Potential Rogers deal to buy Leafs, Raptors sparks debate over control of sport content

The Canadian Press
By: The Canadian Press
Dec 1, 2010

The Toronto Maple Leafs logo is seen on goalie Jonas Gustavsson\'s jersey in a Monday, November 22, 2010 photo. THE CANADIAN PRESS/Nathan Denette Author: The Hockey News


Potential Rogers deal to buy Leafs, Raptors sparks debate over control of sport content

The Canadian Press
By: The Canadian Press
Dec 1, 2010

TORONTO - Rumours that Blue Jays owner Rogers Communications Ltd. is also seeking to buy Toronto's professional hockey, basketball and soccer teams has reignited a smouldering debate over who will control access to Canada's most valuable sports and entertainment content.

The same issues came up when BCE Inc. (TSX:BCE) said earlier this year that it would reacquire control of the CTV media business and by the purchase of the Canwest television business by Shaw Communications Inc. (TSX:SJR.B).

"For a company like Rogers and all these companies that we're talking about, they're trying to enhance their 'access' offers. They're trying to enhance their wireless offer, their television offer, their Internet offer," market consultant Brahm Eiley said in an interview Wednesday.

Having exclusive control over sports as the team owner—from live games broadcasts, Internet streaming, specialized sports chatrooms, email team alerts and mobile applications still being dreamed up—would all boost revenue potential at Rogers' big wireless, cable TV, radio and TV broadcasting and magazine and online businesses.

"All those offers can be enhanced by having content."

Eiley, president of the Toronto-based Convergence Consulting Group, said it's still unclear whether Rogers would be able to lock out rivals or give preferential game coverage to its own telecom customers.

"There's no 100 per cent, definitive answer to that yet," Eiley said.

He noted the issue is currently being examined by the Canadian Radio-television and Teleommunications Commission—the federal agency that regulates the country's phone, cable, radio and television industries.

Rogers already has experience in this business through its ownership of the Blue Jays, Sportsnet cable channel and Fan 590, an all-sports AM radio station as well as the Citytv conventional television stations.

Many Toronto sports fans—who lament the poor performance of the Leafs and Raptors under the current ownership—say they'd welcome having Rogers take over Maple Leaf Entertainment and Sports.

"Rogers seems to have the interest in winning. I think that they will be able to provide a large amount of money to make this team a success," one person wrote on a Leafs discussion board.

Rogers bought the Blue Jays in 2000, many years after the team's championship success in winning the 1992 and 1993 World Series titles. It has not been afraid to spend on high-profile free-agents but has failed so far to match the team's early 1990s success under earlier owners.

"Rogers has a history of trying to win with the Blue Jays to a point," wrote a commenter on a Raptors discussion board.

Dvai Ghose, an analyst at Canaccord Genuity who covers the telecom industry, issued a note Wednesday saying that while Rogers is downplaying the story, it wouldn't be surprising if it came to pass.

Ghose added that Rogers could easily finance such a purchase, since it generates nearly $2 billion in cash annually from its business and had $344 million of cash at the end of September—as well as up to $2.2 billion of available credit.

However, he wrote, "if such a deal ever takes place, it is unlikely to be accretive (add to earnings) and may not be viewed positively by the market."

Rogers (TSX:RCI.B) and the Ontario Teachers Pension Plan Board said little about reports they are in high-level talks for company to buy the retirement fund's 66 per cent of MLSE.

Kilmer Sports, which is controlled by Toronto businessman Larry Tanenbaum, holds about 20.5 per cent of the company and TD Capital holds the remaining 13.5 per cent.

"We have a successful, long-standing sponsorship and broadcasting arrangement with MLSE," Rogers said in a statement.

"Sports is an important part of Rogers and we're always in discussions with companies to enhance the sports content we offer our customers. There's no change to our current relationship with MLSE. As to the specifics, we don't comment on rumour or speculation."

A spokeswoman for Teachers said the pension fund manager also wouldn't comment.

"It's our policy to neither confirm nor deny such stories," said OTPP's Deborah Allan said in an email.

Lynn Lashbrook, president of Oregon-based Sports Management Worldwide, saidhe attended a conference in Toronto last month that attracted many of the heavyweights in the North American sports media industry.

While there wasn't any buzz about a Rogers-Teachers deal, Lashbrook said it would make sense for the Leafs and other sports teams to be part of an organization like Rogers rather than a pension fund.

"All the technologies have just helped revenues grow," Lashbrook said from Portland, Ore. "If you own your own platform, there's obviously synergies and cost-effective ways to cross-promote."

Conversely, it's unusual for a pension fund to control a major North American sports franchise.

"There's too much headache owning something that's so visible," Lashbrook said.

Eiley added that another important question is whether Ottawa will relax federal laws the restrict foreign ownership of Canadian media and telecom companies.

Either way, there are good reasons for telecom and network companies to own sports franchises and their rights to programming that can be distributed or licensed out.

"If foreign ownership laws ever change, the Americans will look to acquire Canadian assets and to integrate them into their offerings," he said.

"If the government decides not to go in that direction, well these assets are protected as well. In the long run, they will pay out."

Rogers B shares closed Wednesday at $36.19, down 10 cents, on the Toronto Stock Exchange.

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Potential Rogers deal to buy Leafs, Raptors sparks debate over control of sport content