In 2009, they found a buyer for the Cubs – the Ricketts family. They bought the team for $845 million. Since the Tribune had bought the Cubs in 1981 for $20.5 million, they were on the hook for a large tax bill. They tried to avoid paying it by using a leveraged partnership instead of an outright sale.
Fast forward seven years to today. The Cubs are now worth $2.2 billion and the favorite to win the World Series.
I wonder if the Tribune wishes it held on?
While the Cubs made the Tribune $824.5 million over 28 years of ownership, the Ricketts family made $1.355 billion over just 7 years of ownership. To add insult to injury, the IRS is still pursuing them for $225 million in back taxes. The IRS considers the leveraged partnership to be a disguised sale.
Why did the Cubs explode in value during the last 7 years? The progress on the field had little to do with it.
The key is Tivo.
Tivo pioneered the concept of fast-forwarding live TV, time-shifting, and binge watching. Commercial TV has lost much of its value to advertisers. The one exception is sports – people will still view them live, without fast forwarding.
Out of all sports, baseball is the one that has the most broadcasts during a season. TV networks and channels started bidding to win the right to telecast baseball, and the TV money exploded, along with team values.
The Chicago Cubs have always been one of the most watched teams, and are in one of the most TV-friendly markets in the country. As a result, their economic value was especially affected.