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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Will the 2016 season be the last for the Rays in St. Petersburg?

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I was expecting the time leading up to the Christmas Holidays to be quiet in regards to the fate of the Tampa Bay Rays and the ever more plausible scenario that the Rays will eventually be sold and relocated to Montreal.  A St. Petersburg city council vote to allow the Rays to explore sites outside of the county was expected to be favorable.  This would have started a three-year journey for the Rays to look at alternate sites to build a stadium across the bridge in Tampa.  This was not the case and a political dust up ensued.  There was a call for a cooling off period.  In my opinion, there is no need for cooling off nor a three year analysis for sites in Tampa.  I talk about this in another post.  The damage has been done over the course of the last six years.  Consider the Rays gone.

I am not alone with this opinion.  Accomplished journalists like Bill Madden state it very directly:

“With no prospects for a new stadium, the Rays are doomed and might as well trade Ben Zobrist, a free agent after next year, and even Evan Longoria. Nobody will care. Here’s an educated prediction: Owner Stu Sternberg sells the team and, in three years, the Rays are playing in Montreal.”

A bold statement indeed.  Recall that Madden first broke the story about Sternberg meeting with Wall Street associates about moving the Rays to Montreal.  I am convinced that many other journalists that are not from the bay area agree but are staying silent.  The Rays are purging payroll and like Madden, I would not be surprised if either of Longoria, Loney, or Zobrist are traded away before long.  This is exactly what happened from 1999 – 2003 when the writing was on the wall in Montreal and we ended up losing our team to Washington.

After that fateful vote, many in the Tampa / St. Pete media stated that there is still plenty of time, 2027 is a long way down the road.  The Rays can never get out of the Use Agreement.  Besides, Montreal has neither an ownership group nor a stadium, they said.  Well Montreal does have an ownership group lined up.  One of the potential owners, Bell Media, is flush with cash and will instantly broaden the team’s reach from 2 million people in the bay area to 30 million across Canada.

What about a stadium?  Last Friday during a radio broadcast, the mayor or Montreal, Denis Coderre dropped some subtle hints about baseball and baseball stadium(s).  First, he wants to improve the baseball infrastructure in Montreal, spruce up the parks, better fields, better draining, etc.  Building from the ground up, he called this.  Coderre also wants to be the host of high level baseball, and “…non! pas de Can-Am”, he states emphatically, referring to the Can-Am Independent Baseball League.  Certainly, Coderre wants to see the World Baseball Classic in 2017 in Montreal and more professional baseball beyond that.

There is also this pesky issue about fixing the roof at Olympic Stadium.  The price tag for this is about $400M.  The Mayor talked about the possibility of going roofless, avoid the expenses for repair and maintenance.  He also has 2026 FIFA Soccer in his sights.  So the question remains: Fix the roof or put the $400M towards a baseball stadium?  Coderre, a deft politician, skated away from a response.  During the interview all other questions were answered unequivocally.  Not the stadium question.  Something is simmering and we await for some sort of an announcement.

I have been following the situation in St. Petersburg intently.  Why did so few citizens speak at City Council on December 18?  One report had it at only eight people!  I have read some of the citizens’ comments about the stadium saga and they are giving Sternberg much more credit about his business savvy than the media chooses to report.  Citizens know that the writing is on the wall.  On Shadow of the Stadium, one of the best written blogs anywhere, a commenter wrote:

“… why would a businessman continue putting up with this and continue trying what hasnt worked in the past? they are not staying at the Trop until 2027, thats for sure.”

Copyright © 2014 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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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.

Copyright © 2014 BaseballPoutine.com. All Rights Reserved.

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