Wednesday, May 30, 2007

FIRE Gary Bettman – not any more, Bettman doing a good job

The pages of Sports Business News demanded Gary Bettman be held accountable for his performance as NHL commissioner in a Wednesday, February 7, 2007 editorial demanding the NHL’s leader be fired for the good of the game. Close to four months later in an updated version of the February 7 Insider not only does SBN believe Bettman should keep his job, but when you balance out what Bettman has done, the scales of justice tip in Bettman’s favor. So what has so dramatically changed SBN’s point-of-view? Not SBN’s relationship with the NHL which on the best of days continues to remain testy at best, but the reality the NHL has excelled in the last few months in reaching out to the New Media, embracing the opportunities derived from the Internet better than most other sports properties.

“Television in the U.S., obviously it could be better, and we're working on it. But the media world is changing. And in recognition of that fact we are using new technology in a big way. In the last five months we have signed 15 new agreements with digital partners, and some of those agreements you're familiar with. YouTube, we were the first league, and there have been 12 million streams of highlights since we entered into that relationship.

“Google, there's been 2 million downloads of games. We were the first league with MySpace, the first league with Joost.

“, of all the major sports sites, in April had the largest percentage increase in traffic of over 65 percent.

“It's a long-winded way of saying the way that sports interact with media, while traditional television, Nielsen ratings, will always be one measure, it is but one measure of how well we're doing.

“And we think, based on what's going on with media, there is a great opportunity for us moving forward.”

The comments Bettman offered Monday night in his ‘state of the league’ were honest and straightforward. Leaders admit what’s wrong and look for solutions, and in reaching out to the New Media the NHL may have found a long-term solution to the overwhelming challenge the NHL continues to face in reaching their fans. Gary Bettman didn’t need to say this Monday night and likely wouldn’t have anyway, but the NHL is no longer living in the same altitude the NFL, MLB, the NBA and NASCAR are. Add NCAA football and men’s basketball and the NHL isn’t even in the top five anymore. But if anyone was waiting for Bettman to admit the obvious Monday night they were only fooling themselves. It would have been irresponsible for Bettman to admit the NHL is no longer considered a major sport.

The media covering the Stanley Cup finals have been very critical regarding the number of major media not covering the Stanley Cup finals.
“Well, actually our numbers this year are about what they were last year. So there hasn't been a decline last year to this year.

“But the point you're making is a good one and a fair one. We covet as much attention as we can get from every possible outlet and source. So what I'm about to say shouldn't be construed as my attempt to minimize that, because it's not.

“The newspaper industry is in a very challenging period. Editors, particularly sports editors, are looking to cut expenses every way they can.

“This was something when the AP sports editors were in to see me, as they come around in April to see all the commissioners when they visit through New York over a couple of days, the way that the newspapers do business and cover all sports is changing dramatically because of the economic constraints.

“And the newspaper industry has its challenges. And that's why you're seeing some of the decisions made. The good news from our standpoint, and I use that in quotes, and I don't mean it's good news, the fact that it's happening now with all the coverage through other forms of media that's more instantaneous means that fans aren't relying as much on newspapers as they did 20 or 30 years ago to get their news.

“That's probably one of the reasons that the newspaper industry is having the problems that it is. We are in changing and challenging times with respect to coverage and how it's covered. I saw one editor say he wasn't sending somebody because he didn't like the geographic matchup. With all due respect, if you're making your decisions as to how you cover your sports based on geography, I'm not sure that your readers are going to be reading your sports pages that often.

“I think what's most important is what's taking place, in our case, on the ice, what happens on any playing surface in any sport. And I think newspapers are adjusting to very difficult economic times.

“Having said that, I'll go back to what I first said. I wish everybody were here because watching our game in person, particularly the Final, there's nothing like it in sports. And it's great to be a part of.”

For all the questions asked by the media who attended the press conference live (the NHL offered media not in Anaheim an opportunity to listen but not to participate in Bettman’s Monday presser) this was a wasted question. When the NBA Finals begin in two weeks time there may be more media covering the NBA Finals but there will be many, many papers that used to cover the NBA Finals relying on the wire services for their coverage. We live in an era where the newspapers believe the best way to make more money is by cutting back on expenses. And since most newspapers use the various wire services why not avail themselves of that opportunity to save money?

The issue shouldn’t be whether or not newspapers are incurring the cost of sending their NHL beat writers to Anaheim and Ottawa but whether or not they’re offering space in their papers for Stanley Cup finals coverage. Both The Pittsburgh Tribune Review and The Pittsburgh Post Gazette offered complete coverage of Monday night’s game one, and published the same set of Associated Press material. Penguins’ fans went to their dailies safe in the knowledge they’d have plenty of game one coverage, but not with their NHL beat writers. Frankly one might hope the savings the Post Gazette and Review Tribune are enjoying from not sending someone to Ottawa or Anaheim would be invested into better local coverage, but that really isn’t the issue.

What should have been an issue, after two years of Versus as the league’s national cable partner why did the NHL not only embrace Versus decision to pick up the third year option on their inaugural contract but why has the NHL allowed Versus to extend that agreement by an additional three years. That was one very important point not raised by the media who asked Bettman question and the rationale for asking the question could have easily begun with Versus reaching only 59 percent of the Los Angeles market. Versus’ agreement with the NHL offers the fledging cable network exclusivity for games one and two of the Stanley Cup finals. That pointed question was never asked.

Did the media pepper Bettman about NBC’s decision to leave Game five of the Ottawa/Buffalo Sabres Eastern Conference final when the two teams ended up tied after regulation time forcing the game into overtime, yes. Bettman handled that question easily telling it exactly how it is and even having NBC sports president Dick Ebersol in attendance to back up what Bettman said about the issue, but what should have been asked why wasn’t NBC allowed to move the game to one of their cable affiliates (USA Network that reaches 100 percent of the cable ready homes in the United States) as opposed to heading to Versus and their 71 percent reach. That would have been a fair question to ask the Commissioner. In SBN’s February 7, 2007 Fire Bettman editorial a cornerstone of that Insider was the Versus deal. Nearly four months later Versus has yet to demonstrate they have a plan, a real vision whereby they’ll be anything more than a “B” cable network throughout the next four years of their relationship with the NHL. While Bettman needs to be held accountable for his decision to move forward with a cable deal with Versus, remember in deciding if Bettman should stay where he is you have to look at the entire body of his work as commissioner – not what this publication believes is a mistake.

And it’s important to understand since March 1, 2007 the NHL has become very proactive in addressing the New Media. Since March 1 NHL games have been streamed live on the Internet a plan that will have the advantage of being a part of the NHL’s plans from the start of the 2007-08 season. And when it comes to the New Media, while the CBC should be given full credit for how they’ve leveraged the internet, since the start of the playoffs the CBC has offered complete pre and post game shows on their website and has also streamed all of their Stanley Cup games live. The NFL, NBA and MLB have yet to offer anything close to what the CBC has offered web savvy hockey fans. Yes, the NHL through the CBC’s efforts have gone where no sports league has gone before. The NHL may have been slow to get out the gate when it comes to the New Media, but in the last few months the NHL has shown every indication they’ve not only embraced the New Media but they’re ready to create new and exciting opportunities. Clearly SBN may have been too quick to judge the NHL’s New Media efforts at the start of the NHL season when the NHL began the year offering fans the right to download and access games that were 48 hours old for a fee. The point – the NHL turned a bad situation into a win-win for its media partners and hockey fans and that in part is because of Gary Bettman’s leadership.

And remember before anyone decides its time for Gary Bettman to be fired let’s remember if it wasn’t for Gary Bettman the Ottawa Senators would have either be contracted or would have been playing in another city after the franchises second owner Rod Bryden bankrupt the franchise in early 2003. The history of the Ottawa Senators (who were awarded a franchise before Bettman became the league’s commissioner early in 2003) began well before Bettman was in charge. Bettman inherited the financial mess known as the Ottawa Senators.

The Ottawa Senators were a financial disaster almost from the day the NHL awarded expansion franchises to Ottawa and Tampa Bay in December 1990, with the both teams scheduled to begin playing in the NHL at the start of the 1992-93 season.

The Senators' bid had been considered something of a long-shot, particularly in the face of a financially much stronger bid from Hamilton, Ontario, and ran into financial trouble almost at once, as Bruce Firestone (the teams’ founder) had trouble borrowing money to meet the $50-million expansion fee. Firestone had to pay the entire costs associated with the arena and all related infrastructure costs. In 1995-96, the Senators moved from the Ottawa Civic Centre to the Palladium (later renamed the Corel Centre and now
Scotiabank Place), on January 15, 1996.

For several years management (the Firestone led group) had trouble securing financing for the construction of an arena. The team received no financial help from government, neither provincial nor federal, including a refusal by the Ontario government to pay for a new $40-million highway interchange. On August 17, 1993, Bruce Firestone resigned after missing mortgage and development payments and was replaced by Rod Bryden, a founder of SHL Systemhouse. A year later he managed to borrow enough to pay for a $188-million arena called the Palladium. Soon after Firestone secured an expansion franchise Bryden became one of the teams’ minority partners gaining complete control soon after the teams first season

Although widely acknowledged as a well-designed arena (modeled after the Palace at Auburn Hills), in the years since construction the arena has been criticized for being remote. It is located in the far west end of Ottawa , and is a long trip from many other areas, especially in the east or the Outaouais, which is the area around Hull , Quebec . Difficulties are compounded by frequent traffic jams before and after games. With no financial help from the government to improve the existing interchange, the team was forced to build interchanges and a new bridge that goes over the highway out of its own pocket.

Over the years, the arena has become one of the driving forces for development in Kanata. What was once an arena surrounded by farmland is a growing commercial and residential area.

The Senators (now owned by Rod Bryden) filed for bankruptcy on January 9, 2003, after a long history of debt. They continued regular season play after getting some emergency financing from the NHL. Despite the off-ice problems, Ottawa won the Presidents' Trophy in 2002-03, finishing with a league-best 113 points, making them the first Canadian team to have won it since 1989, when the Calgary Flames won it.

Bryden said he’d hope the team will be able to stay in the city. But he warned that one of the deciding factors would be whether fans buy tickets. If the seats can't be filled now, while the Senators are in or near first place in the league, investors will be scared away.

"This isn't the big bad banks chasing us out of town," Bryden told a news conference. Investors simply want a fair return, and are quite willing to keep the team where it is as long as they can make a profit, he said.

“We need to decide whether or not we are going to have a team in the city and whether we're prepared to pay for it. There is a marvelous opportunity to have this asset here at today's values, soundly funded.”

After a decade in Canada 's capital city, "there is more than a chance" the Senators will be sold and moved to another location, he said.

"The challenge for Ottawa is, will it benefit from those 10 years of effort and that investment?" Bryden said. "Or, will it build a marvelous asset to watch the Stanley Cup final on television?"

How bad was the Senators financial situation when Bryden finally declared bankruptcy? Soon after filing for bankruptcy protection Bryden lost control of the teams’ arena having failed to pay little of any of the $210 million he owed to Covanta Energy Corp. who lent Bryden the $210 million to build the Corel Centre.

Bryden tried several schemes between missing the teams’ payroll on January 1, 2003 and the end of February 2003 to maintain control of the franchise, finally admitting he had no option but to walk away from his investment on February 25, 2003 (he made the announcement between the second and third period of a home game against the Dallas Stars).

On August 26, 2003, Eugene Melnyk purchased the Ottawa Senators hockey club of the NHL. He is an alumnus of St. Michael's College School and the current owner of the Toronto St. Michael's Majors and the Mississauga IceDogs hockey teams of the OHL. Melynk paid an estimated $27.5 million for the arena (a facility that cost more than $200 million to build) and $75 million for the balance of the franchises assets (primarily the Ottawa Senators team and its players). Forbes financial valuation had the Senators at a value of $117 million in 2003 when Melnyk again paid just a shade over $100 million for the arena and the team (a combined conservative paper value of about $340 million).

Nonetheless it was Melnyk and Melnyk alone who stood up and made an offer to buy the Senators and keep the team in Ottawa . Others expressed interest but the only serious offer came from Melnyk. Did Eugene Melnyk get a great deal, yes but that’s one of the reasons he’s billionaire he seizes great business opportunities.

The Senators are one of four NHL franchises who filed for bankruptcy protection during Bettman’s tenure. The Buffalo Sabres, Pittsburgh Penguins and Los Angeles Kings are the other three. In each case the bankruptcies had nothing to do with Bettman’s leadership and everything to do with the wrong people owning the four franchises when they each filed for bankruptcy protection. In fact in each case you can make a pretty strong argument that if not for Gary Bettman – those four teams would either have been contracted or moved. Bettman’s determination saved those four teams.

But Bettman’s biggest accomplishment isn’t the saving of the four teams – it’s his leadership that led to the complete change in the NHL economics. Bettman had been beaten badly by former NHL Players Association executive director Bob Goodenow in the one major battle they faced in negotiating a collective bargaining agreement.

Goodenow succeeded Alan Eagleson as the head of the NHLPA in 1992 when Eagleson was forced out after allegations of fraud and embezzlement. In Goodenow's first couple of months on the job, he led the players out on a 10-day strike on the eve of the Stanley Cup playoffs. The strike was a major contrast to Eagleson's style which had been "cozy up" with favoured owners and it succeeded in gaining the players ownership rights over hockey cards. Two years later, he and NHL Commissioner Gary Bettman oversaw a 103-day lockout that lasted from October 1, 1994 to January 11, 1995. Although the 1995 agreement appeared to favour the NHL owners, over time the NHLPA agents under Goodenow's leadership exploited loopholes in the agreement and it ended up favoring the players heavily.

During his tenure as NHLPA chief, he oversaw significant increases in player salaries in the span of a decade. However, Goodenow's tactics have come under fire because of his focus on raising player salaries without regard to certain NHL teams who started to experience serious financial difficulties.

Bettman worked hard at making NHL owners understand how economically broken the NHL was, even hiring Former U.S. Securities & Exchange Commission Chair Arthur Levitt to produce a report that looked at the finances for the NHL for the 2002-03 season. At a press conference held on February 20, 2004 Levitt suggested that the National Hockey League's losses of $273 million on revenues of $1.996 billion, sustained during the 2002-03 season, threaten the viability of the League. Goodenow tried his best to impugn Levitt’s report (released just a few months before the league’s CBA was set to expire) but Goodenow made the first of many mistakes in what led to the greatest single collapse in sports labor history – he underestimated how organized Gary Bettman was in ensuring the Lords of the Rink understood the business of the NHL needed to be fixed. A year later the NHL’s economics were fixed, costing the league an entire season but increasing the financial valuation of every NHL franchise, and yes Gary Bettman’s leadership was clearly the key.

One question Bettman was asked Monday night – was he ready to ride off into the sunset and leave the NHL behind?

“Generally I don't negotiate with the Board because I love what I'm doing and they tell me the terms upon which I'll continue to do it.

“Somehow this became a cause celebre after the All Star game. I have a contract that goes for many, many more years. I think it would take me at least to my 60th birthday. For those who don't know, my 55th birthday is next Saturday. You don't all have to sing Happy Birthday at once.

“I love what I do. I find it both challenging and emotionally rewarding. And some days a little too rewarding from that standpoint. If I ever lose the passion or the owners ever lose their passion for me, then I'll go do something else.

“But this is my life professionally, and if you ask my family, personally as well because it dominates everything I do and I wouldn't have it any other way.”

And at the end of the day, that’s likely what is in the best interests of the NHL. Far from perfect but when you look at everything Gary Bettman has accomplished he deserves to keep his job.

For Sports Business News this is Howard Bloom.

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