Rogers Communications Inc. (RCI/B) is raising its bet on sports with a 12-player trade designed to revive the Toronto Blue Jays baseball franchise a year after buying the National Hockey League’s Toronto Maple Leafs.
The Blue Jays, who haven’t made the playoffs since winning a second-straight World Series title in 1993, may add about $160 million to its payroll with pitchers Josh Johnson and Mark Buehrle and shortstop Jose Reyes in a trade with the Miami Marlins, the Miami Herald and Associated Press reported Nov. 14. Jay Stenhouse, a Blue Jays spokesman, declined to comment on the reports, and Rogers spokeswoman Patricia Trott didn’t return an e-mail yesterday seeking comment.
“It’s a renewal of their interest in getting the team to a competitive level,” said Bob Decker, who helps manage about C$5.5 billion ($5.5 billion) in assets at Aurion Capital in Toronto and doesn’t own Rogers shares. “They do want to maintain the integrity of the franchise in Canada because they have such a vested interest in it.”
In addition, Melky Cabrera, who played with the San Francisco Giants this year, signed a two-year $16 million free- agent contract with Toronto, according to a report in the New York Post today.
Toronto-based Rogers, Canada’s largest wireless company, is looking to improve the on-field performance of the Blue Jays to help drive higher baseball viewership among its cable, smartphone and tablet customers. Like its Montreal-based competitor BCE Inc. (BCE), Rogers is betting that wireless data spending, which jumped 18 percent last quarter to C$719 million, will rise if it can continue to offer exclusive sports content from the Blue Jays, Maple Leafs and basketball’s Raptors.
Revenue from Rogers’ media unit, which includes the Blue Jays, fell 4 percent to C$392 million last quarter from a year earlier even as revenue from its SportsNet channels rose. Profit at the business declined 9 percent to C$50 million due to cost containment efforts and “higher baseball player-related costs” in the quarter.
The Blue Jays would increase their payroll by $13.8 million for right-handed pitcher Johnson, who was 8-14 last season; $96 million over five years for Reyes; and $52 million over three years for left-handed pitcher Buehrle, who was 13-13 last season, the Miami Herald reported.
The trade has already boosted the Blue Jays’ odds of winning in the Las Vegas sports books, according to R.J. Bell of Pregame.com. Toronto, previously given a 100-1 chance of winning the 2013 World Series, had its odds improve to 15-1 after talk of the trade surfaced, Bell said in an e-mail.
“If you can put out a more successful team, there’s a snowball effect for the business side,” David Heger, an analyst with Edward Jones who covers Rogers, said by phone from St. Louis.
Rogers already added the most valuable team in the NHL. Rogers and BCE completed their joint C$1.32 billion purchase of a 75 percent stake in Maple Leaf Sports & Entertainment Ltd. in August. BCE also has a minority stake in the Montreal Canadiens hockey team. In October, Rogers completed a C$167 million deal to buy Score Media, adding online sports programming.
BCE and Rogers’ approach is in contrast to Telus Corp. (T), Canada’s third-largest wireless carrier. The Vancouver-based company has avoided acquiring content and instead has focused on investing in the speed and reach of its network and striking outside deals for programming.
Rogers rose 0.8 percent to C$42.57 at the close in Toronto. The shares have climbed 8.5 percent this year, compared with a 1.1 percent drop for BCE and a 9 percent gain for Telus.
While owning professional sports teams may draw fans, it isn’t necessarily a win for shareholders, and the payoff may only come when a team is sold, said Neeraj Monga, an analyst at Veritas Research in Toronto.
The Blue Jays average attendance at the Rogers Centre was 25,921 this year, among the 10 worst in Major League Baseball, according to ESPN estimates. The Philadelphia Phillies had average attendance of 44,021, while the New York Yankees had an average of 43,733, according to the ESPN website. In 2010, Toronto’s average attendance fell to a decade low of 20,068.
Toronto’s payroll has shrunk relative to their rivals since winning the two championships in the 1990s. Under Rogers’ ownership, the combined player salaries were $75.5 million on opening day this past season, or 23rd in the league, according to USA Today. By contrast, the Yankees’ payroll was $198 million. The Blue Jays had the highest payroll in the league in 1995.
“The extent to which owners can easily monetize their sports teams is not clear to me.” Monga said. “Rogers now has hockey and basketball along with baseball, but in order to crystallize value for shareholders they might have to spin it off at some time just like Cablevision did with Madison Square Garden.”
Cablevision Systems Corp. (CVC:US) spun off its Madison Square Garden unit in February 2010, giving its shareholders one share of the new sports company for every four Cablevision shares they owned.
Madison Square Garden comprises the New York Knicks basketball team, Radio City Music Hall, Madison Square Garden, the New York Rangers hockey team and two New York-area sports networks. Rogers also owns Rogers Centre, the home stadium of the Jays, as well as the Air Canada (AC/B) Centre arena in downtown Toronto along with its ownership of the Jays, Raptors, Leafs, Toronto Marlies of the American Hockey League and Toronto F.C. pro soccer team.
Madison Square Garden has climbed about 150 percent since the February spinoff. Rogers has risen 25 percent in that time.
Blue Jays General Manager Alex Anthopoulos, a Montreal native, is betting the trade with the Marlins with fill more seats for Rogers and turn around a team that finished fourth in the American League East for the fourth straight season. Johnson is a two-time all star, and Buehrle pitched a perfect game three years ago.
In Reyes, the Blue Jays get a shortstop who is a four-time All-Star. Marlins owner Jeffrey Loria, who once ran the Montreal Expos baseball team before it relocated to Washington, was looking to reduce his payroll after the team finished last in the National League East division this year.
Rogers’ other main sports investment, meanwhile, is on hold after the NHL owners locked out players before the start of the season in September. That means the Toronto Maple Leafs aren’t drawing sell-out crowds at the Air Canada Centre as they normally would this time of year. The Raptors of the National Basketball Association and the Marlies continue to play.
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