SBJ/December 19 - 25, 2005/Other News

Fiscal turnaround fuels Jays’ spending

The Toronto Blue Jays, just two years ago awash in red ink and facing an uncertain future, have repositioned themselves for a remarkable economic recovery.

The club made the biggest headlines at Major League Baseball’s recent Winter Meetings in Dallas by signing pitchers B.J. Ryan and A.J. Burnett to $102 million in total contract commitments, with Ryan’s five-year, $47 million deal the richest ever granted to a relief pitcher. Those moves were followed by a trade with Milwaukee for rising infielder Lyle Overbay.

The Jays’ J.P. Ricciardi (left) and Paul Godfrey (right)
with signee A.J. Burnett.

But underpinning the spending spree is a fiscal reorganization few thought possible not long ago. Thanks to a quickly strengthening Canadian dollar, a deal last February to gain full control of the Rogers Centre, MLB’s enlarged revenue sharing and the recent roster moves, the Blue Jays are at once aiming to challenge the New York Yankees and Boston Red Sox in the AL East and reach profitability by 2007.

“We’ve gone about all of this in a very comprehensive way,” said Paul Godfrey, Blue Jays president and chief executive. “We’ve rebuilt the farm system, made a complete and ongoing commitment to improving our stadium experience, and then set about for a few difference-makers on our roster to push us forward.

“We’ve seen a number of key pieces come into place, and now is the time to make an investment in payroll, and we’re going to be providing a more competitive club. We’re still not the Yankees or Red Sox, but we’re going to make a go at it,” Godfrey said.

While never in nearly as dire economic straits as its fellow Canadian team, the now-departed and renamed Montreal Expos, the Blue Jays spent much of the past eight years or so mired in a fiscal treadmill. With declining attendance and a weak Canadian dollar, Toronto posted an MLB-worst $52.9 million operating loss in 2001, according to MLB documents provided to Congress, and a $30 million loss two years later. Since the Blue Jays’ last title in 1993, the club has failed to top 88 wins in any season and posted eight losing campaigns.

But owner Ted Rogers, who in 2004 completed a purchase of the 20 percent of team equity he didn’t own, committed $210 million to player payroll for the 2005-07 seasons once he saw the country’s economy begin to improve and MLB’s revenue sharing grow from $169 million in 2002 to about $300 million in 2005. The move was followed by a $21 million cash deal to buy SkyDome from Sportsco International LP, with the facility promptly renamed Rogers Centre.

With that building ownership — at last allowing the Blue Jays complete control over luxury seat sales, concessions and other key revenue sources — joining other Rogers Media Inc. interests in local media rights holders Rogers SportsNet and flagship radio station CJCL (Fan 590), the Blue Jays are now a fully integrated source of content in a similar way as the Yankees, Red Sox, Chicago Cubs and other well-heeled MLB clubs.

A deal to gain full control of the Rogers Centre
helped move the Blue Jays toward the black.

The Blue Jays lost about $7 million last year on attendance of just over 2 million and revenue of about $150 million. The team is modestly projecting to bump the attendance to 2.15 million in 2006. With payroll rising from $45 million this year to $75 million in 2006, a small fiscal loss is anticipated, but Godfrey expects new revenue growth to allow the ledgers to finally even out in 2007 or 2008 at the latest. Rogers’ cash purchases of the team and stadium, as well as funding of the annual operating losses, has left the club with no long-term debt.

Meanwhile, the rising Canadian dollar is providing the Blue Jays with a major shot in the arm. The Canadian dollar was worth about 87 cents U.S. last week, the highest such level in 14 years. During the depths of the economic struggles of the Blue Jays and Expos, a Canadian dollar was worth just 62 cents U.S. The Blue Jays, like Canada’s NHL and NBA teams, take in revenue in Canadian dollars, and pay most expenses in American currency.

“It’s great to see the Jays making a real push after being mediocre for so long,” said Dave Hopkinson, vice president of corporate sales and service for Maple Leaf Sports & Entertainment, which operates the Toronto Maple Leafs and Raptors. “They’re spending a lot of dough, and they’re going to need to sell a lot of tickets. But there’s no doubt they’ve been the talk of the town lately.”

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