27

Rogers CFO Tony Staffieri Admits the Company May Look to Sell the Blue Jays

It was reported back in October that Rogers is considering selling the Blue Jays. Andrew Willis of the Globe’s Report On Business wrote that “After Rogers management sat down with analysts in New York last month, Citibank published a note that said Rogers brass is earmarking cash from asset sales for paying down debt, buying back shares and boosting dividends.” He added that “Coming out of the same meeting, UBS pumped out a report detailing how Rogers’s management planned to deal with the taxes that would come with selling the Jays and Cogeco shares.”

“Speculation on Rogers’s plans for the Jays and the Cogeco stake has swirled for years. But the arrival of a new CEO with a reputation for a laser focus on wireless and cable operations and the steady drumbeat for asset sales from the analysts has got the hedge-fund crowd sniffing around,” Willis explained.

Well, now according to a report from Natalie Wong of Bloomberg, which comes our way via the Globe and Mail, those notions have moved beyond the realm of speculation.

Rogers Communications Inc. is considering selling assets such as baseball’s Toronto Blue Jays and a stake in media company Cogeco Inc. to free up capital for other investments, Chief Financial Officer Tony Staffieri said.

. . .

The company has said before that it’s exploring ways to get more value from its portfolio of assets, including the Jays, but Staffieri’s comments Tuesday were more specific. Rogers still wants rights to sports programming but doesn’t have to own a team to have that, he said, pointing to the company’s 12-year deal with the National Hockey League.

The idea of Rogers selling the Jays is a very welcome one to a whole lot of Blue Jays fans. I might go as far as to say that it would be welcomed by every single Jays fan living, dead, or otherwise. And long term, I certainly would love to see an owner less concerned with maximizing operating profit, and happy to think more about winning, secure in the knowledge that the constant rise in franchise equity will make their investment a success almost no matter what.

But during the sale, as the company tries to make the club as attractive as possible to potential suitors, what might that mean for payroll?

Could Rogers be reluctant to allow the Jays to spend this winter, with a view to a sale? Could they scuttle a potential Josh Donaldson extension, make a mid-summer sell-off more likely, or thwart plans to be competitive in 2019 by reducing payroll later on?

I mean, we’ve long known that Rogers’ whims seem to have a tangible impact on how the Jays do business. In fact, just back in October, Mark Shapiro told Future Blue Jays that when fans will start to see some of the significant and much talked-about upgrades to the Rogers Centre is “up to Rogers – where it fits in the hierarchy of their capital needs” — a comment that, among others in the interview, led to the author’s observation that “inferring from his body language and comments about dealing with the folks at 333 Bloor St East, [the company divesting themselves of the team] might be a welcome development for Shapiro.”

Yes, that’s more reason to feel good that they might be moving this way, but if the money suddenly dries up this could become a very different offseason. If the Jays don’t have the twenty-odd million dollars it’s believed they have in order to help upgrade their roster, it gets quite difficult to see the club being able to upgrade enough to meet even their modest goals for 2018.

Now, the fact that the Jays extended Marco Estrada back in September, that they were reportedly looking hard at Dee Gordon in July, and that there haven’t yet been any rumblings about the club looking to move salary, probably means that these sorts of worries are unfounded. But until we get a better sense of what’s going on — and clearly, if Staffieri is speaking publicly about selling the team, something is going on — this stuff has no choice but to be seen lurking in the background of everything the team does.

And the other thing, of course, is… who do they sell the team to? It is spectacularly easy to dislike Rogers, but for all the shit they rightfully take when it comes to this team, they they’ve taken the team — with much encouragement from MLB’s recent CBAs, which have phased them out of revenue sharing, and the league’s lucrative US TV deals — from a $70 million payroll in 2011 to $163 million last season. In fact, in his Winter Meetings primer for BlueJays.com, Gregor Chisholm suggests it could go as high as $170 million in 2018.

That’s honestly not bad. And I’m not so sure how many eccentric billionaires would be lining up to buy the team. Even if there are, one need only to look at MLB’s most recent ownership change, down in Miami, to see how easily a situation can seemingly go from bad to worse.

Then again, as I wrote the last time this came up, MLSE is certainly an intriguing option.

From getting a chance to properly auction off their broadcast rights, to not having every financial decision floated through the prism of an army of stockholders, there is a lot to like about the idea of the Jays no longer being controlled by a publicly traded company — and no chance that the club might move from what’s one of the great markets in the game. Even if the Jays were to be purchased by a jointly-owned venture like MLSE — of which Rogers and Bell own 37.5% each, with the remaining 25% belonging to Larry Tanenbaum’s Kilmer Sports Inc. — that would seem to be quite preferable to the current setup. As Dave “the Hammer” Shoalts wrote for the Globe and Mail in 2015, an accounting rule known as the “equity accounting method” means that ” the profit or loss of any majority-owned asset such as the Blue Jays has to be included in Rogers’ earnings before interest, taxes, depreciation and amortization (EBITDA), which can directly affect the company’s share price,” but that “publicly traded companies can combine the profits or losses of any subsidiary companies in which they own less than a 51-per-cent interest and keep those results separate from their annual EBITDA.”

In plain terms, to crib the examples Shoalts used then, MLSE can go and spend big on Mike Babcock, Lou Lamoriello, and a state-of-the-art practice facility for the Raptors without those big outlays of cash affecting Rogers’ or BCE’s bottom in in the same way that it would if the Jays were to ramp up their budget to sign a top tier free agent. “According to a source familiar with the finances of both Rogers and BCE,” Shoalts wrote, “if Rogers were to sign [David] Price for $30-million a season, then that $30-million would have to come from the budgets of other Rogers Media companies.”

It would be interesting to see where MLSE would take the Jays, payroll wise, given that the Leafs can really only do so much beyond their capped payroll, but I’d sure as hell be interested in seeing.

And with these, the strongest rumblings yet that Rogers is serious about selling the Jays, more than at any point in the evil empire’s seventeen years of ownership, it feels like it just might really be happening. I guess we’ll see…

  • under what circumstances would we see the team actually get the revenue for broadcast rights? since MLSE seems like the obvious prospective buyer, wouldn’t they be in relatively the same situation from that perspective? i get that there would be other benefits that could allow for an increase in payroll due to the ownership breakdown, but at the end of the day, i don’t see how being owned by another entity that is made up of media corps would be a substantial improvement.

    • AD

      Yeah, being owned by mlse does not seem like an improvement. Although we dont know how they would operate in a non cap environment like mlb, but my guess is much the same like rogers

  • AD

    Fingers crossed! Hope the team is sold to someone that cares about winning and can take advantage of this market. Not crazy about mlse based on how they run the raps and leafs.

    • GrumblePup

      “Not happy about how they run the Leafs”
      Ummm… you meaning drafting a core of fantastic young players, keeping them and developing them and then making room on the roster for them when the time comes?
      You mean having faith in a young core and have them go to playoffs for the first time in however many years that was?

      You mean trading for goaltenders because that was a spot of need for the team?

      You mean going out and spending money on free agents to help shore up places of need on the team?

      Yeah, I sure hate the way they run the Leafs too.

      • Regulator Johnson

        I mean they had run the Leafs pretty atrociously for like a decade prior to our 1+ year of success so I’d say the complaint is valid, Auston Matthews notwithstanding.

        • GrumblePup

          Yeah, there were a bunch of bad years, but I would argue that since 2014 (I’ll say starting with the addition of Brendan Shanahan although the changes started a little before him, I think) the team has been trending in the right direction. There were years where the team seemed to be flip flopping between soft rebuilds, and going for it.
          However, there seems to be a plan in place now. There is a willingness to stick with that plan and see it through for the long term benefit of the team. Those 3 years has lead to a bright core, with a future.
          They aren’t willy-nilly signing and trading players. They aren’t just grabbing whatever name player they can get and hoping it works out (ugh. Lindros…).
          The philosophy around the team has changed. I don’t know as much about the Raptors, but from the little knowledge I do have, it seems to me like they’re also trending in the right direction as a team.
          And, Soccer sucks (in my opinion) but it seems like Toronto FC has been making strides as a franchise starting around the same time.

          Teams can be bad for a long time, and then turn it around. In this case, MLSE has 3 teams that were middling teams and it didn’t really feel like they were going anywhere. And then starting around 2012-2014 all three teams had a turn around.

          Now, I could be wrong about all of this and maybe MLSE jsut fluked into having some decent teams.
          If only 1 team started to make improvements, I wouldn’t think anything of it, but when all 3 teams start operating in the same way, make strides to improve the team and stick to their guns instead of panicking and selling of players or signing whatever big name is available hoping for quick fixes and good luck, I’d say I have some trust in that ownership group.

          Not all of the trust, but they seem to be running teams in exactly the way we all want them to be run and the way we talk about how we wished Rogers would run.

          • The Humungus

            They didn’t fluke. It was Tim Leiweke. He hired Bezbachenko, Ujiri and Shanahan and gave each of them authority over their franchise.

            Corporately, each operates as a separate division within the parent with it’s own head who has full control and only has to answer to the CEO. It’s why all three got on the right track at the same time. Leiweke set it up brilliantly after the TPF divested themselves and they could be a sports managment organization rather than an investment holding (which is what pushed them down for years, because the Teacher’s didn’t care if they won or lost, so long as there was profit to grow their fund).

          • Derrick

            That is the type of ownership group the Blue Jays have now. Shapiro operates the Jays as a separate business (or division) within the Rogers group of companies. He answers to the BOD, which is how Bezbachenko, Ujiri and Shanahan operate within MLSE. In fact he has more autonomy because he also has control over the building.

          • The Humungus

            Not exactly. There’s one key difference.

            Shapiro has shareholders to answer to with the board. MLSE’s Team Presidents have stakeholder’s.

            It’s subtle, but the former has far more interest in profitability than they do on “winning”.

  • Johnny Wholesome

    I’m worried that this might turn out to be a “better the devil you know” situation in retrospect. It’s really easy to shit on Rogers (really, really easy) but the number of super rich dudes in Canada looking to own a ball club AND would be willing to spend a ton might be few and far between. A cheap fucker like Melnyk in Ottawa comes immediately to mind. Then, again, Rogers sucks and someone has to realize they could be printing money, red sox-style, right?

      • The Humungus

        https://en.wikipedia.org/wiki/List_of_Canadians_by_net_worth

        Here’s a handy list of people who MIGHT be able to do it. If you discount anyone who lives outside of Ontario and assume that no one is spending more than 1/3 of their net worth on the team, including the renovations to the building, there are, at best, 3-4 people who can do this:

        David Thomson
        Galen Weston
        Edward Rogers III
        Carlo Fidani

        The dark horse to me is Mark Scheinberg. He’s got his pokerstars money and he’s the sort of new money guy who buys franchises in the US. Of course, he’d have to move back from England. Anyone know if he’s a Jays fan?

        • Barry

          My first thought is that we should, obviously, strike Eddie off that list … but maybe there is a scenario in which he would want to own the team separate from Rogers, and I’m under the impression that the Rogers board is pretty happy when he’s occupied with things that keep him out of their hair. And if this is about divesting themselves of the team while retaining broadcast rights, no one’s going to be more open to Rogers retaining broadcast rights than a Rogers.

          That said, the only way I could be less qualified to make such speculations would be if I were dead.

  • Derrick

    MLB is unlikely to allow MLSE to buy the club. They are looking to reduce the number of public companies owning the company, not add another one (BCE). Also, you’re going to get less cash from an MLSE sale because Rogers will still have a stake in the team.

    I would recommend listening to Brunt’s and Blair’s discussion this morning. The discussion they had was a good one, and the most important fact they raised was that anyone who buys this team isn’t making a real estate play, unlike the one at the ACC. Rogers Centre is located on gov’t owned land, so a buyer is buying the stadium, which is nearly 30 years old, and which needs hundred’s of millions of dollars of upgrades to ensure it is relevant. Any new stadium built in the near future will most likely be built outside of the downtown core, and likely cost taxpayers something.

    I also don’t see why fans think the team is going to have this major rights windfall from broadcasts. Who is going to pay for this – Sportsnet and TSN, which is losing subscribers due to cable cutting? And say goodbye to that sweet MLB channel – it will now be blacked out across the country. You’re gonna need a cable package to see the games.

    • Barry

      I’m not sure I understand what you’re saying about TV rights. Whether the games are on basic cable, streaming, or PPV, there will be TV rights in play and they are likely to be significant, given the Jays’ current ratings and national appeal. The games will be broadcast somewhere, somehow … I don’t know of any options currently in play that would result in lowball rights sales. Are there examples of recent broadcast rights agreements that were paltry?

    • Nice Guy Eddie

      One of the things that make it difficult to run the Blue Jays is the core stupidity of internet complainers who have no fucking idea what they are talking about. One of their core beliefs is that there are untold billions of dollars in tv revenue just waiting to be handed over to the Blue Jays. As you note, cables are being cut not installed. TV ad revenues are plummeting not rising, and only 8 years ago CBC dumped the Jays because they could get the ad revenue to cover paying $150,000 a game. Rogers was the first to broadcast all 162 games after CBC dumped its broadcast rights. Yet somehow, mystery tv revenues are going to appear from thin air. Also, Tao of Stieb commented on twitter yesterday how out to lunch the fans are who think some mystery eccentric billionaire is going to pump a billion of his own cash into the Blue Jays and operate the team like a fan and spend more money like a drunken sailor. Pure nut stuff. Here are some more likely outcomes:

      1. A new owner is going to have spent a lot for the team and be looking for returns on that investment, and will start by reducing payroll.
      2. Instead of rich tv deals that people blow smoke out their asses about, we’ll go back to the pre-Rogers days when some games aren’t even televised.

      And that is assuming a Canadian buyer can be found. Interbrew tried for years to sell the team, with no success and Ted Rogers bought it to keep it in Toronto. If no one buys, eventually there will be pressure again to move the team.

      • Flash McLennan

        This is breathtakingly ignorant and condescending at the same time. Congratulations!
        Let’s try five minutes of Google…
        https://www.forbes.com/sites/maurybrown/2017/10/10/here-are-the-2017-mlb-prime-time-television-ratings-for-each-team/#75867f563799
        Oh look. Toronto’s “local” TV broadcast gets nearly 3x the viewers of the next closest team’s broadcast. 3. Times. Huh. Might be worth something, you think?

        But you’re right, challenges. Let’s arbitrarily assume a 30% haircut in the value of the viewership because Canadians somehow spend less/ exchange rates/ whatever.
        Let’s also imagine that networks are waking up to cordcutting. Now incredibly ESPN ad rates are going up despite the falling viewership. It seems that live sports are becoming more valuable even with a shrinking audience, because that audience’s ad watching is going down proportionately less than other TV. Whatever, let’s assume another 50% (!!!!) haircut vs deals the Rangers, Dodgers etc were signing 2-3 years ago.

        So here’s my math:
        Let X be Dodger/Yankee/ Big TV contract money
        Let Y be fair market Blue Jay money
        Y≈ 3*.5*.7*X=1.05X

        So I think, despite some wildly negative assumptions, that the Blue Jays rights are worth at least what the richest teams get.
        So, yeah – there’s going to be lots of TV money coming. Awesome.

  • abigditka

    Could ownership be pushing this narrative because they don’t want to spend but don’t want the fan backlash either? They can just say they are considering a sale and signing multi year contract would hurt their bargaining power. It doesn’t give them a ton of cover but it would go over better than ‘we loved all the interest but we aren’t going to spend regardless of attendance.’ With the content the Jays provide for Rogers I don’t really see a sale in the near term.