Rogers Centre

A Different Conversation About Selling the Blue Jays

I want you to imagine this:

You are a billionaire. You sold your Internet start-up for $6 billion and now you are sitting on, after tax, $3.2 billion. Nice one!

Now that we know you’re super-rich, what else do we know about you?

You’re reading this article, which makes you a baseball fan. More specifically, a Toronto Blue Jays fan. You love them. When you were a kid, once you realized you weren’t good enough to play or smart enough to be a GM, you daydreamed about owning the team. You still do. When you get carried away, you can even see yourself accepting that super-ugly championship trophy while Marcus Stroman pours champagne on your head[1] and lights your cigar. After the party, you and Gibby clink Bud Lights and talk about what it was like to play with Darrell and Dwight. Don’t pretend. I know who you are.

Newsflash! The Blue Jays are for sale!

Second newsflash! Rogers wants to lock in a below-market TV rights deal. They also want to keep the name Rogers on the stadium. In fact, they’re keeping the stadium, building a moat around Ted’s statue in case anyone gets any smart ideas, and locking in a long term lease.

Hmm. You go talk to your financial advisers. They tell you that despite those deals, Rogers still wants $1.5 billion for the team. And, since you want to spend up to the luxury tax to make this team great, you could lose $50M a season if all goes really badly. They also tell you that MLB teams have been in a valuation bubble since the Dodgers were sold for $2 billion in 2012. So you might spend $2.5 billion over the next 20 years and be left with something worth far less than you paid. They advise against it. Why not buy corporate bonds instead?

What do you do? And I mean really, what do you do? Not some hypothetical other billionaire for whom you are making assumptions about their financial decision-making. YOU!

Of course you buy the team. Of course you do! I do, you do, everyone reading this article does. You’re left with $700 million in the end (using the silly assumption that the team becomes completely worthless). That’s some serious cash; more than you or your family could spend in several hundred years!

Maybe you negotiate to call it the Rogers Skydome because you’re nostalgic like that and maybe you bargain to put in a Roy Halladay statue that’s three times the size of Ted. But these are minor points. You buy the team.

All of this brings me to our tortured conversation about the potential sale of the Blue Jays. We do it in such a pessimistic way, trotting out the same list of Canadian (mostly corporate) buyers, and worrying that the next owners may be less willing to fund the team than the last. We’ve been completely beaten down by corporate ownership in this city. We talk about payroll parameters, shareholder value, return on investment… It’s what I imagine it would be like to watch FOXNews all the time. Even if you disagreed with what they were talking about, eventually things just get stuck in your head.

I think about the great pains analysts go through to parse Rogers’ public reports to estimate the team’s profitability or to get clues about the team’s willingness to spend on the next year’s player budget. I think about my own efforts to do the same, drawing on history to try to predict attendance because I know the Blue Jays need to match revenue to expenses over the relatively short term. (The same analysis, by the way, would question the accepted assumption of current Blue Jays blogosphere that the 2018 player budget will be as high as 2017. I think it will be lower.)

The thing is, if Mike Illich (RIP), John Henry, or Arte Moreno is my owner, I don’t do any of that work. None of us do. The only thing we care about then is the luxury tax number. And even then, maybe only once every few years. Fans of the Red Sox don’t spend their time parsing corporate-speak for clues about next year’s player budget like we do. They spend their time thinking about winning.

That’s what we forget in Toronto when it comes to sports teams. In most cities, people (not companies) own them because owning a sports team must be awesome. Prices are driven by a complete lack of supply and the fact that there are so many more super-rich people today. In 2001, around the time the Jays were last for sale, there were about 500 billionaires in the world. Today, there are over 2,000. They’re younger and their money came quicker. And if you bought something for the awesomeness of it, and you still have money to burn, then what’s the point if your team doesn’t win? We’re all pretty competitive – if you’re in a fantasy baseball league, don’t you want to win? Billionaires also want to win, and, unlike Rogers, not just because winning increases cash flow or improves their brand image. Billionaires want to win for the same reasons we do – because it’s fun.

Scarcity matters too. Do you know how many MLB teams have been sold in the last 10 years? Six. It’s similar in other sports. That’s why you see people from Texas buying NHL teams that need to stay in North Carolina. So if you love baseball and you’re super rich, you’d better jump when you have the chance even if the price doesn’t make strict financial sense or the team isn’t from your home town (or home country, for that matter).

And if you think billionaires got to be billionaires because they don’t buy stupid things, I invite you to think of superyachts. Yachts are objectively stupid. The biggest ones cost hundreds of millions of dollars, they only depreciate in value, and you only use them a few weeks of the year. But people buy the stupid stuff they can afford. You do it, I do it, billionaires do it. The only difference is the size and cost of the stupid stuff.

Case in point: the Florida Marlins. The Marlins are probably one of the least appealing teams in baseball. No history, no international fans, barely any local fans, locked-in to a terrible stadium, staring at a long rebuild, and almost certainly another rebranding exercise. But you get to own a team! And hang out with Derek fricken Jeter! (But not Giancarlo Stanton…) So they sold for over $1B. There’s no way that team supports that price on a return on investment basis.[2]

So, all the armchair financial analysts are missing both the rarity of teams and the fact that billionaires are also people. They get excited, they want stupid stuff, they want status, and they want fun.

But there may also be something else at play, especially when it comes to MLB teams. While we are all people, there is something that very successful business people can see that most others can’t: a bigger picture. We’ve been so pummeled by corporate-speak from both executives and the media, that we now also think of things in terms of budgets, quarters, and cash flow.

I’m not going to claim to be able to see the whole big picture, but let’s take a bit of a trip down Optimism Lane for a minute. Let’s say you wanted to build a globally recognized sports brand. You want to be Manchester United, the New York Yankees, or the L.A. Lakers. These teams benefit substantially from popularity in overseas markets. How do you get there? Assuming you’re not willing to wait for the Lakers to come onto the market, buying a “regular” team and making it a sustained winner is your most likely bet.

The New England Patriots are a great case study. They were never an important NFL franchise. They were an AFL team coming over in the 1970 merger that changed their name in 1971. They never won anything. They were completely irrelevant. Then in 2000, they started winning and have continued to win ever since. Now, according to Forbes they’re the 10th more valuable global sports team brand, and behind only the Cowboys in the NFL.

OK. Winning is the ticket. How do you do that? How do you do that if drafting Tom Brady is a crapshoot and Bill Belichick is really rare and hard to identify?

You do that by spending money. Money is the best – and most predictable – way to sustain a winning team.[3] It isn’t enough on its own, but combined with good (but not Belichick level) management, it should be enough. Look at how the Yankees were able to complete a rebuild without ever actually being bad. That required money.[4]

Because of salary caps in the NFL, NBA and the NHL (who I’m including as a major sports league because: Canada!), European soccer and Major League Baseball are the only leagues where you can spend as much money as you want to build and sustain a winning team. This puts an owner in much more control of building a global brand. If you think the Dodgers are crazy for having such a high payroll, this is why they’re doing it. It’s also why their team has such an international flavour.

Manchester City offers an interesting road map. If you’re like me and you don’t follow soccer closely, did you even know Manchester had another team a few years ago? Abu Dhabi United Group bought the team in 2008, poured money into it, turned it into a winner and now it’s one of the world’s top sports brands. I get that it’s not a perfect proxy – and that soccer is more popular in the world than baseball – but MLB has the world’s first and sixth most valuable brands (Yankees and Red Sox), so we know it’s possible. And MLB has something Euro soccer leagues don’t have – a virtual monopoly on the sport’s best players.

If we accept (for optimism’s sake) that by spending money you can turn an MLB team into a global sports brand, let’s put that in the Blue Jays context. Toronto is a financial powerhouse and the team has a large established fan base, so that’s a good start. It’s a city people in the world know and where a billionaire would want to live (i.e. not Pittsburgh) and in a country that people generally like. Being the only non-American team would have cachet in a lot of places. They play the Yankees and Red Sox almost all the time (you don’t think other teams benefit by being on TV with Man U? For brand potential, being in the AL East is like being in the EPL instead of, I don’t know, whatever the French league is called). They were even rated as having the sport’s best logo! (Which it absolutely true.)[5]

My point is this: you can talk all you want about how “crazy” it would be for someone to buy the Blue Jays without the stadium or TV rights. Do a discounted cash flow analysis if you want. Plan out a 5-year budget! Knock yourself out. Maybe you’ll be right. Maybe you aren’t very boring.

Just don’t underestimate the importance of scarcity and the willingness of billionaires to do “stupid” things because they’re fun. Spend a minute with an open mind and think about the Blue Jays becoming something much, much bigger than we can see through the fog of the current short-term focused, corporate narrative.

And then don’t be surprised when they sell for more than the “experts” are predicting and when the new owner spends much more on the team than we’re used to.[6]

It’s going to be great.

P.S. If you happen to be a billionaire looking to build a global brand, I’ll be your Huckleberry. Let’s do this!


[1]You must be short, but height doesn’t measure wealthTM.

[2]On this, it seems pretty clear no one wanted to buy the Marlins at the price Loria wanted, right? Also seems pretty clear MLB was so desperate to get rid of Loria they accepted what is clearly an under-cashed buying group and hoped the Derek Jeter-ness of it would paper that over in time.

[3]Cue the “whatabouters:” What about this team or that team who spend money and lost? I know. That sometimes happens. Over the long term, money spent on players influences winning. It’s been studied. Look it up.

[4]Though seriously, the Yankees should have been very bad at least one of the past few years. It’s really irritating that they weren’t. I hate the Yankees.

[5]Lots of the value of a global brand accrues to the TV rights holder, and didn’t we just say we gave that away to Rogers? Sure, but they can’t sign a “forever” deal and we’re thinking about the long term. And there are other revenue sources than TV for the short term.

[6]Also don’t be surprised to see a serious bidder from China. They’ve been all over European soccer teams, baseball is growing in China and Toronto would be a perfect way in for them to MLB. Even if they’re not from China, don’t be surprised if the new owner isn’t Canadian.

Lead Photo © Dan Hamilton-USA TODAY Sports

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3 comments on “A Different Conversation About Selling the Blue Jays”

Vasio N. Martianin

What a great post! One of the most highly accurate characterizations of Toronto’s corporate culture ever.
However, is amusing to think that if you put together a prospectus about a potential target audience it would be, what, 4? That’s what it was at the last count, no? Or maybe it’s skyrocketed to 5 or 6?


Coincidentally, when it came out Rogers was willing to sell, after MLSE popped up as a possible new owner, my mind went to foreign money, not necessarily from China, but also the Middle East. So while I’m not expecting a buyer to come from one of those regions, I can’t say I’d be bowled over either.

Hey thank you for the great post. I enjoy reading your stuff!

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