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	<title>Toronto &#187; Jon Shell</title>
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		<title>A Different Conversation About Selling the Blue Jays</title>
		<link>http://toronto.locals.baseballprospectus.com/2017/12/11/a-different-conversation-about-selling-the-blue-jays/</link>
		<comments>http://toronto.locals.baseballprospectus.com/2017/12/11/a-different-conversation-about-selling-the-blue-jays/#comments</comments>
		<pubDate>Mon, 11 Dec 2017 15:13:45 +0000</pubDate>
		<dc:creator><![CDATA[Jon Shell]]></dc:creator>
				<category><![CDATA[Articles]]></category>
		<category><![CDATA[Featured]]></category>

		<guid isPermaLink="false">http://toronto.locals.baseballprospectus.com/?p=14548</guid>
		<description><![CDATA[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&#8217;re super-rich, what else do we know about you? You&#8217;re reading this article, which makes you a baseball fan. More specifically, [&#8230;]]]></description>
				<content:encoded><![CDATA[<p>I want you to imagine this:</p>
<p>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!</p>
<p>Now that we know you&#8217;re super-rich, what else do we know about you?</p>
<p>You&#8217;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&#8217;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<a id="ref1" href="#1"><sup>[1]</sup></a> 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&#8217;t pretend. I know who you are.</p>
<p>Newsflash! The Blue Jays are for sale!</p>
<p>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&#8217;re keeping the stadium, building a moat around Ted&#8217;s statue in case anyone gets any smart ideas, and locking in a long term lease.</p>
<p>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?</p>
<p>What do you do? And I mean really, what do <em>you</em> do? Not some hypothetical other billionaire for whom you are making assumptions about their financial decision-making. YOU!</p>
<p>Of course you buy the team. Of course you do! I do, you do, everyone reading this article does. You&#8217;re left with $700 million in the end (using the silly assumption that the team becomes completely worthless). That&#8217;s some serious cash; more than you or your family could spend in several hundred years!</p>
<p>Maybe you negotiate to call it the Rogers Skydome because you&#8217;re nostalgic like that and maybe you bargain to put in a Roy Halladay statue that&#8217;s three times the size of Ted. But these are minor points. You buy the team.</p>
<p>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&#8217;ve been completely beaten down by corporate ownership in this city. We talk about payroll parameters, shareholder value, return on investment… It&#8217;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.</p>
<p>I think about the <a href="https://bluejaysnation.com/2016/07/22/rogers-declares-the-blue-jays-part-of-a-big-financial-success-though-actual-q2-results-are-a-bit-murkier/">great pains</a> analysts go through to <a href="https://www.theglobeandmail.com/sports/no-love-for-blue-jays-in-rogerss-sports-spending-blame-an-accounting-rule/article28709405/">parse Rogers&#8217; </a>public reports to estimate the team&#8217;s profitability or to get clues about the team&#8217;s willingness to spend on the next year&#8217;s player budget. I think about <a href="http://toronto.locals.baseballprospectus.com/2017/05/04/death-to-2018-payroll-implications-of-a-nightmare-start-to-the-year/">my own efforts</a> to do the same, <a href="https://www.bluebirdbanter.com/2016/11/8/13561070/a-business-case-for-a-much-higher-payroll">drawing on history</a> 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.)</p>
<p>The thing is, if Mike Illich (RIP), John Henry, or Arte Moreno is my owner, I don&#8217;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.</p>
<p>That&#8217;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&#8217;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&#8217;s the point if your team doesn&#8217;t win? We&#8217;re all pretty competitive &#8211; if you&#8217;re in a fantasy baseball league, don&#8217;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 &#8211; because it&#8217;s fun.</p>
<p>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&#8217;s why you see people from <a href="http://www.newsobserver.com/sports/nhl/carolina-hurricanes/article188664169.html">Texas buying NHL teams</a> that need to stay in North Carolina. So if you love baseball and you&#8217;re super rich, you&#8217;d better jump when you have the chance even if the price doesn&#8217;t make strict financial sense or the team isn&#8217;t from your home town (or home country, for that matter).</p>
<p>And if you think billionaires got to be billionaires because they don&#8217;t buy stupid things, I invite you to think of superyachts. Yachts are objectively stupid. The biggest ones cost <a href="https://www.forbes.com/sites/aliciaadamczyk/2015/04/08/how-much-does-a-superyacht-really-cost/#3d41950f36bc">hundreds of millions of dollars</a>, 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.</p>
<p>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&#8217;s no way that team supports that price on a return on investment basis.<a id="ref2" href="#2"><sup>[2]</sup></a></p>
<p>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.</p>
<p>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&#8217;t: a bigger picture. We&#8217;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.</p>
<p>I&#8217;m not going to claim to be able to see the whole big picture, but let&#8217;s take a bit of a trip down Optimism Lane for a minute. Let&#8217;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&#8217;re not willing to wait for the Lakers to come onto the market, buying a &#8220;regular&#8221; team and making it a sustained winner is your most likely bet.</p>
<p>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 <a href="https://www.forbes.com/pictures/mlm45jemm/10-new-england-patriots/#934e8c233924">Forbes</a> they’re the 10th more valuable global sports team brand, and behind only the Cowboys in the NFL.</p>
<p>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?</p>
<p>You do that by spending money. Money is the best &#8211; and most predictable &#8211; way to sustain a winning team.<a id="ref3" href="#3"><sup>[3]</sup></a> It isn&#8217;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.<a id="ref4" href="#4"><sup>[4]</sup></a></p>
<p>Because of salary caps in the NFL, NBA and the NHL (who I&#8217;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&#8217;re doing it. It&#8217;s also why their team has such an international flavour.</p>
<p>Manchester City offers an interesting road map. If you&#8217;re like me and you don&#8217;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 &#8211; and that soccer is more popular in the world than baseball &#8211; 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.</p>
<p>If we accept (for optimism’s sake) that by spending money you can turn an MLB team into a global sports brand, let&#8217;s put that in the Blue Jays context. Toronto is a financial powerhouse and the team has a large established fan base, so that&#8217;s a good start. It&#8217;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&#8217;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&#8217;t know, whatever the French league is called). They were even rated as having the <a href="http://www.nbcsports.com/washington/washington-nationals/ranking-all-30-mlb-logos-worst-first#slide-37">sport&#8217;s best logo</a>! (Which it absolutely true.)<a id="ref5" href="#5"><sup>[5]</sup></a></p>
<p>My point is this: you can talk all you want about how &#8220;crazy&#8221; 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&#8217;ll be right. Maybe you aren&#8217;t very boring.</p>
<p>Just don&#8217;t underestimate the importance of scarcity and the willingness of billionaires to do “stupid” things because they&#8217;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.</p>
<p>And then don&#8217;t be surprised when they sell for more than the &#8220;experts&#8221; are predicting and when the new owner spends much more on the team than we&#8217;re used to.<a id="ref6" href="#6"><sup>[6]</sup></a></p>
<p>It&#8217;s going to be great.</p>
<p>P.S. If you happen to be a billionaire looking to build a global brand, I&#8217;ll be your Huckleberry. Let&#8217;s do this!</p>
<p><strong>FOOTNOTES</strong></p>
<p><a id="1" href="#ref1"><sup>[1]</sup></a>You must be short, but height doesn&#8217;t measure wealth<sup>TM</sup>.</p>
<p><a id="2" href="#ref2"><sup>[2]</sup></a>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.</p>
<p><a id="3" href="#ref3"><sup>[3]</sup></a>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.</p>
<p><a id="4" href="#ref4"><sup>[4]</sup></a>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.</p>
<p><a id="5" href="#ref5"><sup>[5]</sup></a>Lots of the value of a global brand accrues to the TV rights holder, and didn&#8217;t we just say we gave that away to Rogers? Sure, but they can&#8217;t sign a &#8220;forever&#8221; deal and we&#8217;re thinking about the long term. And there are other revenue sources than TV for the short term.</p>
<p><a id="6" href="#ref6"><sup>[6]</sup></a>Also don&#8217;t be surprised to see a serious bidder from China. They&#8217;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&#8217;re not from China, don’t be surprised if the new owner isn’t Canadian.</p>
<p>Lead Photo © Dan Hamilton-USA TODAY Sports</p>
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		<title>Dear Joe Natale: It&#8217;s Time to Sell the Blue Jays</title>
		<link>http://toronto.locals.baseballprospectus.com/2017/06/29/dear-joe-natale-its-time-to-sell-the-blue-jays/</link>
		<comments>http://toronto.locals.baseballprospectus.com/2017/06/29/dear-joe-natale-its-time-to-sell-the-blue-jays/#comments</comments>
		<pubDate>Thu, 29 Jun 2017 11:46:13 +0000</pubDate>
		<dc:creator><![CDATA[Jon Shell]]></dc:creator>
				<category><![CDATA[Articles]]></category>

		<guid isPermaLink="false">http://toronto.locals.baseballprospectus.com/?p=12025</guid>
		<description><![CDATA[Dear Joe, Congratulations on recently becoming Rogers CEO! I know you’re busy improving customer service, so I don’t want to take too much of your time. And as a Rogers customer, thanks for that in advance, by the way. Big job. I wanted to talk to you about the Toronto Blue Jays. It’s time to [&#8230;]]]></description>
				<content:encoded><![CDATA[<p>Dear Joe,</p>
<p>Congratulations on <a href="https://www.theglobeandmail.com/report-on-business/new-rogers-ceo-joe-natale-plans-to-obsess-over-customer-service/article34753531/" target="_blank">recently becoming Rogers CEO</a>!</p>
<p>I know you’re busy improving customer service, so I don’t want to take too much of your time. And as a Rogers customer, thanks for that in advance, by the way. Big job.</p>
<p>I wanted to talk to you about the Toronto Blue Jays.</p>
<p>It’s time to sell the team.</p>
<p>Corporate ownership of an MLB team is unusual. It’s just you and Atlanta. Seattle used to be, but they sold last year. Given the amount of corporate money out there, it’s a bit odd, don’t you think? It’s probably because teams don’t produce enough profit to justify their current market value to shareholders. Things that bring status to the super-rich do not normally come at a bargain.</p>
<p>Why would you want the team, anyway? It doesn’t help your brand. Remember the summer of 2015, when everyone in the country fell in love with the Blue Jays? After Rogers approved taking on additional contracts at the trade deadline? They all credited Alex Anthopoulos and Paul Beeston and were really angry at you for bringing in some “corporate” people from Cleveland to push them out. Even when it goes well for the Blue Jays, it doesn’t go well for Rogers.</p>
<p>I get that the content is valuable to you. But you can extract much of the benefit the team produces for you without actually owning it. Lock in a low-cost long-term TV contract, including the digital content that drives traffic to your digital properties. Keep the building and sign a long-term lease, which maintains the naming value as well. (Even though many of us will continue to call it SkyDome. Sorry). Negotiate for some promotional rights. Keep your name on the tickets, even! It’s all there for the taking, Joe.</p>
<p>Will doing those things reduce the value of the asset? Of course. But there&#8217;s cachet to owning a sports team, and I&#8217;d predict that because of that, the reduction in price would be less than the economic value of some below-market long-term contracts. That would make the deal even better for your shareholders.</p>
<p>And what an asset you have to sell! The price of sports franchises has skyrocketed. The Miami Marlins are about to be sold in the range of $1 &#8211; $1.3 billion USD. Billion! The Miami Marlins! That’s gotta be a bubble, right?</p>
<p>Here’s more reasons why the Jays may be at peak value:</p>
<ul>
<li>More than ever, it’s Canada’s team, which has huge value. A 35 million person market! But how long will that last? Canadians from outside the city don’t generally <em>love</em> cheering for Toronto, so what happens when a plucky upstart team returns to Montreal?</li>
<li>The team led the league in attendance last year, and will probably top 3 million fans again this year. What happens next year if they finish this year below .500? Why wait around to find out?</li>
<li>Osuna, Donaldson, Stroman, Sanchez, Vlady Jr. – new owners pay extra for having marketable stars that they can work to lock up. You’ve got that in spades right now.</li>
</ul>
<p>Fan interest, stars, a huge market – this thing sells itself.</p>
<p>What about demand? Hoo-boy! There will be lots of demand. Your good friend Edward Rogers will get a group together, no doubt. So will Paul Beeston. Paul Godfrey? All the Pauls! There are more than three dozen Canadian billionaires. Surely there are a few baseball fans in there.</p>
<p>You will have to be true to your shareholders and get the best possible price, but let me make another suggestion. You can absolutely leverage this for Rogers’ brand if you prioritize selling to a Canadian group (or individual) who loves baseball and wants to run the team as a passion, not as a business. If you find us our own Arte Morino, Ted Lerner or Mike Illich, Rogers can be a hero by selling the team that they could never be by owning it.</p>
<p>Also, the team needs it! If a new owner took over, they’d probably look to make a splash. Sign Josh Donaldson to an extension? Go after Bryce Harper or one of the other superstar free agents available soon? Run payroll up to $200 million a year for a few years while the farm system gets re-built? These are absolutely things a new cashed-up owner might do to keep attendance high. The Dodgers followed this approach after their early 2012 acquisition, and were up 800,000 fans by 2013 (which they’ve kept through continued investment in players and management). With a national audience to buy merchandise and the capacity to draw four million fans locally, there’s no reason the Blue Jays can’t join the Dodgers, Yankees and Red Sox at the top of the sport.</p>
<p>Let’s be honest Joe – are you prepared to take a plan like that to your board? To really support this team the way it deserves to be supported? The way a passionate Canadian baseball fan would?</p>
<p>You’ve got a peak value asset, the ability to extract value through a lease and a TV contract and a honeymoon period at the beginning of your tenure. Not to mention a way to earn the undying gratitude of a desperate fan base.</p>
<p>Do the right thing, Joe. Do it now.</p>
<p>Best Regards,</p>
<p>Every Blue Jay Fan, Everywhere</p>
<p><em>Lead Photo: Dan Hamilton-USA TODAY Sports</em></p>
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		<title>What Ticket Sale Data can Tell us About Future Blue Jays Attendance</title>
		<link>http://toronto.locals.baseballprospectus.com/2017/06/20/what-ticket-sale-data-tells-us-about-future-blue-jays-attendance/</link>
		<comments>http://toronto.locals.baseballprospectus.com/2017/06/20/what-ticket-sale-data-tells-us-about-future-blue-jays-attendance/#comments</comments>
		<pubDate>Tue, 20 Jun 2017 14:20:53 +0000</pubDate>
		<dc:creator><![CDATA[Jon Shell]]></dc:creator>
				<category><![CDATA[Articles]]></category>
		<category><![CDATA[Featured]]></category>
		<category><![CDATA[Attendance]]></category>
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		<category><![CDATA[Trade Deadline]]></category>

		<guid isPermaLink="false">http://toronto.locals.baseballprospectus.com/?p=11955</guid>
		<description><![CDATA[In an article last month arguing that the Blue Jays shouldn’t trade Josh Donaldson, Jonah Keri leaned heavily on a financial argument: “Losing games would be one thing. Losing games and trading Donaldson could signal to fans that a full teardown is underway, and that the next several years of Blue Jays baseball might be [&#8230;]]]></description>
				<content:encoded><![CDATA[<p>In an<a href="http://www.sportsnet.ca/baseball/mlb/jonah-keri-case-trading-josh-donaldson-season/"> article last month</a> arguing that the Blue Jays shouldn’t trade Josh Donaldson, Jonah Keri leaned heavily on a financial argument:</p>
<p>“Losing games would be one thing. Losing games and trading Donaldson could signal to fans that a full teardown is underway, and that the next several years of Blue Jays baseball might be tough to watch…Keeping Donaldson around for as long as possible could help prolong the franchise’s off-field momentum, the kind that’s supercharged attendance and TV ratings, and more intangibly made the Jays a hot topic of conversation on those glorious Toronto summer patio nights — like they were 25 years ago.”</p>
<p>Keri here is making a guess about something we don’t really know much about &#8211; namely, fan reactions to head office moves, and the implications for franchise revenue. It’s not that the financial side doesn’t matter – in fact, especially for a corporate club like the Jays, it’s crucial! It’s just that we tend to attach too much credibility to our gut instincts when we don&#8217;t have facts to lean on. I doubt Keri, or anyone else, wants to be like that scout in Moneyball talking about “the good face.” But when it comes to the economics of baseball, that’s who we often are.</p>
<p>The revolution in baseball analysis hasn&#8217;t extended to the financial side, despite its large influence on team decision-making. Even high-effort attempts to understand teams&#8217; current state and future prospects limit their financial analysis to current payroll levels, such as this otherwise <a href="http://www.hardballtimes.com/ground-rule-doppelgangers-2017-edition/">very cool concept </a>at the Hardball Times.<a id="ref1" href="#1"><sup>[1]</sup></a> But to a large extent, current payroll is a backward-looking metric, as it reflects decisions made in the past in potentially different circumstances. For example, the Detroit Tigers are an aging team with a high payroll and a collapsing attendance base. Current payroll may be an indicator of what they’re willing to spend in a good situation, but may not be a good indicator of their willingness or ability to add quality players over the next few years.</p>
<p>Since we currently often use hunch-based economics to support our arguments about what each team should do at the trade deadline, it might be useful to have some analytical tools or theories based on research. For example, what’s the actual “signalling” impact of trading someone like Josh Donaldson or Roberto Osuna? Does attendance reflect who the players are, and how long they’ve been with the team, or is it just about winning? How much does team revenue influence the player budget, and how does that differ based on the type of team owner?</p>
<p>While these questions would require some pretty painful historical research, we probably have enough available data today to create some useful metrics. The rise of Stubhub has produced accessible data about demand for tickets that scalpers never published. This data can be like the “peripherals” of revenue, using current market sentiment to predict a team’s season attendance, which is a good proxy for their revenue.<a id="ref2" href="#2"><sup>[2]</sup></a> This is exactly the same way xFIP tries to predict long-term ERA. Call it xREV, or xATT.</p>
<p>I think it would be pretty cool if Jonah Keri could say that the xREV for the Blue Jays is looking down about 10% for 2017, so we can’t expect the player budget to increase and need to think about things like trading Roberto Osuna. When <a href="https://bluejaysnation.com/2017/06/16/dont-trade-roberto-osuna-commit-to-making-him-a-starter/" target="_blank">Andrew Stoeten says</a> “unless something with their budget changes dramatically, the Blue Jays&#8230;aren’t quite going to be in that 2015-like push-in-all-your-chips, our-window-is-right-now kind of place,” this reasonable argument would be helped if xATT showed little reason to expect a dramatic change in their budget.</p>
<p>While we don&#8217;t have this metric, I&#8217;m going to make a lazy attempt at something similar.</p>
<p>First, let’s look at actual attendance so far this year compared to the last few years:</p>
<table width="385">
<tbody>
<tr>
<td colspan="4" width="385">Blue Jays Attendance through 36 Home Games</td>
</tr>
<tr>
<td>Year</td>
<td>Record</td>
<td>Total Attendance</td>
<td>Average Per Game</td>
</tr>
<tr>
<td>2014</td>
<td>39-27</td>
<td> 914,601</td>
<td> 25,405</td>
</tr>
<tr>
<td>2015</td>
<td>37-33</td>
<td> 949,648</td>
<td> 26,379</td>
</tr>
<tr>
<td>2016</td>
<td>40-34</td>
<td> 1,369,090</td>
<td> 38,030</td>
</tr>
<tr>
<td>2017</td>
<td>33-35</td>
<td> 1,400,638</td>
<td> 38,907</td>
</tr>
</tbody>
</table>
<p>Well, that doesn’t look too bad. On the face of it, the Blue Jays seem to be holding on to the gains they made last year, where they finished the year with 3.3 million fans. As Jonah points out, first in the AL!</p>
<p>But the underlying demand that would go into a predictive “xREV” paint a different picture. To look at it, I used seatgeek.com and my friend Dan. Seatgeek.com has a cool tool that shows you average ticket price on the secondary market for a team over time. My friend Dan lives in Calgary and actively sells every one of his season tickets on stubhub, which he has so he can get playoff tickets.<a id="ref3" href="#3"><sup>[3]</sup></a> He’s better than your friend Dan because he also keeps really good track of his sales stats.</p>
<p>Here’s the Jays picture on seatgeek.com since Feb, 2014:</p>
<p style="text-align: center"><a href="http://toronto.locals.baseballprospectus.com/wp-content/uploads/sites/10/2017/06/Since-beginning-of-2014.png"><img class="aligncenter size-full wp-image-11956" src="http://toronto.locals.baseballprospectus.com/wp-content/uploads/sites/10/2017/06/Since-beginning-of-2014.png" alt="Since beginning of 2014" width="500" height="405" /></a></p>
<p>Average ticket prices last year dipped as low as $57, but this year they’ve barely ever been at that level, and are currently at $42, similar to prices in 2014 and early 2015 when attendance and interest was much lower. They did sell a lot more advance seats this year, so some of this would be expected as there’s a lot more supply in the market, but this should be a good indicator of a reduced interest in walk-up tickets.</p>
<p>Obviously, the team is doing worse, so that&#8217;s to be expected, but there have also been times this year where their record was very similar to last year, and it&#8217;s the same story.</p>
<p>For example, this year the Yankees came to town for a weekend series June 2-4, with the Blue Jays just under .500. The series drew 138K fans. Last year, the Red Sox came for a weekend series May 27-29 with the team just under .500, and drew 142K fans. That was almost exactly the same situation. According to Seatgeek, last year the average ticket price for the Red Sox series ranged from $45 to $58, while this year it was $39-41 for the Yanks. Dan’s results were even worse, averaging $61 a ticket this year versus $91 last year. <em>Even when the team performance was equally bad</em>, demand this year is a lot less than last year.</p>
<p>In fact, so far this year Dan’s getting crushed.<a id="ref4" href="#4"><sup>[4]</sup></a> Here’s his stats through 36 games:</p>
<table>
<tbody>
<tr>
<td colspan="5" width="349">Dan&#8217;s Ticket Sales (through 36 games)</td>
</tr>
<tr>
<td width="38"></td>
<td width="78">Total Sales</td>
<td width="61">Average</td>
<td width="116">Sales above $90</td>
<td width="56">No Sale</td>
</tr>
<tr>
<td width="38">2016</td>
<td width="78">$2,242</td>
<td width="61">$62.29</td>
<td width="116">12</td>
<td width="56">3</td>
</tr>
<tr>
<td width="38">2017</td>
<td width="78">$1,228</td>
<td width="61">$34.11</td>
<td width="116">1</td>
<td width="56">10</td>
</tr>
</tbody>
</table>
<p>And if you think he’s being lazy, he’s actually working harder this year. “Last year I held back the tickets because we knew there’d be real demand for the big games. This year, I have to post them way in advance, actively manage the change in prices and keep adjusting. I’m not going to do it again next year.” So, the Jays are already down two seats in 2018!</p>
<p>The change showed up very early, as last year’s home opener average on seatgeek was $61, while this year’s, after the miserable 1-5 start, was $39. Dan’s story was worse again, selling last year’s tickets for $260, and this year’s for $67.<a id="ref5" href="#5"><sup>[5]</sup></a></p>
<p>If demand continues to be this soft for new ticket sales, you’d expect to see a much lower average attendance for the rest of this year than the 47K per game they had from this point forward in 2016. Even keeping our league-leading current average attendance of 39K per game leads to a loss of 350K fans for the year. And there’s some evidence (the Yankees/Red Sox series comparison) that even if the team rallies back to take a wild card, interest would be lower than it was for the same result last year. If I had to take a stab at xATT, it would be 2.9-3.1M.</p>
<p>In Keri’s <a href="http://www.sportsnet.ca/baseball/mlb/osunas-dominance-present-blue-jays-tempting-options/" target="_blank">perfectly reasonable article about trading Roberto Osuna</a>,<a id="ref6" href="#6"><sup>[6]</sup></a> he says this about the Jays fanbase: “Balanced against all that is a fanbase that’s been energized by the team’s recent success, with two straight ALCS appearances producing the best home attendance for any American League team this year, as well as surging TV ratings and a more intangible buzz around the ballclub, the kind that hadn’t been felt since the back-to-black glory years of 1992 and 1993.”</p>
<p>We’ll see how the rest of the season goes, but it’s possible that momentum has already swung the other way, and that underlying attendance “peripherals” may point to a lot less money to work with going forward. Before we trade Donaldson and “tear it all down,” this is pretty lazy analysis, and could easily be useless. But there’s a big gap in the baseball analytics world, and developing some useful tools on these topics would make predicting a team’s moves a lot more interesting and better informed.</p>
<p><em>Lead Photo © John E. Sokolowski-USA TODAY Sports</em></p>
<p><span style="text-decoration: underline"><strong>FOOTNOTES</strong></span></p>
<p><a id="1" href="#ref1"><sup>[1]</sup></a>The analysis attempts to find a historical match for each current team based on a number of dimensions.  The Jays are, as it happens, compared to the 1990 San Francisco Giants, who won 85, 75 and 72 games from 1990-1992.  Let’s hope not!</p>
<p><a id="2" href="#ref2"><sup>[2]</sup></a>Attendance is a team’s primary revenue source, and you’d expect it to drive merchandise sales, which are two of the three main drivers of revenue. TV is the other, and for most other teams, this is a long-term contract unaffected by attendance. Because the Blue Jays don’t have a TV contract for a specific set amount of money, TV revenue for the Blue Jays/Rogers is directly tied to advertising revenue, which is directly tied to ratings and therefore fan interest. So, attendance is a better proxy for revenue for the Jays than other teams.</p>
<p><a id="3" href="#ref3"><sup>[3]</sup></a>This worked out really well for Dan last year, as he made enough of a profit on the regular season seats to more or less pay for his trip to Toronto to see the playoffs. This year, not so much.</p>
<p><a id="4" href="#ref4"><sup>[4]</sup></a>Before you scream “small sample size,” Stubhub works largely like a stock market for tickets, where there are many buyer and sellers, so an active seller’s result will be indicative of the actual market rate.</p>
<p><a id="5" href="#ref5"><sup>[5]</sup></a>To be fair, last year was a Friday against the Red Sox and this year was a Tuesday against the Brewers, but these are some pretty dramatic differences.</p>
<p><a id="6" href="#ref6"><sup>[6]</sup></a>Not to get too deeply into this, but Osuna’s going to cost somewhere between $25-30M in his last three years of arbitration eligibility if he stays healthy. Kenley Jansen signed for $16M/year, or about $50M over the same time period. The recent hauls for players like Ken Giles and Tyler Thornburg were worth more than the difference, and Osuna’s better than those guys (not to mention the Andrew Miller and Craig Kimbrel deals). I’m not saying “do it,” but it’s certainly not crazy. And my love for Osuna runs deep…</p>
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		<title>Death to 2018: Future Payroll Implications of a Nightmare Start to the Year</title>
		<link>http://toronto.locals.baseballprospectus.com/2017/05/04/death-to-2018-payroll-implications-of-a-nightmare-start-to-the-year/</link>
		<comments>http://toronto.locals.baseballprospectus.com/2017/05/04/death-to-2018-payroll-implications-of-a-nightmare-start-to-the-year/#comments</comments>
		<pubDate>Thu, 04 May 2017 12:00:55 +0000</pubDate>
		<dc:creator><![CDATA[Jon Shell]]></dc:creator>
				<category><![CDATA[Articles]]></category>
		<category><![CDATA[Featured]]></category>

		<guid isPermaLink="false">http://toronto.locals.baseballprospectus.com/?p=10581</guid>
		<description><![CDATA[In November I wrote a piece about how important winning in 2017 was to the sustainability of the Blue Jays fan interest and attendance. To summarize: The massive increase in Blue Jays attendance from 2014 to 2016 was matched by only 20 teams in the last 40 years. In each case, the teams involved had experienced recent [&#8230;]]]></description>
				<content:encoded><![CDATA[<p>In <a href="http://www.bluebirdbanter.com/2016/11/8/13561070/a-business-case-for-a-much-higher-payroll" target="_blank">November</a> I wrote a piece about how important winning in 2017 was to the sustainability of the Blue Jays fan interest and attendance. To summarize:</p>
<ul>
<li>The massive increase in Blue Jays attendance from 2014 to 2016 was matched by only 20 teams in the last 40 years. In each case, the teams involved had experienced recent on-field success.<a id="ref1" href="#1"><sup>[1]</sup></a></li>
<li>Every team that followed up an increase like that with a winning team was able to maintain those fans for several more years, even after they stopped being competitive.</li>
<li>Almost every team that followed it up with a losing team lost most of their gains over the following two years.</li>
<li>The piece recommended spending a lot of money last off-season to give the team as much of a chance of winning in 2017 as possible, thus converting recent fans into long-term fans and providing a strong return on investment.</li>
</ul>
<p>The article suggested a 2017 payroll of $170-180M to get to a high 80s win expectancy, versus the actual opening day payroll of <a href="http://www.baseballprospectus.com/compensation/cots/al-east/toronto-blue-jays/" target="_blank">$163M</a><strong><em>.</em></strong> Given how things have started, would an extra $10-15M have made a difference so far this year? Probably not much. Mike Trout probably wouldn&#8217;t have been enough.</p>
<p>For this article I am assuming that the Blue Jays will not contend for the postseason this year and will end the year with a losing record. I’m assuming this because, while it’s baseball and it’s still early, this is the most reasonable assumption for a team with an 9-19 record whose current lineup often includes four or five of: Darwin Barney, Ryan Goins, Ezequiel Carrera, Chris Coghlan, the 2015 version of Steve Pearce, and Justin Smoak.<a id="ref2" href="#2"><sup>[2]</sup></a></p>
<p><strong>Sudden surges in attendance fall off a cliff if the team stops winning</strong></p>
<p>This may seem obvious, but in the past, teams that kept winning for even a couple more years held on to the fans. The 1991 Atlanta team, the 2003 Anaheim Angels, ’87 Giants and ’96 Padres are all examples of teams that won for a few more years, and then held on to their fans <em>even after they returned to mediocrity</em>. It wouldn’t be a stretch to say that once the new fans became interested, if they were kept interested for a few more years they became real fans and attendance and viewership became a habit.  So if the Jays had started 19-9 (or even .500 like last year), hope would likely have abounded, recent fans would likely have remain engaged, attendance would be poised to grow, and both the business case for investing in 2018 and this article would have been very different.</p>
<p>To show what happens when the team stops winning too soon, here’s the complete list of teams in the last 40 years that had a two-year attendance increase over 700K fans, and then were below .500 for the two years following.</p>
<table width="549">
<tbody>
<tr>
<td width="64">Year</td>
<td width="78">Team</td>
<td width="81">Attendance</td>
<td width="93">Two-Year Attendance Increase</td>
<td width="83"> Next Two-Year Winning Percentage</td>
<td width="76"> Next Two-Year Attendance Decline</td>
<td width="74">Percentage of Gain Lost</td>
</tr>
<tr>
<td>1988</td>
<td>Minnesota</td>
<td>    3,030,672</td>
<td>        1,775,219</td>
<td>             0.475</td>
<td> (1,279,088)</td>
<td>72%</td>
</tr>
<tr>
<td>1993</td>
<td>Philadelphia</td>
<td>    3,137,674</td>
<td>        1,087,662</td>
<td>             0.475</td>
<td> (1,094,076)</td>
<td>101%</td>
</tr>
<tr>
<td>2006</td>
<td>Chicago Sox</td>
<td>    2,957,414</td>
<td>        1,026,877</td>
<td>             0.495</td>
<td>     (456,766)</td>
<td>44%</td>
</tr>
<tr>
<td>2007</td>
<td>Detroit</td>
<td>    3,047,133</td>
<td>        1,022,702</td>
<td>             0.492</td>
<td>     (479,968)</td>
<td>47%</td>
</tr>
<tr>
<td>2012</td>
<td>Texas</td>
<td>    3,460,280</td>
<td>           955,109</td>
<td>             0.486</td>
<td>     (741,547)</td>
<td>78%</td>
</tr>
<tr>
<td>2004</td>
<td>Florida</td>
<td>    1,723,105</td>
<td>           909,987</td>
<td>             0.497</td>
<td>     (558,971)</td>
<td>61%</td>
</tr>
<tr>
<td>1991</td>
<td>Seattle</td>
<td>    2,147,905</td>
<td>           849,462</td>
<td>             0.450</td>
<td>       (95,267)</td>
<td>11%</td>
</tr>
<tr>
<td>2000</td>
<td>Cincinatti</td>
<td>    2,577,371</td>
<td>           783,722</td>
<td>             0.444</td>
<td>     (721,584)</td>
<td>92%</td>
</tr>
<tr>
<td>2008</td>
<td>Milwaukee</td>
<td>    3,068,458</td>
<td>           732,815</td>
<td>             0.485</td>
<td>     (291,927)</td>
<td>40%</td>
</tr>
<tr>
<td>1992</td>
<td>Minnesota</td>
<td>    2,482,428</td>
<td>           730,844</td>
<td>             0.451</td>
<td> (1,083,863)</td>
<td>148%</td>
</tr>
<tr>
<td>Average</td>
<td></td>
<td>    2,763,244</td>
<td>           987,440</td>
<td>             0.475</td>
<td>    (680,306)</td>
<td>69%</td>
</tr>
<tr>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>2016</td>
<td>Toronto</td>
<td>    3,392,099</td>
<td>        1,016,574</td>
<td> ?</td>
<td> ?</td>
<td> ?</td>
</tr>
</tbody>
</table>
<p>On average, the teams lost 69% of their attendance gains two years after the attendance surge. Only one team, Seattle, lost less than 40%.</p>
<p>Can Toronto buck this trend? Walking around the city and seeing everyone in a Blue Jays hat and talking to friends who never cared about the game about how much their kids love Kevin Pillar, you’d want to think so. But if the Jays were going to be the exception to the list of teams above, April’s nightmare is going to make it that much tougher. Because the team is so far behind so early, it’s more than likely that they’ll never be within striking distance of the playoffs at any time this year. People I know are already checked out. If I had to bet, I’d bet precedent will be followed.</p>
<p>So what does this mean for the team? In my previous article I estimated that the 1M increase in fans and 70% increase in TV viewership that happened at the same time was worth about $75M USD in revenue (with limited marginal cost). A loss of 45-65% of <em>that</em> means a loss of about $35-50M USD.</p>
<p>That’s a lot! With a corporate owner, you’d have to believe this will have an impact on the player budget the team has to work with. But that’s not the only problem for next year’s budget.</p>
<p><strong>2018: Free Agents and Arbitration</strong></p>
<p>In the absence of trades, our 2018 player budget picture has four categories:</p>
<ol>
<li>Backloading is complete! All returning veterans come back on more or less the same salaries. So far, so good.</li>
<li>A bunch of guys who are replaceable for something close to their 2017 salaries (Grilli, Howell, Smith, Barney, etc.). No problem there.</li>
<li>Bautista, Estrada and Liriano are all free agents at a 2017 cost of about $46M. I mean, you could probably get Estrada and Liriano themselves and a power hitting corner OFer with some flaws for about that, right?</li>
<li>Donaldson, Sanchez, Osuna, Stroman, Travis and Pillar all due big arbitration raises. Uh, Oh.</li>
</ol>
<p>I took a stab at estimating how much the arbitration raises will be. I’m no expert, but I looked for comparable players with comparable service times, and assumed all our guys will be healthy at the end of the year and with expected performance this year. Here’s the estimate:</p>
<table width="507">
<tbody>
<tr>
<td width="127">Player</td>
<td width="96"> 2017 Salary</td>
<td width="108"> 2018 Projection</td>
<td width="176">Comparables</td>
</tr>
<tr>
<td width="127">Roberto Osuna</td>
<td width="96">      552,400</td>
<td width="108">       4,500,000</td>
<td width="176">Holland, Britton, Reed</td>
</tr>
<tr>
<td width="127">Devon Travis</td>
<td width="96">      545,200</td>
<td width="108">       2,500,000</td>
<td width="176">Lawrie, Crawford</td>
</tr>
<tr>
<td width="127">Aaron Sanchez</td>
<td width="96">      535,000</td>
<td width="108">       5,000,000</td>
<td width="176">Alvarez, Cobb, Wood</td>
</tr>
<tr>
<td width="127">Marcus Stroman</td>
<td width="96">     3,400,000</td>
<td width="108">       6,500,000</td>
<td width="176">Wood, Strasburg</td>
</tr>
<tr>
<td width="127">Kevin Pillar</td>
<td width="96">      555,000</td>
<td width="108">       3,500,000</td>
<td width="176">Revere, Cain, Jennings</td>
</tr>
<tr>
<td width="127">Josh Donaldson</td>
<td width="96">    17,000,000</td>
<td width="108">      22,000,000</td>
<td width="176">Ragnar Lothbrok</td>
</tr>
<tr>
<td width="127"><strong>Total</strong></td>
<td width="96"><strong>   22,587,600 </strong></td>
<td width="108"><strong>     44,000,000 </strong></td>
<td width="176"><strong> </strong></td>
</tr>
</tbody>
</table>
<p>I’m sure this isn’t going to be perfect, but it passes the smell test. And if it’s close, it means a $21M increase in the player budget for those guys.</p>
<p>So, to summarize, the current team without Estrada, Liriano and Bautista is likely to cost about $138M<a id="ref3" href="#3"><sup>[3]</sup></a> in 2018, which is about what the playoff-bound 2016 full team payroll was to start the year. And that’s with older versions of Tulo, Martin, Morales and Happ.</p>
<p><strong>Can trades or the farm fill the holes?</strong></p>
<p>This $138M 2018 team has holes at RF, LF, two SPs and still has Justin Smoak at 1B.</p>
<p>The experts all seem to believe the farm system is improving. But other than the post-post-post-hype Dalton Pompey and the lottery ticket that is Lourdes Gurriel, the Jays’ main prospects are still a couple of years away. Can Rowdy Tellez help at age 23? Maybe, but scouts don’t love him and he’s struggling in AAA. Sean Reid-Foley? Jon Harris? Anthony Alford? Vlad Jr.? Great prospects, but it’s hard to picture them being MLB impact players in 2018.</p>
<p>That leaves the almost certain trades of Estrada, Liriano and Bautista, especially if the team is out of contention through the summer. One would certainly expect a decent-but-not-amazing return here,<a id="ref4" href="#4"><sup>[4]</sup></a> but there’s not much precedent for trading for players that are likely to be better then the ones you’re trading away the very next year. It doesn’t make much sense for a contender to trade a useful MLB piece, so you’re looking at a return that may eventually be better than what you’re trading away, but not likely in 2018.</p>
<p><strong>A bad business case for free agency</strong></p>
<p>The business case for investing in the team last off-season was really, really strong. Huge increase in attendance and attention and a very good team with clear needs. But even with that strong case, the investment last year was underwhelming. The $27M or so increase in payroll from 2016 to 2017 included about $20M in back-loaded increases to Martin, Happ, Estrada and Donaldson and an arbitration increase to Stroman. So very little went to actual improvements to the team. We now know that the offer to the most perfect fit on the market, Dexter Fowler, was $64M over 4 years.<a id="ref5" href="#5"><sup>[5]</sup></a> That&#8217;s a decent enough offer, but not one that was likely to get him to move off of CF, onto turf, and into Canada. And we all know the Edwin story.</p>
<p>So, when you combine a team that’s harder to believe in, revenue that&#8217;s almost certain to be quite a bit lower and a higher starting payroll base, how active do you think this team will be in free agency next year to fill those big holes? Especially after it wasn&#8217;t all that active last season? How many long-term commitments are they likely to make given the age of some of the team&#8217;s core players? Even if we bring back exactly the same team, it would cost about $185M.</p>
<p>It’s just not a compelling case. With little help coming from the farm, from trades, or from the free agent market, my way too early call is that 2018 is looking pretty grim, indeed.</p>
<p><strong>A Note about the 2008 Milwaukee Brewers</strong></p>
<p>There&#8217;s one team in the list above that deserves a bit more discussion before we get to some good news. Two things about their experience may be instructive. First, while they did lose a lot of fans over two years, they didn&#8217;t lose many when they went 80-82 in 2009 (30,000, or about 1%). Second, after a rough 2010 they were really good again in 2011, winning 96 games. And the fans came back! 2011 attendance was more than their previous high in 2008, and then they were able to more-or-less maintain it for the next three years despite fielding a .500 team and never finishing higher than 3rd. A few things about that team:</p>
<ul>
<li>It obviously provides a reasonable road map. If the Blue Jays need to take a step back for 2018, but can make good trades both this year and next year to be good again in 2019, it may be soon enough for the team to reclaim the lapsed new fans. I&#8217;d argue this is especially true if those teams are able to retain the players that the new fans first got to know: Pillar, Osuna, Sanchez, Stroman, etc., and if they were to dive into the 2019 free agency pool. This approach also probably means that if you can&#8217;t extend Donaldson soon, it makes sense to trade him this year when the opportunity to get helpful 2019 assets is greater then it will be next year.</li>
<li>The Brewers&#8217; 2009 performance underscores the relevance of the terrible April the Blue Jays just completed. That year the Brewers started OK, then had a terrific May and remained in contention until the All-Star break, spending 45 days in first place in May and June before fading terribly down the stretch. I expect that pattern was much more conducive to keeping the fans interested than having to claw back to .500 all year long. Not every 80-82 year is created equal.<a id="ref6" href="#6"><sup>[6]</sup></a></li>
</ul>
<p>Before we leave the Brewers, there&#8217;s another important similarity. Prior to hitting just under 2.9M fans in 2007, in their first year in contention since 1992, they had exceeded 2.4M fans only once in their history: when they opened Miller Park in 2001. From 2007 to 2009 Milwaukee fans proved they&#8217;d back a winner, which ownership wouldn&#8217;t have known prior to that (and Cleveland ownership is still waiting for &#8211; &#8220;winning = fans&#8221; is not always true). Ownership responded by backing the team financially (in the context of a very small market), running payroll up to $109M in 2014, after running consistently league-bottom payrolls prior to 2007.</p>
<p>We will revisit this when we talk about&#8230;</p>
<p><strong>Some good news!</strong></p>
<p>2017 and even 2018 will probably suck, but let’s not forget how lucky we are. The “all-in” trades of the 2012/13 off-season were supposed to open a 2-3 year window. And for the first two of those, it was a total disaster. Then, due to the miracles of the 2014 off-season and 2015 trade deadline,<a id="ref7" href="#7"><sup>[7]</sup></a> we enjoyed two years of incredibly exciting baseball played by a very lovable team. The window should have been closed, the back-loaded contracts we traded for should have been killing us, and we should have been well into a sad rebuild. But we got to put it off for a while, and it was glorious.</p>
<p>Even better, the surge in attendance in 2015/16 <em>should</em> really help when the team is in its next competitive window. After 1995, the Blue Jays never hit 2.6M in attendance until 2015, including the hope-filled 2013 season. It had been so long since the heady days after the Dome opened, there must have been real doubt at Rogers that the team could ever draw well again, even with a winner. Filling the stadium game after game last August and September shows how profitable owning a Toronto baseball team can be.</p>
<p>I can understand the baseball logic of Shapiro not investing heavily in this team given how late it is in the window, even if I don’t like it. But, if the Jays get to the stage the Cubs were in a few years ago, they should be able to sign their own Jon Lester and Jason Heyward early in the window. Toronto should be able to do what Houston did in bringing in McCann, Beltran and Reddick, or what Washington did in signing Scherzer. And there&#8217;s certainly hope that with the young core of the team under control through 2020, some clever moves can get the Blue Jays back to contention early enough to talk about long-term extensions rather than trades.</p>
<p>The business case for piling payroll (read: $175M+) into a young team with high potential will be much stronger than it would have been before the last couple years, and that suggests a really bright future.</p>
<p>Just not next year.</p>
<p><em>Lead Photo © Tom Szczerbowski-USA TODAY Sports</em></p>
<p><span style="text-decoration: underline"><strong>FOOTNOTES</strong></span></p>
<p><a id="1" href="#ref1"><sup>[1]</sup></a>I excluded increases that happened after a team moved into a new stadium to focus on increases driven by winning.</p>
<p><a id="2" href="#ref2"><sup>[2]</sup></a>I know. Injuries. I&#8217;m sure the Blue Jays will be better when Tulowitski, Donaldson, Happ, and Sanchez come back. But how far back will the team be by then? And also. Injuries! There&#8217;s no evidence yet that Happ will be OK and veteran fans of the Jays know how hard blisters can be to overcome. Maybe they will be amazing when everyone gets back healthy, and maybe they won&#8217;t all get back healthy. The most reasonable case is that the Blue Jays will not be in contention this year. I&#8217;ll say one thing &#8211; I really, really hope this looks very dumb after an 11-game winning streak and getting everyone back healthy. If that happens I will gladly post a picture with egg on my face in the comments.</p>
<p><a id="3" href="#ref3"><sup>[3]</sup></a>My simple math is to start with the $163M payroll from this year, subtract the $46M for the three big free agents, and add $21M in arbitration increases to get to $138M. There&#8217;s small other adjustments, including small raises for Loup, Goins and Gurriel and elimination of the Upton contract, but this math is more-or-less right.</p>
<p><a id="4" href="#ref4"><sup>[4]</sup></a>Interesting recent story from <a href="http://www.espn.com/blog/buster-olney/insider/post/_/id/16589/olney-starting-pitchers-are-flooding-the-market-so-who-could-be-traded" target="_blank">Buster Olney at ESPN</a> [Paywall] suggesting the market may be flooded with SPs this summer. Not great news if you have two to sell that aren&#8217;t aces&#8230;</p>
<p><a id="5" href="#ref5"><sup>[5]</sup></a>Referenced in the same Buster Olney piece in Footnote 4.</p>
<p><a id="6" href="#ref6"><sup>[6]</sup></a>We only need look to the 2013 Blue Jays to recall a terrible pattern for fan engagement. There was so much excitement before the year, a similarly terrible start, an 11 game-winning streak once most had given up, followed by a slow painful fade to the end.</p>
<p><a id="7" href="#ref7"><sup>[7]</sup></a>The number of incredibly unlikely things that went right in 2015 doesn&#8217;t get discussed enough. In my view, in order of importance, they are:</p>
<ol>
<li>The Josh Donaldson trade, which has been talked about a lot, and is crazy.</li>
<li>Roberto Osuna coming from absolutely nowhere.  He was a good prospect, sure. But coming out of spring it seemed like Osuna made the team to translate for Miguel Castro. Becoming an ice-in-his-veins closer was not only unlikely, but also underrated for its importance. If not him, who would have closed for the Blue Jays the last couple of years? There is literally no one and it came at a time when the cost of late inning relief sky-rocketed on the open market to a price the Jays were very unlikely to pay, either in cash or prospects.</li>
<li>Marco Estrada becoming Marco Ace-strada. Would the hopes for him have been markedly different than the hopes for Jesse Chavez? It took <em>forever</em> for the team to trust him as an actual starter even though he kept doing whatever it is he does. A miracle.</li>
<li>Kevin Pillar, known for a relatively empty batting average while playing mostly corner outfield in the minors, becoming one of the best defensive centrefielders in the world.  It makes no sense, but it&#8217;s incredibly important.</li>
<li>The Devon Travis trade.</li>
<li>The Troy Tulowitski trade, especially in light of what happened to Jose Reyes afterward.</li>
</ol>
<p>Sure, strange things go right for teams all the time.  But all of the above happening within 9 months?  A miracle to be thankful for. (Sorry &#8211; went a bit &#8220;Bill Simmons&#8221; on that footnote&#8230;)</p>
<p>&nbsp;</p>
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		<title>Big Data, Beer, and Influencing Rogers</title>
		<link>http://toronto.locals.baseballprospectus.com/2017/03/30/big-data-beer-and-influencing-rogers/</link>
		<comments>http://toronto.locals.baseballprospectus.com/2017/03/30/big-data-beer-and-influencing-rogers/#comments</comments>
		<pubDate>Thu, 30 Mar 2017 13:54:08 +0000</pubDate>
		<dc:creator><![CDATA[Jon Shell]]></dc:creator>
				<category><![CDATA[Articles]]></category>

		<guid isPermaLink="false">http://toronto.locals.baseballprospectus.com/?p=9723</guid>
		<description><![CDATA[Since his arrival, Mark Shapiro has been pushing the Jays forward on multiple fronts. His baseball decisions have been much debated, but we know there has been a heavy investment in building analytical capability in the baseball operations department. Arden Zwelling wrote a great piece about Toronto&#8217;s new, highly publicized high performance department, but the Jays are [&#8230;]]]></description>
				<content:encoded><![CDATA[<p>Since his arrival, Mark Shapiro has been pushing the Jays forward on multiple fronts. His baseball decisions have been much debated, but we know there has been a heavy investment in building analytical capability in the baseball operations department. <a href="http://www.sportsnet.ca/baseball/mlb/big-read-inside-toronto-blue-jays-high-performance-department/"><span style="text-decoration: underline">Arden Zwelling</span></a> wrote a great piece about Toronto&#8217;s new, highly publicized high performance department, but the Jays are also trying to catch up to other teams in the other baseball big data revolution: Marketing.</p>
<p>To wit: The hottest job in Toronto lately might have been the newly created Vice-President, Strategy &amp; Business Analytics for the Toronto Blue Jays (rumour has it that several hundred qualified candidates applied for it). Whoever gets the job will report to Andrew Miller (no, not <em>that</em> Andrew Miller), the Executive Vice President, Business Operations for the Jays. Miller&#8217;s last role? Vice-President, Strategy &amp; Business Analytics for Cleveland.</p>
<p>In the last few years many baseball teams have significantly invested in their business departments to identify ways to sell their fans more things, more often, and for higher prices. As you might expect, Cleveland was one of the leaders, and Miller is looking to build that capability in Toronto.</p>
<p>So, why should we, the Toronto Blue Jays fans, care about this? For one, it probably means that in slow, steady and subtle ways, your fan experience is going to get both better and more expensive. But more importantly, because Rogers is who Rogers is, if they can get it right, it might mean a consistently better team.</p>
<p>The introduction of dynamic ticket pricing has likely been the most high-profile change to business practices. Some people see this as Rogers being greedy, but it’s easy to look at it differently. We already had dynamic pricing, and it was called Stubhub. If people are willing to pay more for some games, isn’t it better for that revenue to go to the club, rather than a middleman? The richer the team is, the more likely they are to spend money on players.</p>
<p>The ticket pricing is obviously the big splash, but there will also be many lower-profile changes that will affect the fan experience. In 2013, <a href="http://toronto.locals.baseballprospectus.com/wp-admin/www.baseballprospectus.com/article.php?articleid=19854"><span style="text-decoration: underline">Ben Lindbergh</span></a> wrote an article about a baseball business analytics presentation he attended and it featured Cleveland.  They were using data to understand the most successful promotional giveaways (cap days, apparently – expect more of those) and the best days on which to have them; they were learning about when and how to promote games to their fans. Their more complete understanding of their fan base even drove them to create a Kids Clubhouse.</p>
<p>As fans, these are good things. If they learned cap days bring out the crowds, that means we probably like caps and will be happier when we get one. If they advertise tickets to us when we’re most likely to buy, it means we probably wanted to go to the game and going will make us happy. They will get better at predicting crowd sizes, and therefore better at staffing for them (a constant irritation at the Dome).</p>
<p>Data analysis will make them better at knowing what merchandise we want, and at predicting the sizes they will need. So, I will be less likely to find empty shelves when I shop for my 4 and 2-year old girls. That will make me really happy, and I’ll spend more.</p>
<p>There’s a next level to this, though. As the team collects more data, they&#8217;re getting more sophisticated. They&#8217;re<br />
building profiles of different fans – the sections they like, the food they eat, where they watch the game when they’re not there, and which players they follow on social media. Partnerships with <a href="https://www.sas.com/en_us/news/press-releases/2014/october/mets-analytics-fans.html#">major data companies</a> will help them analyze it all. Soon, advances in artificial intelligence will allow the team to create “robot” versions of these fans and let them interact with each other in computer simulations. These interactions will then predict the right way to serve each fan type and how much those fans are willing to pay. They will continue to get better at creating the perfect experience to separate team followers from as many dollars as possible.</p>
<p>To use an example, I really like craft beer.<a id="ref1" href="#1"><sup>[1]</sup></a> I also like sitting in the 100 level of the outfield. So the robot fan version of me will interact with all the other robot fans, and collectively they will predict where most of the fans who like craft beer are likely to sit. Once the club has accomplished this, they can locate a craft beer stand near that section and then start to promote it: if you like craft beer, try sitting in this certain section that they know you are likely to choose anyway. And they’ll communicate these promotions directly to me since they will know what fan type I am. My baseball experience becomes a baseball and craft beer experience and again, I’m both spending more and I’m happier. And likely drunker.<a id="ref2" href="#2"><sup>[2]</sup></a> The team wins, and I win.</p>
<p>So, the goal of all these things is to increase the value of each individual fan of the team, right up to their maximum willingness to pay for any product or service and the maximum value of their attention for sponsors. This is not a new goal, but analytics makes achieving it a lot easier.</p>
<p>This is where it gets really interesting: Toronto is one of only <a href="http://www.baseball-reference.com/bullpen/List_of_Major_League_Baseball_principal_owners">two</a> corporate-owned MLB teams (Atlanta is the other). This is a gross simplification, but that makes them more likely to be thought of as a “business unit” than other teams owned by a billionaire passionate baseball fan like the late Mike Illich. Through a purely “investment-return” lens, the player budget is justified by the number of fans it is likely to produce, as fans are the basis for every element of revenue, from advertising to ticket sales to bat-shaped pens.</p>
<p>But what if you could make each fan worth more? If you could increase your revenue by 10% with no increase in attendance simply by understanding the people better and giving them what they want, when they want it? A billionaire fan-owner probably thinks this is great but I doubt it changes their willingness to spend. But for Rogers? If you told them you could increase the average cable subscriber revenue by 10%, they would absolutely pour more money into acquiring more cable subscribers. In sports, winning drives fan acquisition more than anything, and all other things being equal, a higher payroll increases the chance of winning. So, if you can actually increase the value of a fan, the case for investing in winning becomes much better.<sup><a id="ref3" href="#3">[3]</a>  </sup></p>
<p>It&#8217;s easy to see the investments in high-performance and data analytics through the same lens: it&#8217;s Mark Shapiro aiming to increase the return on investment of each payroll dollar, giving him a better case to push for a higher budget with a data-driven corporate owner.</p>
<p>I don’t know about you, but I’m getting used to this team winning, and I don’t want it to end. So, bring on dynamic pricing. Bring on craft beer at higher prices and more hat promotions.</p>
<p>Come and get me, robots. Let’s do this.</p>
<p><em>Lead Photo: © Tom Szczerbowski-USA TODAY Sports</em></p>
<p><span style="text-decoration: underline"><strong>FOOTNOTES</strong></span><br />
<a id="1" href="#ref1"><sup>[1]</sup></a>:Or at least I think I do. In a blind taste test I probably couldn’t tell an IPA from a Labatt 50.</p>
<p><a id="2" href="#ref2"><sup>[2]</sup></a>But wait – what about the fan who can’t afford all this?  The one who gets priced out by dynamic pricing and the elimination of things like the Ballpark Pass? If we’re being charged more because we’re willing to pay, how does the team nurture the next generation of fans? Do they alienate fans who love the team, want to participate, and now can’t afford it? This is its own article, and worth a real discussion. More to come on this, as it should be possible to do both.</p>
<p><a id="3" href="#ref3"><sup>[3]</sup></a>The same argument probably applies to small-market teams, but that makes the article less punchy so let’s not digress…</p>
<p>&nbsp;</p>
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