Sports by Nigel Aplin

What kind of owners should fans

of professional sports teams want?

Reports from Florida in February, as the Toronto Blue Jays were about to begin spring training for the 2016 season, claimed that the Blue Jays 35-year-old slugger, Jose Bautista, whose contract expires at the end of this upcoming season, wants a new six-year deal that will pay him about $30 million per season for a total commitment of $180 million. He is set to earn $14 million in 2016.

Another heavy hitting Blue Jay, Edwin Encarnacion who is now 33, is also entering the final year of his contract which pays him $10 million this season. He too wants a new multi-year deal for top dollar. Blue Jays President Mark Shapiro has maintained that the club will not negotiate with its players through the media but he has indicated that the team would like to retain both players past this season.

Major League Baseball is the only one of the four major North American team sports without a player salary cap. Teams are free to spend whatever amounts they want on player salaries. This is one reason why teams which play in large markets like the New York Yankees, New York Mets, Los Angeles Dodgers and Chicago Cubs, usually have the highest payrolls and often, but certainly not always, field the best teams. They can drive more revenue from gate receipts and the sale of local broadcast rights than other teams. Baseball has been this way for a hundred years or more. In baseball, there is a long and rich history to hating the big, bad Yankees.

Many callers to sports radio programs in Toronto seem to think that both Bautista and Encarnacion are simply too old to command multi-year guaranteed deals, especially for the annual salaries they have apparently demanded. They voice these opinions as if they are spending their own money. But the Blue Jays are owned by Rogers Communications, a publicly traded Canadian telecom company with a market capitalization of about $26 billion. Rogers also owns the television and radio broadcast platforms which carry each and every Blue Jays game. Last year’s successful pennant drive and playoff run resulted in home sell-outs through August and September and record television audiences for all of the games through the stretch drive and playoffs. Bautista, in his limited public comments about his contract demands, even referenced the uptick in the Rogers share price after the 2015 baseball season.

But, Rogers management owes a duty to its shareholders to maximize revenues, minimize expenses and drive its share price upward. Fans of the baseball team are looking for on-field success. These two objectives sometimes intersect but often they do not. Would Blue Jays fans want Bautista and Encarnacion signed to the team long term after this season? Yes, of course. But Mr. Shapiro’s job is to balance the team’s financial results with its competitive success. That’s what he is paid to do. So, is Rogers the best kind of owner for a professional sports team?

When the Ontario Teacher’s Pension Plan sold its controlling interest in Maple Leaf Sports and Entertainment (MLSE), which owns the Toronto Maple Leafs, Toronto Raptors, the Air Canada Centre (where the Leafs and Raptors play) and the Toronto FC soccer team in 2012, some Toronto sports fans heaved a sigh of relief. Why? Because the Teacher’s Pension Plan not only sought to maximize its return, it was, by virtue of being a pension fund, obligated to do so. At least the new MLSE majority owners, BCE Inc. (Bell) and Rogers (each with a 37.5% stake) could justify spending on their new sports teams with a view to longer term goodwill among fans which could potentially translate into improved corporate images for the two telecom firms who, in consumer surveys in recent years, finish either first or second as Canada’s most hated company. Improved consumer goodwill for Bell and Rogers could then drive customer loyalty in their core businesses of cell phone contracts and cable TV. The Teacher’s Pension Fund could do no such “soft” spending without being able to show a direct benefit to the fund.

Who then owns the other 25% of MLSE? It’s concrete magnate Larry Tannenbaum. Mr. Tannenbaum is both a wealthy individual and a sports fan. His ownership position in MLSE is, arguably, nothing more than a “hobby” investment for him. He would love to bring a Stanley Cup or an NBA Championship to Toronto and he would probably be willing to take a smaller return from his MLSE holding in order to do so. He is the kind of owner that fans really want, weather they realize it or not. If he owed 100% of MLSE, the only thing holding him back would be the player salary caps in the NHL and the NBA.

It’s too bad that Mr. Tannenbaum doesn’t own the Blue Jays.

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