Currency Exchange Boosting Blue Jays Bottom Line
Blue Jays President and CEO Paul Godfrey remembers the 2002 and 2003 seasons quite vividly. What stings isn't the Blue Jays record over that time period, it was the currency exchange rate that crippled the team more.
Godfrey says that when the exchange rate between the loonie (slang for Canadian dollar coin) and the American dollar was at its worst during that time period, the Blue Jays lost in between $35 million and $40 million on the currency exchange alone.
"About 35 percent of our revenues come in in U.S. dollars and 65 percent come in Canadian dollars," Godfrey told CNBC. "So when the (Canadian) dollar was the other way--it was as high as $1.61 Canadian to the dollar American, the cost to the ball club was astronomical. We were by far the largest losing baseball team in the major leagues. With the loonie improved, so does our bottom line. In fact, every time the Canadian dollar goes up one cent relative to the U.S. dollar, our bottom line improves by about $730,000 Canadian."
But the Canadian dollar is surging against the greenback. Over the past year, the U.S. dollar is down 17 percent against the Canadian dollar. And as of Tuesday morning, each loonie is worth one cent more than a U.S. dollar. This means that Godfrey and the Blue Jays executive team have to read the business news more than any other group of team executives. Godfrey acknowledges he looks at the box score and the standings each morning as well as the attendance numbers, but he also looks at the currency exchange.
In the lean years (2002-2006), Major League Baseball commissioner Bud Selig gave the Blue Jays $5 million in U.S. dollars, from his discretionary funds to help things, but Blue Jays owner Ted Rogers still hasn't made a dime since buying the team in 2000. The better rate has enabled him to have confidence that he can spend more money and one day make a profit.
"In 2005, we had a $50 million payroll," Godfrey said. "In 2006, we had a $70 million payroll and we approximate at about $90 million in 2007. We've not established our budget for 2008 yet, but we saw the currency beginning to move in a most positive direction.
As far as the club is considered, we may be one of the few industries in all of Canada that are cheering for a higher (Canadian) dollar." That's because, as the American dollar declines, tourism from the United States will decline and Canadians will flock to the U.S. Currently, 80 percent of the Blue Jays expenses are in American dollars, including the team's payroll. As to whether a player could request his salary in loonies instead of dollars?
Said Godfrey: "My response would be to the player, 'Are you prepared to also take it if the Canadian dollar slipped back to 90 cents against the U.S. dollar?"
Questions? Comments? SportsBiz@cnbc.com