Toronto Blue Jays

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Build, boom, and bust! That’s the quickest and simplest way to describe the fortunes of the Toronto Blue Jays. The Blue Jays have existed for 28 years (1977 to 2005), and when you look at their history in terms of team performance and fan attendance you’ll see that they have definitely gone through a business cycle.

Currently, the Blue Jays (specifically) and Major League Baseball (generally) are facing tough economic times, and the game is suffering. Fan interest is waning, largely due to escalating payrolls and labour disagreements between players and owners. The attitude of extremely well-paid players and the arrogance of extremely rich owners toward the fans have negatively affected fan participation at games. Lower attendance around the league indicates that fans are tired of paying high prices to watch a failing product. Over the past five years (1999–2003), total league attendance has been virtually flat. See Figure 1 for details.

Baseball Economics

The rich are getting richer and the poor are getting poorer. That’s one way of looking at baseball’s present situation. Another version of the same premise has rich owners paying whatever it takes to build a winning team while other owners follow a business model that places an emphasis on cost control and profit. It seems that the former rather than the latter produces the best results, at least in terms of attracting people to the ballpark. As well, exceptional teams like the New York Yankees and Atlanta Braves, both consistent World Series participants, tend to have it both ways.

Major League Baseball Commissioner Bud Selig insists baseball is in trouble. His solution is to reduce the number of teams if the economic situation isn’t corrected. The plight of the Montreal Expos has been a sore spot for the league since 1996. Would the team stay in Montreal, move, or simply be dropped from the league? At the end of the 2004 season Selig finally confirmed that the Montreal Expos would move to Washington D.C. for the 2005 season.

Over the past two decades, baseball has been hindered by labour strife. While each round of negotiations (eight rounds in total) can be viewed separately in terms of success and failure, the impact on the public has been cumulative and negative. The sentiment of many fans is “Go on strike again and I won’t be back.”

The last strike occurred mid-season in 1994, when the players, anticipating an attempt by the owners to unilaterally impose a new contract, went on strike. There was no World Series that fall, and the owners began spring training in 1995 with replacement players. Later that year sanity prevailed and a settlement was reached. Attendance dropped 19 percent—but if Cal Ripken hadn’t been chasing Lou Gehrig’s iron man record for consecutive games played, it could have been much worse. It wasn’t until 1998, when Mark McGwire and Sammy Sosa staged their dramatic home run–hitting spree, that attendance levels—and TV ratings—began to come back.

Copyright © 2007 Pearson Education Canada 1 The Commissioner is probably right when he says the system is in serious need of repair. But, as the representative of the owners, his view is biased; it is the owners who continually pay exorbitant salaries to free agents and then cry wolf about not making any money. If the money is on the table, the players are going to take it. Both professional football and basketball have a salary-cap system in place whereby teams cannot exceed a total team salary figure. In principle such a system keeps the league competitively balanced. The assumption, however, is that all teams pay the cap.

To demonstrate how things are out of whack, teams such as the New York Yankees, Boston Red Sox, Atlanta Braves, and Los Angeles Dodgers have payrolls of more than $100 million. The Yankees lead the pack at $180 million (all figures are for 2003), and they have been to the World Series for three consecutive years. There is no problem with fan interest and attendance in the Big Apple. Other teams such as the Arizona Diamondbacks, Seattle Mariners, San Francisco Giants, and Philadelphia Phillies spend $80 to $90 million on salaries, and with the exception of the Phillies have proven to be competitive teams from year to year.

The lower echelon that includes the Toronto Blue Jays, Pittsburgh Pirates, Kansas City Royals, and Oakland Athletics is in the $50- to $60-million range. The Tampa Bay Devilrays have the lowest payroll, at $31 million. Alex Rodriguez, former shortstop of the Texas Rangers and now New York Yankees, makes $24 million a year himself— further proof that the salary scales are out of whack.

Major League Baseball has imposed a luxury tax on any payroll that exceeds $98 million a year. The taxes that are collected go into a pool that is used for revenue sharing among the poorer teams. This system doesn’t seem to be working, and rich owners are tired of subsidizing their poorer brethren.

Blue Jay Economics

Over the years, the Toronto Blue Jays have been one of the stronger teams financially. They have approached the salary situation from both ends of the spectrum. In good years, when the team was winning, they paid a high price to attract free agents. The payroll was as high as $70 million in the early 1990s when the team won the World Series championships. At the same time the team led the major leagues in attendance, cracking the 4-million mark for three consecutive years (1991–1993).

More recently, the team has exercised fiscal policy (or sanity). In 2002, the Blue Jays weren’t doing that well on the field so they traded away some high-salaried players to save money for the future. Rather than emphasizing star players, they are focused on developing young players and building from within. In the short term, the team continued to lose more than it won, but midway through its five-year development plan the team showed encouraging signs of improvement. Whether the fans will continue to support such a plan is questionable.

Rogers Communications is a national communications company engaged in cable television, wireless communications, media communications, high-speed Internet access, and video retailing. The Rogers Cable network is Canada’s largest cable system with 2.3 million customers, serving approximately 75 percent of homes. Rogers AT&T Wireless offers a complete range of wireless solutions including digital PCS, cellular, advanced wireless data services, and one- and two-way messaging services. Rogers Media operate Rogers Broadcasting and Rogers Publishing. Rogers Broadcasting embraces major- market radio stations, multicultural television stations, a regional sports network (Rogers Sports Net), and the Shopping Channel. Rogers Publishing produces well-known consumer and trade magazines such as Maclean’s, Chatelaine, Flare, and Canadian Business. All print media have their own websites. The Toronto Blue Jays operate out of the Rogers Media division.

Rogers Communications posted revenues of C$5.6 billion in 2004 and an operating income of C$644 million. However, non–operating expenses have a considerable impact on the overall financial situation. Net income before taxes was only C$70.2 million. Refer to Figure 2 for more details.

Rogers Media Division and the Toronto Blue Jays

The media industry in Canada has changed drastically in the past five years. Media convergence has taken place, producing a market that is virtually controlled by three media empires: Bell GlobeMedia, CanWest Global, and Rogers Communications.

When the Toronto Blue Jays were acquired in 2000, Rogers saw a good strategic fit. The Blue Jays would be a headline property that could be promoted and broadcast by its radio and television stations. The team would make money, and the broadcast outlets would make money by selling advertising. However, the on-field performance of the Blue Jays has not met with fan or sponsor expectations. Advertising revenue has fallen short of expectations and television ratings have declined each year since Rogers took control of the team. Poor television ratings translate into less revenue generated from television advertising.

Owning content in targeted niches is an element of Rogers’ business strategy, and sports content is no exception. The Toronto Blue Jays and anything else that Rogers owns can be promoted from within through two durable mediums: broadcast and print media, and stadiums. The Jays are promoted heavily on Rogers Sports Net and radio station 590 The Fan in Toronto, an all-sports talk station.

The Blue Jays also struggle financially because of the Canadian dollar. Revenue is earned in Canadian dollars but players are paid in U.S. dollars. For operating purposes the Jays benefit when the Canadian dollar is high relative to the U.S. dollar. On an annual basis the Blue Jays generate about $130 million in revenue from all sources but operate at a loss each year. Refer to Figure 3 for details.

Copyright © 2007 Pearson Education Canada 3 Rogers is working with the league to address the economic issues, and its goal is to make the Blue Jays a profitable franchise. As a key move in that direction, the club hired a new general manager, J. P. Ricciardi, three years ago. Ricciardi had a strong track record of building a winning baseball franchise on a modest budget. Most of his experience was gained with the Oakland Athletics organization. He developed and is in the process of implementing a five-year plan for the club; the past year (2004) was the third year of the plan. His overall strategy is to build from within by developing young prospects instead of seeking overly priced veterans.

The Toronto Blue Jays

The Blue Jays were established in 1977. Just eight years into their development (1985) the team won the American League East Division Pennant and repeated that success in 1989 and 1991. In 1992 and 1993 the Blue Jays made history by being the first Canadian baseball team to win two consecutive World Series Championships. It’s no coincidence that as the team improved, attendance at games improved. Between 1990 and 1993 the Blue Jays were the toast of the town. They couldn’t do anything wrong. Attendance peaked in 1993 at 4.1 million. Refer to Figure 4 for attendance trends and team performance trends.

The overall attendance trend confirms the build, boom, and bust cycle the Blue Jays have experienced. In the early years, the team was not that competitive but there was good fan support. The Blue Jays were a novelty in Toronto. Faithful fans were rewarded with a winning record (more games won than lost in a season) for the first time in 1984. The following year the team won the division pennant.

From 1986 to 1993 the team improved further and attendance continued to climb. Attendance jumped from 2.5 million in 1986 to 4.0 million in 1991, the boom phase for the club. In 1992 and 1993, the two years the team won the World Series, attendance also cracked the 4-million mark. Ticket scalpers were having a field day! The Blue Jays actually hold three of the top four attendance years in major league baseball history (1990–1992). Only the 1993 Colorado Rockies have drawn more fans in a single season.

In 1994 the players went on strike in mid-season. Despite the short season, the Blue Jays attracted 2.9 million fans. From that year on, however, attendance has gradually declined and the team entered the bust cycle. The team’s performance at best was mediocre—well behind the division leaders each year. Fan interest was extremely low, and many hard- core fans gave up on the game because of the 1994 strike. The effects of that strike still linger on. In 2000 and 2001 attendance dipped below the 2-million mark, a sure sign that the Blue Jays are heading in the wrong direction.

Is there a relationship between the team’s record and attendance? Certainly the numbers are open to interpretation. Trends aside, the early 1990s was a time when the team was winning big and attendance was at its highest point. Since then the team has performed poorly and attendance has tailed off drastically. Average attendance over the past four years is approximately 22 400 per game.

Copyright © 2007 Pearson Education Canada 4 While the team has passed through several ownership groups since it started, the owners have been committed to winning. The combination of developing their own players in the minor leagues and bringing them to the big league when ready, and signing free agents to bolster the team when needed, has been a good strategy.

Over the years many great players have played for the Blue Jays. Some were developed from within and others acquired by trades or free agency. Among the best (enough to form an All-Star team that would challenge any other organization’s best) include Damaso Garcia, George Bell, Dave Steib, Willie Upshaw, Lloyd Moseby, Jimmy Key, Tom Henke, Tony Fernandez, Jack Morris, David Wells, Fred McGriff, John Olerud, Roberto Alomar, Joe Carter, Paul Molitor, Dave Winfield, Carlos Delgado, Pat Hentgen, Roger Clemens, and Shawn Green. Wouldn’t it be nice to have some of these guys back! The present lineup is built around emerging stars such as Roy Halladay, Shea Hillenbrand, Orlando Hudson, and Vernon Wells.

Marketing Strategies

The Blue Jays are somewhat restricted in terms of how they utilize the marketing mix. Decisions about product are made at the corporate level and all games (distribution) are played at SkyDome (now the Rogers Centre) in downtown Toronto. The marketing department plays a more active role in marketing communications and pricing.

Product

Baseball is professional sport, and professional sport is entertainment. When people attend a baseball game they expect to be entertained. Part of the aura is the venue itself. When SkyDome first opened it was a marvel to behold. Fans flocked to the stadium. Coincidentally, the Blue Jays started winning. These were the good times for the club.

In the past five years all kinds of new stadiums have opened in the U.S. Many of them have an “old look”; that is, they were designed to capture baseball’s past. Parks in this category include Cleveland’s Jacob’s Field and Baltimore’s Camden Yards. In contrast, SkyDome’s modern architecture has dated the facility quickly. Since it has a retractable roof all games are played under ideal conditions, so in that sense it is a comfortable facility to watch a game in.

Rogers recently acquired SkyDome for $25 million and renamed it the Rogers Centre. Numerous upgrades have occurred and a new playing field has been installed. Made of Field Turf, the surface is artificial but resembles a real grass field.

The product (team) will improve only if Rogers commits additional funds to bring in new players. Each season brings a new round of free agency. Whether a club is in the free- agency game depends on how deep the corporate pockets are and what the strategic plan is. Currently, the Blue Jays are in year four of a five-year building plan that is focused on developing players from within the organization. This strategy involves drafting good young players and then giving them the right training and experience in the minor leagues before moving to the major league.

Baseball is a long season—162 games and 81 home dates. Prices for baseball games are lower than for other professional sports in Toronto (Maple Leaf hockey and Raptors basketball). All professional sports teams rely on season ticket sales as the financial foundation from which they operate. The Blue Jays (Rogers) do not publicly announce how many season tickets they have sold, though it is much lower today that it was in the early 1990s.

Over the past few years the club has experimented with several different pricing strategies and has settled on a plan where prices vary by month and day. It doesn’t matter who the opponent is. Based on the premise that the fan experience changes with the season, a Tuesday night game in July is more meaningful than a Tuesday night game in April.

There are 48 regularly priced games that cover all Saturday and Sunday games from June through September, Friday night games from June through September, and weekday games in July, August, and September. There are several premium-priced games, which include opening night and special events such as the annual Father’s Day sleepover game. The remaining games are “value games” scheduled Monday through Friday in April and May and Monday through Thursday in June.

Ticket prices do increase each year—a fact of life in professional sports. In 2004, ticket prices in all sections increased by an average of 8 percent over 2003. In 2005, ticket prices rose another 5 percent. Refer to Figure 5 for specific details about current ticket prices.

Marketing Communications

The club relies heavily on its own media outlets to create awareness in the Toronto area and the southern Ontario region. Advertisements for the club appear in a variety of Rogers print publications and on SportsNet, the primary broadcaster of Blue Jays baseball games. A variety of official and unofficial websites also publish all kinds of information about the team. Like any professional sports team, the Jays rely on the local press to communicate news about the team. In Toronto, teams like the Maple Leafs and Argonauts get more media buzz than the Blue Jays.

The team believes in advertising. Their most recent campaign (2004) stressed “value and affordability.” The affordability aspect was directed at adults, while irreverent TV ads were aimed at kids to develop a “cool factor.” CEO Paul Godfrey says, “We were marketing like Robitussin instead of PlayStation. The message to kids is about the cool, young players on the Jays.” The annual media budget for advertising is about $1 million, but the actual value derived is closer to $3 million when various contra deals in the Rogers media empire are factored in. The campaign theme is “Baseball North: You gotta see these guys play.” The message was communicated by television, print, radio, and outdoor boards.

Copyright © 2007 Pearson Education Canada 6 Sales promotions have always played a key role in baseball marketing, and the Blue Jays are very active in this area. These promotions usually involve giveaways from corporate sponsors to a designated number of fans entering the ball park. A sampling of giveaways in 2002 included:

• Bobblehead Doll Days (first 15 000 fans at each game)

• Toronto Star T-Shirt Day (first 5000 kids under 14)

• Royal Bank Disposable Camera Day (first 15 000 fans)

• Canadian Tire Cap Day (first 15 000 fans)

• Mr. Sub Sports Bag Day (first 20 000 fans)

• TIM-BR Mart Visor Day (first 15 000 fans)

The effectiveness of these promotions is questionable. While fans enjoy getting something for free (a reward for attending), it is not the type of promotion that entices a new fan to attend. From the corporate sponsors’ point of view the giveaway creates goodwill with potential customers.

Distribution

As indicated earlier, all games are played at Rogers Centre (formerly SkyDome). The downtown location can be accessed by car or public transit. The stadium is a short walk from Union Station, the major drop-off point for users of public transit. For residents of Toronto, the TTC (public transit system) is an efficient way of getting to and from a game.

The public can purchase tickets at the ballpark or online through the official Blue Jays website. Third-party websites such as Ticketmaster also sell tickets.

The Present Situation

Is it just a problem with the Blue Jays, or is it the general conditions in the baseball world that are affecting interest? There is fear in Toronto that if the Jays don’t turn things around, Rogers Communications will sell the team to American interests and they would relocate to an American city. The Montreal Expos are now the Washington Nationals. There’s a lot at stake!

Many fans look at what the team has done in recent years and have voiced their opinions. Here are a few of them:

“I am patient but am I that patient that I will continue to purchase my tickets year after year? I just don’t know.”

“Now I hear we are rebuilding again but I’ve been hearing that for the past five years … it can get frustrating.”

Kathryn O’Malley, season ticket holder since Day One

“I think the strike (1994) absolutely killed the Jays. They sold out every game prior to that. After that the fans said forget it. I don’t think they have done anything to put a winner on the field since.”

Larry Aicken, season ticket holder

With revenues declining significantly it is hard to justify the acquisition of high-salaried free agents in the short term to improve the team. Their impact would not be that immediate. As General Manager J. P. Ricciardi says, “Why pay out more just to become a .500 team? Is that what the fans really want?”

In defence of the team’s plight, CEO Paul Godfrey’s only words are “Be patient.” He is convinced that those who stick with the Jays will be rewarded a few years hence. “Unfortunately I can’t give them an instant answer [as to when that will be] but I urge the fans to stick with us and watch the change … within a few years we will be a much more aggressive team.”

The Challenge

The Blue Jays must pay closer attention to marketing strategy if they want to generate a stronger fan base. For 2006 the attendance objective is 2.1 million. What marketing strategies and tactics will you recommend to achieve this objective? Prior to formulating a plan of action you should conduct some secondary research in the area of sports marketing and examine what successful teams do in other sports to attract fans to their games. The Blue Jays must protect the fan base they already have while attracting new fans to the ballpark.

Figure 1

Major League Baseball: Total Attendance, 1999–2003

Year Games Attendance Average

1999 2428 70 139 380 29 888

2000 2429 71 358 907 29 378

2001 2429 72 581 101 29 881

2002 2397 67 390 074 28 114

Source: Baseball-reference.com.

Figure 2

Rogers Communications Inc.: Annual Financials, 2003–2004

Income Statement 2004 2003

Revenue 5629.2 4870.1

Cost of goods sold 800.8 508.4

Gross profit 4828.4 4361.7

SG&A expense 3087.7 2906.1

Depreciation & amortization 1096.6 1045.2

Operating income 644.1 410.4

Non-operating income (43.8) 246.2

Non-operating expenses 524.0 491.1

Income before taxes 70.2 165.4

Source: Hoover’s Annual Financials

Figure 3

Blue Jays Financials: $000

Revenue & Expenses 2003 2002 2001

Revenue 133 510 131 682 125 086

Operating Expenses 152 599 186 088 202 018

Operating Loss (19 089) (54 406) (76 932)

Source: Rogers Communications

Blue Jays Home Attendance Trends: 20 Years

Season Won Lost PCT GBL Attendance

2004 67 94 .416 33.5 1 900 041

2003 86 76 .531 15.0 1 799 895

2002 78 84 .481 26.0 1 638 170

2001 80 82 .494 16.0 1 915 438

2000 83 79 .512 4.5 1 819 883

1999 84 78 .519 14.0 2 163 486

1998 88 74 .543 26.0 2 454 283

1997 76 86 .469 22.0 2 589 297

1996 74 88 .457 18.0 2 559 573

1995 56 88 .389 30.0 2 826 483

1994* 55 60 .478 16.0 2 907 903

1993 95 67 .586 — 4 057 947

1992 96 66 .593 — 4 028 318

1991 91 71 .562 — 4 001 527

1990 86 76 .531 2.0 3 885 284

1989 89 73 .549 — 3 375 883

1988 87 75 .537 2.0 2 595 175

1987 96 66 .593 2.0 2 778 429

1986 86 76 .531 9.5 2 455 477

1985 99 62 .615 — 2 468 925

Notes:

PCT refers to winning percentage (games won divided by games played).

Figure 5

Blue Jay Ticket Prices, 2005

Location Premium Regular Value

In the Action $205 $195 $195

Premium Dugout 62 56 51

Club 200 Infield 65 59 54

Field Level Infield 60 54 49

Club 200 Baselines 47 44 34

Field Level Bases 40 37 27

Field Level Baselines 30 26 18

100 Level Outfield 26 23 15

200 level Outfield 24 21 2

200 Level Family Zone 9 9 2

500 Level 9 9 2

Note: Applicable service charges and taxes are extra.

Adapted from Derek DeCloet, “Rogers’ accounting sides steps Blue Jays’ losses,” Globe and Mail, March 30, 2004, p. B17; Lisa D’Innocenzo, “Unconventional $3.5-million Jays campaign borrows from retail playbook: Value and affordability,” Strategy, March 8, 2004, p. 3; Allan Ryan, “Blue Jays’ ticket prices depend on month, day,” Toronto Star, January 8, 2003, p. D3; Mike Ganter, “Fans set to tune out,” Toronto Sun, July 11, 2002; John Feinstein, “What Baseball Needs: A Floor,” Washington Post, June 1, 2002, p. A19; www.washingtonpost.com; www.toronto.bluejays.mlb.com; www.rogers.com; www.slam.canoe.ca; www.hoovers.com/rogers-comunications; www.espn.com/mlb/news/2003/0721/1583823.html; www.kenn.com/sports/baseball/mlb_numbers.html; www.wikipedia.org/wiki/Major_League_Baseball_attendance.