Executives at Rogers Communications Inc. love to talk hockey, but it is America's pastime that's been in focus at the wireless and cable company ever since baseball's trade deadline.
Ted Rogers, the company's late founder, faced criticism when he bought the Toronto Blue Jays in 2000 – paying $112-million (U.S.) for 80 per cent of the team and later acquiring the rest from Interbrew SA of Belgium – and the team floundered for many of the years that followed. Critics are hard to find now as the team prepares to head into its first American League Division Series in 22 years.
The Jays say they sold out 20 of their last 21 home games (Rogers also bought the stadium, formerly known as the SkyDome, for $25-million) and for their 81 home games this season, attendance totalled 2,794,891, the most since 1995, when the team attracted 2,826,483.
"We've doubled down on sports," Rogers CEO Guy Laurence said at an investor conference in Montreal on Sept. 17, pointing to Rogers' hockey coverage and the boost it has given to the company's Sportsnet television network. "At the same time, we invested in the Jays. And this year we've got a hell of a return on our hands."
"Realistically, on the financial side, it's not the biggest part of the business," Laurence said of baseball a few days earlier, telling reporters, "but it's certainly one of the most important to us, particularly at this moment in terms of supporting the Blue Jays as they go through this period."
Baseball is such a small part of the telecom company's overall business that Rogers doesn't break out the Blue Jays' numbers when it reports its financial results, although it occasionally points to higher player salaries as a factor in the media division's costs or notes that increased Blue Jays revenue gave the unit a lift. Similarly, Rogers only provides sporadic updates on how its $5.2-billion (Canadian) investment in the national NHL broadcast rights is paying off.
Forbes magazine prepares annual estimates of professional sports teams' valuations and revenues and in March it pegged the Blue Jays' revenue for the 2014 season at $227-million, including $48-million in ticket sales, and estimated the club had an operating loss (negative earnings before interest, taxes, depreciation and amortization, or EBITDA) of $18-million.
In early September, telecom analyst Greg MacDonald used the Forbes numbers to prepare a rough estimate of the gain the Blue Jays could enjoy because of the increased excitement around the team and its playoff run. He estimated the club could see an additional $20-million at the gate and a boost of about $40-million from higher merchandise sales and ad revenue. Higher costs, including player salaries, could increase expenses by about $20-million, he said.
That all adds up to a net increase of about $40-million or a profit of around $20-million for the year, which he said represents about 50 cents per share at Rogers' then-current stock price of $43.96 per share.
MacDonald said in an e-mail he assumed the Forbes revenue estimate was in Canadian dollars, but if it were in U.S. dollars, the ultimate impact would be a profit of about $27-million in Canadian dollars. Either way, he said, his conclusion remains the same: "It is great for the sentiment, but given the massive size of Rogers' other businesses, not really a needle-mover for the stock. That said, the trade moves at the deadline were [in pure economic terms] almost certainly a positive in our view."
Scott Moore, president of Sportsnet and NHL properties at Rogers, told The Globe in early September he expects a boost of about 10 per cent in advertising revenue this season, depending on how well the Blue Jays do. "If they go all the way to the World Series, I would expect our revenues to be even better," he said in an interview Friday.
"But the interesting challenge is that marketers don't necessarily keep millions of dollars sitting on the sidelines just waiting for sports teams to do well. … It's easy to say there could be a substantial windfall, but marketers have to find the money within their budgets to support the Blue Jays," he said. "So it's still a challenge in an environment where advertising on traditional media is perhaps on a different trajectory. But I'd far rather have this content in a challenged advertising environment than anything else."
Rogers is also likely to benefit from happy feelings around the Jays in both concrete and hard-to-quantify ways.
"I think there is a bit of a halo effect that may be positive if you look at the Rogers brand – let's face it, the airtime that they get on this is tremendous," Scotia Capital Inc. analyst Jeff Fan said in an interview Friday. "But I actually think the real potential positive effect – that may be more material – is the higher carriage fees that Sportsnet may be able to charge going forward."
Using 2014 numbers published by the Canadian Radio-television and Telecommunications Commission (CRTC), Fan said Sportsnet received an average of $2.38 per month per subscriber while its main rival Bell Media-owned TSN took in about $3.07 per subscriber per month.
For argument's sake, Fan said, if Sportsnet could charge its cable, satellite and IPTV distributors at least as much as TSN's 2014 rate, that could translate to close to $70-million in additional revenue.
Moore said ratings are obviously an important factor in negotiations with distributors over fees. "That's why we made it our stated goal five years ago to be the No. 1 sports-media brand in the country," he said, adding that hockey and baseball helped him reach that goal a year early. Sportsnet and TSN have recently been locked in a battle to assert they are in first place, each pointing to various favourable statistics to bolster their claims.
Sportsnet enjoyed an enviable run in September as the Jays chased a playoff berth and clinched the division with just a few games to play in the regular season. The network claimed 7.9 per cent of the viewing audience in Canada, an average per-minute audience over 24 hours, according to Moore. "That's the highest it's ever been." he said, adding that it was the No. 2 network in Canada in prime time, ahead of "Global, CBC, City and every specialty network in the country."
The network's website saw a 450-per-cent boost in traffic over September, 2014 and usage of its mobile app, Sportsnet Now, spiked on Wednesday afternoon (when the Jays defeated Baltimore to claim the division title) with usage similar to what the company saw at the beginning of last year's hockey season.
It's not just the post-trade-deadline drive that has contributed to this success, Moore said. He said it dates back to a push in 2011 when both the network and the team "made a concerted effort to make both the fan and the broadcast experience more fun and higher quality."
"There's whole new generation of Blue Jays fans," he said. "That's good for the team, that's good for us, and it's good for Rogers as a company."
Rogers Centre stats for Jays' 2015 season
Total attendance at 81 home games: 2,794,891 (up 17.6 per cent from 2014 and the largest season attendance since 1995's 2,826,483)
Average attendance for 2015 season: 34,305
Number of sellout games: 27, including the past 12 games in a row
Increase in merchandise sales over the last two months: 100 per cent
Jerseys sold over the past two months: 25,000
Source: Toronto Blue Jays