More hints towards a Rogers sale of the Blue Jays?

Forbes has released their MLB team review! Let us rejoice – maybe just The 10%. The rest of you can go back to drooling over Vlad Jr, we’ll join you in a bit. In the meantime, we’ll be scratching our heads at these figures.

Stoeten touched on this a few years back – 100% of us already miss him – so there really is no need to rehash everything. There are, however, a few Jays-related tidbits needing attention this go-around.

  • Operating Profit – Loss of $1.3 million (2017) relative to gain of $23 million (2016).
  • Franchise Value – $1.35 billion (2017). $1.3 billion (2016).
  • Player Expenses – $180 million (2018). $164 million (2017).

It’s interesting to note the Jays had a swing of $24.3 million in operating income suggesting some fairly legitimate capital investments. A $16 million increase in player payroll will eat up a large portion of that expense, but there is still a question of the remaining $8.3 million. Considering the team cut 23 jobs from their marketing department, it’s logical to assume this increase is not going towards human resources.

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Is this Paul Beeston magic? You might remember he’s the one that famously boasted, “I can turn a $4 million profit into a $2 million loss and get every national accounting firm to agree with me.”

This probably accounts for a hefty chunk of that financial swing.

Nothing wrong with this approach, it’s the nature of the beast and this is how teams will continue to operate. The fact that teams are increasingly more vertically integrated is just making it easier. Once again, Stoeten considered this in a piece last October. It should be added that the increase in Jays’ payroll seemingly resulted in an 18% drop in Rogers media division’s operating profit considering this is where the team falls within Rogers’ structure. 

Not to scare you, but this really looks like the Jays are being primed for sale.

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What’s happening with Rogers and the Jays is eerily similar to what happened with the Florida Panthers back in Wayne Huizenga’s ownership days. We all know Rogers is talking about selling the team so it would make sense for them to insulate their core business at the expense of the Blue Jays. What you may not know is Huizenga owned both the Panthers and its broadcast partner before selling his majority share of the team while keeping ownership of the broadcast partner, including broadcast rights to Panthers games through deals he negotiated with himself.

With the Jays broadcast rights locked up, it can be assumed Rogers has already negotiated a sweetheart deal benefiting the company over the Jays (to some degree). French broadcasts are under contract for another three seasons with TVA Sports – a Rogers subsidiary. The rights to Jays’ games in 2012 were sold to Rogers at $225,000 per game for a 162 game total value of $36 million – not bad right? Well, the Texas Rangers signed a deal the same year for $150 million per year and the San Diego Padres got $75 million per year – now $36 million is a lot tougher to accept as fair considering the Jays’ market size.

Can we please consider the fact that the Padres got double the payout? They play in a saturated market that is still somehow dominated by the Dodgers, while the Jays’ have all of Canada – something is missing here. Or maybe it’s just Rogers squeezing every drop of value from the Jays and leaving the team with pittance.

The playbook keeps looking more and more similar to the Panthers’ sale. Rogers has been considering selling the naming rights to Rogers Centre just as the Panthers sold the naming rights to their stadium the season before the team changed owners (2012 for a sale in 2013). Obviously part of the push for Rogers is to recoup some value from their name on the stadium while they are negotiating only with themselves.

Come on!

So we know Rogers has gotten their value out of the Jays and are probably going to sell the team. The next owner has an uphill climb as they can’t rely on revenues from fair broadcast deals. This is why a sale to MLSE makes sense, just as most pundits have mentioned. Rogers could divest their interests in the Jays, while still remaining a minority owner through MLSE. The Jays could slowly bring their financials back to a fair standard assuming MLSE allows it, but this may not even be possible considering the control MLSE has over the Toronto sports market and Rogers has over MLSE – there is no impetus for MLSE to adjust the Jays’ financials in any significant manner.

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Before we leave this for you to share your opinions, let’s consider one last point.

The Panthers’ financials were made public through a public offering of shares years ago. Since then, the NHL has removed this option for teams as the public kick back is still being felt. Even though the NHL was claiming Panthers were taking massive losses, financial audits were showing the team actually was profiting every season. Raises questions to how reliable the financial figures were that Forbes reviewed.

If only we could get Paul Beeston to explain this further…

  • fred2

    I’m not saying you couldn’t be right here, but I think you’re adding 2 and 2 and making about 1.3 billion here. In all the years I’ve followed the Jays (going back to when Rogers took over of a bit before), they never appear to make much of a profit, and more often make a loss, and the only conclusion I can come to is that Rogers don’t want them to make money. A small loss is kind of a return to ‘business as usual’ isn’t it?

    Given the fans packing the stands last year, even in a terrible garbage year, the only excuse for making a loss on the Jays is that they wanted to make a loss. Which – surprises nobody, right? The value of the team is in driving advertising for the TV and filling up countless hours that would otherwise be full of Major League Poker or darts. The money is in the ad sales for live sport, which are worth more than ever as people Tivo everything else, and, as you rightly point out, the ridiculous sweetheart deal Sportsnet get for the largest TV baseball market in North America.

    So, yeah, all the things you say could be true, but I don’t see any particular new evidence for any of it. Yes we know there have been reliably-sourced rumours of a sale, but that’s still all we know, and I don’t think there’s any evidence here to make those rumours stronger.

    • fred2

      To clarify the ‘Rogers don’t want them to make money’ thing … there’s nothing necessarily sinister there. I presume if the Jays division makes money, then it pays tax on the profits (although I’m guessing as to whether Rogers tax bill is divided by divisions, or one big bill for the whole company). Make a loss while increasing the actual value of the franchise, and increasing the profits in a more important division … that may be the accountant’s preferred option.

      • Blue Ox

        Fred makes a few great points, particularly regarding the playoff implications on operating costs. I agree that a small loss can be business as usual, but I’d rather say claiming a small loss is business as usual instead of an actual loss being taken.

        There is absolutely nothing sinister about how Rogers operates the Blue Jays, I whole heartedly agree with you, but how Rogers operates the Blue Jays directly impacts the team’s financials. The only reason I bring up the Panthers is to show the MO for how media companies operate when they own professional sports franchises – nothing new to add other than the value to the public the Panthers mistake was of offering public shares as they could no longer hide behind private financials.

    • OakvilleJays

      I am an accountant & I agree with Paul Beeston. It’s easy to turn profits into losses for any division . The TV rights being sold by the Jays to Rogers for $36 million is a perfect example. The Blue Jays report revenue of $36M & Rogers Broadcasting report expenses of $36M. Rogers has not disclosed the advertising revenue it earns from the Jays broadcasts. It’s fine to report higher payroll expenses, since the Canadian dollar fell in 2017. I suspect that the advertising revenue that Rogers earned is used to subsidize other divisions within Rogers. If Rogers sells the Jays after having tied up a long term broadcast deal with the new owner, then the price it receives for the team will be lower.

  • Magicaleigh

    The difference in operating revenue is directly tied to not making the playoffs.

    You’re also making a lot of assumptions based on nothing throughout the rest of the article.

    • Blue Ox

      Ah shoot magic. Gave Fred your credit for connection of operating revenue to playoffs.

      Not entirely sure what assumptions you’re referencing, but if it’s what potential avenue Rogers could take with any sale of the Jays than I’ll concede that it is just my opinion based on what has previously occurred with media owned sport franchises.

      Whats your opinion, you think Rogers’ ownership of the Jays is long-term? Rumours floating if they sell of the Jays and Cogeco they could get about $2 billion to reinvest – considering they have broadcast deals in place for a few more years, the money could be re positioned elsewhere.

  • Abogilo

    This is an interesting parallel between the current Jays situation and the Florida Panthers. It would not be the first time a company decided to copy a successfully strategy so it’s very possible. It’s also possible that it’s just accounting magic to save overall money on taxes because one entity under Rogers has fewer expenses than another.

    The most interesting part of this is the brand became 50million more valuable Ina year where

    • Abogilo

      Continue above..

      On field success was limited and and profit was negative. That certainty of value growth has to be good for someone… but I can’t think of anyone to whom the Jays are more valuable than Rogers. This is simply because equity growth is valuable to them and they can leverage on field success to prop up the much greater media division and cable aubscriptions and as a massive company with other revenue streams the need to extract and generate cash year over year with the Jays specifically is much smaller…

      Disclaimer – I have no expertise or experience on this subject just using my own ideas of how Rogers might think and limited small business experience.

      • Blue Ox

        The Panthers isn’t the only parallel out there, no doubt. It’s just the one that I find fits Rogers’ narrative. The obvious difference here is Rogers has a partner in MLSE that can still benefit Rogers if they sell – this is something not available to the Panthers then-ownership. Like most great minds, Rogers learned from history – yes, I’m openly claiming Rogers is full of great minds! Gotta give credit where it’s due.

        Put it out there to Magic, but feel like you’ve got a well thought out opinion on this matter as well: estimates are out there that Cogeco and the Jays have a market valuation of about $2 billion; Rogers has ownership stake in MLSE; any sale of Jays/Cogeco opens up cashflow for Rogers…..

        • Abogilo

          Your argument makes great sense and it certainly possible. Cash flow is very important in business, and its very easy to see a situation where a massive cash injection is worth giving up stable equity growth… especially when you can continue to force a sweatheart deal to continue to extract value from the content while paying well below market rates for it.

          I confess, most of the reason I like my view of the situation is because it allows me to believe that at some point investing large amounts of money in the jays makes sense to Rogers as they can leverage it to greater profits in their media division where an owner looking only at maximizing equity growth or year over year profit specifically in the Jays might be more interested in playing it safe or may not have the resources to make a big push.

        • VK63

          As Rogers hockey broadcasts are related to these same great minds and the choices they make in their selection of experts.

          I give you Kipper, Hrudey, porn couch suits, past due dates and a gross collection of idiots who verifiably insult the basic fundamental intelligence of the target audience.
          As a case in point, the Winnipeg series. Normally the task of broadcasting the Jets falls to Beyak with Orlesky handling in game interviews and features.
          Welp…. the Rogers version of same, has Romanuk, Galley and cassie fucking campbell. The mute button literally starts glowing in the remote; begging us, do the right thing. Save yourself. Do not succumb to the senseless bludgeoning of your ability to reason.

          Rogers blows dead goats.

      • OakvilleJays

        TVA Sports is not a subsiduary of Rogers. It is owned by a rival company Quebecor. The price that Quebecor paid for the Jays broadcast is at Fair Market Value. TVA Sports was set up so that in the event that Quebcor obtained an NHL Franchise for Quebec City, TVA Sports would broadcast the games. Quebcor believes that owning a sports franchise & a cable tv network is a good idea.

    • Blue Ox

      Ha. knew there had to be someone who specializes in valuations!

      If you haven’t checked out the Panthers financials from back in the day than you really should. You’d most likely get a real kick out of them – the Broward County story is amazing (if you’re into that kinda thing).

      • The Humungus

        The financials don’t really tell the story, though.

        Sports franchise values are closer to real estate than any functioning business.

        This issue with the numbers is in their breakdowns “sports/market/building/brand”. If you look at those, it’s pretty easy to smell the bullshit (like the Mariners brand being about 16% more valuable than the Blue Jays brand, which is trash).

        Forbes loves to write these stories, but they have no basis in reality. If they did, then there would be a lot of fund investors freaking out right now about the purchase price of the Marlins (whom Forbes valued at less than half what was paid for the team last year).

    • OakvilleJays

      I agree. It’s hard to believe that the Jays are worth$1.35B & the Tampa Bay Rays are worth $900M. The Jays TV market of 35M is higher than the Rays TV market which is a few million.

  • liamdevlin02

    Yeah, TVA Sports is not a Rogers subsidiary (our friends in Quebec would take great exception to that). And every argument made on this, here and elsewhere, discounts that fact that Ed Rogers wants to be seen as a big player out there; his handling of Beeston’s departure and his recent adoption of the title of Chairman of the Blue Jays points to that. As for the rest, the speculation on Rogers desire to sell the team may or may not be true but there is a gigantic component missing from this entire selling the team situation: a buyer. Who is out there hunting for a baseball franchise to buy? MLB isn’t the NHL where they have cities and owners (apparently) lined up to buy wayward franchises.

    So you have an ego-driven owner and no prospect of a buyer. Sounds like a recipe for a team to stay where it is, regardless of the financials.

    • Blue Ox

      100% agree the Jays are staying put. There is no basis for a move even if they are sold.

      Your comment is correct, TVA Sports may not be a Rogers’ subsidiary in the literal sense, however their relationship with Rogers is fraught with relationships and actions mirroring that of a subsidiary. TVA Sports and Rogers are partners through a sublicense agreement which ensures assets are shared between TVA Sports (or possibly better put, Quebecor Media) and Sportsnet (or possibly better put, Rogers). This relationship ensures Sportsnet and TVA Sports operate as sister companies much like the relationship between CBC and Sportsnet as it relates to Hockey Night in Canada broadcasts.

      TVA Sports provides Rogers access to a dedicated French-language sports channel, an area of weakness for Rogers.

      Thanks for addressing this, it’s much appreciated. Join in more of these discussions, your input is really valued!