This will probably come as a bit of a surprise, but the Toronto Blue Jays start their 2013 season tonight.
The Toronto media has been calm, with only a handful of columnists suggesting this is the best team to ever take to a field in any sport, ever. The team’s corporate owner, Rogers Communications Inc., has also been very understated as it quietly ensured its players were on every billboard in the country and took up 94 per cent of the commercial airtime available in the days leading up to the home opener.
“The air of optimism is at an all-time high,” Rogers Media president Keith Pelley said to a room full of reporters last week, who visited his company’s Sportsnet studios to learn about how Rogers is in favour of professional sports. “I’ve never seen anything like it … it’s terrific.”
It’s hard to argue with that – so here is a deeper look at the business of Blue Jays baseball.
Small fish, big company
Rogers is pretty big – it’s a multibillion cable and cellphone company that just happens to dabble in sports. That can be hard to accept as you sit there in your official jersey while wearing your giant foam finger, but the sooner you accept the team doesn’t mean as much to its owners as it does to you, the sooner a warm sense of calm is likely to envelop you.
Tim Casey, an analyst at BMO Nesbitt Burns, wrote in a report that Rogers has reported Blue Jays revenue as either “Blue Jays” or “sports entertainment” since taking over the team in 2006, and that sports and entertainment revenue at the company peaked in 2012 at $210-million.
“To put this in context, this represents about 2 per cent of consolidated revenue for Rogers Communications,” he wrote.
The company’s 2012 annual general report said consolidated revenue was about $12.5-billion last year. Its adjusted operating profit – the amount of money left over after paying for everything else – was $4.8-billion. That’s enough to cover the entire payroll of 23 other teams.
No pressure, fellas
Rogers has made it clear that fielding a winning team is about more than, well, fielding a winning team. Rogers Media president Keith Pelley honestly believe that the most important fan you can attract to a sporting event is what he calls a “fashionable fan,” someone who goes to the game because their friends tell them it’s cool. By that metric, last year was a winner.
But an actual winning team (as opposed to a fashionable team) helps Rogers in a lot of different ways – more TV viewers means more ad money, more fans in the park means more ticket money. So to make that happen, the team added $39-million to its payroll to bring some big-shot players to town.
That brings its payroll – inflation adjusted – to $122-million. That’s the highest the team has ever paid, the next closest was $104-million in 2008 when the team wasn’t winning at baseball or fashion. It’s about twice as high as the team was paying out in salaries when it was winning the World Series, and makes the 1985 team’s $10-million in salaries perfectly adorable.
Outgoing Rogers chief executive officer Nadir Mohamed took home $8.2-million in total compensation in 2012, which would make him the fifth highest paid player on the team if he decided to take to the field in his retirement (Jose Bautista is the highest paid Jay at $14-million, according to Baseballprospectus.com).
Sharing is caring
Baseball can be hard to understand – there’s the infield fly rule, something called a slugging average and the mysterious formula that determines the markup on a can of premium beer versus domestic.
But perhaps the most mysterious thing of all is how teams in tiny markets (not Toronto – Toronto is a World Class City) pull in enough money to field teams. The answer is sharing – each team takes 34 per cent of the money gathered from tickets, concessions and local television contracts and hands it over to the league so that it can be spread around.
So the next time you break out a $20 to buy a beer at Rogers Centre and don’t get any change, you can feel good knowing that a little girl in Kansas City is able to watch a semi-serviceable team thanks to your noble efforts.
There’s also a levy for teams that exceed the luxury tax, but Mr. Casey said that’s only ever been triggered by four teams (New York Yankees, Boston Red Sox, Los Angeles Angels of Anaheim and Detroit Tigers) since it was introduced in 2003. And the Yankees have paid 91 per cent of the total payments in the last nine years.
Speaking of TV…
There’s more than national pride at stake when the Blue Jays argue that they are Canada’s Team. There’s also television rights, which are a big, giant deal for both the team and the league. In the United States, the league owns national broadcast rights for each team and the teams themselves own the rights to their local market. The national TV money gets pooled and paid out to each team, while the regional money is kept in local hands (aside from the part teams are forced to share).
This is one example of how American ignorance of Canadian geography actually works in our favour – the entire country is considered Blue Jays territory. That means more of the money Rogers pays to itself for the right to broadcast the team it owns stays in its own pocket.
Rogers does not disclose what Rogers pays Rogers to televise the Rogers-owned Blue Jays. The league is pretty clever, though. It has a rule to ensure broadcasters which own teams pay market rates when they negotiate broadcast deals with themselves.
Not for sale, but maybe…
There’s no reason to think Rogers would sell the Blue Jays. The team means a lot to the organization – it provides a tenant for the baseball stadium it owns in downtown Toronto, it provides 162 games a year for its Sportsnet television channels, content for its radio call-in shows.
But as Mr. Casey notes, everything has its price. Forbes – which attempts to place valuations on teams – calculated the team would be worth $568-million if sold today (including the Rogers Centre).
“We find it hard to envision a scenario where the Blue Jays would be sold in the current media environment,” he said. “Over a 20-year period, major league baseball teams have been sold for sums ranging from $82-million for the Detroit Tigers in 1992 to $2-billion for the LA Dodgers in 2012. Whatever the figure, it is not debatable that the price would be a significant multiple of what Rogers paid for it, and it would come with long-term broadcasting rights.”
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