Franchise Value of the Cubs

I was quoted in a recent Chicago Tribune story on the value of the Cubs franchise.

Wrigley Field casts a long shadow as prospective buyers review the Cubs’ confidential financial records and prepare the next round of bids for the stadium and team.

At issue is not whether the Cubs will remain at the beloved, 94-year-old ballpark, but how much it will cost to preserve and enhance Wrigley. The price that the franchise and stadium fetch will depend largely on how much more revenue can be wrung out of Wrigley.

“The franchise value is a guess on what future profits will be,” said Phillip Miller, an associate professor of economics at Minnesota State University-Mankato, who has studied baseball economics. “If you have to gut the place in the extreme case, that would affect the value.”

Bidders aren’t publicly discussing their plans for the stadium because the sales process is ongoing. But their concerns go beyond maintaining the stadium in a safe condition. Fans and players have expressed the desire for more modern amenities, such as a larger clubhouse and more space for concessions and bathrooms, without losing the vibe and charm of the old ballpark. If a new owner has to privately finance such improvements, fans could see higher ticket and food prices, and even the stadium’s sacrosanct name replaced with a corporate sponsor.

Fans would bear higher prices partly because of the honeymoon effect associated with renovations that improve the fan experience, but better amenities for players wouldn’t directly affect the prices fans pay. If anything, it could attract more players to Wrigley, possibly decreasing the salaries the Cubs pay at the margin (a compensating differential).

Cross-posted at Market Power

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Author: Phil Miller

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