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Pete Toms Article Archive
Written by Pete Toms   
Monday, 26 April 2010 10:05

Last Week in Bizball by Pete Toms

This week in “Last Week in BizBall“, Blue Jays the next Expos?, reports on early attendance, is the NFL disrespecting MLB?, plus the weekly tidbits.

THE BLUE JAYS: THE NEXT EXPOS?

LWIB saw the Toronto Blue Jays set a franchise record for lowest one game attendance when the KC Royals visited Rogers Centre April 19. The paid attendance of 10,314 broke the previous record of 10,610 set five days earlier in a game against the Chicago White Sox. Paid attendance for the initial 10 games this season has declined to 162,510 from 203,966 after the same number of home dates last season. The Blue Jays attendance of approx 1.87 million last season was their lowest since 2003. The sparse crowds this season at Rogers Centre has led to a renewed debate in the local sports media concerning the long term viability of MLB in Toronto. Last week the Toronto Star published a report from Sandra Contenta entitled Can the Blue Jays survive in Toronto? Comparisons of the Blue Jays with the ill fated Montreal Expos (including Ms. Contenta’s piece) abound.

Conjecture concerning Blue Jays owner Rogers Communications Inc.’s long term commitment to their baseball franchise began soon after President and CEO Ted Rogers passed away in December 08. (See the Biz of Baseball report What is the Future of the Blue Jays and Rogers Cable?) Many believed that RCI’s ownership of the Blue Jays was due simply to the native Torontonian Rogers’ wishes that it be so (although he was not at all a sports fan) as opposed to a business decision. Minus the personal commitment at the top to MLB in Toronto, speculation that RCI would become the latest in a series of big media companies (Disney, Time Warner, News Corp., Fox) to sell off their baseball franchise sprouted up almost immediately.

LWIB saw differing opinions on the value of the Blue Jays to RCI. Peter Schwartz of Forbes argued that their baseball franchise is a great asset to RCI:

 …Truth is the Blue Jays’ owner, Roger Communications, is in a great spot if they can win. Rogers owns the team, its ballpark and the TV and radio stations that air most games. The Jays get more money from TV than most teams because their broadcast territory stretches across Canada. Forbes estimates the team has posted an operating profit of $63 million since the 2004 season, including $13 million last year, despite fielding mediocre teams. Put a competitive team on the field and Torontonians have shown they'll support it. In the early 1990s, when the Jays were pennant contenders, the team drew a then-record 16 million fans over a four-season stretch. The Blue Jays are not the Expos.

Despite these seemingly obvious synergistic benefits, some argue that ownership of pro sports franchises are a poor fit for publicly traded companies such as RCI. From the aforementioned report from Ms. Contenta:

Richard Powers, associate dean of the Rotman School of Management, says Rogers Communications Inc., the media giant that owns the Jays and broadcasts most of their games on its highly profitable Sportsnet channel, will eventually cave to pressure from shareholders if business doesn’t improve.

“If attendance does not pick up, if they can’t find other revenue streams that can offset the decline in attendance, they’re really going to have to look at either selling or bringing in new money somehow.”

Last month, Scott Rosner, Associate Director, Wharton Sports Business Initiative, University of Pennsylvania, published an opinion piece in the SportsBusiness Journal examining the aforementioned trend of media, entertainment and communications companies selling off their pro sports franchises. Mr. Rosner wrote;

There is a final hurdle facing large corporate entities that own sports teams: investor and analyst pressure. When the parent company is facing financial difficulties, investors and analysts often place pressure on the company to return to its core businesses. The team is rarely part of that core. In addition, the revenues that are generated by sports franchises create highly seasonal, irregular quarterly EBITDA (earnings before interest, taxation, depreciation and amortization). Public companies are under regular, quarterly pressure to report EBITDA growth. Thus, sports teams are not necessarily a good fit for publicly traded corporations.

While Mr. Rosner’s piece provides a cogent explanation of why the Disneys, News Corp.’s et al abandoned the business of MLB, he does argue that at a local level (RCI is the dominant cable provider in southern Ontario) it makes much more sense for a communications/media company to own a pro sports franchise. “…By owning the team, playing facility and local media distribution channel, the company captures the lion’s share of revenue generated by the team. It dominates the local marketplace, where fans are most passionate about the local team and can be most effectively monetized. Corporate owners with a local or regional focus are more successful than those with a national or global focus…”

Determining the benefits to RCI of owning the Blue Jays is complicated by the conflicting reports surrounding the profitability of the franchise in recent years. As mentioned above, according to Peter Schwartz the team has posted an operating profit of $63 million since the 2004 season, including $13 million last year. But according to the aforementioned report from Sandra Contenta, Blue Jays President and CEO Paul Beeston maintains that the franchise has lost money for at least the last two years while refusing to attach figures. Given the related party transactions involved in RCI’s ownership of the Blue Jays, determining the franchise’s bottom line is at the discretion of their accountants. And while the rows and rows of empty seats at Rogers Centre early this season give the unmistakable impression that business has bottomed out, perhaps the decline in revenues is less than raw attendance numbers would suggest. According to Jeff Blair of the Globe and Mail, the Blue Jays are discounting far fewer tickets (remember “toonie Tuesdays“?) since Paul Beeston succeeded Paul Godfrey last season. Mr. Blair quotes Mr. Beeston, “We’re trying to put some integrity back into our ticket pricing.” Also from Mr. Blair’s report, “Official attendance increased under Godfrey’s watch, from 1.83 million in 2000 to 2.4 million in 2008. But there was a catch. A former Blue Jays employee said the team actually generated more revenue from ticket sales last season – Beeston’s first back in charge – from 1,876,129 fans than it did from ticket sales in 2008.”

Prior to last season there were plenty of reports from “anonymous” sources that RCI wanted out of MLB. This off season saw none of these same “anonymous” sources widely quoted in the Toronto press. One can only interpret the change in the storylines as an indication that, at least in the near-term, RCI is committed to owning the Blue Jays. Perhaps there is no local buyer at the moment, perhaps there is no buyer anywhere on the continent, perhaps RCI believes that some combination of realignment/expanded playoffs is imminent, perhaps RCI concluded that the Blue Jays are of value to their media/communications conglomerate after all….who knows. But it is likely too early to conclude that the Blue Jays will meet the same fate as the Expos, which doesn’t mean that it will never happen….

SELECT READ MORE TO SEE REPORTS ON EARLY ATTENDANCE, IS THE NFL ARROGANT, AND LWIB TIDBITS



REPORTS ON EARLY ATTENDANCE

Tom Van Riper of Forbes informed us that league wide attendance is virtually unchanged from the same point last season. However, he points out that if we exclude the Minnesota Twins from the equation (their attendance has increased dramatically due to the opening of their new stadium) league wide attendance has declined 2% from the same point last season. Mr. Van Riper tells us that the biggest declines so far are in Cleveland, Oakland, Toronto, Florida (Marlins), Arizona, Baltimore and New York (Mets).

Commissioner Selig addressed the subject of early season attendance during his annual session with the Associated Press Sports Editors. Ronald Blum reported (EDITOR'S NOTE: See The Biz of Baseball report MLB Early Season Attendance Down 4% From Same Period in 2009):

Selig said that while attendance is down between one and two percent this season, advance ticket sales for the rest of season were up seven percent as of April 15, according to Major League Baseball Advanced Media, which handles online sales.

“We've had a little weather problem, a little here and there, but I feel pretty good about it,” he said.

Selig has noticed the low crowds in Toronto, Citi Field and other places.

“It doesn't overly bother me,” he said. “Some clubs it depends on winning and losing. But it's April, schools are still in, weekday games. When you are within one or two per cent, it just doesn't add anything to get concerned about.”

Larry Stone of the Seattle Times reported on the Mariners attendance during their initial 9 game homestand. “In a six-game span from Wednesday, April 14 through last Tuesday, the Mariners drew three of the four smallest crowds in the 10 ½-year-plus history of Safeco Field.”….When you look at the entire homestand, in fact, you see they drew 230,822 fans to Safeco Field for nine dates — down just 4,198 total from their first nine dates of 2009. That averages out to 466 fewer fans per night, hardly a sign of mass defections.” Mr. Stone adds that Seattle joins Toronto, Baltimore, Cleveland, Washington and the Mets as the clubs this season to set record-low one game attendance marks in their present ballparks. Mr. Stone identifies the Mets, Padres, Marlins, White Sox and Blue Jays as the franchises experiencing the largest attendance declines over the same period last season.

IS THE NFL ARROGANT?

Last week the NFL released their TV schedule for their upcoming season. Many noted, and were taken aback, that the league has scheduled a Sunday night game for October 31. In all likelihood October 31 will also be Game 4 of the World Series. Tom Jones titled his reaction, NFL puts the screws to Major League Baseball. Fox Sports President Ed Goren (Fox will broadcast the World Series and is also an NFL broadcast partner) was diplomatic in his remarks to USA Today. When asked for his reaction to the news that NBC would be broadcasting Sunday Night Football October 31, Mr. Goren responded. "I really don't have anything to say. Every league has to put its best schedule out. This really is an issue between MLB and the NFL." The Sports Media Watch blog pointed out that the Packers/Vikings game one week earlier on Sunday Night Football could potentially air opposite Game 7 of the NLCS. Also according to Sports Media Watch, during a Pardon the Interruption segment, Mark Cuban was very critical of the NFL’s decision to air their draft opposite some NBA playoff games. All this following Commissioner Selig’s reaction to the Donovan McNabb deal being announced on MLB’s Opening Day. Sports Media Watch also astutely pointed out that Monday Night Football has aired opposite the past 4 World Series.

WEEKLY TIDBITS

  • According to Ed Sherman of Crain’s Chicago Business, Cubs owner Tom Ricketts disagrees with the recently released Team Marketing Report survey which concluded that the average price for a Cubs ticket is the highest in MLB. The discrepancy occurs over what qualifies as a premium seat and the percentage of premium seats in the different ballparks. Using a methodology closer to Mr. Ricketts‘, Mr. Sherman concludes that the Cubs average ticket price is 3rd or 4th highest in MLB. TMR Editor Jon Greenberg made a comparison between the price of bleacher seats at Wrigley Field and Yankee Stadium. “…Mr. Greenberg points out the Cubs charge $50 or more for a bleacher ticket to 60 games. That drives up the Cubs' average when compared to the Yankees, which has a bleacher seat for $12.”
  • Eric Fisher reported for the SportsBusiness Journal that subsequent to their legal defeats in the CDM Fantasy Sports case, MLBAM and the MLBPA struck a new agreement last year. The new deal for “interactive rights” sees BAM pay the PA approximately $2 million annually. By comparison, before CDM Fantasy Sports destroyed their fantasy licensing model, the PA was to receive upwards of $10 million annually from BAM.
  • The SportsBusiness Daily reported that the Pirates/Reds game Sunday April 18 was the highest- rated Bucs afternoon game in six years on FSN Pittsburgh
  • Florida Governor Charlie Crist announced the Grapefruit League set a new record for per game attendance this spring training. (H/T The Sports Economist).



Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.

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