DL but still clawed their way to first place in June. Yes, the Cubs have been chasing Pittsburgh all season long. If not for the horrible Houston Astros, the Cubs would be the worst team in the majors.
The Cubs continue to baffle viewers with new ways to lose: walking the bases loaded then throwing a wild pitch to end the game; dropping routine fly balls; running yourself out of an inning; getting thrown out at home plate time and time again; making two errors on one play; or having the opponent score two runs when the ball never left the infield. It is beyond mind boggling: it is madness.
But nothing changes. Quade does not punish veterans for boneheaded plays, lack of fundamentals or total lack of interest during games. No, manager Q only has anger for youngsters like Castro and Barney when they make a rookie mistake. It instills bad habits, lack of credibility, lack of respect through out the team when the manager and coaching staff has no authority (actual or implied) to discipline the millionaire malingerers in Cub uniforms.
The days of brain dead, Cub kool-aid drinking fans are over. The Cubs attendance is likely to drop from 10 to 15 percent this season. People have stopped watching, too, as the local Comcast sports network is now showing more games on its extra channel which is not on all Chicagoland cable systems. With Ricketts in the shotgun seat, Hendry filled up the car with gasoline cans and sped toward the canyon rim at 75 miles per hour. They are currently airborne in the middle of the canyon at the pause in a Roadrunner cartoon. But Tommy Boy is just here enjoying the ride. The more he speaks to the media (which is getting harder and harder), the less intelligent he sounds. He lacks any vision, guidance or basic understanding of why his team is playing so badly. He has delegated all the operations to his employees, whether they are competent or not at their jobs. Ricketts apparently never wanted to run the team, just buy it for the status and fun of owning one like a rich kid getting a gold and diamond studded hobby horse for Christmas.
There are many people not qualified to be on the Cubs. According to the team, star pitcher and leading head case Carlos Zambrano was placed on the 30 day disqualified list for leaving the team during a game after he was ejected for throwing at Chipper Jones. The Braves had hit a modern record tying five home runs off Zambrano in the game so his batting practice outing had to come to an end. But Z packed up his locker and told attendants he was contemplating retirement. That comment brought a Cheshire grin to Hendry would would be off the hook for another $34 million if Zambrano really retired. Alas, Z's agent told the Cubs that his client was not retiring, so the team did the next best thing: suspending him without pay for 30 days. That means Ricketts gets to keep around $2 million which helps off set the sagging revenue streams at Wrigley. But it also means that Hendry will have to parade another round of gawd-awful washed up and incompetent starting pitchers for the next month.
From all speculative accounts, Ricketts is the new P.K. Wrigley. A cheap, hands-off caretaker who will let sleeping dogs lie.
So that means that in all probability Kenney and Hendry will return for next season. Ricketts is not going to eat millions of dollars in executive and coaching staff salaries to blow up the organizational chart and start from scratch with an experienced (thus expensive) club president. The names of old school builders like Pat Gillick, Bobby Cox or Jack McKeon are too old to start a five year rebuilding project. For the Cubs to change the structure and culture, the entire organization needs to be wiped out and rebuilt player by player. And at each level of the minor leagues, a set training program will have to be put into place, with accountability, in order for real development of prospects to come to light. Ricketts does not have the stomach or mind to oversee such minute details to create a championship organization.
Instead, he will let his inherited help continue to guide the club through their new buzzwords like investing in minor leagues. It is one thing to spend more money on unproven talent, but just by spending more money does not equate to spending wisely. In the last two years, the Cubs have overdrafted players in the first round and thus overpaying them when other teams would have rated them 5 or 10 rounds below. Hendry is paying over-MLB slot bonuses on lower round prospects so he can sign them. Hendry is a spendthrift with money; spending for spending's sake. Look at the major league roster: the huge contracts on Zambrano, Soriano, Bradley (since dealt), Ramirez . . . unmoveable at the trade deadline.
But Ricketts has appointed Hendry the captain of the Cubs ship for the foreseeable future. And that is what is more upsetting to Cub fans than the team's actual record.