Tuesday, October 12, 2010

How Much is Too Much: Part 3

So, I spent a bunch of time over the weekend preparing my final case for Rogers to increase the Blue Jays Payroll. I actually read the entire 2009 Rogers Annual Report (it's kinda boring mostly, and they do their best to disguise any Blue Jays Related revenues)

Here is what the Jays contribute to the Empire:

-$181 Million in total Revenue. This is the only line where Rogers admits that the Jays bring in money, though they make several references to $19 Million in contract buyouts (which they used to save money on taxes, but that's a minor point)

-The Media wing of Rogers Corporation took in 674 Million in advertising revenue in 2009. Considering that Sportsnet accounted for about 1/4 of those channels, I will assume that they provided 1/4 that revenue. (About $168 Million) Since the Jays provide 162 days worth of prime-time content, they must be considered the primary contributor for this revenue (not counting 30 or so hockey games that Snet broadcasts)

-interesting note: The first quarter of each of the last 4 years has been the poorest performing revenue wise. There is a sharp increase in revenue for the Media arm at the beginning of each Blue Jays season. I have no evidence to prove correlation, but I'd like to think they are related.

-The Ownership and ad Revenue from the Rogers Dome is not clearly explained in the report, but it has to be assumed that it is accounted for elsewhere.

Other statistics:

-10 Million people within 2 Hours drive of Rogers Dome. This has to be considered as the total market. Forbes Magazine incorrectly uses 2.5 Million people as the population of Toronto, which SEVERELY diminishes the valuation of the Franchise. Since the size of the market is so large, they have much higher potential for ticket sales, as well as ancillary income (Jerseys, Hats, etc)

-In 2010, the Media arm introduced Sportsnet One. They are expected to be the primary carrier of the team next season.Various reports have Sportsnet one costing $3 per month per subscriber, and Rogers expects it to be available to all homes in Canada by the end of 2010. There are about 15 Million Potential Subscriptions in Canada, and if we only account for the 6 months that the Blue Jays season lasts, they will be helping the new channel to genereate $270 Million dollars. This is accurate within the sport, as the Yankees and Red Sox both receive in excess of this amount as part owners of their respective broadcasters.

Based on the FACTS that I've been able to gather from publicly available sources, I am going to make an educated guess: The Toronto Blue Jays are directly responsible for approximately $500 Million in Revenue for the Corporation. This is completely in line with my estimated revenues for the Boston Red Sox, who play in a smaller market, but have a larger National Brand Presence.

Obviously, I don't have access to internally available numbers, so this analysis can't be concrete. But, if the Jays revenue matches the Red Sox, what is preventing them from matching the Red Sox Payroll?

I would go another step: If the Blue Jays manage their brand carefully, and develop additional, complementary revenue sources, the ultimate goal SHOULD be to match the New York Yankees in Payroll. A lofty goal to be sure, but with smart fiscal management, it can be accomplished.

I'd like to hear your thoughts.


  1. you've compared the jays to the yanks and sox but are there other comparables to teams that are owned by the media? what do their payrolls look like? it seems to me that if rogers wants to promote SN1 and increase subscribers across canada it would behoove them to increase the value of the product by making it more competitive. it can't just be beeston and AA deciding how much to spend. the decision to go after players like crawford or lee has to come from rogers. I am not optimistic. They could have easily gone to halladay and said look we are going to increase payroll above 100 mil to bring in top notch talent and we want you to be a part of it. But they didn't.

  2. BigBadBird really doesn't get that wacky concept of "team-building". You don't blow millions on overpriced free agents when it's an expensive and unnecessary gamble. Better to build from within and create a sustainable competitor rather than go for broke for one year and wreck the team for years to come. Crawford and Lee are unnecessary and would serve no purpose on the Jays (not to mention they're in no need of starting pitching right now).

  3. I say don't spend until they're ready. We all know the Birds have money. Rogers is one of the wealthiest owners in all of sports & has publicly stated that the money is there once they want to spend. My point is, don't rush it. We all know what happens when that goes down (i.e. Burnett, Glaus, Molina, Eckstein, Ryan, Rios etc...). Stay on course & see through the re-build. Spend once this young team becomes a contender in August. Beeston does things properly. By the time he's done we'll have a winner. trust me.

  4. BigBadBird

    A couple of faults in your analysis:
    1. Rogers did throw money at Halladay, a lot of money, according to an article by R. Griffin when he spoke to Halladay's wife Brandy.
    2. It is up to AA to decide what their payroll should be. Rogers has put the ball in his court, that as long as the moves make sense, the money will be there.

    That being said, AA isn't like the city of Toronto past mayors, who start throwing money around just because they have it. Sure they raised ticket prices last year, but next year they will be the same as last year. Why? With SN1 in place, I believe that a national branding of the team is in place making attendance revenue a secondary source of income.

    The Jays are about to boom into Canada's team, especially if they make the playoffs in the near future.

    However, Anthopoulos isn't going to just start throwing money at people just for the sake of throwing money at people. He's being fiscally responsible while trying to build a long term winner, not get stuck into Vernon Wells situations again.

    Guys like Lee, Crawford, Werth, Fielder, Pujols are going to be demanding albatross contracts, and if they falter, then we're back into JP regime again.

    I definitely think the Jays are heading in the right direction in terms of putting an on-field product, national branding scheme, and increase it's fiscal profitability.

    Anonymous - the author of this piece is just trying to look to see what kind of numbers we'll see from forbes when they release their 2010 numbers. We've already seen that the Jays made a small margin of net gains last year, even with a terrible season. Meaning that with a correct path in terms of on-field product and national branding restructuring, this team could possibly meet Red Sox and Yankees markets (or even exceed them, which is what I believe). They were the biggest market in the MLB when they won their world series, and that was with Montreal still in the MLB. I definitely think they can reachieve that success.

  5. I'm pretty sure that the sale of MLB merchandise goes into one giant pool and products that are co-licenced with the MLBPA need to be taken from this fund. Then it is split with all the teams in baseball. KC gets just as much as NYC. I read an article a few years ago that explained how this worked. A short (translation: lazy) web search has yet to produce this article, if I find it, link will be posted.

  6. GCM1979: Don't take this the wrong way but... I love you.

    "The Jays are about to boom into Canada's team, especially if they make the playoffs in the near future." - I have been telling myself not to get too carried away with the theoretical possibilities that keep popping up, but you guys are making credible arguments. The long-term economic truth is that the departure of the Expos could make the Jays into a glorious club.

  7. It was the biggest market in baseball when it widely considered that the Skydome was the best ballpark on the planet. Today you could make the argument that its the worst in the league.

  8. some of these comments are laughable. dont spend until they're ready? when do you think that will be? the jays are already set at most positions. there is no rebuilding left to do. all the stud players are already called up? how do you expect this team to improve? in case you haven't noticed, most of the playoff teams are high payroll. until the jays spend with the big boys they are NEVER going to make the playoffs. the window of opportunity is right now. you already have players who are close to 30. lind, hill, wells, bautista. in a couple years they will be on the downside. all they need is a couple proven hitters and a few arms and that's it. those are players you get in free agency.

    the premise of the article was that rogers has money to spend. I think rogers are cheapskates. they have no intention of spending. sorry but AA doesn't decide what the payroll is. NO business operates without a cost structure. He has been told by rogers what he can spend and it's not 100 mil. the fact is if the jays went out and signed some free agents they have a good chance of making the playoffs right now.

    dont believe everything you read. just because beeston says they have money doesn't mean it's so. what do you expect him to say? we aren't going to spend? the jays are happy to sell swampland to fans telling them it's prime real estate. most of the bad contracts are off the books now, so there is no excuse for not going out and spending. the team already won 85 games. what else do they have to do? in 3 years hill, lind, jbau, wells may not even be here then you are back to rebuilding again.

  9. GCM: You got the exact message I was trying to send. This is a team and organization on the rise.
    I do think that they might have to take an FA risk at 1B. Competitors need a high WAR contributor at that position, and there aren't any on the immediate horizon.

    Anon 1147: I don't think anyone would agree with you that it is the worst market in the league. They were a .500 team most of the season, and still drew solid attendance numbers toward the end of the year. Tampa had a playoff contendor, and couldn't get 20,000 a night.

  10. Good read (and good blog)

    My take is somewhat different from the general perception. IMO, if in fact the Jays are generating (or can) that sort of revenue, then I'd like to see them revolutionize the spending that goes into player development (not just contracts but nutrition (especially) and training and coaching ad so forth)

    I'd FAR rather see the Jays spend $15 million on the system in that manner this year than spend $15 million on Carl Crawford (just to pull a big name out of the air).

  11. @Southpaw, an excellent point. Another area that I would recommend investment would be in mechanical analysis.

    There is a sports science lab at a University in New York that analyzes pitching mechanics. They can predict injury probability to within a +/- 10% rating. I heard a professor do an interview on the Fan 590, and he did a great job promoting their service.

    Imagine if you could analyze the mechanics of a prospect before you waste a draft pick? you would have a steady stream of developing prospects meeting timelines. It would be a major efficiency improvement.

  12. @BigBadBird, the rebuild has just finished year one and it's time to go for broke on free agents, most of whom are on the downside of their careers, or will be towards the back half of their bloated contracts? Seriously? Have you learned nothing from the J.P. Ricciardi era? You cannot build a sustainable team/organization on a foundation of free agents/big contracts (New York Yankees somewhat excepted). J.P. tried that. I would call that building from the top down. How'd that go? I guess the house didn't completely fall down, but it also didn't achieve the desired result. If you're gonna build on a foundation of free agents/big contracts you might as well flush your money down the crapper. Build a strong foundation. Build the house from the bottom up. *Warning: corny alert* If you build it (the right way), they (the fans) will come (well, once the team is a genuine year in year out contender).

    Look at the Yankees from 1982 through 1993. They spent like maniacs and didn't play one playoff game. In the meantime though, they were hard at work building up a dynasty through the farm with players like: Bernie Williams, Derek Jeter, Jorge Posada, Andy Pettitte, Mariano Rivera, Orlando Hernandez, Alfonso Soriano, and Ramiro Mendoza, and it continues today with Robinson Cano, Brett Gardner, Phil Hughes, Chien-Ming Wang (until Interleague play destroyed his career) and Joba Chamberlain. Even the almighty Yankees recognize that the building blocks must come from within. They have the luxury of being able to spend a gazillion dollars on payroll, but it took them getting smart about their farm system to get back to the top after a very dry decade and then some.

    How were the Jays' World Series teams built? By very, very gradually and patiently building up the farm system until it was overflowing with talent. Then, Stand Pat made some shrewd trades. Finally when they knew they were a real contender (read: not an overachieving 85 win team), they sprinkled in the free agents. Back before the World Series years, this team building method came to be known as "The Blue Jay Way" (it's more than just a street down by the Rogers Centre ya know ;) ) and as a fan, I for one, am thrilled to see a return to the slow, steady process. The Ash/Ricciardi eras were full of moves that said "We're contenders...I mean we're pretenders...I mean we're contenders". There was no clear direction. Make no mistake about it, there is a crystal clear direction now AND the money for the MLB payroll will be there when it's time for it. The old saying: "Slow and steady wins the race" is true, despite the fact that it often gets lost in the hustle and bustle of today's amped up world. Fans want it all and they want it now. That's fine, but like the old saying goes: general managers who act like fans are gonna wind up sitting with them sooner or later.

    Great post 5th starter and I'm glad to see it has generated, for the most part, sane, thoughtful analysis in the comments section which can be somewhat absent elsewhere on the internets. Excellent suggestion Southpaw. $100 million+ over 5+ years (ballpark figure for one of the big name free agents this offseason) would be far more wisely invested in many diverse areas of the organization/farm system/front office, including the outside the box thinking that both yourself and 5th starter suggest in your comments. Who knows what getting the kids off the McDonalds, In 'N Out, Taco Bell etc that their current per diem affords them could do for their development. Love the sports science lab suggestion too 5th starter. That's the kind of thinking you need to compete with the big boys. Marcum's mechanics scare me a little. It seems like he's one false step away from a career ender with that violent delivery.