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SBJ/January 14-20, 2013/FranchisesPrint All
The sign on the conference room wall in the offices at the Prudential Center reads, “Sell Like A Devil.” It’s a fitting theme for a meeting of New Jersey Devils ticket sales executives on the Monday morning after the NHL lockout has ended.
“Have the phones been busy?” Krezwick asked no one in particular. “Compared to, say, Christmas week?”
The cover of the Devils’ “re-entry guide”
It was clear, being embedded with the Devils and with unlimited access in their offices on that day-after Monday, that there was much to do. It also was clear that much had already been done. Devils employees had spent their time during the lockout preparing for what they hoped would be a mad dash to the start of the season. The preparation paid off when an early-morning deal between the NHL and NHLPA was reached on Jan. 6. Only formal ratification of the deal by the league and union stood in the way of the NHL releasing a new 48-game regular-season schedule.
As the meeting of ticket sales executives took place, Devils owner Jeff Vanderbeek walked the halls of the executive offices, wishing employees “Happy New Year” and urging them to “get excited” for the start of the season. Although Vanderbeek gives autonomy on hockey operations decisions to general manager Lou Lamoriello, the architect of three Stanley Cup teams in New Jersey, including last year’s Cup finalist, he is a hands-on owner. On this day, he will meet individually with all department heads, asking where they need support and offering his assistance. Later in the day, Vanderbeek called sponsors — simply touching base, as he had throughout the lockout. He also read more than 100 emails sent to him by fans over the previous 24 hours.
“I try to talk with fans all the time,” Vanderbeek said. “I give out my email address. It’s important to communicate with anyone who supports your team.”
Vanderbeek is enjoying a happy 2013 so far. On Jan. 3, he refinanced the club’s debt and became the Devils’ sole owner by buying out his three partners. The new collective-bargaining agreement, with an eventual 50-50 split of hockey-related revenue after transition payments, will benefit Vanderbeek and all team owners. (Because the deal, on this particular day, had yet to be ratified, he politely declined when asked how the details of the new agreement would enhance the Devils’ ability to make more money).
Back at the ticket sales meeting, Krezwick moves through agenda items at a quick pace. NHL clubs are accustomed to having regular-season schedules by the middle of July, giving staffers three months before their home openers to devise plans, market and sell. On this Monday, the Devils’ anticipated opener is about two weeks away. So the Devils’ sales staff does what it can. There is a debate over offering partial plans of 10 games and 13 games. With a projected condensed schedule of 24 home games and 24 away, a 13-game plan would be a sort of half-season plan with a baker’s dozen twist.
“No one is going to get what they paid for; they’re going to get more,” Krezwick tells his staff. “The fans are getting a completely new schedule on short notice. The games will be crammed. We know they’ll miss a game because of work or a wedding or something else. I want to give them a free game.”
The rest of the crew supports the plan.
While the 13-game plan will be pitched to prospective customers, it is decided that the team will hold off on the 10-game plan. After much debate, the consensus is that it will be more effective to wait until the schedule is released and make the first game of the plan approximately two weeks after the home opener. This way, the fans have more time to ponder buying the package, and the team has more time to sell it.
There is some early good news. Michael Strickland, the Devils’ database marketing and analysis manager, has his laptop on the conference room table. Strickland updates the staff on the effectiveness of a campaign the Devils ran on the team’s website and social media pages moments after NHL Commissioner Gary Bettman and NHLPA head Don Fehr announced the labor agreement in principle. Devils fans were asked to submit their contact information in order to be among the first to receive the new game schedule and enter a lottery. One fan would win a pair of season tickets.
At 11:10 a.m., Strickland reported that 1,777 fans had entered the contest. At his cubicle four hours later, he informed colleagues that the total was up to 3,427.
“The best part,” Strickland said, “is that over three-quarters of them don’t have any ticket plans with us.”
As the keeper of the Devils’ client and prospect database, Strickland’s role is essential in the post-lockout crunch time. The team has 10,000 season-ticket holders, meaning there are more than 7,000 seats to fill for each game at the 17,625-seat Prudential Center. Using Microsoft’s customer relationship management system, Strickland is able to identify and disseminate sales leads to the team’s season-ticket sales staff.
“It’s how we grow prospects into customers,” Strickland said. “Whenever the season started, we were going to be prepared.”
Strickland’s charts tell him which fans expressed interest in a full-season or partial plan when the lockout ended, which ones have ever signed up for promotions and sales information, and who has purchased tickets for an event at the team’s arena. One long list on his desktop is headed “Lockout-Pending Phase” for the prospects most likely to consider purchasing tickets when a labor deal was done.
Down the hall, the phone rings in the office of Neil Desormeaux, the Devils’ senior director of group sales. As a team employee since 1990, Desormeaux’s clients have in many cases become friends. He was in his driveway in Tuxedo, N.Y., early Sunday morning when a police officer from Farnwood, N.J., called him on his cellphone to say he wanted to book groups for two games once the schedule was announced. This time, the call is from Howard Lippoff, who has ordered group tickets for classes from Fort Lee (N.J.) High School for more than 10 years.
“My mood is a lot better than it was before the lockout ended,” Lippoff told Desormeaux. The two laugh and proceed to do business for a game in March, schedule pending, before saying goodbye.
“Some fans are feeling jilted because of the long break,” Desormeaux said after the call. “My staff’s perspective is that it’s all about customer service. Let’s make it as easy and enjoyable as possible for these group leaders so they want to keep coming back to our games.”
Consistent messaging is crucial to the organization. During the lockout — one in which no Devils employees received pay cuts or furloughs, unlike league office employees and some with other clubs — the Devils created an internal document called “Back to Hockey 10 Day Plan” to be ready during the expected 10 days between the end of the labor stalemate and the start of the season. The document, conceived by Vanderbeek, was written by Krezwick and his staff starting on Sept. 18 and then revised every day over the next four months. While staff had been studying this playbook throughout its revisions, the finished product was distributed to all department heads the morning Bettman and Fehr announced the agreement in principle.
The plan is intended to serve as a textbook for the organization at this point, with subjects labeled “Communications Objectives” and “Season Ticketholder Action Steps,” among many others. There is a page for each day counting down from “10 Days to Hockey” to “Game Day,” with that last page also carrying in its header the words “Let’s Play Hockey.”
“We had been planning for this day for a long time,” Vanderbeek said. “Quite frankly, we didn’t want it to be a day that would be frenetic.”
Rich Krezwick (at head of table) runs the Devils’ first post-lockout ticket sales meeting.
Putting the focus back on the ice, the Devils created a theme to be used in advertising and all marketing initiatives at the start of the abbreviated season: Drop the Puck.
“The last time games were played, our team reached the Stanley Cup Final,” Krezwick said. “Our history includes three Stanley Cups. Hockey, winning and fans enjoying themselves is where all the attention should be.”
Over at the office of Dana Weinbach, vice president of corporate partnerships for Devils Arena Entertainment, it’s not just about messaging, but about massaging relationships. Because of the lockout, sponsors lost the opportunity to make impressions on the fans for 17 of the originally scheduled 41 home games. During Christmas week, Weinbach and her staff of three went through the roster of sponsors and tried to project what each of them would want as make-goods.
“It runs the gamut,” said Weinbach, adding that she didn’t expect requests for financial refunds. “Bonusing can be anything from extending deals to tickets to just about anything. We’re telling all of them, ‘Let us not just make you whole; let’s make you better than whole.’ We don’t see any negatives. Because so many of our Devils partners also have deals on the arena side — like digital screens on the concourse — we’re constantly in touch with them even when there isn’t hockey.”
Having the Rolling Stones play two of their three U.S. concerts in 2012 at the Prudential Center in December was a timely boon.
“Just a month ago, we were able to make our top partners very happy with tickets to the Stones and access to the crowds those events brought,” Weinbach said. “That was big.”
But at the end of the day, the Devils are a hockey franchise. So at AmeriHealth Pavilion, the team’s practice facility adjacent to the arena, Devils operations vice president Troy Flynn had the ice surface in midseason form in anticipation of the first official practice of the season. “The sheet is ready, the glass is buffed, the locker rooms are prepped,” Flynn said with the smile of a youngster on the last day of school.
Flynn received three phone calls in the immediate aftermath of the labor resolution. One was from Lamoriello, another from Krezwick. “Just making sure I was ready to go,” he said.
But the first call came from Nick Kryshak, the team’s assistant ice technician and Zamboni driver at the arena and the practice facility, reporting that the lockout was over.
“It felt good to get that call from Nick,” Flynn said. “It meant we were back to doing what we love.”
Four months after telecommunications rivals Bell Canada and Rogers Communications closed their $1.3 billion acquisition of Maple Leaf Sports and Entertainment, Tom Anselmi is blunt about what must change.
“The mandate is to win,” said Anselmi, president and chief operating officer of MLSE, sitting in a conference room inside the company’s sleek 15th floor headquarters overlooking Lake Ontario in downtown Toronto. “[MLSE] has been a great business. Now, we have to be a great sports organization as well.”
MLSE’s holdings include the Raptors, Maple Leafs and Toronto FC, but that’s only the start.
Photo by:GETTY IMAGES (3); MLSE / PHOTO ILLUSTRATION BY COREY M. EDWARDS
Think AEG or Madison Square Garden Sports in structure, and two national media rivals teaming to buy it.
MLSE may be the most powerful sports and entertainment property in North America that operates in relative anonymity, at least south of the Canadian border.
“They are a big part of the North American sports landscape and are one of the most profitable [sports and entertainment companies],” said Brian Cooper, president and CEO of Toronto-based sports marketer S&E Sponsorship Group and a former MLSE vice president of operations and development. “They just don’t have the profile of an AEG, but they have done a good job in building the business. While they are in one of the top five markets in North America, the company just doesn’t get the play it should.”
A futile level of team performance certainly hasn’t helped.
The Maple Leafs, an Original Six NHL franchise, are the crown jewel of the MLSE stable. On the back of one of the league’s most passionate fan bases along with the league’s highest ticket prices, Toronto is one the NHL’s most valued franchises. It also hasn’t been in the postseason since 2004, the longest playoff drought in the NHL. The Leafs last won the Stanley Cup in 1967.
Similarly, MLSE’s NBA franchise, the Raptors, have been absent from the playoffs since 2008. And Toronto FC, coming off its worst season since MLSE bought into the MLS in 2007, has never made the playoffs.
Reversing that win-loss record is about to become that much more important now that the ownership of the teams’ parent company is looking at the clubs as media content programming.
“Rogers and Bell provide a great resource and a base that we love to have,” said MLSE Chairman Larry Tanenbaum. “Their breadth and scope in Canada fits in so well. We are in this for the long play. The mindset is, how to take this $2 billion business to a $4 billion business. I feel there is a lot of upside. They are buying an overall business that has grown out of sports content.”
A Deep Reach
What the records of the Maple Leafs, Raptors and Toronto FC have not hurt is MLSE’s financial clout. That’s due in large part to how much MLSE controls beyond those three franchises.
MLSE is the lead tenant for MasterCard Centre, the Leafs’ training facility. The company also owns three TV networks: Leafs TV, NBA TV Canada, and GolTV.
Maple Leaf Square, a $500 million Toronto development in which MLSE is a partner, features condos plus commercial destinations such as Real Sports Apparel (top) and Real Sports Bar and Grill.
Photos by:MAPLE LEAF SPORTS AND ENTERTAINMENT (2)
Signifying MLSE’s bridge between sports and entertainment is a glass-covered walkway linking Air Canada Centre to the adjacent Maple Leaf Square — a bridge, not surprisingly, also built by MLSE.
MLSE owns another Real Sports Bar and Grill location that recently opened in Ottawa, as well. Add it all up, and MLSE has annual operating revenue of $500 million and a 20 percent annual operating profit margin.
“Their business acumen is demonstrated by their revenues that they generate from the hockey and basketball teams at a time when on the ice and on the court they are not as good as they want to be,” said NBA Commissioner David Stern. “They are a really powerful, multifaceted, integrated enterprise. They are known for being aggressive sellers, creative marketers and data-driven decision-makers.”
Under former MLSE Chief Executive Officer Richard Peddie, now retired, the privately held company grew from a $150 million business at its founding in 1998 to today’s $2 billion conglomerate. Other than a private placement tied to its real estate developments, the company is relatively debt free, and in its most recent years it has served as a cash cow for the Ontario Teachers’ Pension Plan.
That plan, which funds the pensions of 300,000 current and retired teachers, had its initial investment through the Leafs, in 1994. The Leafs combined with the Raptors for the creation of MLSE in 1998, and the fund subsequently upped its ante through the years across MLSE’s assets to the tune of $300 million. When it cashed out with the sale of the company last year, it did so with $1 billion in profit based on MLSE’s $1.3 billion transaction price.
The pension plan today lists $118 billion in total net assets.
“The teachers fund was a terrific owner,” Anselmi said. “It was a private equity investment requiring enterprise value growth.”
But note the was: It was a terrific owner. Things are different now, and they’re about to be even more so. MLSE is changing.
A Pure Content Play
It is lunchtime on a Tuesday in Toronto, and the Real Sports Bar and Grill is filling up fast. Diners eat in front of a 39-foot high-definition television and have a choice from 119 beer taps. The 25,000-square-foot restaurant has been profitable since it opened in 2010.
Among its vast media and telecom holdings, Rogers, with $12 billion in annual revenue, owns Sportsnet TV along with the Toronto Blue Jays and the Jays’ Rogers Centre home. Bell, with $19 billion in annual revenue, owns the CTV network along with the TSN sports channel, and it has an 18 percent stake in the Montreal Canadiens.
These two companies combined now also control the Maple Leafs, the Raptors and Toronto FC.
The deal faced scrutiny by Canadian media regulators, but the government gave the go-ahead in August, clearing the way for the partnership to proceed.
“You have got two of Canada’s biggest companies buying more live sports programming, and it’s programming that is growing more valuable,” said media industry analyst Brad Adgate, senior vice president and director of research at Horizon Media in New York.
That’s especially important given that media in 2013 means so much more than television. What’s at play is content to distribute through wireless networks, mobile phones and tablets — along with, of course, TV.
“Yes, it is a content play, but we have to be more than a content factory,” Anselmi said. “[Bell and Rogers] are going to be different. They have more of an operational focus: less about enterprise value and more about market-share growth.”
Currently, television rights for the Leafs are split between Rogers-owned Sportsnet, Bell-owned TSN and MLSE-owned Leafs TV, with CBC separately owning national Saturday night broadcast rights for its “Hockey Night in Canada” franchise. The Raptors’ rights are with TSN and Sportsnet, while Toronto FC’s TV rights are with TSN, Sportsnet and MLSE-owned GolTV.
All of the MLSE team television rights deals expire by 2015, and terms of the Bell-Rogers MLSE acquisition call for the companies to split the newly acquired team content down the middle, though specific details of how that split is made were unavailable.
In total, the structure of the new ownership calls for Bell and Rogers each to own a 37.5 percent stake in MLSE, for a total stake of 75 percent. MLSE Chairman Tanenbaum owns the remaining 25 percent (see related story).
“It is about content, and this is special content,” Tanenbaum said. “Clearly [Bell and Rogers] can use the iconic brands and distribute it to their customer base, and their customer base is all of Canada. It is exciting to the point of having both the resources and expertise to help us make a positive impact across the country for our fans.”
It’s a deal, Peddie said, that was made in part to protect both Bell and Rogers. “It’s both an offensive and defensive move,” he said. And any uncertainty stemming from that seemingly mixed approach is only enhanced by the relative silence from both companies about their plans. Executives from both Bell and Rogers declined to comment for this story.
Said the NBA’s Stern, “It is business as usual, but the new ownership group is experienced in digital and broadcasting and they made it clear to us that they will bring the experience to bear to help grow the property. We expect that their digital experience and breadth will be put to a very intense use to drive the teams and increase our presence in Canada.”
The companies clearly aren’t strangers to doing business together to protect their interests, despite being fierce competitors. They teamed to create a consortium to buy the Canadian Olympic television rights for the 2010 Winter Games in Vancouver and the 2012 Summer Games in London.
“The MLSE deal was a very Canadian solution,” said Cooper, of S&E Sponsorship Group. “Instead of one outbidding the other and then using the content to beat the other to a pulp, Bell and Rogers agree to go in as equal partners, and no one gets hurt. You would never see MSG and Comcast divvy up the business.”
“What was surprising to me is how the deal came together in the way that it did,” said Paul Godfrey, former president of the Toronto Blue Jays, a former Toronto political leader and current chief executive of Postmedia Network in Toronto. “Normally, Bell and Rogers are fierce competitors, but they found an opportunity to join forces in owning the most powerful sports franchise in Canada. My guess is that both companies were concerned the other may get it and they both thought it would be better to share rather than let the other guy get the bulk of it.”
What that means most immediately is that MLSE is downshifting from a growth approach to more of an operations-focused strategy, as Bell and Rogers evaluate MLSE’s business in these first months following their purchase.
“We are taking a pause,” said MLSE Chief Financial Officer Ian Clarke. “We were in a growth mode. My focus will turn inward. We need to improve our brand image.”
A partnership with Live Nation to bring the first House of Blues music venue to Canada has been put on hold. So too has a plan to create an MLSE regional sports network.
“For the day-to-day operations, it is business as usual,” Tanenbaum said. “Yes, there is a pause, and that is fine and we have no issue with that. We do want to focus on winning now. Then the question is, How can we build on the growth and the platform we have. The one thing that has changed for us is that we will not be launching our own sports network. That won’t happen, but we have other growth factors. We can look at our concert area and our food and beverage area.”
A New Agenda
Since the Canadian Radio-television and Telecommunications Commission approved the sale of MLSE in August, there has been one board meeting between MLSE management and its new ownership group. The next meeting is scheduled for next month.
“It is a very strategic approach,” said MLSE’s Bob Hunter recently. A few nights earlier, Hunter, executive vice president of venues and entertainment for MLSE, had attended a dinner with executives involved in the sale. “What do we want this company to be? They are interested in growth, but in what areas?”
What insiders expect is a bigger investment in winning for the acquired franchises, because for Bell and Rogers, good teams mean more valuable content to be driven across the companies’ media and telecommunications platforms.
“I believe you will see the Raptors and the Leafs spend until they get a winner,” Cooper said. “MLSE is now part of a much bigger business and it is now about building winning teams to get better programming. It is about getting the content to feed everything else.”
That’s where, in theory, observers might first notice changes with the new ownership: in the win-loss columns. As the losing seasons have piled up for the Leafs, Raptors and Toronto FC, there is the lingering perception among some Toronto sports insiders (and fans) that MLSE has been more interested in profits than team performance.
“Until now, MLSE has generated great profits for its ownership group,” said Reg Bronskill, chief executive officer of The Bronskill Group, a Toronto-based sports and entertainment marketer that counts NHL and MLB teams as clients.“The [pension plan] ownership was a pure investment.”
The retired Peddie, for his part, says any suggestion that winning hasn’t been important at MLSE is “a crock.”
“Winning is good for profits,” Peddie said.
And it’s clear that, despite the teams’ poor performances, efforts have been taken to build winning teams.
MLSE in 2006 hired Bryan Colangelo as Raptors president and general manger on the heels of Colangelo winning the NBA’s Executive of Year the Award in 2005 for his work with Phoenix. The company also, in 2008, hired highly regarded NHL executive Brian Burke as president and general manager of the Leafs. Burke joined Toronto from the Anaheim Ducks, where he saw the team win the Stanley Cup as general manager in 2007.
“The pension fund was hands-off, but they got maligned for only caring about the bottom line,” said Bob Stellick, former director of business operations for the Leafs who now runs Stellick Marketing and Communications in Toronto. “But under their watch, a lot of money was spent on high-priced managers — and success just didn’t come.”
Perhaps a sign of things to come: Consider, some say, last month’s trade by the Rogers-owned Blue Jays with the Florida Marlins that sent five players to the Jays along with some $100 million in salary.
“Rogers and Bell have been quiet, but they no doubt are looking to reinvigorate MLSE,” Bronskill said. “Rogers has allowed the Jays to make a difference, and media is driven by great content.”
More directly, last week, Burke was relieved of his duties as president and general manager of the Leafs. David Nonis was named senior vice president and general manager. Said Anselmi, in a statement, “I’ve worked closely with our [MLSE] Board to evaluate the long-term direction of the Leafs, and as a result of this assessment we have decided to make these leadership changes.”
Before his dismissal, Burke spoke of what he saw ahead for the Leafs for MLSE under the company’s new ownership. “These are two hard-driving, blue-chip companies,” Burke said of Bell and Rogers. “They expect performance from all the teams. They are entitled.”
And more changes are coming — perhaps most notably, in MLSE’s corporate offices. When Anselmi was promoted to president and chief operating officer in September, he replaced Peddie as president, but the longtime MLSE executive did not get the CEO title opened by Peddie’s retirement at the end of 2011. That job remains vacant as the new owners evaluate MLSE. Prior to the sale, the Ontario Teachers’ Pension Plan hired search firm Korn/Ferry International to identify potential CEO candidates. For now, Anselmi is getting his shot at running the company.
Whether the company names Anselmi as CEO or hires someone else for that job is one of the major outstanding questions regarding MLSE. It’s only enhanced by the fact that there is no timetable for any decision.
“We are preparing for a new era,” Clarke said. “It is another turning point for the organization.”
By virtue of his 25 percent stake in Maple Leaf Sports and Entertainment, and his long-established reputation as a dealmaker, Larry Tanenbaum is one of the most powerful sports figures in Canada.
Chairman of MLSE since 2003, Tanenbaum oversees a company that touts $500 million in annual revenue and carries an enterprise value of more than $2 billion.
But don’t look for any public displays of that power from the low-key executive.
Tanenbaum reportedly has a net worth of more than $1 billion, putting him on the list of the richest Canadians. His wealth is tied to the construction and real estate industry: He is chairman and CEO of Kilmer Van Nostrand Co., a diversified construction company, and he runs Kilmer Capital Partners, a private equity fund. Under terms of the sale of MLSE to Bell Canada and Rogers Communications, Tanenbaum’s stake in the company grew from 20 percent to 25 percent.
Larry Tanenbaum, at left with the Boston Bruins’ Jeremy Jacobs (left) and the NHL’s Bill Daly (right), is known as soft-spoken but well-connected.
Photo by:GETTY IMAGES (2)
The 66-year-old Tanenbaum prefers a behind-the-scenes approach. You won’t often find him quoted in the media, and when he does speak publicly, it is done in a very calculated manner — a measured approach, which also applies to his style of doing business.
“He is not walking into a room and taking control,” said Brian Cooper, who worked as a vice president of business development for MLSE and is president and CEO of S&E Sponsorship Group. “He has surrounded himself with smart people and he listens a lot. He measures every word he says and it is very strategic.”
As governor of the MLSE-owned Toronto FC of MLS, the NBA Raptors and the NHL Maple Leafs, Tanenbaum takes an active role in league matters. He is on the executive committee of all three leagues and is a member of the NBA’s finance committee. He also, last month, was part of the six-owner committee that negotiated directly with the players in the NHL lockout without league or union officials present.
“Larry’s style is very low-key but well-informed and issue-focused,” said NBA Commissioner David Stern. “If he makes a statement, you can be sure he has done his homework to support his observations, his view or his argument. He has become a very important voice in the NBA. He is a voice for the good of the league rather than looking at every matter through the prism of his own franchise.”
Added Marc Ganis, president of Chicago-based sports consultancy SportsCorp Ltd., “He is very well-connected and soft-spoken. He is like an old-school ambassador and an excellent representative of almost any organization you can think of.”
Tanenbaum’s trusted hand is attorney Dale Lastman. Together, they have played key roles in MLSE’s explosive growth while under the ownership of the Ontario Teachers’ Pension Plan and during the plan’s sale of MLSE to Bell and Rogers.
“He and Dale hooked up when the Leafs and the Raptors came together [in 1998], and they make a dynamic duo as far as business is concerned,” Godfrey said.
Do not, however, mistake Tanenbaum’s hands-off management style with the Leafs, Raptors and Toronto FC for a sign of a dispassionate owner.
“He desperately want the teams to do well,” said Bob Stellick, former director of business operations for the Leafs who now runs Stellick Marketing and Communications in Toronto. “He feels it personally. He does love the fact that owning the teams has vaulted him into one of the best-known citizens in Toronto, but the downside is that the teams are continuing to struggle.”
For Tanenbaum, running a sports company has presented a far different set of challenges compared to his background in the construction industry.
“I came out of road building and civil engineering, where everything I did was planned and formatted,” he said. “I knew exactly where the bridge was going to be built. At the end of the day, the only variable was the weather. In sports, there are a lot of unknowns. It is different than building a road.”