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Home Pete Toms LWIB: The Blue Jays Flying in Turbulence

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Pete Toms Article Archive
Written by Pete Toms   
Monday, 05 October 2009 00:34

Last Week in Bizball by Pete Toms

This week in LWIB, the Blue Jays ‘09 season concludes amidst great pessimism and uncertainty concerning the future fortunes of the franchise.

BLUE JAYS UPDATE

The Blue Jays’ 2009 season began with a 27-14 record. The Blue Jays completed the 2009 season with their second worst record this decade. Of greater concern to Blue Jays fans has to be the off the field uncertainties surrounding the franchise. This season began amidst much speculation concerning owner Rogers Communications Inc.’s long term plans for their baseball club in light of the passing last year of President and CEO Ted Rogers. Their season has concluded and seemingly nothing has been resolved concerning RCI’s near and long term approach to owning and operating the Blue Jays.

LWIB the Blue Jays fired GM J.P. Ricciardi. Ricciardi’s dismissal had been anticipated since the man who hired him - Paul Godfrey - resigned as Blue Jays President and CEO last year. As the Blue Jays dismal season unfolded, the end of the Ricciardi reign became increasingly inevitable as, rightly or wrongly, he became the focal point of Blue Jays fans frustrations. Alex Anthopoulos was promoted from assistant GM to succeed Ricciardi and while Blue Jays President and CEO Paul Beeston has not attached an “interim” tag to the promotion, there is doubt amongst some pundits. The speculation arises from confusion (amongst media and fans if not RCI) surrounding Mr. Beeston’s future role with the franchise. When Mr. Beeston succeeded Mr. Godfrey his stated goal was to replace himself, his return to the Blue Jays would be short term. Next week will mark the one year anniversary of Mr. Beeston’s “interim” appointment and rumours abound concerning his future role with the Blue Jays. There have been many reports that Mr. Beeston will remain with the Blue Jays in an “advisory” capacity after he appoints a new President and CEO. When and if Mr. Beeston hires his replacement, will that person have the autonomy to appoint their own GM? Speculation concerning Mr. Beeston’s future with the Blue Jays has even included a future stake in new ownership of the franchise.

The timing of Mr. Ricciardi’s dismissal might well have been an effort to divert attention from a much publicized rift last week between Blue Jays players and Manager Cito Gaston. The players animus towards Gaston was widely characterized as a “near-mutiny”. Both Vernon Wells and Aaron Hill went “on the record” in media coverage concerning the reported near-revolt and tacitly acknowledged that the players did not want to play under Gaston. These same reports usually included rumours that the coaching staff was also divided. Holdovers from previous Jays managers John Gibbons’ staff (most notably pitching coach Brad Arnsberg) on one side with Gaston and the coaches he brought with him (Gene Tenace, Nick Leyva) on the other. On Saturday the players met with Beeston (Beeston had planned the “end of season” address to the players prior to the reports of player “mutiny”), Anthopoulos and Rogers Media CEO Tony Viner. The meeting appeared to placate the players, at least in the short term, and the “players in revolt” stories died with Hill and Wells adopting more diplomatic stances on the subject with the media. Anthopoulos and Beeston also met with the manager and afterward provided the media a “seemingly tepid endorsement of Gaston.

Select Read More to see details on the Blue Jays season

The negative storylines of the Blue Jays '09 season were not limited to wins and losses, botched non-trades, front office changes and clubhouse meltdown. Not surprisingly, Blue Jays attendance was another in the long list of bad news surrounding the franchise. From Robert MacLeod at The Globe and Mail;

 

As the Blue Jays stumbled through one of the poorest second-half performances in team history, overall home attendance fell 21.8 per cent to an average of 23,162 at Rogers Centre, second worst in baseball only to Washington – the former Montreal Expos.

Bruce Arthur reported for the National Post last month that a new Rogers Centre / Skydome record for lowest single game attendance had been set.

…..the Minnesota series earlier this month, in which the low-water mark for attendance at the Rogers Centre was set on a night that Roy Halladay took the mound, and likely MVP Joe Mauer and Canadian Justin Morneau were in the Twins lineup. That night, the number was 11,159; the next, 11,461.

LWIB, Paul Beeston explained that the Blue Jays 09 attendance is not as disappointing as the raw numbers indicate when put in the proper perspective. From Morgan Campbell at the Toronto Star;

….interim president Paul Beeston denies the club is hemorrhaging fans the way the stats suggest.

This season, he says, the Jays counted only tickets sold in their attendance figures, which yielded smaller numbers but a better read on the team's popularity.

"Overall we are not disappointed with attendance, because we are up in revenue. I would say we're up marginally, but we're up'' (over 2008)," he said. "Going forward, these are numbers you can chase in the future, real numbers.''

Perhaps a more revealing development of what the future holds for the Blue Jays franchise was the announcement LWIB that the Blue Jays had made significant personnel cuts in their non baseball front office. From Jeremy Sandler at the National Post;

The Toronto Blue Jays yesterday laid off a large number of staff in the team's front office for the second time in less than a year.

…..Last December the club shed 33 employees.

AND

A source said the marketing and ticketing departments were particularly hard hit, with vice-president of marketing Laurel Lindsay among those losing their jobs.

The layoffs in the Blue Jays front office were not the first indication this season that RCI might be closely monitoring their baseball team’s bottom line. After years of complying with Commissioner Selig’s “slot recommendations”, the Blue Jays announced they would go “over slot” if need be. While the Blue Jays did go “over slot” (the Jays spent approximately $700,000 “over slot” for third round pick Jake Marisnick), ultimately the Blue Jays 09 draft left many puzzled by their approach. From John Manuel at Baseball America;

J.P. Ricciardi & Co. signed first-rounder Chad Jenkins, but not two Canadian lefthanders—supplemental first-rounder James Paxton, who returned to Kentucky, or second-rounder Jake Eliopoulos, Canada's top prep player available. Third-rounder Jake Barrett, a prep righthander from Arizona, also didn't sign, but Toronto got its second third-rounder, prep outfielder Jake Marisnick, done for $1 million.

And from Mr. Manuel’s Baseball America colleague Jim Callis;

I haven't talked to the Jays or seen a post-mortem yet, but their draft strategy seemed odd, to say the least. They'll recoup compensation picks for their unsigned sandwich-, second- and third-rounders, but why take that many over-slot guys at the top of the draft if you can't or won't sign them? They did land Jacob Marisnick for $1 million and got a couple of other guys done late, but they let a lot of talent walk away.

A second round of front office layoffs inside of a year, combined with the diminished player payroll this season, combined with a directionless performance in the amateur draft, combined with Paul Beeston’s fruitless efforts to replace himself, all inevitably lead to the same question that has been posed since the passing of Ted Rogers. What is the future of the Blue Jays within RCI? In the very short term the Blue Jays are reported to be considering two options concerning major league payroll. Spend more and attempt to compete with the Yankees and Red Sox or reduce payroll and expectations of competing. LWIB Buster Olney reported for ESPN;

The Jays' ownership has been presented with a recommendation from the front office of going one of two ways -- either raising the payroll dramatically to about $110 million-$120 million, or slashing it back to $60 million. The thinking behind those numbers is that if Toronto wants to seriously go toe-to-toe with the AL East money monsters in Boston and New York, then it will have to spend a lot more -- and short of that, it doesn't make a lot of sense to overspend, so better to keep a modest payroll and give the team a chance to earn a profit. Odds are that the Blue Jays will go with the lower number, as Paul Beeston steps aside as the team's CEO.

Similarly, Shi Davidi reported LWIB for the Canadian Press that the last thing the Blue Jays want is to be relegated to the middle ranks of MLB.

Those within the organization fear staying the course may drop the Blue Jays into baseball's dead zone, where clubs are neither good enough to contend nor bad enough to secure high draft picks.

Aforementioned Rogers Media CEO Tony Viner admitted this weekend that the direction the Blue Jays will take remains undecided. From a different piece by Bruce Arthur at The National Post;

"We don't know what the payroll's going to be because we simply don't know what the best way to proceed is," Rogers president Tony Viner told reporters in Baltimore Saturday, after he and interim Jays president Paul Beeston fired Ricciardi.

The longer term and most important decision RCI must make concerning the Blue Jays is where (or if?) the baseball franchise and Rogers Centre fit in their rapidly changing telecommunications empire. The Blue Jays are part of Rogers Media which is responsible for the operation of the “old media” (magazines, TV and radio stations including the RSN which broadcasts most of the Blue Jays games and their flagship radio station FAN 590) holdings within RCI. Declining ad revenues have not been kind to Rogers Media over the past year. From the aforementioned report from Jeremy Sandler;

In June, Rogers Communications, which owns the Blue Jays, announced a second quarter adjusted operating profit of more than $1-billion

That included more than $37-million from the media division that contains the Blue Jays and Rogers Centre, down from $52-million in the second quarter of 2008 for a decline of about 29%.

But RCI’s core business is their cable and wireless operations. RCI is Canada’s leading cable TV services provider and largest cellphone provider. Hugo Miller reported for Bloomberg last month;

The company gets more than half its total revenue from the wireless business and an additional third from wired telecommunications, which includes cable, Internet and home- phone service.

Kristine Owram reported last month for the Canadian Press that RCI will soon face the challenge of a more competitive Canadian wireless and cable marketplace. At the same time, Canada’s largest cable provider acknowledges that they are operating in an increasingly wireless world. From Ms. Owram;

Several new players, such as Quebecor Inc. (TSX:QBR.B) and Globalive Communications Corp. are poised to enter the cellphone market after a massive sale of broadband space. Cable TV operators who have prospered by winning Internet customers away from the traditional phone companies now also face greater competition from former rivals such as Telus Corp. (TSX:T) and Bell Canada (TSX:BCE) for television customers.

"The telecommunications industry in Canada is about to undergo the most significant change to the landscape in probably the last generation, with the entrance of new wireless competitors over the next number of months," Levi said. (LWIB note; Levi is technology analyst Carmi Levy)

In the same report RCI CEO Nadir Mohamed is quoted;

He said wireless technology is "taking on a more significant role in how people communicate" as it incorporates voice, data and video functions. Meanwhile, content that has traditionally been delivered over cable TV is increasingly moving online.

So where do the Blue Jays fit in the RCI alchemy of old media, cable and wireless? LWIB has reported previously that the Blue Jays are one of the last MLB franchises owned by a big media company. Disney, Time Warner and News Corp. all sold off their baseball franchises. (Liberty Media’s ownership of the Braves will be relatively brief and is not analogous. Tribune Co. is expected to soon finalize the sale of the Cubs). More recently and perhaps more pertinent to the Blue Jays situation, Cablevision is spinning off the Knicks, Rangers, MSG and two RSNs. What changed and is RCI the next big media company to want out of professional sports team ownership? Jon Fine reported for BusinessWeek in February;

In earlier and more expansive times for media—and very good times they were—the industry's moguls fantasized about hitherto unforeseen advantages to be squeezed from all manner of assets. So many snapped up sports teams. News Corp. bought the Los Angeles Dodgers. Disney grabbed the Anaheim Angels and hockey's Mighty Ducks (unquestionably the only team to pinch its moniker from an Emilio Estevez film). Cablevision bought New York's Knicks and Rangers. I could go on. The argument advanced was a variation on the (now wholly discredited) "synergy" theme then taking root: Take your programming. Run it through your distribution. Get richer faster.

Tom Van Riper reported similarly for Forbes in May;

Media giants are discovering that the sports business just isn't worth it. Unpredictability, volatile revenues, high turnover among players and coaches--it all goes against the predictable money flow that a regional cable network enjoys.

Bethpage, N.Y.-based Cablevision, owner of the NBA Knicks and NHL Rangers, hinted Thursday that it may join the likes of Time Warner , the TBS parent that sold off the Atlanta Braves in 2007, and News Corp., which got rid of the Los Angeles Dodgers in 2004.

"The mindset of running a corporation versus owning a team is different," says Lee Berke, a New York-based sports media consultant. A national or regional network, he notes, is typically valued at 15 to 20 times cash flow, unfettered. Sports teams, less predictable year to year, have a way of messing with that multiple.

AND

The TV-business trend of owning your own team to provide content for your network has been waning for several years now, as momentum shifts toward teams forming their own networks, a la the Yankees and Mets

It has often been reported that Ted Rogers was advised by those close to him at RCI not to buy the Blue Jays and the stadium in which they play. While never a sports fan, many believe that Mr. Rogers nonetheless went ahead because he believed MLB was of benefit to his hometown of Toronto. In his last years Mr. Rogers also boosted the Blue Jays payroll to the middle ranks of MLB and the club enjoyed back to back to back winning seasons (without qualifying for the playoffs). Going forward, those in charge of RCI (Edward Rogers, Nadir Mohamed and Tony Viner) will decide if the Blue Jays are of benefit (as content for TV and radio, stadium as corporate promotional vehicle) to their telecommunications conglomerate or if pro sports team ownership has outlived it’s usefulness in adding cable subscribers and providing programming for their RSN. Certainly the season long negative coverage that RCI has been subject to in the sports media concerning their ongoing inability to field a playoff team at the Rogers Centre must leave them wondering if MLB is an industry that they need to be a part of.

LWIB will return October 19.

 


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