SBJ/20041220/SBJ In-Depth

Taking teams to the top

Two weeks ago, the CEO of the Palace Sports &

Davidson
Entertainment empire went to the company’s managing partner, glass magnate Bill Davidson, with a pitch to spend about $15 million to expand their Detroit basketball arena. The conversation proceeded the way most of their talks have for the last 27 years.

“I just laid it out, like I always do,” said Tom Wilson, who joined Davidson — or Mr. D, as most in his companies call him — in 1977 as part of a five-person staff that ran the sad-sack Detroit Pistons. “Here’s what it will cost. But here’s what it will generate.”

Wilson had sketched out plans to blow out the north end of the arena, building a V-shaped addition that would add eight more of the Palace’s signature, lower-level suites, along with another arena club and more room for concessions and ticket windows.

Davidson started their meeting as he often does, by listening. Then he went digging for pen and pad. He wanted to know how much the project would cost, then how much revenue each of the additions would generate. He wanted to know how Wilson had arrived at those numbers. He wanted to know what the enhancements would mean for his customers.

Davidson put it all on paper, then looked back up at Wilson. The projections showed that the addition would pay for itself in three years.

“OK,” Davidson said. “I’m bullish on it.”

“It was a 25-minute conversation to spend 14 million or 15 million dollars,” Wilson said. “I was confident that he’d want to do it. But you always try to get to him before you make the decision. Then he partners with you on it. Over time, you develop a tremendous level of trust.”

This, Davidson said, is how he runs all his enterprises. He puts those he determines to be “the right people” in charge, then empowers them to make decisions.

This year, it paid off at a level unprecedented in professional sports. Davidson became the first majority owner to win championships in two major sports leagues in the same season when, in a span of nine days, his Pistons claimed the NBA title and the Tampa Bay Lightning won the Stanley Cup. Another of his Palace Sports teams, the Detroit Shock, won the WNBA title in September 2003.

Davidson has a lifetime of accomplishments, but those during the last 12 months led to his selection as Sports Executive of the Year, awarded by the staffs of SportsBusiness Journal and sister publication The Sports Business Daily.

At 82, Davidson still shows up by 10 most mornings at the headquarters of his glass empire, Guardian Industries, which he conveniently relocated nine years ago to a hill across the parking lot from the Pistons’ practice facility and around the bend from the Palace of Auburn Hills.

Davidson starts with a round of phone calls to executives outside the building, including Wilson, then touches base with those down the hall. Most mornings, he drops by the office of Pistons basketball President Joe Dumars on the way to his daily workout with a trainer.

“You always want to remember, and make them remember, that in almost everything you do you are working through people,” Davidson said during an interview at his Guardian office this month. “I completely franchise all of my key people. They can do anything they want. But that’s after we’ve done a lot of talking together and exploring possibilities.

“So much of the growth of the Palace and promotion of the Palace had nothing to do with me. It had to do with Tom and the people that work for him. They come to me almost with accomplished facts. I listen and try to ask the right questions. That’s how you do everything.”

Davidson, surrounded on the ice, was outbid in his first attempt to buy the Lightning but bought the team at a discount a year later.

Business school

Dumars knew in his gut that Rasheed Wallace was the missing piece that could get the Pistons past the Indiana Pacers in the East and give them a puncher’s chance in the NBA Finals.

But to land him, the team had to put $3 million in cash into a three-way deal with the Boston Celtics and Atlanta Hawks. Dumars needed clearance from Davidson to spend beyond his budget for a player who came with considerable baggage.

“When I called his office, he asked me just two questions,” Dumars said.

“Joe, do you feel that Rasheed is the guy who can make the difference?”

“Absolutely.”

“Do you think the money is worth it?”

“Absolutely.”

“OK. Let’s do it.”

Dumars concedes that it sounds simple. When replayed, so many of these conversations do. Davidson keeps his questions concise and direct. But those who work for him point to those exchanges as the cornerstones upon which Palace Sports & Entertainment was built.

Davidson frequently reminds Dumars, Wilson and others that the decisions are theirs to make. Then he talks them through their reasoning.

“He wants to see your wheels turn,” said Palace Sports COO Alan Ostfield, hired by Wilson three years ago to analyze new business opportunities and since promoted to serve as his No. 2. “It’s through that process that you sometimes find you’re right and sometimes find you’re wrong.”

Michael Yormark was executive vice president and chief marketing officer for the Lightning for almost five years before joining the Florida Panthers as chief operating officer in October 2003. He said Davidson doesn’t get involved in routine, day-to-day affairs. He said Davidson allows you to make mistakes, but expects you to learn from them.

“He clearly identified what his expectations are and allows you to get the job done,” Yormark said. “It’s a corporate culture where accountability is key. People who work for him understand what the goals and objectives are. It’s important that you perform.”

Dumars describes his chats with Davidson as his “business education.” As a player, he had a cordial relationship with the owner. But they didn’t socialize. Never even went to dinner together. Then, after practice one afternoon during Dumars’ final season on the floor, Davidson invited him back to his office.

Davidson didn’t wait long after the introductory pleasantries to ask Dumars to stay on to run the organization after the season ended. He said he admired Dumars’ vision, discipline and leadership and wanted him to infuse them throughout the basketball operation.

“I’m in sweats,” Dumars said, flashing back to an afternoon that changed his life. “I’d just left my teammates and my coaches. I told him, ‘Let’s get back together after the season.’ We had a game the next night. I was playing in it.”

Dumars eventually agreed to take the job, but only if Davidson would let him take a year to distance himself from the locker room and familiarize himself with the intricacies of the salary cap. Davidson agreed.

Hiring Dumars, rather than a recycled, experienced GM, was a risk that would pay off in a championship.

It wasn’t the first time Davidson had gone that route. When you ask him about hiring Wilson, whom he ribs the way you rib an eldest son, he chuckles and shrugs his shoulders. “If you asked me, he was always there.”

Tom Wilson (right), now CEO of Palace Sports & Entertainment, was just 28 years old when Davidson put him in charge of the Pistons.
Actually, Wilson was hired by one of Davidson’s lieutenants. Five weeks later, the guy bolted, leaving Wilson to handle sales and marketing on his own. After a year in that role, Davidson handed Wilson the keys to the entire business operation.

“I’m 28 years old; I’ve got no business running a franchise,” Wilson said. “I told him later, much later, that it was a mistake. I wouldn’t have taken a chance on somebody my age with my experience to run a whole organization. He took a flier on me.”

Davidson, who was 28 when he took over a family business that had fallen into disarray, had taken many fliers before. And he would take many more.

“Bill Davidson has vision, he has foresight, and he’s not afraid to be on the cutting edge,” Dumars said, launching into a guided tour of trails that Palace Sports has blazed. “And the last thing that’s not lost on me is, from the perspective of a 36-year-old African-American athlete that just retired, here this guy looks at me and says, ‘You can run this organization.’ I’m eternally grateful for that opportunity, because so often that opportunity is not afforded.

“That’s what I’d love for people to know. Somebody out there has to be strong enough, deep enough, to say, ‘Yes, we can do that.’ As a young African-American out here, I’m eternally grateful for that.”

Tough decisions

You know the story. The names change, but the circumstances rarely do. Bill Davidson got into the basketball business as the result of a combustible combination. He’d made a handsome stack of money and he loved sports.

It was late in the 1960s. Davidson didn’t have enough money to buy a baseball team, but he thought the $5 million or $6 million that he could afford might land him a majority stake in the Miami Dolphins. He came up well short.

A few years later, his hunger remained. He was walking on the beach near his mother’s home in Florida when he ran into Fred Zollner, owner of the Detroit Pistons. The conversation evolved into a negotiation. Davidson ended up buying the Pistons for about $6 million.

“Like all naive initial owners, I looked at it as a hobby,” Davidson said. “It wasn’t many years, though, before it developed into being a serious business. As you began to understand what you should be doing versus what you were doing, and you began to concentrate a little more, you realized it was a business and you had to treat it as one.”

Davidson quickly went from hobbyist to sports industrialist, accepting appointments to chair key NBA committees and, eventually, taking over as head of the board of governors. He was in that role when the league hired David Stern as its commissioner in 1984.

That, Davidson said, is when he began to realize that the sports business was actually a subset of the entertainment business. A company that succeeded in one might flourish in both. Today, Palace Sports encompasses three teams and two major arenas, along with the nation’s busiest amphitheater and a smaller concert venue.

The decision that set the stage for it all, Davidson said, was the difficult call to move the Detroit Pistons outside the city limits.

“We couldn’t become an important franchise if we stayed in the city of Detroit,” Davidson said. “Now, that’s a hard decision, because to this day I’m resented by the city. But the decision had to be made that you either were going to try to compete or not. You had to have a much bigger base of revenue than you could ever get in the city of Detroit.”

Davidson started by moving to the suburbs, to the Pontiac Silverdome, where the Pistons would draw record crowds. But it wasn’t long before he and Wilson realized that wouldn’t work for them either. They needed a building of their own.

They chose a patch of land not far from the Silverdome, close to I-75 but detached from all else. Davidson would pay for the building and own it, a move unheard-of at the time.

“There is, of course, more risk when you choose to own,” Davidson said. “But I just don’t have a real aversion to taking risks. Most newspaper articles called it folly. They said this wasn’t a location that could sustain a team. But I didn’t care.

“We knew they were wrong.”

Davidson and Wilson were confident that if they controlled all the revenue streams, they could generate enough to justify a privately funded, $45 million building. But, as the project evolved, it wouldn’t be a $45 million building. It would be a $90 million building.

Wilson says Davidson never would have gone down the road if he’d expected the price to get that high, but he kept approving additional expenses because each one of them promised to generate enough to pay for itself and then yield a profit.

The hallmark of the building — and the innovation that made it a financial hit — was Wilson’s idea to build suites near court level, providing a premium place to entertain clients adjacent to a set of great seats. They would build a ring of them about 15 rows above courtside, then go back and build another ring at the top of the lower level. When those sold well initially, they opted for a third level. The upfront money generated by the three-year leases would fund the construction.

There were plenty of reasons to doubt that it would work.

The Pistons entered a market in which there already were plenty of unsold suites. Joe Louis Arena had about 20 out of 80 vacant. The Silverdome had about 30 out of 100 available.

“There’s all this inventory out there and here we came with suites that were three times more expensive than anything the market had seen,” Wilson said. “That took some courage. But you had to do it. It’s the only way we could pay to get it built.

“I mean, there’s no way this thing works. And, honestly, there were days when we said, ‘I don’t think this is going to work.’ But you had to keep going. And [Davidson] never wavered. Never wavered.”

Showing patience

The president of the Tampa Bay Lightning, Ron Campbell, remembers what it was like to work at Guardian in the early 1980s, when Davidson’s Pistons were losing games and money.

See also:
 
Notable recent dates for Palace Sports & Entertainment
 
According to
Bill Davidson
“To those of us at corporate, there was not a lot of esteem about this investment called the Detroit Pistons,” said Campbell, who worked as an accountant at Guardian for three years before moving over to handle finances for the Pistons in 1984. “When you looked from corporate headquarters at Bill Davidson’s flagship, nobody was saying this was one of his best ideas. But Mr. D had the patience and perseverance and, once he got the right people in place, it took off.”

Sounds a bit like the saga of the franchise that Campbell runs, the Lightning.

Palace tried to buy the Lightning about a year before it actually got the team, but was outbid — quite mercifully, it turns out. When the winning bidder lost his stomach for the financial mess he’d gotten himself into, Wilson and Campbell found themselves tempted back to the table. They got the franchise for about $20 million less than it had sold for a year earlier.

When Davidson details the expansion of Palace Sports, he is quick to point out that buying the Lightning “was Tom’s idea,” popping a short chuckle after he says it. He’s pointed that out frequently enough that it has become an inside joke within the company, so much so that Wilson, when roasting his boss at Guardian’s most recent annual meeting, told the assembled, “The hockey hasn’t worked out very well, but that was Tom Wilson’s idea.”

“I don’t think it was a good purchase,” Davidson says now, even after winning the Stanley Cup. “I do think there was a good risk in it. There’s been a lot of difficulties, and there still are. The jury is still out on what’s going to happen with the NHL.”

Even before the lockout, and even with the Cup, the Lightning has proved to be a frustrating endeavor. The company has lost $50 million there in four years, even though it has exceeded many of its goals. It has doubled attendance, gate revenue and suite revenue, Wilson said. Advertising sales are up five-fold. The building ranks in the top 10 as a concert venue. The Lightning made a bit of money last year on the way to the Cup.

“It’s a remarkable story of doing everything right and achieving all your goals,” Wilson said, “and because of what’s happened with the economy and the league it’s worth less than what it was when we bought it.”

Still, Davidson has stayed the course. While he candidly says he might prefer to be out of the hockey business, he never gave the order that other owners have given in a similar situation. He never gave up on the franchise.

“It goes back to Mr. D and the patience he shows,” Campbell said. “There’s plenty of people in the [Palace] organization back in Detroit that said, ‘What are we doing with the Lightning?,’ just like those of us at Guardian did years ago with the Pistons. But Mr. Davidson has the patience. Generally, he’s a holder of assets. So here we are, and we’ve been able to right the ship.

“I’m not saying he liked any of it. I don’t think Mr. D would say that he’d pay $50 million to put his name on the Stanley Cup. He wouldn’t. But I think he’s proud of what we’ve done.”

Going the distance

The furthest you will get the chronically understated Mr. D to go when describing the events of that unprecedented nine-day span is to call it “very, very exciting.”

“I’d rather it not be a once-in-a-lifetime experience,” he said. “But, realistically, it probably is.”

Winning NBA and NHL titles the same year, Davidson says simply, was “very, very exciting.”
As is often the case with Davidson, you’ll glean more by examining his actions than his words.

With his Pistons opening the NBA Finals in Los Angeles, Davidson flew west on his private plane. He checked into his hotel, headed to the Staples Center and watched his team win Game 1. After a short night of sleep, he boarded the jet again and headed to Tampa, where the Lightning was playing Game 7.

He entered the arena as the anthem began. He watched his team win the Stanley Cup, cradled it like a baby, and absorbed a splash or two of champagne. Then he headed back to his jet, which flew him back to Los Angeles for Game 2. After Kobe Bryant hit the shot that gave the Lakers their only win of the series, he insisted on yet another cross-country flight.

Bill Davidson insisted on being at his desk by 10 o’clock Monday morning.

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