For the Chicago Cubs, Winning at Long Last Might Create a $4 Billion Franchise

(Bloomberg) -- In March 2015, a few months after the Chicago Cubs declared themselves ready to try to win again, Crane Kenney, the team's president of business operations, described his role this way: “Basically, my job is fill a wheelbarrow with money, take it to Theo’s office, and dump it.” He was referring to Theo Epstein, the team's president of baseball operations and the man who has now put together World Series winners in Chicago and Boston, ending a pair of legendary championship droughts.

After years spent gutting the Cubs from top to bottom, Epstein now looks well positioned to win for years to come—and that wheelbarrow full of money is only going to get bigger. "I would expect sustained growth over the long term really unlike anything we’ve seen," say Peter Schwartz, a consultant on strategy and business valuation for Anderson Economic Group who was studied franchise finances in baseball. "The Cubs will be a freight train."

Franchises typically see a 20 percent increase in overall revenue in the season following a World Series win. The Cubs, by Schwartz's estimates, will see less of a bump in the short term—closer to 15 precent—because Wrigley Field already sells out, allowing less room to increase ticket revenue. And while Cubs World Series merchandise is selling at a record pace, the team has to share most of that revenue with the league's other 29 teams; the Cubs get to keeps all the proceeds only for gear sold at or near Wrigley. In the longer term, however, the Cubs are likely to see revenue increase by hundreds of millions and could soon become the second-most valuable team in baseball, behind only the New York Yankees.

The Ricketts family, who purchased the Cubs for $845 million in 2009, along with Wrigley Field and a minority share in Comcast SportsNet Chicago, could see the value of those assets rise to around $4 billion by 2020, according to Schwartz. Three years ago, Bloomberg estimated the total value of the Cubs at $1.32 billion, the fifth most in baseball, with annual revenue of $320 million. (Schwartz worked at Bloomberg at the time and helped to compile its franchise valuations.) That was before the team started winning again and before it began an ongoing $575 million renovation of Wrigley, with new bleachers seats, signs, and video boards in the outfield already in place and suites at Wrigley and a 175-room hotel just outside the park still to come. These new amenities are coming to market at just the right time. 

Back in 2015, the Cubs' Kenney estimated that the Wrigley improvements, along with the updating of everything from ticket sales to sponsorships under the Ricketts, would add roughly $100 million in annual revenue to the team's coffers. After the World Series victory, that figure seems modest. "It’s like what happened to the Red Sox in 2004," says Schwartz, "but it will be on a bigger scale, because now teams can derive revenue through more sources than they did back then and Chicago is an even bigger market with an even longer drought." The Cubs organization, which declined to comment for this story, has also lined up its local TV deals to expire in 2019, when it will have a chance to launch its own regional sports network, which itself could be worth billions.

The lovable losers are no longer losers. The Cubs are now a powerhouse franchise to rival any in sports.

To contact the author of this story: Ira Boudway in New York at iboudway@bloomberg.net.

To contact the editor responsible for this story: Aaron Rutkoff at arutkoff@bloomberg.net.