pelley

Keith Pelley

Fascinating stuff in a piece on Tuesday from Simon Houpt of the Globe and Mail, as he follows ongoing CRTC license renewal hearings:

The traditional economics of broadcasting are disappearing, and only TV channels with multiple sources of revenue – from both advertising and subscriber fees – will be able to make money on sports in the future, according to Keith Pelley, president of Rogers Media.

The costs of sports rights “have escalated at a gargantuan rate,” Mr. Pelley told the Canadian Radio-television and Telecommunications Commission, which is weighing the renewals of 17 Rogers-owned TV services, including City network and Sportsnet. In the United States, rights costs “have doubled over the last 10 years. And it’s also happened in Canada.”

Mr. Pelley added that the conventional TV business is collapsing, amid a flood of programming and an exploding array of advertising choices for marketers, and that Canadian broadcasters’ reliance on U.S. programming is an unsustainable long-term strategy. “That’s why I feel so good we’ve acquired hockey. It allows us to reduce our reliance on U.S. programming, because I don’t believe, over the air, that’s where we’re going to make our money long-term,” he said.

The hockey broadcasts will allow City to cut its expenditure on U.S. programming by about 20 per cent, he added.

So, on one hand we’re being told that Rogers Media — the division that also controls the Blue Jays — needs to stem losses from an outdated traditional broadcast network with a too-small reach and, which Pelley later concedes, began trying to expand into a true coast-to-coast network “five to seven years too late.” (And, in that gloomy scenario for the division, it would almost make sense that everyone is being asked to tighten their belt.)

On the other hand, though, without saying so, Pelley is explaining to us just how astronomically valuable their no-bid Jays rights are. The value of those rights to the holders has doubled over ten years, he claims, yet when adjusted for inflation, the Jays were running bigger payrolls — thanks to commitments made at the end of the InBev era — in 2001 and 2002, than they were for all but one (2008) of the next ten seasons.

Much of the reason that the Jays even exceed that level again in 2013 was the fact that new revenue was on the horizon, with MLB’s new national TV deals about to begin pumping an additional $26-million into every team’s cash flow. Take that gift of $26-million away and the 2013 Jays still weren’t running as high an inflation-adjusted payroll as they were in 2002. (According to the Bank of Canada, the Jays 2002 payroll of $76,864,333 was worth $97.34-million in 2013 dollars. That year the club ran a big league payroll of $119.28-million. All figures per Cot’s.)

And yet the value of the TV rights — not subject in this two conglomerate town to actual forces of the market, as they’re kept entirely in house with Rogers — was in the process of doubling. Meanwhile the value of the franchise as a whole — which was purchased by Rogers for $120-million in 2000 — jumped to $950-million, according to a report last fall from Bloomberg.

That same report ranked the Jays as making the 22nd-most money off of TV rights out of the 30 MLB teams, despite the fact that the data from TV Basics ranks Toronto as the fourth-biggest market in the United States and Canada, and that the club’s games are televised nationally, pulling viewers from all over the country — who they gleefully market themselves to as “Canada’s team.”

In fact, Chris Zelkovich of Yahoo! reported last week that the Jays drew a “disappointing” 391,000 viewers for their Opening Day loss to Tampa. There are caveats, though. He explains that “the good news is that 1.9 million people tuned in for some of the game and 540,000 hung around long enough to ascertain that this game was pretty much over.” Meanwhile TV Media Insight cites a report indicating that the Yankees’ opening day game against the Astros on YES Network drew almost the exact same number, 392,000 viewers in the New York market.

Even if that’s an awkward, apples to oranges comparison — and it is: the Sportsnet number is national, while the YES number is specifically described as representing the New York market (though, on the other hand, the Yankees played at 7:10 PM on Tuesday, compared to 4:10 PM on Monday for the Jays, in a game that was all but over by the time most people returned home from work) — and even if the value of a Sportsnet viewer isn’t as high as that of a YES viewer because of the advertising dynamic of both regions and both teams, or if there is something in the way the numbers are measured that make them farther apart than they appear, it’s still a stunning contrast given that the Bloomberg figure for media rights revenue made by the Jays is significantly below that of the split-market Baltimore Orioles, and the small-market Clevelands.

More stunning: the Yankees, who Bloomberg ranks first in MLB in media rights revenue at $158-million per year, averaged just 244,000 viewers during the 2013 season — down from an average of 454,000 in 2007 — according to a New York Times report last October. Last weekend, according to another report from Zelkovich, the Jays on Sportsnet drew 664,000 (Sunday), 684,000 (Saturday), 896,000 (Friday).

And the Media division of Rogers clearly knows the value of such things, it’s president just having boasted about the $5.2-billion rights deal with the NHL that the company says it needs in order to save money.

I mean… do they wonder why Jays fans feel a fucking disconnect?

Again: the company boasts about how it will save money in the overall by paying $5.2-billion to the NHL, yet the Jays are caught in an endless cost-benefit loop where the benefit to ownership is so astronomically huge that any investment beyond the minimum simply doesn’t add up for them. Three times now they’ve shown that they’re willing to open the purse strings at precisely the point when they’ve felt that continuing their preferred pattern of inexplicable stinginess and false hope could actually do long-term damage to the brand. And every single time they’ve ultimately pulled back and left their GM to his own devices, saddled by bad deals made when the money looked like it was flowing, and an inadequate roster that he’s in too difficult a position to make meaningful change to. The effect is that it forces the GM to cross his fingers and go with what he’s got, the ultimate obvious failure of which providing the impetus for a new narrative: that Ash must go, that Ricciardi must go, that Anthopoulos must go, and that the club must start again from scratch — particularly when it comes to payroll, because obviously you don’t need a high payroll when your objective is to rebuild, and to trade expensive veteran talent for cheap promises of youth. In other words: more money for corporate coiffeurs! [Note: at Rogers they pay through the nose for fancy haircuts.]

Sure, that’s an awfully cynical way to look at it, but what the hell else are we left with at this point? What the hell else can we possibly think when a club is denied the ability to spend to better itself, and in so doing is forced to pass on wide open opportunities to put themselves in a much better position to break the cycle of mediocrity and disappointment? How can we be if not impossibly cynical?

And the worst thing is, it’s not even inexplicable or devious behaviour from Rogers. They’re doing exactly what you’d expect that kind of shameless, mammoth, greed belching company to do. In fact, the without-fail increase in equity and the ability to provide extraordinarily valuable content for extraordinarily cheap to their army of networks are precisely two of the reasons that the company bought the team in the first place — all the statues and pretensions to community service in the world aren’t going to make us blind to that. The fact that they are now able to use it to help prop up their stake in an industry they’ve suddenly realized has been on the verge of collapse for at least a half-decade would seem to be a nice bonus to the endeavor, and not one we’d expect ownership to decline using to their other properties’ advantage.

But boasting about how they’re going to subsidize other ventures, the demise of which they admit they’ve been too inept to see coming, off the back of this exact type of content, which only holds such tremendous value because of our loyalty to the Jays and our love of the sport of baseball? Doing that while not financially doing right by the team is offensive.

They can talk all they want about running the tenth highest payroll in the game (in the fourth largest single-city TV market, with a national reach that no other team can dream of), but we can see how stagnant it really has been. We can remember how they’ve been encouraged to pad the big league payroll thanks to MLB’s latest CBA and its spending limits on the draft and international amateur bonuses. We can see that the league has told them to behave like the big market club that they are, shutting off the revenue sharing tap and not considering them for additional “competitive balance” draft picks. We can see the viewership numbers, skewed as they may be, in comparison to the club getting the most out of its media rights.

We can see that they themselves admit to how quickly the value of the property has grown, we can see the impact that last year’s excitement had on attendance (more than 2.5-million through the turnstiles for the first time since 1997) and on TV ratings (a record 1.4-million viewers on Opening Day), and yet somewhere in the cost-benefit analysis the Jays still lose.

The benefit would seem, especially though their own admission, to be simply so high that additional cost — even after the levels to which excitement about the team can push attendance and ratings have been unequivocally demonstrated — is almost never justified.

The next group to run the Jays’ front office will need to understand this better than the previous ones have, and will need to have the balls to sidestep the “ownership directive” mandating spending that will ultimately come, and have the strength to continue building the club slowly, no matter how sick they get of that particular phase of the job — two subjects spoken about by J.P. Ricciardi in Blue Jays In Focus, which I wrote about yesterday, and two areas in which it seems his successor has followed his same path to failure. As long as ownership remains the same, the job of a Jays GM isn’t merely to win inside Major League Baseball, but to win within the Rogers corporation as well. Given all that, it’s not surprising that so far the person capable of both has proven elusive. And the shittiest thing of all is, Rogers probably likes it that way.

In the mean time, everybody cross your fingers.

 

Image via Toro.

Comments (133)

  1. Well.. you nailed it. Ugh.

    • Wow. Everything Stoeten puts out here is so true and so obvious, it breaks my heart to read.

      I could only get like a paragraph in and I honestly got sick and had to close it

  2. I saw this last night at the Globe….not a lot of smart economist people are bullish on Canada right now, right or wrong

    Dollar has sunk, building condos is going out of style and at some point interest rates will go up as will the cost of carrying record debt

    the point is not to predict what’s going to happen, but the best business people focus on 1) growth 2) preventing loss

    we’ll see…

    • The *best* business people find under-serviced markets (let’s call them “market inefficiencies”) and exploit them via innovation. The perfectly adequate business people do what you’ve just described. :)

    • The thing is, our current government does not want the dollar to rise any further. When the dollar hit $1.10, they took action to lower the dollar because it was hurting Ontario’s manufacturing sector. That is the very reason investors don’t push the Canadian dollar up that high anymore–they know that if the dollar hits that mark again, the Bank of Canada will find another way to devalue it.

  3. Great article Stoeten, depressing, but honest and very well done. Gold star.

    • Maybe hold off until people who actually know what they’re talking about in these areas start weighing in. Always afraid I’m missing something fundamental, as the business pages are certainly not my background, and doing these sorts of things can be a real slog. But thanks!

      • Don’t undersell yourself Stoeten. I’ve been a long time reader of your little blog thing and can say that your analytical skills have grown exponentially.

        Thing is this. You are one of the very few to have the actual balls to ask questions about the incestuous financial ties between Rogers’ baseball operations and Rogers media. Its a fucking joke in many ways.

        The Santana thing is very illustrative of where things stand now. AA’s balls are being squeezed by ownership through the smiling and conniving Beeston. Sure, having Santana or not having him should not make the ultimate difference between finishing 4 the or 1st. But the principle matters. Having to resort to passing a hat to sign Santana looks very fucking bad .

        Looks like the new guy with his gonzo economics has taken hold with baseball operations.

      • You got the essense of it Stoeten.
        You missed some points,but good job.
        For what it’s worth,IMO,It’s much worse than you’ve stated.
        The dollars that the Jays make,directly and indirectly, for Rogers is truly amazing.
        It’d take another post just to list it all
        The Jays organization is getting fucked up the ass.

      • The business pages are my background and (unfortunately) you’re pretty much bang on with this.

        It’s the “Law of Diminishing Returns”. Does putting more into the payroll cause enough of an increase at the gates and in viewership to justify it? At some point no matter how much money you put into something the profitability simply flatlines and increased investments become a waste.

        Last year was an experiment to see how an increased payroll would work. Even with increased viewership and ticket sales, it’s clear Rogers didn’t like the results. Combine that with a sinking dollar, new CEO and competitive investments in other TV markets where they don’t have a monopoly and this is where we stand.

        It’s really quite gross and makes it difficult (for me personally) to care too much about how they do. Also a grwat argumebt agaibst corporate owned sports teams who obviously have a priority other than winning.

        Still cheering for the Jays and always will, but sick of supporting Rogers shareholders while they dick my team around. Unfortunately you can’t do one without other.

  4. Re: “…… And every single time they’ve ultimately pulled back and left their GM to his own devices”

    Um,….didn’t payroll go up 18 million this year?

    • Don’t be dumb.

      • 18 mil is a 15% increase on last years payroll, which was increased by 41% the year prior. That’s a positive trajectory. Rogers continues to invest in the Blue Jays.

        That said, diversifying the profit taken from one asset and reinvesting into additional assets that are at an attractive cost is how you make money over time, wether it be a media corp., or your TSFA.

        Rogers is doing both of these. This should be applauded by both shareholders and customers as it is being demonstrated that there is long term commitment to core content.

        I really don’t understand your dismay on the issue.

        • Look at the reduction to draft and armature free agent signings by the new CBA. All Rogers did was move the money around.

          • Correct, a strategic investment during the type b comp pick era to get extra value, and then they moved the resources to the MLB roster when the market/CBA changed.

            This called getting the most out of what you got to work with.

        • Insanity.

        • That was already an obligation before last season. Hence, y’know, don’t be dumb.

  5. Good article, I guess add/nitpick that the rise in team equity isn’t particularly impactful on anything, since the gains aren’t actually realized unless they sell, which they clearly won’t.

    • I’m not a businessman (I’m a business, man), but I’m not sure I agree with you. They can still borrow and trade on that increased equity even without selling. So it does matter before they sell.

      • Accounting-wise, equity cam be defined as assets minus liabilities, so in addition to book value, it can be used to roughly judge the “health” of a business.

        Not having to pay for TV rights, and instead merely getting to reap subscription and advertiser funds is a liability that it’s nice not to have.

    • Equity always matters.

      Period.

  6. It’d be great if AA could somehow survive what appears to be an unsurvivable position. He’s a smart enough guy that I think he can adapt. So maybe the team competes enough this year that he doesn’t become a scapegoat, and buy him enough time to retool and realize he can’t rely on an infusion of money from ownership precisely when he needs it.
    Given enough time I believe he could develop a strong team on a payroll that ‘s mid-marketish.
    Problems are: does he have that much leeway now, and why the fuck does the team have to act like a mid-market team?

  7. That statue is going to get defaced.

    • I’ve noticed this week that there are security guys near the statue that I don’t recall being there before. Guess they expect the same possibility.

  8. This section confused me: “Take that away and the 2013 Jays still weren’t running as high an inflation-adjusted payroll as they were in 2002. (According to the Bank of Canada, the Jays 2002 payroll of $76,864,333 was worth $97.34-million in 2013 dollars. That year the club ran a big league payroll of $119.28-million. All figures per Cot’s.)”

    Am I reading this wrong? Looks like 2002 adjusted figure is 97.34 M but the 2013 payroll was 119.28 M. So higher in 2013 than 2002 in adjusted dollars?

    • I thought the same thing

    • The “that” of “take that away” is the gift of the additional $26-million from MLB’s new TV deal. I’ll clarify, though. Thanks.

    • I was confused there too until I saw the $26 million in the previous figure.

      But with that said, I was under the impression some of that $26 million was budgeted for this year’s payroll increase.

  9. That was a work of art. The Jays are like a player pre free agent days, you are kind of fucked but there is nothing you can do about it.

  10. Funny how we are back to the same things we were talking and complaining about two years ago. I commented multiple times back then when I argued that the payroll once adjusted for inflation was low. I don’t think there should be any doubt now that Rogers has been putting in far less than they are taking out. If you factor in what they used to get from the revenue sharing itbwas even worse.

    It’s a pity when you consider what could be.

    • Welcome to corporate ownership; Steinbrenner family we are not. The passing of the Ervin Santana hat to collect pennies is a fucking embarrassment.

      I don’t know whether I should laugh or cry.

      “Starting pitching is our biggest need and we know it” – AA

      Che Catso !!

  11. Re. Rogers: fuck those guys and their Ted Rogers statue.

  12. Great write up on a depressing subject. Being a Jays fan is tough when team ownership doesn’t seem to share the goals of either the group on the field or the group in the stands.

  13. I’m intrigued by the drop in Yankees ratings. Steoten, do you think this is a result of people not watching on “traditional” media? (i.e. streaming etc…).

    • I’d personally lay the blame at the Yankees sucking.

      • Probably a little of both.

        • Seriously? This information is available. There has been a tiny (less than 1% of total subscribers in NA) dropping of PayTV services. There has been a larger trend of people trimming their packages, and this matters more in Canada where the service providers tend not to be allowed to put their sports networks in the “basic package”. But none of this can explain even a 5% drop in Yankees ratings. The real answer is simply the natural variance in enthusiasm for the team, expectations for which are World-Series parade or bust. Sports ratings for individual teams are notoriously volatile, which effects advertising revenues, but tends not to effect the main subscription revenue stream at all.

  14. Somewhat related question, does anyone know how MLB.tv ratings are factored in, if at all?

  15. Rogers is just trying to spin the Jays’ payroll increase as their own investment, when it’s really just extra money from MLB’s national TV deal.

    If there’s anything that shows AA’s genius, it’s that he went on his spending spree last off-season, grabbing Buehrle, Reyes, et al to pre-national TV contract deals. The idea was sound–lock everyone up before the national TV deal spirals player contract costs out of control. Imagine how expensive those players would be as free agents today.

    The unfortunate part was that the team didn’t work out. The other unfortunate part is because AA spent the national TV money a year early, he didn’t have any money to bolster the team this season.

    Which of course gets back to the point of this blog post: Rogers still hasn’t, and really hasn’t ever, spent money on the Jays.

  16. Andrew, you hit it on the head when you said this is unsurprising behaviour for a for-profit corporation. I disagree that it’s *evil*, but it is frustrating for me as a fan. I’d much rather have an emotionally attached individual owner over a corporation. (Then again, we could have somebody like Loria, so the grass isn’t always greener…)

    Reality: Rogers wanted a business case to spend an *extra* 14 million on Santana. I get why that case wasn’t made – without Santana, people are still watching. It’s irrelevant that the Jays are surely a highly profitable piece for Rogers’ bottom line — they’re not going to spend 14 mil just because they can.

  17. Part of the problem I assume is that each Sub-Business of Rogers is run independently of the other with Profitability mandates for each and head haunchos for each. While it would be nice if Rogers fed the Jays with Cable and wireless $, in true reality it is probably not managed or reported that way so each big swinging dick has to manage according to their individual metrics.

    So the lines about “running it like a business” are entirely real, and the Baseball Division is relied upon to grow budgets with more sales of seats, beer and corporate partnerships. Rogers can obviously afford to dump as much $ in to the Jays as any franchise in baseball but unfortunately they operate in individual silos and aren’t willing to take one for the “collective team” or the fans.

    • But I don’t think that’s true, because the Baseball Division has the value of its TV rights taken away from it to subsidize other divisions. It’s not about asking them to feed the Jays with money from cable or wireless, and it’s not even about asking them to let the Jays put the TV rights on the open market (obviously that’s just not feasible), but the suggestion I’d make is that maybe they could do a less offensive job of “approximating” what the Jays ought to be getting back for those TV rights.

      • I’m sure they use BS accounting re the broadcast revenue, but at the end of the day it’s irrelevant to those controlling the payroll expense budget. The cost/benefit analysis rules the day.

      • I add that if my recollection is correct, MLB recently forced Rogers to increase the nominal (i.e. internal paper transfer) value of the Jays TV contract. They had been keeping that number so artificially low to game the revenue-sharing in the CBA that the league felt the need to intervene.

  18. Re: “While it would be nice if Rogers fed the Jays with Cable and wireless $”

    That’s exactly what they did when they purchased the team in the early 2000′s.

    Overtime the investment (Jays) stopped losing money and broke even, and now it’s beginning it’s phase as a profit generator, and they’ll use some of that profit to fund new ventures. That’s how you continue to make money.

    Problem with the tone of the author is that there is this misguided impression that they are cashing in the team Loria style when in reality they increased payroll by 18%.

    • Hey look everybody, a shill!

      • Are you going to ask me if I support the troops next?, or begin to open your mind to fact that healthy Rogers Media division as a whole is of benefit to the Blue Jays long term.

      • Trolls be trollin’.

        • Some decent points in the abstract, but it’s just absolutely hilarious to try to spin payroll trajectory the way he’s doing. Sure, let’s include the one-time commitments made last year that happened to have been on this year’s books in order to pretend that payroll is on a trajectory that it very clearly is not (while also forgetting about the gift of an additional $26-million per year from MLB’s national US deals that accounts for most of the increase he’s claiming, along with the moving of money out of the draft and the international amateur pool). Like… for fuck sakes! I hope that’s not the kind of shit they teach him at Rogers is actually going to work on people.

    • So Famous… didn’t actually read the article then eh? The 18% is not the only ratio. But why would I explain what has already been explained. You aren’t big on reading I suppose.

      • I read the entire article. It was filled with red herring arguments based on shoehorned facts that did not distract me from what is happening in reality.

        I’m mean really, do you really expect a entity as large as Blue Jays to change their annual budget based on one weekend of viewership? The ads for these games was sold months ago at probably a decanted rate.

        Or citing YES network viewership numbers and comparing them to the Jays while ignoring that the YES network is based on a subscription model?

        Ya, I read it, but no thanks to most of what it said.

        • What company do you work for, Shill Clinton?

        • By the way, it speaks to the emptiness of your argument that you need to pretend you’re dumb enough to think that I brought up the weekend’s viewership as a reason to increase their budget right now. So please, keep on digging for as long as you want, it’s only getting funnier from here, I bet.

          Good to know I don’t have to subscribe to get Sportsnet, too!

        • The Yankee’s are a subscription model, but they’ve sold 80% of YES to Fox, so most of their year/ year revenue comes from attendance.

  19. Very well written Mr. Stoeten.

    I’m curious what lack of spending bothers you (or anyone here) the most? Santana? Is the consensus that we could have got him before the Braves thing happened if we weren’t playing budget games with the other players?

    Or is it just the general failure to sign or trade for and take on the salary of a big name pitcher?

    Or is it the mediocre handlings for 2B and C?

    I am mad like everyone here but I admit I don’t fully have a target that I am mad about. I just in general wanted at least a very decent and experienced pitcher and if the money was there I assume AA could have pulled something off.

    • To answer my own question: I also get upset knowing there is little chance we keep Rasmus or Cabrera.

      • We don’t really know enough to say that there’s little chance, to be fair. History and the sweet setup they have for themselves in regard to these media rights doesn’t paint a great picture, though.

  20. i’d like to kick keith pelley’s teeth in

  21. It’s not as black and white I don’t think as a simple lack of spending; god knows enough teams have tried to spend to win and failed enough times. It’s when you shift your entire philosophical focus from building within, acquiring assets and growing the farm into win-now mode and your GM clearly has a belief there is some sort of continued capital flow coming, it’s a slap in the face to fans to immediately cut it off and say deal with it. It’s not that Ervin Santana is going to win the Jays the AL East; it’s that he represented an upgrade over what the team already has at 0 cost in assets, and ownership is not concerned with marginal values and improvement. Which are the exact kind of moves that make an ok team good, good team great, etc. Again it’s not that he’d put us over the top, it’s that there was an upgrade to be had.

    It’s that management shifted the team from one phase to another last season, GAVE us the windows for contention we keep citing, and then as mentioned with Ash and Riccardi before flipped the bird and dropped the mic when an actual investment might be needed

  22. Hey Famous,
    Are you being deliberately obtuse? The rise in value in sports as it pertains to broadcasting has been sloshed across the news for a number of years. (How do you think ESPN bought ABC?) Rogers has been the beneficiary of that, along with the extra revenue for all teams, NONE OF WHICH THEY WERE RESPONSIBLE FOR. What, exactly, have they done to increase the value of the Jays by 800 million in a decade? I can tell you. Nothing. The Jays have been mired in mediocrity and haven’t made the playoffs in twenty years. Get a grip, man. The shit you’re spewing about the 18% increase is just dumb. Shill is right.

    • I truly do believe that the Rogers controlling and reinvesting in their content in production, acquisition, and delivery over the medium to long term will be of tremendous benefit to the Toronto Blue Jays.

      Controlling content is the name of the game these days. The LA Dogers were purchased at a princley price just because of that.

      If it means that they Jays have to remain somewhat value conscious in the short term as they build content around their crown jewel content, then so be it.

      • What is long term? Rogers has had the team for what 13 years now? At what point is long term supposed to come to fruition; by your definition there’s no reason to ever make that happen. Which if I’m not mistaken was the point of the article.

        • Ha doabaso perfectly put.

        • I think the Jays will be close the Luxury tax threshold within 2 years.

          • Really? They are roughly $55 million from it now and it will only go up each year so they just have to overcome that initial deficit and any future increases in that threshold. Considering that every pundit out there is predicting a massive teardown if this team doesn’t perform then that sounds like someone going on the mother of all free agency spending sprees in the next two years.

            Lets face it, the Jays content is the golden goose for this corporation on the media side of things. Every new deal signed by the other teams in MLB just strengthen that argument even if you want to ignore what rogers executives are saying about it. Live sports is where the advertising dollars are going when it comes to TV.

          • famous amazing how are the jays going to be over the cap when they are projecting to spend less money next year at the moment. 96 mill on the books plus 25 in arb and doubt on resigning melky, rasmus and no need to resign Jansen.

            • FAG, I was kind of with you until you predicted they would be paying luxury tax within 2/3 years. Was your whole position based on this unfounded optimism?

              The thing is, the Jays are indeed a very valuable commodity to Rogers and they’re making great money off the property. And that’s all it comes down to – they will only spend as much as is necessary to maximize revenue. Every dollar spent beyond that point is wasted profit.

              We can wish they’d spend more to upgrade the on field product, but the view that they’re ripping off the Jays is misguided. As is the idea that they’ll spend more just because. They’ll spend more if they’ll make more as a result. Bottom line.

      • “If it means that they Jays have to remain somewhat value conscious in the short term as they build content around their crown jewel content, then so be it.”

        Do you even hear yourself when you type stuff like this??

      • You’re assuming that value isn’t there yet and hasn’t begun to be realized which is clearly not true. They are making out like bandits with the Jays content and they liked it so much they just doubled down on the strategy by investing even more in the hockey. When you look at what they paid a few years ago everything else has been gravy for years now. At the end of the day they have chosen not to direct what was needed to build a winner here for a myriad of reasons. You can agree or disagree whether it’s the right thing to do, clearly you don’t have a problem with it, but what you can’t argue is that they have not done so. It’s obvious that they haven’t unlike other teams like the Dodgers, Yanks or Red Sox who are benefitting from the same financial set up.

        Remember MLB took them off revenue sharing for a reason. While there is only so much they can do when it comes to extracting a minimal amount for the TV rights they know better than anyone just what these teams are making.

        • I believe that the Jays could rival Boston and Phillly within the next few years, and the Yankees and Dogers with the next 5 to 8. But the later cannot happen if they cash in on their content property too soon.

          Their is a long play to this.

      • Is that you Paul Beeston? Can you explain why you and AA don’t seem to be on the same page as far as your dipshit five year policy is concerned? And why we’re you bellowing crap about Alex not having lost his “initiative” when nobody was asking? Why don’t you do your goddamned job and squeeze the necessary resources out the cheap fucks at Rogers?

    • I feel the need to point out that Disney (owner of ABC) aquired the 80% of ESPN which it still owns in 1996. ESPN most certainly did not buy ABC…

  23. I will give back my salary to help get more players if it gets me recalled to the big leagues. Rogers is to cheap to spend more money to make more money. #CALLMEUP

    • Aren’t you supposed to be pitching right now? When you stop walking/hitting/serving up meatballs to everyone, we’ll talk.

  24. Stoeten, man, apropos of nothing, I look forward to the day you get over your youthful need to tell people you disagree with how stupid they are. Posts like this show that you’re really coming into your own as a journalist. I see that you are struggling to keep speaking “the truth” as you see it despite the fact that you appear to be (even though I’m not exactly sure how) somehow beholden to the evil lords who run the Jays (and if I’m wrong, I’m sure you’ll tell me how much of a fucking moron I am), and I admire you for it. But for newcomers to the site, the possibility of getting chanted down remains a disincentive to truly engaging with the site.

    When I was a kid, the fate of the Blue Jays was life and death shit to me. I remember how stoked I was in ’83 when Upshaw became the first Jay to knock in 100 runs. I remember how crestfallen I was when I was at the last game (or one of the last games) of that seasons and he was left stranded on 3B and got stuck on 99 runs for the season. I remember when Jim Acker gave up a home run literally every time he got brought in from the pen yet still always got called upon in high leverage situations (before they were referred to as high leverage situations). I remember throwing shattering my bedroom windown with my Macho Man Savage doll in ’87 when Jimmy Key gave up the home run off the top of the fence to Chet Lemon to put the cherry on top of the most devastating Jays collapse of all time (fuck you Bill Madlock for breaking Fernandez’ elbow and then fuck you Manny Lee for letting that grounder go through your legs).

    And yet, now that I’m an adult and don’t have time to dedicate every second to knowing every single thing about the Jays, I’m hesitant to come on here and be like, “As if the Jays could ever possibly be considered a true threat with a scrub like Goins at 2B”, because you and your disciples might come back at me like, “You fucking idiot, don’t you know that Goins’ BABIP was ridiculously low and his dWAR shows that he’s worth 3/5 of ’92 Alomar at 8.67% of the average yearly salary and you’re a dumb fuck and shut the fuck up”.

    Anyway, TL;DR but maybe you’ll read this and give it some thought. I was a pseudo-journalist at one point and I look back and regret how strident and dismissive I was of people I thought were uninformed back when I was younger. This is a great site and I will continue to read everything you write, but I just think you could be a bit more respectful of people who make sincere, but in your opinion misguided, comments on the site. It’s one thing to call out a troll, but it’s another thing to drop bombs on some guy who likes your site but says something you disagree with.

    • Fair points, for sure. Hope it’s not in reference to FamousAmazingGuy, but on anyone else, you’re definitely right. It’s too easy to let sincere misguidedness get swept away by the dismissiveness I think is warranted in the direction of those many who are just genuinely being shits and trying to waste people’s time, venting just to hear the sound of their own voice, or otherwise just taking a shit in the sandbox. I struggle with that far more than I do with being beholden in any way to any Jays overlords (I am not in any capacity at all), but you’re not wrong that my being polite with people is sometimes reactive, after I’ve started off shitting on them, and not as proactive as it should be. Maybe in that way the shithead trolls are actually winning. Ugh.

  25. The Jays’ TV ratings, even when they were shittier than they have been for the past two or three years, were insanely good when compared to most US markets and when taking into account population figures.

    I mean, combine both New York teams and you’re still looking at proportionally lower TV numbers than Blue Jays ratings, given a Canadian population of 34 million and a New York CSA population of 24 million.

    In LA, combine both teams’ average ratings and compare to the CSA and you get a lower figure than New York.

    In Chicago, combine both teams’ average ratings and compare to the CSA and you get a lower figure still than LA’s.

    Even if you double the US ratings figures, you’re looking at just marginally better ratings for the teams in the biggest cities and with the grandest baseball traditions.

    The Jays gets ridiculous TV ratings, with a higher percentage of the population marketed to tuning in regularly than in places with much, much higher perceived interest in baseball.

    The team is likely worth more than Rogers is willing to say, especially given the incestuous TV thing. Yet it’s handled like a small market team when it has a bigger following than most of the biggest US teams.

  26. Whining about the money the Jays get from Rogers is stupid. They are not even in the bottom of the league in payroll so, its hard to believe they are hand-cuffed.

    they sit 10th
    the cardinals sit 13th and won the WS two years ago
    the rays and the pirates are 27th and 28th and were both in the playoffs last season..

    so whats the point of this article?

    • Of course the pirates and rays were dog shit for years. rays it took 12 years of dog shit and drafting and pirates over 20…. so if the jays throw out and extra 50 million and draft 12-16 instead of 1-2 of course they need everything to work for them in hopes of going to the show. It’s like saying jee them penguins are good but forgetting that they had the #1-2 draft pick in 2003,2004,2005, and 2006. I hate referencing hockey because I hate hockey, but I feel this is a reference you will understand. I am not saying drafting is the # 1 way to get to the top, but if you do not throw money at free agents (Yankees/ Red Sox/ Dodgers) or throw money at international prospects, than you need to draft from within.

      jays have a strong bullpen from drafting and strong scouting (great trades). but still need to draft some better position players.

    • Will everyone stop with this “top 10″ BS. There are only 30 teams. 10 means just a handful of teams above average. Switch Reyes out for Yunel and we are probably right near middle of the pack.

      And the bigger point isn’t whether we are top 10. It is whether we really are going the veteran route at present. I’m fine with an 85m payroll if we just traded all the vets and are rebuilding. But don’t have Bautista and Reyes and Dickey and Buehrle and then cheap out at getting one starter, especially when he comes cheaper to you than most other teams.

      We should have done it just to get a trade chip at the deadline.

  27. Hey you finally figured it out, good for you. Would you like a cookie?

  28. It’s notable that the Mets have recently been hammered in the press for the same excuses the Jays used to make: “the fans have to come out to games first, and then we can spend more.”

  29. I’m probably out to lunch here…but I see ROGERS spending 5 BILLION dollars for hockey – yet squeezing AA’s balls like they’re down to their last penny in the baseball operations.
    Granted, I’m not psychic – so I don’t know if all of AA’s non-acquisitions this winter were because of a certain payroll parameter restriction – or if EVERY SINGLE ONE of those free agents developed an aversion to playing in Toronto.
    But it just seems to me that throwing another 20M into this team might (repeat cautiously : MIGHT) have taken them to a higher place.

  30. Sometimes I feel like there is too much information for fans out there to digest and play armchair experts, when in reality we only know 1/10th of the big picture on what’s really going on. Its easy to be cynical about all this (no offense intended to any writers here, its just nice to actually think about baseball more than the financial statement).

    Question Andrew, you talk a lot about how the payroll hasn’t really increased as much as it looks, but we know that Jays have gone from bottom of the league in payroll to top 10. Doesn’t that relative increase mean anything about ownership’s willingness to spend?

    • No because the $ increase in payroll amounts to almost exactly what they are no longer allowed to spend on the draft, international etc. in the new CBA; they simply shifted those extra $ to payroll. So yes payroll is higher; no they have not spent anything more.

      • I get that, but if all teams did that Jays would still be bottom of the heap in MLB in terms of payroll.

        Its how you look at it, other teams pocketed the increases in revenue and savings on the draft/international, while the Jays moved that extra cash into the payroll. Relatively, they deserve some acknowledgement, don’t they?

        • Glass half full, fresh. I like you lol. I’m more cynical though. Firstly I don’t have nearly this amount of information regarding the other 29 teams to make even a cursory judgment call on their good and bad faith dealings regarding spending. (Except LA and NYY, they’re fairly obvious lol).

          But I do see a giant company making claims of investing in the team when they in fact have not done so. I see a giant ownership group making claims of increased payroll with 0 context thrown in. They’re acknowledgement came last year when 2 million fans showed up. They cut it off at the knees this year, what acknowledgement do they deserve in 2014?

  31. MLSE
    MLSE
    MLSE
    MLSE
    MLSE

  32. Good read, but profoundly depressing.

  33. hey on a side note about baseball,
    if the jays were willing to roll with a defense first player up the middle this year, to save money, realistically how is that different than getting a real second basement and letting colby walk? a decent not black hole second baseman, maybe even macier, is about 17 mil a year cheaper than what colby is going to make, and would the drop off be that substantial?
    young season and all, but wouldn’t you kind of like a few more years of melky?

    • ‘Cept even if Melky stays and there’s no guarantee he will (especially if he has a good year), you’re still down a CF and Gose shows no sign he’s even close to Colby.

  34. I’d love to see Keith Pelley vs Scott Boras in a steel cage match with no ladder. Pay-per-view money would pad the bottom line…

  35. I’m glad to see you focussing on this issue Stoeten as I think it’s very important.

    Basically sports networks make most of their money now off subscription revenue. This is why the Dodger situation is of crucial importance to Rogers.

    The Dodgers/ Time Warner play is to get into 5 million homes in the LA basin at about $4.50 a month for this service. If you do the math that’s $ 270 million bucks a year before you sell one second of advertising ( the Dodgers get $ 210 million year on an escalator clause for this years broadcast rights).

    The problem is that Time Warner is provider for only 30% of the market and so far haven’t been able to get other providers to pick up the channel at this price. They are optimistic however, as they faced similar issues with a Lakers only channel before cable companies eventually caved and provided the service given public pressure.

    Why is this important to Rogers? I think at some point if the Dodgers are successful , hopefully somebody with some long term strategic thinking ( which seems to be in short supply at times I believe at Rogers ) will see the massive revenue opportunities in what is the largest baseball market in the game.

    I could see them monetizing SportsNet 360 perhaps, putting 100 Jay games exclusively on this channel. They’ll charge $ 3 bucks a month ( this is what TSN essentially charges) up from the 5 to 10 cents they currently charge for this channel ( yes – people will be pissed as Canadians are used to getting content much cheaper, but get used to it as this is the model of the future).

    If you get 9 million subs , currently what TSN and Sport Net essentially have , you’d be looking at 320 million in found revenue.

    The key though is to spend on the product. Add $ 100 million of the new revenue into the team payroll. The Astros tried the same gambit, but the team was so crappy the network went bankrupt.

    We’ll see what happens if the Dodgers are successful , maybe Rogers and by extension the Jays will get their shit together , but selling this new broadcast model won’t be easy.

  36. Don’t forget Rogers purchasing their ballpark for a song… this is a depressing situation. Interesting article, though. Hopefully you are wrong haha.

  37. Navarro stealing, Lawrie actually squaring one up…what the hell is going on here?

  38. Amazing post. You always say what I think I must’ve been grasping at thinking about but with more swearing.

    Rogers is going to look foolishly blind for running the team so poorly. They’ve increased their equity and made huge profits. You’d think they’d invest those back in this business in hopes the equity will continue to build instead of assuming that people will continue to come to a decrepit concrete mausoleum and drink overpriced loser-beer. How ridiculous being an east coaster that takes family vacations to see this team? A subpar stadium for players and a borderline miserable fan experience compared to many MLB and even MiLB parks….

    And they lost Dirk Hayhurst so the coverage of the games isn’t as informative.

    And whatever Ninja is that who orchestrated giving 5+ quality players/prospects for the right to pay a knuckleballer, a #4 starter and a 30 something shortstop ONE THIRD of your payroll ceiling for the next three years!?!!?!?

    And the Yu Darvish thing was just total horsedung. They complained for years that they can’t do the free agent thing because of term and desirable location for the player, the perfect exception comes up on a can’t miss guy and they fake high bid and try to sell to the fans they tried.

    For a lot of fans the Jays under Rogers are a nasty old friend who makes more money than you but still demands needs you to pick up the tab all the time. Eventually people are going to kick it if they keep lying like we’re all soccer moms on valium. Or just realize it’s not the Jays we loved as kids and move on, like so many already have.

  39. An excellent post that is an example of why Jays fans come here.

    While I don’t necessarily agree with all of FAG’s points (I laughed out loud at the pushing the luxury tax threshold part), as unpopular as it seemingly is, I’m willing to hold off on shitting at Rogers until we actually have some evidence that they are pulling the rug out from under AA.

    The ML payroll has increased significantly and the Jays are in the top 10 (for now).

    While the relative payroll shouldn’t end every and all conversations, I don’t think it should be taken for granted, either.

    The Jays didn’t gut the team this offseason.

    Not that Rogers deserves an award or anything. But, again, it shouldn’t be completely ignored, either.

    Whether or not the money was truly available for a short term upgrade like Burnett/Santana or Johnson if he didn’t implode is anyone’s guess.

    Personally, I don’t think we should take the player-initiated deferral stuff as an absolute indication that Rogers has put up the corporate stop sign (though they very well may have).

    Should the difference between a passable offseason and an unacceptable one for the organization really be determined on whether or not Burnett or Santana was willing to take the Jays’ money?

    Remember the last time everybody thought the Jays had strict payroll parameters?

    It was swiftly followed by a spending spree.

    As I’m writing this I realize how much it sounds like I’m apologizing for Rogers.

    To be clear, I’ve shat on Rogers before, I’m extremely skeptical about this team maintaining a high payroll and I will surely shit on Rogers in the future.

    I’d simply like to wait and see what the organization does in the next year or so with pending free agents like Rasmus & Cabrera especially if the team doesn’t contend this year.

    If it comes to pass that Rogers pulls the rug as I suspect they might if it’s another underwhelming year, I’ll rejoin the mob.

  40. Great, insightful article. It really is something to see all of those details written down in one place. This is the kind of stuff about this organization that you won’t be able to find anywhere else. You might even say it was “courageous and telling.”

    You know, it’s funny looking back now at the times years ago when I used to accuse Stoeten of being a Rogers apologist for his defense of ownership. Times have certainly changed (as that’s clearly the last thing anybody would call him now). Unfortunately for us, though, the way Rogers manages its baseball team very much hasn’t.

    It seems the only thing that could stop this pattern from repeating itself once again is a Jays team finally experiencing some unexpected, surprise success. I think we’re more than due for that one of these years, right?

    • Indeed, we find ourselves reduced to hoping for that year when everything breaks right. Fortunately, that stuff happens and it could happen to us.

      But for any hope of longer term coherent team management, there will have to be an ownership change. There are few ways I can see this happening. My best scenario is that as the value of TV sports rights plateaus (already happening), Rogers could be tempted to sell high on a portion of the Jays. Even a partial ownership stake from outside would require a major change in the club’s accounting.

  41. I may have missed it in the comments, but if all of this is true (and I believe it is) why on earth would Rogers pull back and not want to invest more to have a better shot at a winning team? History shows that a wining team gets multiple more times as many viewers as a losing team.

    These are smart guys, there must be reason we are not seeing.

    • See the above discussion regarding diminishing returns. As Stoeten puts it, the relative benefit to the Jays is so large as it is that any additional investment does not appear to be worth the risks. Of course, if the investment were somehow almost guaranteed to succeed , they could do it… thing is few things are guaranteed to succeed when markets work properly.

      In short, the folks at Rogers are milking the Jays because they are smart business people and don’t give a fuck about the feelings of baseball fans. If fans got so mad that the team’s equity were threatened, things might change, but I just don’t see that happening.

    • The Jays viewership numbers are already pretty freaking good. “Many multiples” is probably a stretch. Attendance would go up, but by enough to pay for all those pricey free agents? I wouldn’t be so sure.

      In the end, if the Jays spend more, profits will fall, even if they win.

  42. I’ve brought this up a few times when this topic is discussed but Canadian TV ad dollars are worth about half of US TV ad dollars. So you basically need to divide the Jays ratings by half to compare them to the other teams in the league to gauge what Rogers is making off ads

  43. As I understand it, baseball is a sport, it’s a sport run by business, and therefore making or losing money is a concern, however in order to make money you need to attract viewers, and usually winning teams attract more than losing teams. So yes, it is a risk, but if the jays spent $200 million this year and won it all, they would probably make money, so this idea that the team can only be financially viable if it is starved of payroll is utterly ridiculous, you have to spend it to make it, baseball is no different in most places. No one expects a 200 million dollar payroll, but things like this deferment scheme are an absolute embarrassment and utter joke for a team owned by such a wealthy corporation. The chicken and egg theory of payroll just isn’t going to cut it, it certainly won’t cut it for a year or two after many years of starving the team. We need more income to increase payroll, we need better results to increase income, we cant get better results because we can’t compete for the tools required to attract the viewership, and on it goes.

    By 2017 we have almost no one signed, what is more likely if this years team fails, over the next two years they resign the best parts we have now, and spend a pile of money on new players, or they trade away most everything of value and start the next rebuild with a 50-60 million dollar payroll despite the increased profitability of the team in the last few years. Maybe option 2 is the better one anyway, but you can be sure of which option rogers would prefer. Selling hope for next year, that’s where the real profits are made.

    • you kinda missed the point with your first paragraph, which is that they’ve put themselves in a position where they can make huge buckets of money without putting a contending team on the field consistently.
      Even if it’s true that they could make EVEN MORE money with a winner (it is true) the increase is small in comparison to how much they are already pulling in and therefore the additional investment required to do so is not worthwhile to them (because they can instead take their insane profits and reinvest those dollars in something that will give them a higher return)

      • No, that’s pretty much what I meant, and said.

      • But would the increase in profit be small compared to what they are already pulling in if the team was a winner? It would double attendance alone which would more than make up for additional payroll. Dont understanding why Rogers wouldn’t be seeking to cash in big time with increased revenues it seems pretty apparent the potential revenue and consequently profit gains.

  44. Welp… That made me want to start looking for a new favourite team.
    I think I might cry.

  45. Really good read, sums up the whole shitty mess perfectly

  46. Time for a Blue Jays only specific channel? Jays TV

    • Oh wait, sasktel would take 4 years to pick that up. Never mind

      • Hopefully Bell satellite would then carry the channel as they would see it as an opportunity to gain your business from Sasktel.

        • NOT AVAILABLE ON BELL!!!

          • Bull Shit – if they don’t include it all of a sudden Roger’s would cancel Bell owned channels such as MTV Canada, the comedy network, Discovery channel etc.. In retaliation on Rogers cable.

  47. Very well written and informatiive post!

    Something doesn’t add up. Roger’s being profit seekers why are they not more motivated for the team to do well given the obvious and demonstrated revenue gains that would lead to? In attendance alone spending more on payroll would more than be made up for by the additional ticket revenue if there is a winner on the field – not even to mention the increased ratings. That is not very speculative – the potential revenue gains are proven -the city supports a winner – proven after how many consecutive sell outs in the hey day and the bumps simply from hype that the team could be a winner last year demonstrates it in the present. So investing in the team and creating a winner would mean more profit for Rogers so the strategy to cheap out makes no sense in terms of maximising ROI

    • And think you hit the nail on the head about FO needing to navigate and be effective in that both through MLB and Rogers. That is Beeston’s job – he needs to present the business case that more expenses / payroll will lead to a winner and the increased revenues. AA, the GM, needs to navigate MLB and President navigate Rogers. Strong conviction and strong business case to Rogers should be able to get the job done, its easy to see the very strong business case

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