Holy Cow! The Chicago Cubs Finally Have a Winning Business Plan
When Jon Lester came to visit the Chicago Cubs the week before Thanksgiving, the team brought him to its brick offices a couple of blocks north of Wrigley Field. Lester, a 6-foot-4 left-handed pitcher with a devastating cut fastball, was one of the prize free agents on the market. Crane Kenney, the Cubs’ president for business operations, showed him a table-size scale model of Wrigley as it will be when the team finishes a $575 million renovation, with restored ironwork and terra cotta on the exterior, a jumbo video board above the left field bleachers, and a Cubs-branded hotel across the street. On a 108-inch touchscreen, Kenney brought up illustrations of the new clubhouse, which will have a 200-seat auditorium along with its dining, recreation, and weight rooms. “The Yankees will have a slightly larger clubhouse than ours,” Kenney says, reprising the same presentation four months later, “but at 30,000 square feet, we’ll be the second-largest.”
The bulk of the spiel came from Theo Epstein, the Cubs’ president for baseball operations and the guy responsible for putting together a winning roster. He made a virtue of the Cubs’ failure to win a World Series since 1908. Epstein says, “We told him how he could help deliver one of the most significant championships in the history of sports and how we felt like we weren’t too far away.”
Lester’s a Cub now. In December he signed a contract for $155 million over six years. Lester, Epstein recalls, kept repeating “over and over that if we win here they will burn the city down again.” It was that possibility more than any new clubhouse that landed the pitcher.
His signing was a loud announcement that the Cubs, coming out of one of the most thorough demolition jobs in baseball history, are ready to compete again. Since the team hired Epstein in October 2011, they’ve won 200 games and lost 286. In 2012 they lost 101 times—their worst season since 1966. “I don’t think you can ever succeed lying to your fans,” Epstein says of the lost seasons. “So we told them, ‘Right now we are in a mode where we are trying to do everything we can to acquire young talent. And we are doing it because we want to create a perennial contender.’ ”
The overhaul was not only on the field. In the past five years, the team has doubled the size of its front office and updated almost everything about its operations, from ticketing to media deals. It’s built new training facilities in the Dominican Republic and Arizona and begun the largest renovation in Wrigley Field’s 101-year history. The reboot started when the bankrupt Tribune Co. sold the bankrupt Cubs to the Ricketts family in October 2009. Tom Ricketts—with his parents, Joe and Marlene, and three siblings, Pete, Laura, and Todd—paid $845 million for the team.
In the Tribune media empire, the Cubs were programming for cable superstation WGN-TV. The company bought the team and the ballpark from cash-strapped William Wrigley III for $20.5 million in 1981 and paid them both about as much attention as it did to reruns of Cheers. William had been the third generation of Wrigleys to own the team. Like his father, P.K., he treated the Cubs as a vehicle for selling afternoons of beer and sunshine. “The grass would be so green, and the ivy so lush, and the sun so bright, and the Old Style lager so cold, that people wouldn’t care what the scoreboard said,” says George Will, the Washington Post columnist, who’s been a Cubs fan for more than 60 years. The Rickettses are trying to run the Cubs like a modern baseball team. It’s a novel approach for the Lovable Losers, who now have the chance to contend year after year, and maybe even win a World Series.
When the Rickettses bought the Cubs, the team was coming off of three straight winning seasons. “I’ll be honest: I think we have a team that can do it next year,” Tom, the team chairman, said at the press conference announcing the purchase. The on-field performance, however, papered over institutional rot. Under Tribune, almost every dollar of the budget went to player payroll. Big-name free agents kept fans coming through the turnstiles and tuning in on TV; everything else was neglected. “We basically had this asset that was in a time capsule for 30 or 40 years,” Kenney says.
The Cubs spent just $10 million a year maintaining Wrigley Field. Nets kept chunks of concrete from falling onto fans from the upper-deck roof. Trailers housed media relations, information technology, and human resources. The team’s servers were protected from water leaks by a “rain hat,” Kenney says, recalling a tinfoil bonnet devised by a co-worker. Group ticket sales were recorded in triplicate using carbon paper. Season ticket renewals were done by fax. The staff tracked progress by how many times they refilled the fax machine.
In 2010, Kenney presented Tom Ricketts with a list of 12 projects that would all cost a lot of money and make enemies. It included the stadium rebuild and a large turnover of staff. “My hope was that he would say, ‘I’m OK with one, five, eight, and eleven,’ ” Kenney recalls. “Instead he said, ‘Let’s do them all.’ ”
Kenney joined Tribune in 1994 as a lawyer helping to buy and launch radio and TV stations. He was general counsel for the company in 2001, when the Cubs proposed a 2,600-seat addition to Wrigley’s bleachers, sparking a legal war with business owners who’d turned the rooftops outside the field into game-day bars. Two years later the company put him in charge of the team.
Kenney’s baseball knowledge was minimal (he’d been a swimmer at Notre Dame). Balance sheets were his specialty. The day he discovered that major league clubs share financial information with each other was “Christmas morning,” he says. “If you ask me what did the Braves take in last year in concessions, I can tell you.” He waves a thick pile of bar charts. “What did the Red Sox spend in player development? I can tell you.” (He won’t, though, because teams don’t disclose this information to the public.) He’s sitting next to the model of the new Wrigley in the Cubs presentation room. At 52, he still has a swimmer’s physique and strawberry-blond hair, but his beard is graying.
Looking at the numbers in 2006, Kenney saw the broken business and the model for fixing it. The Boston Red Sox looked a lot like the Cubs, except richer. “Why is it they’re producing so much more revenue than we are, in the same cramped little ballpark, in the same-size market, with the same fan base?” he recalls asking himself. He set out to create the Red Sox of the Midwest. “The road map in many ways has already been paved,” Kenney says. “The Red Sox have done it by renovating their old ballpark, redoing their media rights, putting a better product on the field, and bringing more marketing into the ballpark.” Tribune, however, was in no rush to fix the team. And the rooftop owners were happy with the way things were.
The rooftop scene started in the 1970s with a few Weber grills and cases of beer on top of apartment buildings across the street from Wrigley’s outfield. By the time the Cubs proposed the bleacher expansion in 2001, the bars had become a cottage industry with bleachers of their own, liquor licenses, and more than $10 million in annual revenue. The rooftop owners didn’t want their views obstructed, so they donated tens of thousands of dollars annually to city aldermen, who began the process of landmarking Wrigley—a designation that would allow the city to block changes to the ballpark. The Cubs resisted. In 2002, looking for leverage in a losing political fight, the team sued rooftop owners for copyright infringement and unfair competition. When negotiations ended in early 2004, the city got its landmark, including protection for the “uninterrupted sweep of the bleachers,” but it allowed the Cubs to add 200 premium seats behind home plate and more night games to the schedule. Under a 20-year agreement, signed days earlier, the rooftops pay the Cubs 17 percent of their sales in exchange for limits on changes to their views. So far, the rooftop owners have paid about $4 million per year. It hasn’t been a great deal for the Cubs. By their reckoning, the landmark restriction has cost them as much as $30 million a year in lost revenue from outfield advertising.
While the rooftop dispute unfolded, Tribune was crumbling. Sam Zell, a self-described “grave dancer” who specialized in distressed real estate, had bought the debt-laden company for $8.2 billion in 2007 and let the world know that the Cubs were for sale. The Ricketts family won the bidding in January 2009. When the sale closed nine months later, they got the team, the stadium, and 25 percent of Comcast SportsNet Chicago, the cable channel that carries many of its games. Almost any new owner would have been welcome under the circumstances, but these were a Cubs fan’s fantasy come true.
Joe, the father, made the family fortune as founder of the discount stock brokerage now known as TD Ameritrade. Tom, 49, runs the team day-to-day. Before the purchase, he was an options trader and Cubs bleacher bum. (He met his wife, Cecilia, in the center field seats in 1991.) Columnist Will calls him “the first worthy and serious owner” since William Wrigley Jr. died in 1932.
Ricketts kept Kenney on as resident bad guy. Ricketts, the superfan, would be the cuddly face of the Cubbies, while Kenney, the corporate lawyer from Tribune, would swing the elbows. Kenney was already the guy who’d sued the neighbors and sold bleacher naming rights to Bud Light. When the Cubs wanted funds for a new spring training ground in Mesa, Ariz., he threatened a move to Naples, Fla. (Mesa eventually paid $99 million for the largest spring training complex in Arizona, opened last year.) When WGN Radio, a Cubs broadcaster for 90 years, dragged its feet on a deal, Kenney moved the team to WBBM.
During the ownership limbo, Kenney had made several failed bids at public financing for a major Wrigley renovation. Now, with backing from Ricketts, he tried again. In 2010 the Cubs asked the state to put up $200 million by drawing from city and county amusement taxes already levied on the team’s ticket sales. Rahm Emanuel, the former White House chief of staff who was elected mayor of Chicago the following year, was central to the proposed deal. But in May 2012 the New York Times got hold of a copy of a document called The Defeat of Barack Hussein Obama: The Ricketts Plan to End His Spending for Good. The proposal, commissioned by Joe Ricketts, an active Republican, called for spending $10 million in PAC money to rehash the Reverend Jeremiah Wright controversy. While Tom tried to distance the family from the proposal, Emanuel, according to the local newspapers, wasn’t amused. Tax money was off the table. “That one ended poorly for us,” Kenney says.
The Cubs decided to foot the bill themselves. Still, they had to get any major changes past the city landmarks commission and deal with the rooftop owners, whose contract with the team doesn’t expire until 2023. In January 2013, after months of negotiations, the Cubs put forward a plan they thought was palatable to everyone. It called for a 6,000-square-foot video board in left field and a smaller, neon-script advertising sign in right. The proposal won approval from the landmarks commission that summer. The rooftop owners, however, were still threatening to sue.
Last May the Cubs gave up trying to appease the rooftops and went ahead with a more ambitious plan, including two video boards and five signs. The landmarks commission approved it in the summer, though with a slightly smaller video board. The Cubs also brought the blueprints to the National Park Service to get Wrigley on the National Register of Historic Places. (Like the Red Sox, the Cubs are looking to take advantage of federal tax breaks offered for restoration projects.) The parks agency tweaked the plans yet again—cutting one sign and shrinking a video board. Work at Wrigley began at season’s end last year.
Two rooftop owners sued in January to block the changes. They allege the Cubs tried to enlist them in a price-fixing scheme for tickets, misrepresented them in public, and breached their contract. The Cubs said in a statement in January that they will “vigorously contest” the suit, which is before a federal judge in Illinois. Thomas Lombardo, a lawyer for the rooftop owners, didn’t return calls for comment. Kenney declined to talk about the case.
A month before the April 5 season opener, against the St. Louis Cardinals, snow covers Wrigley Field. The left field bleachers are a skeleton of gunmetal steel; the right field bleachers have been removed for now. The sun is mostly ornamental with the temperature in the teens. Bobcat loaders zip around the steel columns under the grandstand. Wrigley will still be a construction site on opening day. The right field bleachers won’t be ready until mid-June because record cold slowed work over the winter.
“We had some really wicked days here in February,” says Carl Rice, the Cubs’ vice president for ballpark operations and a 33-year veteran with the team. “We had to redo the footings of the ballpark, cut off the columns and resupport them, and then put in new footings,” says Rice, standing in a hard hat, protective eyewear, and jeans. The columns on the innermost ring run from bedrock 100 feet below to the top of the light stands. “This is the last one we’re doing this year,” he says, pointing to a stick of steel hanging like a stalactite above the heads of two workmen in a hole below the third-base grandstand. Most of the bones of Wrigley haven’t been touched since it was built in 1914. “She was built like a battleship back then, and she’s being built like a brand-new battleship right now.”
By summer, there will be new bleachers in left and right field, with two video boards and four signs as backdrops. The clubhouse, to be built beneath what used to be a parking lot, is scheduled to open in 2016. When the work is done in 2019, there will be expanded luxury suites, four new clubs for fans with premium seats, patios ringing the grandstand, two stories of shops and restaurants tucked against the outer wall in right field, and, on the other side of the park, an outdoor plaza and a 175-room hotel.
The rooftop squabble is an extreme version of a back-and-forth that happens over pretty much anything that occurs at Wrigley. Every pro sports team talks about being a public trust; the Cubs, a 139-year-old franchise plopped in the middle of a residential neighborhood, have to act like one. The team didn’t play a night game until 1988 because of neighbors’ concerns about noise—and because the local bars prefer fans spilling out of the ballpark in the early evening.
“We have to be intentional about the pace of change,” says Colin Faulkner, the Cubs’ vice president for sales and partnerships. The team allows only green-and-white advertising on the field and plans to go easy with the new video board, he says. “We’re not going to run 30-second spots with brands up there.” In 2010, Kenney thought the Cubs could get away with a giant Kraft macaroni noodle outside Wrigley. After broad derision, they moved it across the street and then got rid of it. “That was one where I made the call at the end of the day, and I was wrong,” says Kenney. “So my threshold is: Is this a noodle?”
In February the Rickettses sold six minority shares in the team for about $175 million combined, to ease the squeeze of rebuilding. Expanded luxury suites, a potential source of tens of millions of dollars annually, won’t be complete until 2018. The team has lined up its three local TV deals—with WGN-TV, Comcast SportsNet Chicago, and Chicago’s ABC affiliate—to expire in 2019, when it will have a chance to launch its own regional sports network or at least boost its rates. The Cubs raised ticket prices (about 2 percent) this year for the first time in four seasons. With increases in the gate receipts, sponsorships, and media deals, the team stands to add as much as $100 million in annual revenue, roughly closing the gap with the Red Sox. “Basically, my job is fill a wheelbarrow with money, take it to Theo’s office, and dump it,” Kenney says of Epstein, the head of baseball operations.
Epstein watches from behind home plate on a sunny afternoon at the training complex in Mesa. It’s a so-called B game against the Los Angeles Angels of Anaheim, which means there are no ticketed fans, just a sprinkling of family and team employees. Epstein wears a gray-and-white mesh Nike baseball cap, gray slacks, and a mesh Cubs pullover. He dismisses one of the team’s press handlers, as our interview begins. “I don’t do monitored interviews,” he says.
Epstein, who grew up in Brookline, Mass., came to the Cubs from the Red Sox. At 28, he was the youngest general manager in baseball history when Boston promoted him in 2002. After the Red Sox’s World Series win in 2004, Epstein became a legend, at least in the eyes of the managerial class. He was there for another championship in 2007 and an historic late-season collapse in 2011. Then he left for the only club with a longer history of futility. “I always had this place in the back of my mind as a place I’d like to someday work and try to help win a championship,” he says of the Cubs. At his first press conference, in October 2011, he said he wouldn’t use the word “rebuilding.” That was before he realized the full depth of the Cubs’ problems. “We had a bottom-third farm system without any top-50 prospects,” he says now.
Over three seasons, Epstein cut payroll by $41 million to $93 million in 2014. Every year, as the July trade deadline approached, he offloaded two of the team’s five starting pitchers for draft picks and prospects. Conventional wisdom in baseball says to “grow the arms and buy the bats.” Young talent is doubly precious because the league’s collective bargaining agreement keeps players’ pay controlled through their first six seasons. Last year, the San Francisco Giants rode the left arm of Madison Bumgarner to a World Series win. Bumgarner was in his fourth season, and the Giants paid him $3.75 million, a fraction of what he’d get as a free agent. The savings covered the $16 million salary of veteran right fielder Hunter Pence.
Epstein is running this model in reverse. Lester is the $155 million arm to go with a bumper crop of homegrown bats. Over the last three drafts, the Cubs are one of four teams, along with the Oakland A’s, the Seattle Mariners, and the New York Mets, to use all their first-round picks on position players. Epstein surveyed the history of the draft and found that top-hitting prospects panned out more often than pitchers. For every Bumgarner, there are several prized young pitchers derailed by injury. Cubs fans, by and large, seem to have bought into the rebuild, but Epstein couldn’t afford a flameout. “Rebuilding in a big market is just crazy enough that you want to get it right the first time and you want to do it fairly quickly,” he says.
While Epstein’s talking, two of those Cubs first-rounders—Albert Almora, the sixth pick of the 2012 draft, and Kris Bryant, the second pick of 2013—hit home runs. Bryant’s flies over the wall in left field before anyone has time to cheer. Along with Almora and Addison Russell, he’s part of a pipeline that should keep the team stocked for the next five years. Baseball Prospectus, a respected online guide to the game, now ranks the Cubs’ farm system as the best in the league.
This past offseason, the Cubs decided they were far enough along, on the field and on the balance sheet, to flip the spending switch. Before signing Lester, they hired a new manager, Joe Maddon, from the Tampa Bay Rays, for $25 million over five years. The free-agent spree also included right-handed pitcher Jason Hammel (two years, $20 million). Altogether, they committed $292 million, including signing bonuses, to Maddon and new players.
Last fall, Epstein let fans know that the Cubs’ goal for this year is to win the National League Central Division. Maddon is thinking World Series. “Why not us?” he told USA Today. This is the year, after all, that Marty McFly visits in Back to the Future Part II to discover that the Cubs have finally won the Series.
“There is a broad band of potential outcomes this season,” Epstein says in Mesa, trying to temper expectations. He compares the Cubs to the Kansas City Royals of four years ago, which had the most envied stable of young hitters in baseball. It took those hitters three years to figure out major league pitching. Last October they got hot and came within a game of winning it all. “Is it going to take that long for our guys? It very well could,” Epstein says. “Young players deserve patience.”
The Cubs organization will need some patience as well. A whiff of success would be intoxicating, maybe enough to fall into the usual trap: trading away young talent and signing past-their-prime free agents in the hopes of winning now. “There is definitely a forced discipline to a rebuild, where your situation is obvious and you can be really single-minded,” Epstein says. “Now the hard part starts.”