Wednesday, October 6, 2010
How Much is Too Much?
The media and casual fans spend a lot of time complaining about the oversized payroll of our division rivals. Alex Anthopoulos refuses to give us an absolute payroll ceiling, so I thought I'd take a closer look at the businesses involved, to get a clear picture of what Rogers Media can realistically afford to spend on the Jays payroll by comparing them to some other organizations:
Payroll of 206.3 Million this season (2nd Highest ever in MLB)
How they really do it: The Yankees own a stake in the YES network, which generates an estimated $350 million in revenue through subscriptions ANNUALLY. Even if the Yankees never sold a ticket, the TV station could cover the cost of their best property.
For Tax purposes, the Yankees only "recieve" $67 million from the network for the broadcast rights, but it's much more complicated than that, when the Steinbrenner's get a cut of the revenue and then funnel that into the baseball team as well.
As for the ticket revenue side of things: There are various reports that the Yankees grossed almost $400 Million in Ticket sales ALONE.Their stadium seats 52,325, and most of those seats are occupied 82 times per regular season (Plus playoffs)
So, when people ask why the Yankees outspend other teams by so much: It's to add value to their brand. This value drives incremental revenues that make the cost of their product seem miniscule.
THE RED SOX
Payroll: $163 Million
How'd they do it? Fenway only seats an advertised 36, 298. And, since it was built before rich people existed, the suites aren't big revenue generators.
The Sox do the same with their cable company. They own 80% of NESN, and the subsequent revenues are directed to the team. The team also "dabbles" in other business oriented acquisitions. Of note, they own a controlling share in Rousch Racing. They use the advertising revenue to fund the Ball club.
It is actually extremely hard ot get concrete revenue numbers (try a Google search if you don't believe me) So I'm speculating that their revenues are not quite at a Yankees-level, but Likely approach $500 Million.
SO, To bring this back to the Jays:
Rogers Media arm is who the Jays report to. The Cable Arm owns the Sportsnet family of Channels, but again, this is a tax-trick. It's like taking money from your left pocket and putting it in your right.
2009 Operating revenue was $11.7 BILLION! this covers all arms, including wireless, though Cable and media account for 45% of this total ($5.2 Billion). If we look at PROFIT, using the same 45% ratio, The Cable and Media divisions generated $1.98 Billion.
Since there are no specific data as to how much the Jays contributed to these numbers (it's actually in the team and league's interest to hide this data- It helps in collective bargaining) so again, I'm speculating when I say that Rogers COULD afford to spend more than the Yankees (Share prices might take a hit, but it would be about a 1.5% profit reduction overall to add $100million MORE to the payroll, putting the Jays comfortably among baseball's top spenders.
I plan to look into this deeper at some point, but it makes you wonder why people consider the Jays a "small market" team. Toronto is the 5th largest Census Metropolitan area in North America (Mexico City, NYC, LA, and Chicago are ahead) so the fanbase is there if the marketing and brand development is there.
Bottom Line: Lets up the payroll, Draft and Develop well, And keep our star players.