Raptors’ Lebron Showdown Fills Hockey Hole for Rogers and BCE

  • Toronto’s basketball team is the gift that keeps giving
  • Wins come as TV advertising revenue falters at cable companies

The Toronto Raptors basketball team’s unprecedented playoff run is proving an unexpected boon for the beleaguered TV businesses of Canada’s two biggest telecommunications companies, softening the blow from the worst hockey playoff drought in 40 years.

The Raptors, who face LeBron James’ Cleveland Cavaliers in game five of the eastern conference final Wednesday, are drawing record television ratings, packing the Air Canada Centre arena for every home game and filling a void for Canadian sports fans who have no local teams to watch in the National Hockey League playoffs.

The longest playoff run in the Raptors’ 21-year history is a boost for Rogers Communications Inc. and BCE Inc., which co-own the team and show its games on their TV channels. They’re struggling with falling TV advertising revenue, consumers who are increasingly ditching cable subscriptions and new regulations that will allow customers to pay for only the TV channels they want.

Now “people have a reason to think twice before dropping their sports channels in an unbundled world,” said Greg MacDonald, an analyst with Macquarie Group Ltd. “As far as the economics of these companies are concerned, I think that’s a bigger issue.”

The playoff run is the cherry on top of a basketball surge in Canada, centered in the diverse city of Toronto. After nearly a decade of dismal performances by the Raptors, young stars like Kyle Lowry and DeMar DeRozan are energizing the fan base. The team’s rallying cry of “We the North” is splayed on t-shirts and billboards around the city and hip hop star and Toronto native Drake sits courtside at many home games.

The May 23 match on BCE’s TSN channel against the Cavaliers was the highest-rated National Basketball Association game ever in Canada, reaching 5.5 million people, according to BCE. Playoff games on Rogers’ Sportsnet properties have had an average audience of 960,100, five times more than the average regular-season game, Rogers said.

Both companies declined to comment further on the effects of the Raptors’ success on their business.

Franchise Value

Winning has boosted the team’s overall value as well. The Raptors are now worth $980 million, nearly double what the team was worth in 2014, according to Forbes. That estimate is from January, well before the Raptors started racking up playoff wins.

That makes the team worth nearly as much as the Toronto Maple Leafs and Montreal Canadiens of the NHL, respectively valued by Forbes at $1.15 billion and $1.2 billion. The Raptors are proving there’s more to Canada than just hockey, after all of Canada’s hockey teams missed the playoffs for the first time in more than 40 years. Rogers and BCE originally bought the Raptors in 2011 as part of a package deal to acquire the NHL’s Toronto Maple Leafs for C$1.32 billion ($1 billion). BCE, known by its brand name of Bell, owns part of the Canadiens.

Rogers and Bell don’t break out the value of the Raptors in their financial statements, but the companies would score a major payday if they decided to sell the National Basketball Association team, Desmond Lau, an analyst with Veritas Investment Research Corp., said by phone.

Winning could also give the companies more leverage in their negotiations with advertisers, MacDonald said. Both Rogers and Bell have said TV advertising revenue has been impacted in recent years.

Ad Softness

Rogers is currently restructuring its media business to deal with the “evolving advertising landscape,” Chief Financial Officer Anthony Staffieri said during an April 18 conference call. Sports advertising revenue is the bright spot in the company’s media business, which includes other TV studios and magazines, Staffieri said.

Bell’s advertising revenue also declined in the first quarter of the year because of “general softness” in the market, Chief Financial Officer Glen LeBlanc said on a conference call last month.

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