What impact does a sinking loonie have on the return of MLB to Montreal?

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In the last month, we have seen the Canadian dollar, or the loonie is it is known here, go for a deep dive with no bottom in sight.  The loonie is at its lowest point since the Great Recession of ’08-09.  Since that point, it has enjoyed being above or near parity until recently.  As I write this, the loonie is trading near 78 cents compared to the US Dollar.  How low can it go?

For those of us longing for the return of major league baseball to Montreal, we cannot help but ask: Will a falling Canadian dollar hurt our chances to not only get a team, but ensure its’ viability?  I think that this is a legitimate question.  It goes without saying that a Canadian team’s payroll will be paid in US dollars.  So at the outset, Canadian teams are at a disadvantage with a sub-par loonie.

On the revenue side, revenue sharing, the team’s percentage of gate receipts during away games will be paid in US dollars.  Also in US dollars will be any revenues derived from streaming media such as mlb.tv.

Gate receipts, revenue from concessions for home games will be in Canadian dollars as well as any revenue from Canadian broadcasters.

Canadian teams in other professional sports have and will continue to live through fluctuations in currencies.  A sinking dollar by no means spells the end of baseball dreams in Montreal.  Do not think for a moment that any would-be ownership group is not aware of this.  Like any other business, you have to consider any external factors that are beyond your control and plan accordingly.  Business plans will change as any internal and external factors change.

How low can the loonie go?  Some have pegged it at 71 cents by the end of 2016.  It’s easy for these geniuses to make such assumptions when a currency appears to be in free fall.  I have always believed that the loonie’s “natural” exchange rate to be 75 cents compared to the US dollar.  For the last several years we have all enjoyed cheap trips south of the border and that will no doubt change.  The stronger loonie was mainly due to high oil prices and to some extent a weaker American economy.  Now the Americans got their mojo back and the price of crude oil is falling.  To me, this is the “perfect storm” for a falling loonie and also simply the return to “normal” with respect to where the Canadian dollar should be valued.

So fear not Montreal baseball fans, there will still be plans for a MLB team to land here at some point, regardless of the state of the loonie.  When there were solid plans to build a baseball stadium here in the early 2000s, the loonie was worth about 65 US cents.  The exchange rate was not the factor to why we now see condos in the place where a baseball stadium should have been.  It was a myriad of other factors, mostly political.

Forget about the exchange rate and on April 3 and 4, go watch our native son Russell Martin and the Toronto Blue Jays play the Cincinnati Reds at Olympic Stadium.  Contrary to what I said in a previous post, the are still tickets to be had.  You can get tickets for as little as $22 on the evenko.ca web site.

Let’s fill up the Big O and show Rob Manfred, MLB’s new commissioner, that baseball is in our DNA.

Copyright © 2015 BaseballPoutine.com. All Rights Reserved.

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St. Pete City Council No Vote merely condenses the timeline for the Rays’ inevitable end game

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St. Petersburg City Council has spoken. They have rejected the Tampa Bay Rays offer as stated in the Memorandum of Understanding that was negotiated.  The Rays will not be permitted to look for a stadium outside of St. Petersburg.  Based on what I was reading, a positive response from City Council was achievable.  The turning point was that no matter if the Rays stay in St. Pete or not, they would have had a 50/50 share in the redevelopment profits of the Trop site.  The Rays, not surprisingly, held on to this key negotiating lever, and voila!  A deal-breaker!

There was obviously backlash from the media, blaming the city council members.  This is a totally normal reaction from passionate baseball fans.  I get it.  I believe that time will show that no matter what the outcome of the vote, the Rays are leaving the bay area.  I have stated my reasoning in other posts.  If the vote would have been yes, the Rays would have looked for a “pitch perfect” site in Tampa, and guess what?  Three years would have passed and they would not have found a suitable location for a stadium, which would bring them back to where they started: St. Petersburg.  Three years later, a so-so TV deal, dwindling attendance, and let’s not forget the increasing talk of expansion.

A “NO” vote speeds up the timeline for the inevitable end game: sale and/or relocation the franchise.  Am I certain that it will be in Montreal? No.  The time and place for this to happen will be dictated by cold hard dollars.  There is nothing romantic or nostalgic about what will happen in 2015 and beyond.  We can yell and scream all we want here in Montreal about how MLB-worthy we are.  The fate of the Rays from Opening Day 2015 until whenever, will be predicated by the prevailing business case.

If it is more profitable for Sternberg to keep the Rays in St. Pete, play to an empty Trop and bring in some revenue sharing dollars, that’s what will happen.  Should there be a business case to sell the team, realize hundreds of millions of dollars in profit from the proceeds of the team’s sale and then see what happens in the courts with the so-called iron-clad Use Agreement, that’s what Sternberg will opt for.  It would not be far-fetched for Sternberg to continue to officially call St. Pete the Rays’ home and play their home games in another city, perhaps los Rays de Habana. Here in Montreal, we certainly know that this is a possibility.

There is much to be salvaged by the City of St. Petersburg.

First is to get maximum dollars from the Rays and agree to mutually terminate the Use Agreement.  There is no sense talking about economic benefit, that’s all fiction.  It’s really about filling up the city coffers, so get it done fast and with as much cash as you can.

Second, is to demolish the Trop and concentrate on urban renewal.  St. Pete seems to have a dynamic mayor to make this happen.

Lastly, bid the Rays adieu.  The writing is on the wall: the 2015 Tampa Bay Rays are looking more like the 2003 Omar Minaya Expos than a team with solid plans to stay. They don’t want to be there and they have no fan support.

It’s always better to extract a cavity now than deal with root canal later on.

Copyright © 2014 BaseballPoutine.com. All Rights Reserved.

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Do you agree with Colin Cowherd? (Major League) Baseball will never be successful in the bay area.

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I admire Colin Cowherd.  He is one of the few journalists who will have the courage to state a position while many of his peers stay silent, even if they agree.  Cowherd has the rare gift of stating something complex in a simple, folksy kind of way.  On a recent broadcast he said (of building a new bay area stadium), “That’s like having another baby to save the marriage. It doesn’t work.” (Source).

In the many years that I have been listening to Cowherd, he rarely has been incorrect in his analysis of any situation.  I will even go as far as saying that Major League Baseball will never achieve a sustained success in the state of Florida.  My opinion is based on more than twenty years’ worth of attendance data and as I have stated in a previous post, MLB attendance in Florida is perennially in the bottom five.

Journalists, politicians, and pundits are all convinced that with a new stadium, Major League Baseball will thrive in the bay area.  I have yet to see a business person share this enthusiasm.  Please point me in the direction of any business person raving about spending probably half of $700M to build a stadium so that a team goes from last in attendance at the Trop to last in attendance in a shiny new bay area ballpark.

Assuming that Mr. Cowherd and I are correct and Sternberg agrees, the Rays are doomed to move.  What will become of the so-called lease at the Trop? Um, I mean the Use Agreement.  There are legal opinions which state that compensation could be in excess of $200M.  There is also a Memorandum of Understanding (MOU) that will be up for St. Petersburg city council vote on December 18, putting the liability in the $20M range, allowing the Rays to explore a new stadium site in the Tampa area.  By all accounts, the MOU should be adopted.  If the city councillors adopt the MOU vote, Sternberg will jump for joy as he now knows St. Pete’s BATNA (Best Alternative to a Negotiated Agreement).  Simply put, this means that $20M compensation is the best that the city is hoping to get, anything above $20M is gravy.  This BATNA will come in handy in the very likely event that this goes to the courts when the Rays leave before their lease expires.

Many people are congratulating the mayor for putting the MOU in place.  I congratulate Sternberg for the stroke of business genius.

Copyright © 2014 BaseballPoutine.com. All Rights Reserved.

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Bière froide! – A look at beer prices in Major League parks

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This past summer I attended a game a Fenway Park.  Visiting this pantheon of baseball is always a special trip.  After a full day of Boston sightseeing in the blazing sunshine, I was looking forward to watching a ballgame and sipping a cold beer.  After a five minute wait in the beer line, it was my turn: $7.75 for a smallish cup of cold draft beer. Ouch!

This got to me think of why does it cost so much to buy a beer at a sporting event?  I am presenting a brief unscientific look at this question.  I have failed to see any rationale or correlation as to why we get hosed when we buy a simple glass of beer at a ballpark.

Here are the 2014 beer prices across all cities (source).

2014 MLB Beer Prices
Team Price Serving Size (oz.) Price / oz. Attendance Capacity   Team Price Serving Size (oz.) Price / oz. Attendance Capacity
Marlins $8.00 16 $0.50 57.1% Mariners $6.00 12 $0.50 53.2%
Phillies $7.75 21 $0.37 68.6% Yankees $6.00 12 $0.50 85.7%
Red Sox $7.75 12 $0.65 98.5% Brewers $6.00 16 $0.38 82.4%
Twins $7.50 20 $0.38 70.3% Rockies $6.00 16 $0.38 65.5%
Cubs $7.50 16 $0.47 78.6% Mets $5.75 12 $0.48 64.3%
Braves $7.25 16 $0.45 58.4% Pirates $5.50 16 $0.34 78.6%
Giants $7.00 14 $0.50 99.4% Reds $5.50 12 $0.46 72.3%
Blue Jays $6.82 14 $0.49 59.5% Rangers $5.00 16 $0.31 68.3%
Cardinals $6.75 12 $0.56 99.2% Rays $5.00 12 $0.42 52.4%
Dodgers $6.75 20 $0.34 83.4% Padres $5.00 14 $0.36 63.5%
Orioles $6.75 16 $0.42 67.8% Athletics $5.00 12 $0.42 71.4%
Nationals $6.50 16 $0.41 76.7% Astros $5.00 14 $0.36 52.8%
Royals $6.50 16 $0.41 63.7% Tigers $5.00 12 $0.42 87.3%
White Sox $6.50 16 $0.41 51.5% Angels $4.50 16 $0.28 84.2%
AVG $6.09 14.8 $0.41 Indians $4.00 12 $0.33 42.4%
D’Backs $4.00 14 $0.29 54.0%

At 65 cents per ounce, Fenway’s beer was indeed the most expensive in the Majors, and more than 50% higher than the League average.  When I took the Boston example and mapped it against total attendance, the price kind of made sense from a purely capitalistic standpoint.  All Red Sox games are virtual sell-outs and they have you captive.  The same logic would hold true for the Giants and Cardinals, whose beer prices are above average and that their games are almost always sell-outs.

Conversely, the Diamondbacks and Indians have the lowest beer prices and are among the bottom in attendance as a percentage of their total seating capacity.  This also made sense from the perspective of attempting to attract more fans to their games.  I have been to an Indians home game and it’s a great place to watch baseball.  It is astonishing that their games are so sparsely attended, taking into account the quality of their team, the venue, and the affordable prices for concessions.

My simplistic theory falls apart when I looked at the Los Angeles Angels.  Over 3,000,000 people crossed the turnstiles to watch the Angels play in Anaheim in 2014.  Drawing on the captive audience theory, one would expect high beer prices.  Au contraire. At 28 cents per ounce, the Angels had the lowest beet prices in the Major Leagues.  The Angels also had a payroll of $154M, which makes the low price of beer even more puzzling.  Let’s just say that their owner, Mr. Moreno, is a class act.

Finally, let’s look at the Miami Marlins.  First, their citizens get bamboozled into financing a ballpark.  Secondly, they are being gouged at the concessions – $8.00 for a beer!  Their $45M payroll in 2014 and their below average attendance does not merit such a high price.  You can buy 30 12oz cans of Bud Light for $21.09 in Miami.  That works out to 5.8 cents per ounce.  This is simply arrogance, greed and the usual “I don’t give a damn” attitude that is pervasive with this organization.

When we get a team back in Montreal, I anticipate that the beer prices would be above the league average.  The theory is based on my belief that Montrealers are price inelastic when it comes to beer consumption.

I will also likely see another game at Fenway and will have a few beers in the sunshine – I would be captive, after all.

Copyright © 2014 BaseballPoutine.com. All Rights Reserved.

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What in the world is Billy Beane up to?

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I was shocked when I saw on my twitter feed that Josh Donaldson was traded from the Oakland Athletics to the Toronto Blue Bays for Brett Lawrie and prospects.  This deal in isolation is not so much the biggest surprise, but rather where things have gone since Billy Beane traded away Yoenis Cespedes.  I don’t claim to know as much about baseball as Beane does, bit the moves since July have been puzzling.  To recap:

1) Cespedes to the Red Sox for Jon Lester + Jonny Gomes.  Everyone knew Lester is a rental and Gomes is finished.  Cespedes was a great presence in the clubhouse and protection for Donaldson, and Moss in the batting lineup.

2) Dan Straily, Addison Russell, and Billy McKinney to the Cubs for Jeff Samardzija and Jason Hammel.  Samardzjia likely will be gone after 2015 to free agency.  Hammel’s status is unknown for 2015 as I write this.  In return, the Cubs got a lot of young top quartile talent.  With Joe Maddon in place as manager for the next five years, this trade will prove to be a genius move by Theo Epstein.

3) And lastly the Donaldson for Lawrie trade.  The A’s get an oft-injured player in Brett Lawrie, granted with great defense.  The Jays get essentially Donaldson’s offensive threat and control for the next four years.  Absolutely puzzling.  The middle of the lineup will have Donaldson, Edwin Encarnacion and Joey Bautista.  I like the Blue Jays chances to win the AL East.

At the time of the Cespedes trade, the Athletics were well in front in the AL West standings.  The rationale was that Beane was looking for pitching to take them deep into the postseason.  Gamble lost.

After all the dust has settled, Lester is gone and likely Hammel and Gomes are gone, leaving Samardzjia as essentially a rental for 2015.  Now that Cespedes and Donaldson have moved on, where will the offensive power come from in 2015?  Billy Butler and Ike Davis?

Looking quickly to where the Athletics’ significant contractual obligations will be for 2015: Billy Butler at $6.6M, Coco Crisp at $11M, Scott Kazmir at $13M, and likely a $15M+ payday for Samardzjia in arbitration.

There are two possible scenarios as the off-season continues.  Either Beane is rebuilding, assuming a $85-90M budget or he borrowed Jefrrey Loria’s reset button.  We shall see.

Copyright © 2014 BaseballPoutine.com. All Rights Reserved.

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Why Stuart Sternberg will move the Rays to Montreal

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Full disclosure: For the sake of the fans in Tampa / St. Pete, I do wish that you keep your team, get a new stadium, draw 2.5 million fans and get a multi-billion TV deal.  If these miraculous events occur, Major League Baseball will win and that will be a good thing.  For die-hard fans, losing a team to another city is painful.  I know this because I lived it more than ten years ago.  It’s painful to be among 3,000 in attendance and know that your team drew more in San Juan, Puerto Rico than in your own city.  It’s  painful to watch a team that was one out away from a World Series in 1981 end up fielding the equivalent of a mediocre AAA team in 2004, our final lame duck year.  It’s painful to read reports from other cities stating that the Expos should leave Montreal for reasons x, y, and z.  In retrospect, based on the prevailing economic conditions of the time, for the most part, those reports were accurate.

I am here to present an opinion as to why Stuart Sternberg will have no choice but to move his team.

The Stadium
I seriously doubt that Florida taxpayers can fund or take on additional debt to pay for another $700 million stadium.  Jeffrey Loria and all the controversy that came with building Marlins Stadium pretty much guarantees that this will be a no-go unless the construction is privately funded.  Sternberg will not put any major investment towards a Tampa stadium for reasons that I state later in this article.

Montreal has a few sites for the new ballpark.  Of course, this will require a good amount of public funding.  The Canadian federal government will soon announce a budget surplus and will likely be in a generous mood towards Quebec.  It’s no coincidence that 2015 will be an election year so they are ready to pass out the candy.  We currently have a provincial  government in power that is favorable to economic development in Montreal.  Lastly, our dynamic mayor Denis Coderre, is a baseball nut and has been working hard to champion the cause.  I admit that getting to that groundbreaking ceremony will be a challenge.  Difficult but not impossible.

Television
The Rays’ television deal comes up for renewal at the end of the 2016 baseball season.  If I read the sources correctly, the Rays currently make about $20 million per year and the next deal will likely be only slightly higher come renegotiation time.  Let’s go wild and say that a new TV deal will be worth $50 million per year.

Bell Media is rumored to be among the ownership group interested in acquiring a share of the Rays.  As Jon Morosi reports, Bell Media is thirsty for live sports content.  It is reasonable to think that a TV deal with coverage across Canada will be worth several billion dollars.

Value of the Franchise
According to Forbes, the Tampa Bay Rays are worth $485 million. If we would track this over time, the Rays’ value increases at a lower rate than some notable MLB franchises.  For example, we have seen the Dodgers and Padres get sold for astronomical amounts of money while staying in their respective cities.  Can this happen in Tampa?  I don’t think so.

I am of the opinion that Sternberg can sell a share of his team to Montreal investors, keep his majority ownership and instantly elevate the value of his franchise close to the $1 billion dollar range.  In their heyday, the Montreal Expos had a fan base across Canada, upstate New York, and Vermont.  For the relocated team, this means more revenue in merchandise, brand  recognition and of course value of the franchise.  It does not hurt that the baseball team would ride on the coattails of another billion dollar franchise: the Montreal Canadiens.

Attendance
The numbers don’t lie.  Both the Marlins and Rays are perennial bottom five teams when it comes to attendance.  Certainly the Miami Marlins got a bounce in 2012, their inaugural year, but that was short lived.  A combination of an acrimonious relationship with Loria and $8 beers does not help.  If ever the Rays get a new stadium in Tampa, they will enjoy a  similar bounce in their first year.  The Rays have a very small core of die-hard fans and I doubt that their numbers will sustain any long-term traction.  I read that most of the Gulf Coast residents’ allegiances are with other MLB teams like the Yankees and Red Sox.  Major League Baseball has been in Florida for more than twenty years and has not seen any sort of  sustained success when it comes to attendance.

A Montreal team in the AL East is a perfect fit.  There will be natural rivalries with the Blue Jays, Red Sox, and Yankees.  Doing the math, there should be 29-30 homes games per year with these three teams.  Let’s assume near sell-outs for these games in a 36,000 seat open air stadium.  This adds up to 1 million in attendance with still another 51 games to count on.

Possibility of Expansion
Montreal will accept a baseball team in any flavor with open arms.  By all accounts, expansion is a longshot.  I don’t recall reading anywhere Bud Selig saying “never” to expansion.  Difficult but not impossible.  Will Sternberg stand pat in Tampa and pass on Montreal?  I don’t think so.

Why is Montreal the right place this time?
For starters, one look outside any downtown office window and you will see the skyline littered with cranes.  This city is booming with economic development.  A downtown baseball stadium will be Montreal’s crowning achievement.

As others have stated, the baseball world is far different today than it was 10-15 years ago.  Social media, huge TV deals, streaming MLB content and merchandising to name a few, are all elements that make a city of 3 million people the right place to have a MLB franchise.

Other cities have had second chances at major league baseball.  Given this chance, cities like Washington have flourished.  If the rumors are true about the Montreal ownership group, these guys will not allow this opportunity to fail.  They are proven winners and passionate about Montreal.  Bell Media’s partnership in this venture will be the crown jewel and provide some certainty in cash flows that the team can count on.

… and finally
Montreal has a window of opportunity to make this happen.  I trust that all the movers and shakers will do their best, in a quiet way, to make this happen.  In St. Pete, Stuart Sternberg will go through the motions and say the right things to keep the hope alive.  Realistically, he knows that the writing is on the wall.  He already knows what I have stated here, and then  some.  He too has a window of opportunity to increase the value of his investment.  Will he let this slip away?  I don’t think so.

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