Live at CubsCon: Cubs Business Operations Update
President of Business Ops Crane Kenney takes the stage to welcome a sizable crowd. Says they usually start by taking questions, but instead they’re starting with a short presentation this time.
Crane gets a smattering of applause for reference to going to Notre Dame. Talks about his history with the team, starting out representing them as a young lawyer. His job has always been trying to grow the business as fast as he can to support baseball ops.
He calls the Cubs a “100-year-old startup.” Like most start-ups, they started in an old garage (meaning the new front office space, which used to be a garage). They had to build the business side from scratch. 165 of 277 members of the Cubs team have been hired in the last four years—60 percent of workforce.
The goal is to become the best organization in baseball on and off the field. He offers a big thanks to the crowd for their loyalty and support.
If the Cubs are a start-up, then the fans are the investors. Your investment is helping build the team.
So how do you become the best off the field? By better serving fans, better serving players, better serving partners, better serving communities and giving the team the resources it needs to win a championship.
They did an in-depth study of how companies like Nordstrom’s, Starbucks, etc. provide customer service. Talked to 9,000 fans, 500 ballpark staff, then engaged the Disney Institute to help train the team.
To be the best, the also need first-class facilities for players to train, rehab, prepare for games, etc.
The Cubs have four principle facilities: Wrigley Field, administrative offices, Spring Training facility, Dominican Academy. They’ve made great strides in the last three.
Wrigley Field is still the best ballpark in America. The Ricketts family is ready to invest $500 million in the stadium and surrounding areas without public support. Kenney says not many teams do that. References how the Braves announced they could no longer play in their 17-year-old obsolete ballpark (to some laughter).
Thanks for mayor, City Council and Cubs fans for their support so they can stay at Wrigley for the foreseeable future with the operating flexibility they need. They’ve had lots of meetings in the last year.
They’re done with the night game ordinance, done with the landmark approvals, done with the zoning for the ballpark and plaza, done with the approval for new signage inside and outside, done with the traffic and parking plan and done with security/sanitation issues. So what’s the hold-up?
The remaining issue is the rooftops. They need to settle four issues:
1. Enforcement of current capacity limitations
2. Protections against ambush advertising
3. Ability to expand and add bleachers and signage
4. No lawsuit
There’s been lots of progress in last two weeks.
Kenney calls the rooftops a $20 million yearly drag on their business.
So which comes first—championship baseball or an abundance of economic resources? It’s a chicken-or-egg question. Every day, they’re thinking about how to outpace the other 29 teams, to grow the business and to put the best team on the field.
The Cubs play in the third-largest media market in an iconic ballpark. They’re the No. 3 tourist attraction in Illinois. They’re ranked fifth in baseball in revenue, which they’re using to make long-term investments. The vast majority of the revenue goes to building the major and minor league system. Kenney touts the minor league growth. The Cubs are No. 1 in MLB in spending on first-year and international amateur talent.
Kenney says just about every system at Wrigley needs maintenance and upgrades just to keep the team standing still. They can’t keep putting Band-Aids on the stadium.
Taxes are also a big drag. Of the five team-owned stadiums, the Cubs pay 17 times what the Giants pay in amusement taxes and three times what the Jays pay. The Red Sox and Dodgers pay no taxes.
Revenues come from gate receipts, media rights, corporate partnerships, and non-game revenues.
Gate receipts: The Cubs have held tickets prices flat for the fourth-straight year. They’re not looking to add new seats, but they do want upgraded seating options. Kenney also talks about moving to digital tickets.
Media rights: The WGN contracts expire after the 2014 season. They expect to have an announcement on the radio contract before opening day. They’re very thankful for the relationship with WGN. The Comcast contract expires in 2019. He says he wants to continue the relationship with WGN but can envision a smaller relationship or moving elsewhere.
Corporate partnerships: Kenney touts the Under Armour partnership. They’re looking to add other partners like it to provide a resource advantage. They will be adding a video board in 2015 for highlights, replay, etc.
Non-Game revenue: This can generate significant revenue for the club when the team is not in town. Corporate events, concerts, other sporting events, etc. The Cubs love this revenue because they don’t have to share it with the other clubs. Baseball-related revenues get shared throughout MLB.
Kenney finishes by talking about Cubs Charities and being a good neighbor. This includes the Fitness Trolley, Scholars Program, Diamond Program, etc. He feels they’ve made some good progress on being the best off the field, but they’re making the long-term investments to be the best on the field.
Kenney thanks the fans and brings up Mike Lufrano, Carl Rice, Colin Faulkner and Alison Miller for a question-and-answer session.
The first question is, of course, about Clark the Cubs, the new mascot and will they consider getting rid of him. Miller’s response: Clark took 18 months to develop and is here to stay.
One fan wonders why parts of the Wrigley rebuilding plan, specifically the player facilities still haven’t been started. Carl answers about getting things settled with the city and preemptive construction issues. But ultimately they need the whole plan done before they get started. Lufrano says they think they’re getting close with the rooftop owners. Rooftops have said if they don’t reach a resolution, they plan to challenge the zoning—in other words, the entire restoration of the ballpark.
One fan wants starter Wrigley vines for his house.
Fans want to know why the club can’t build a strong minor league system while winning at big league level. The answer: They’re working on it. But it all starts with building a strong internal foundation. He says 2003-08 was fun, but those big contracts hurt the team.
That’s it for business. Next up is the Meet the Skipper session.