Thursday, May 31, 2007

United Football League – how to lose tens, hundreds of millions of dollars

Wednesday, The New York Times reported Wall Streeter Bill Hambrecht and Google executive Tim Armstrong are launching a professional football league to compete with the N.F.L., and have lined up billionaire Mark Cuban as their first team owner.

In an exclusive New York Times column, Joe Nocera writes that the new United Football League aims to line up seven more owners “with Cuban’s deep pockets and contrarian mindset” so that it can debut with eight teams. Right now, the league is scheduled to play its first pre-season games in August, 2008.

Cuban owns the N.B.A.’s Dallas Mavericks. Undaunted by the monopolistic N.F.L., which has squashed four competitors, he tells Nocera, “There are quite a few good-sized non-N.F.L. cities that can support a pro team.” So far, the league has picked Los Angeles, Las Vegas and Mexico City. San Antonio and Orlando are among other top markets without N.F.L. teams.

According to U.F.L. executives, Nocera reports, the new league will emulate the old American Football League – one of whose major characteristics was revenue sharing. Each owner will put up $30 million, worth a half-interest in a team; the league will own the other half. Eventually, the plan envisions that fans will become stakeholders – because each team will sell shares to the public to raise an average of $60 million per franchise. Public ownership will reduce the pricing pressure on the teams, resulting in cheaper tickets all around.

Officials are convinced they can land decent players from the get-go, and better players later on. “The U.F.L. will be able to offer most rookies, who aren’t top draft choices, far more money than the N.F.L. would give them,” Nocera writes.

This promises to be the latest in a series of failed professional football leagues. Once again a group of entrepreneurs with more money then common sense are attempting to compete with the Behemoth that has consumed professional sports in the last 25-years better known as the National Football League. This isn’t even the first ‘professional’ football league hoping to flourish as the United Football League.

The United Football League operated between 1961 and 1964. It was primarily a Mid-Western league, drawing many quality players from the Big Ten conference. Though it provided the NFL with many talented players, it was an entertaining option during a time when (with lower player salaries) it could compete with other leagues. The league would fold, but many of its backers and players would find new franchises in the Continental Football League.

The Continental Football League was an American football league played in North America from 1965 through 1969. It was established as a minor league. It had hoped to be the "major force" in professional football outside of the National Football League and American Football League. It owed its name, at least in part, to the Continental League, a proposed third Major League Baseball organization that influenced MLB significantly.

Bill Walsh, Ken Stabler and Sam Wyche were among a few players and coaches who would later gain fame in the NFL.

The most recent failed professional football league on paper had a great deal going for itself before it played their only season in 2001. The XFL was founded by Vince McMahon, better known as the owner of World Wrestling Federation (now known as World Wrestling Entertainment). The XFL was intended to be a major professional sports league complement to the off-season of the NFL, but failed to find an audience and folded after its first season. Along with the creative and marketing power of McMahon, 50 percent (McMahon owned the other 50 percent) was owned by NBC.

Created as a joint venture between NBC and the World Wrestling Federation under the company name "XFL, LLC", the XFL was created as a "single-entity league", meaning that the teams were not individually owned and operated franchises (as in the NFL), but that the league was operated as a single business unit.

The concept of the league was first announced on February 3, 2000. The XFL was originally conceived to build on the success of the NFL and professional wrestling. It was hyped as "real" football without penalties for roughness and with fewer rules in general. The loud games featured players and coaches with microphones and cameras in the huddle and in the locker rooms. Stadiums featured trash-talking public address announcers and very scantily-clad cheerleaders. Instead of a pre-game coin toss, XFL officials put the ball on the ground and let a player from each team scramble for it to determine who received the kickoff option, which, unsurprisingly, led to the first XFL injury. This type of "coin-toss" has since been referred to as the "injury zone."

The XFL had impressive television coverage for an upstart league, with three games televised each week on NBC, UPN, and TNN. The XFL paid standardized player salaries. Quarterbacks earned U.S. $5,000 per week, kick-punt specialists earned $3,500, and all other uniformed players earned $4,000 per week. Players on a winning team received a bonus for the week.

On April 21, 2001, the season concluded as the Los Angeles Xtreme defeated the San Francisco Demons 38-6 in the XFL Championship Game (which was originally given the Zen-like moniker "The Big Game at the End of the Season", but was later dubbed the Million Dollar Game, after the amount of money awarded to the winning team).

Though paid attendance at games remained respectable, if unimpressive (overall attendance were only 10% below what the league's goal had been at the start of the season), the XFL ceased operations after just one season due to astonishingly low TV ratings. The NBC telecast of the Chicago/NY-NJ game on March 31 received a 1.5 rating, at that time the lowest ever for any major network primetime television broadcast in the United States. (On July 19, 2006, an episode of the reality game show The One: Making a Music Star broke the that record with only a 1.3 on ABC.)

NBC itself attempted to win back the audience that it had lost when it lost the rights to air NFL games two years previously, which seems to have been the reason behind both its investment in and broadcasting of a new professional football league. But despite initially agreeing to broadcast XFL games for two years and owning half of the league, NBC announced it would not broadcast a second XFL season, thus admitting failure in their attempt at airing replacement pro football. WWF President Vince McMahon initially announced that the XFL would continue, as it still had UPN and TNN as broadcast outlets. However, in order to continue broadcasting XFL games, UPN demanded that WWF SmackDown! broadcasts be cut from two hours to one and a half hours. McMahon found these terms unacceptable and he announced the XFL's closure on May 10, 2001.

One reason for the failure of the league to catch on, despite its financial solvency and massive visibility (perhaps infamy), and perhaps epiphenomenal of its TV ratings, was the lack of respect for the league in the sports media. XFL games were never treated as sports events, but were regarded more as WWF-like sensationalism. Lacking any noteworthy exposition of talent, save Tommy Maddox, the league's MVP, or thoughtful analysis or even consideration by sports columnists, the XFL never gained the necessary recognition to be regarded as a viable league. Most news teams refused to air clips or scores of XFL games. Most newspapers did not report the scores either. This led to many football fans treating the XFL as a joke, rather than competition.

McMahon and the WWF's failed venture is another example of entrepreneurs with mass success in one industry, attempting to replicate that success in a seemingly similar, but often times, entirely diverse business. Clearly, the XFL marked the most recent confirmation that building a successful major sports league is a daunting and often doomed proposition.

Both the WWF and NBC estimated that they lost approximately $70 million from the operation of the XFL.

The United States Football League was a professional American football league that played three seasons between 1983 and 1985. In the process, the National Football League had its greatest competitor since the 1960s version of the American Football League. The USFL was infamous for franchise instability, the signing of Heisman Trophy winner Hershal Walker, Donald Trump as an owner (call Cuban the Trump of the UFL) and what remains one of the more comical lawsuit settlements in sports business history.

In another effort to keep themselves afloat while at the same time attacking the more established National Football League, the USFL filed an antitrust lawsuit against the older league, claiming it had established a monopoly with respect to television broadcasting rights, and in some cases, to access of stadium venues.

The USFL claimed that the NFL had bullied ABC, CBS and NBC into not televising USFL games in the fall. It also claimed that the NFL had a specific plan to eliminate the USFL, the "Porter Presentation." In particular, the USFL claimed the NFL conspired to ruin the Invaders and Generals. The USFL sought damages of $567 million, which would have been tripled to $1.7 billion under antitrust law.

Each NFL franchise was named as a co-defendant, with the exception of the then-Los Angeles Raiders; Raiders owner Al Davis was a major witness for the USFL. Howard Cosell was also a key witness for the USFL.

The case went to trial in the spring of 1986 and lasted 42 days. On July 29, a six-person jury handed down a verdict that devastated the league. While the jury declared the NFL a "duly adjudicated illegal monopoly", and found that the NFL had willfully acquired and maintained monopoly status through predatory tactics, it rejected the USFL's other claims.

The jury found that the USFL had changed its strategy to a more risky goal of merger with the NFL. Furthermore, the switch to a fall schedule caused the loss of several major markets. Most importantly, the jury found that the NFL did not attempt to force the USFL off television. In essence, the jury felt that while the USFL was harmed by the NFL's de facto monopolization of pro football in the United States, most of its problems were due to its own mismanagement. It awarded the USFL only one dollar in damages, which was tripled under antitrust law to three dollars. It later emerged that the jury incorrectly assumed that the judge could increase the award.

The verdict was a classic Pyrrhic victory. The USFL had essentially staked its future on the outcome of the suit, and considered the television-related claims to be the heart of its case. Almost immediately upon announcement of the verdict, it announced it was suspending operations for the 1986 season, with the intent of returning in 1987. Players signed to contracts were free to sign with NFL (or other professional teams) immediately. Indeed, the NFL had held a draft in 1984 for teams to acquire the rights to USFL players, in the event of the league (or teams in the league) folding. However, many USFL players had already signed contracts with NFL teams, and the league was some $160 million in debt. This made it unlikely the USFL would have been able to put together a viable product in any case. With nearly all of its players under contract to the NFL and Canadian Football League, Usher announced the league would stay shuttered in 1987 as well.

Despite the post-trial statements of several jurors indicating that they wished to award much greater sums to the USFL (one juror alone stated a $100 million award, tripled to $300 million, was what he thought appropriate), the USFL's appeal was rejected by the U.S. Court of Appeals for the 2nd Circuit in 1988. This decision was the end of the USFL, which formally dissolved shortly afterward. However, due to a provision of antitrust law which allows an "injured" party in an antitrust action to recover its attorney fees and costs of litigation, the USFL was awarded over $5.5 million in attorney fees and $62,220.92 in court costs. That award was appealed by the NFL; it was affirmed on appeal and ultimately allowed to stand by the U.S. Supreme Court in 1990, long after the USFL had ceased operations.

The USFL finally received a check for $3.76 in damages in 1990, including interest. Notably, the check has never been cashed.

Which brings the failed series of professional football leagues to the New York Times report regarding the United Football League. According to The New York Times report, the fledging league has hired a CEO and COO Bill Daugherty, the C.E.O.; Jon Brod, the C.O.O.; and Andrew Goldberg, a senior analyst are the leagues first three employees.

Both Bill Hambrecht and Tim Armstrong, a senior executive at Google, have pledged $2 million each. Cuban is on board as an owner. Boone Pickens donated $165 million to Oklahoma State’s football program to help rebuild the school’s football stadium. Hambrecht and Armstrong may have somehow convinced Cuban to lend his name to their efforts to start a football league, but Pickens showed the two men the door.

Hambrecht told the New York Times a combination of factors led him to believe he could create a league to compete against the NFL.

“I really started thinking hard about this after the Los Angeles Rams left to go to St. Louis and the Houston Oilers went to Nashville,” he told me over drinks recently. “Why do you leave two of the top 10 TV markets in the country for these two smaller markets?”

Houston has a NFL franchise, but Los Angeles the second largest American market remains without an NFL team and little if any real prospects the NFL will return to Lotus Land anytime in the near future. What Hambrecht refuses to acknowledge is why the NFL doesn’t have a team in Los Angeles. The Lords of the Pigskin don’t believe the Los Angeles Coliseum or the Rose Bowl are up to NFL stadium standards. The two stadiums are home to the USC Trojans and UCLA Bruins respectfully another factor Hambrecht didn’t mention in the New York Times report.

The New York Times report noted 21 of the country’s top 50 markets — including such enormous metropolitan areas as San Antonio, Las Vegas, Orlando and (of course) Los Angeles are without NFL teams. San Antonio desperately wants to become members of the NFL (former Minnesota Vikings owner Red McCombs is a San Antonio native), the biggest stadium in Las Vegas seats just under 40,000 and Las Vegas isn’t interested in a substandard football league (the Canadian Football League failed in that market as did the XFL), and Orlando’s Citrus Bowl is outdated – not ready for big time professional football. It’s easy to point to cities that don’t have NFL teams but it’s far more important to understand why NFL teams aren’t in those markets.

According to the Times report Cuban is interested in the Las Vegas franchise (a classic money-pit) and the UFL seems determined to put a team in Los Angeles and Mexico City. Mexico City – best of luck with that. The NFL did play a game in Mexico City a few years ago, a one-time event that worked. The NFL has worked tirelessly at reaching the Hispanic market and the NFL is knows all too well its going to be a long process. Consider the security issues facing a franchise being located in Latin America? Maybe the players signed by the Mexico City team would enjoy seeing Denzel Washington’s “Man on Fire”?

Roger Noll, a sports economist at Stanford University told The New York Times: The crucial barrier to entry is finding stadiums in the biggest cities,” he replied — something U.F.L. executives insist is not a problem in the places they are considering. “If you can do that, it would be easy to have a league.”

League officials believe the on-field product won’t be short of talent. As Daugherty (the CEO) told The Times, “If you don’t put a good product on the field, nothing else matters.”

Daugherty believes (what else would you expect the CEO to admit) they’ll be able to sign players drafted in the second through seventh rounds of the NFL draft and of course undrafted free agents.

“The average career of an N.F.L. player is less than four years,” Daugherty says. “They have a huge incentive to maximize their income.”

Yes but that doesn’t suggest they’ll sign with an inferior league playing in markets that are questionable at best. And then factor in the history of professional football leagues who have attempted to slay the dragon known as the NFL and Daugherty and his colleagues face a daunting task.

"It's a pretty simple concept," Cuban said in an e-mail to The Associated Press. "We think there is more demand for pro football than supply."

"The NFL wants and needs competition," Cuban wrote. "They have grown so big and powerful that every move they make is scrutinized by local or federal officials. A competitor allows them to point to us and explain that their moves are for competitive reasons rather than the move of a monopoly."

"That's not to say it will be easy. It won't," Cuban wrote. "We still have to cover quite a bit of ground and have a lot of milestones to hit. That said, if we can get the right owners I obviously think we can make this work."

Those are all valid points raised by Mark Cuban but along with seven other owners, the UFL needs eight great cities and stadiums to play in (and Las Vegas isn’t one of those cities) and even more important has to have a national television contract.

The NFL’s $3.75 billion annual television contract is the economic engine that has made the NFL a business that generates more than $6 billion annually. The NFL has long-term agreements with NBC, CBS, Fox and ESPN. ESPN and ABC are owned by Disney. Given that Monday Night Football is the cornerstone of ESPN’s programming and ESPN is the most successful Disney owned media property where exactly does the UFL hope to find a television partner. And no Comcast and their sports cable network Versus with a reach of only 71 million homes won’t work.

Some ideas make no sense; this is a colossal example of a concept that is destined to be an unmitigated financial disaster of biblical proportions.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: Wikipedia and The New York Times.

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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.

“NHL.com, 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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Tuesday, May 29, 2007

Gary Bettman – calm, cool and collected in the eye of the storm

The National Hockey League opened the Stanley Cup Finals Monday night, with the Anaheim Ducks beating the Ottawa Senators 3-2 in game one of their best of seven series. SBN will spend the next two days focused on where the NHL is with its current and longstanding leader Gary Bettman.

Before the game NHL commissioner Gary Bettman held his semi-annual state of the league (the other major opportunity being at the All-Star Game). Once Bettman opened the media gathering for questions the often criticized Bettman was very much in control of the event, more often than not taking whatever the media could throw at him, never backing down and answering every question. Several of the highlights from Bettman’s opening statement set the table, with Bettman going on the offense acknowledging that the NHL isn’t perfect, but if you choose to believe Bettman is a business in decent shape.

“This was another season of record attendance and record revenues. We had a strong, solid season. The game has been entertaining and exciting. And we continue to move in what I believe is a positive direction.

“Is everything perfect? Is everything exactly where we would like it to be? Of course not. And it never is for any sports league. It never is for any business.

“Here will always be issues and challenges, and we are always trying to improve and to do better. However, our issues and our challenges are but a mere fraction of what they were just a few years ago.

“So we are feeling good about things, and we are excited about the future.

“As I said two years in a row since coming back from the work stoppage, record attendance and record revenues, TV in Canada remains strong. We are a vital and important programming, as evidenced by our new agreement with the CBC extending our relationship for Hockey Night in Canada.

“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.

“NHL.com, 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.”

Sports executives set the table at media press conferences. Bettman may have been classic Bettman but he was determined to get his message out to the media and then handle whatever questions they had. By admitting the NHL wasn’t perfect Bettman believed a good defense would make for a great offense – and it did.

When the questions began many members of the media that had traveled to Anaheim to attend the Stanley Cup Finals were from Canada. There has been a great deal of attention in the Canadian media regarding the future of the Nashville Predators, a seemingly uncertain future in the Tennessee city after Canadian Jim Balsillie signed a $220 million letter of intent last week to buy the Predators. And as far as Bettman is concerned it’s far from certain the Predators are going anywhere.

“What's going to happen with Nashville? We have an application by the club for Craig Leipold to sell the Nashville Predators to Jim Balsillie. That is a process that requires us to do some more due diligence, even though we did some in Pittsburgh, we have more to do.

“It will require a three-quarter approval by the Board of Governors in terms of whether or not Mr. Balsillie as an owner and this transaction should be approved.

“The Predators have a lease that goes, I think, for another 14 years, give or take. There is a possibility that the lease could terminate in a year if certain things do or don't happen. But as far as we're concerned right now, Mr. Balsillie's request for approval and the transaction related solely to him buying the Nashville Predators subject to whatever lease is in effect, and if, in fact, at some point the lease is terminated and he seeks to relocate the franchise, that is something that would have to be considered under the league's constitution and bylaws at the time.

“That's why I answered the question the way I did. I'm hoping to dispel the perception. If the attendance mark is satisfied, even if it's not, if the city cures what would then be the default, this team is not going anywhere.

“There is a lease, and sports leagues aren't in the practice of letting teams violate their leases. I believe Mr. Balsillie understands that and it's conceivable that this team will be in Nashville for as long as its lease, however long that may be.”

What was really interesting about what Bettman said – Balsillie needs at least 23 votes to be approved as the owner of the Predators. On the plus side Balsillie’s $220 million purchase price, the largest amount ever paid for an NHL franchise increases the financial valuation of every NHL franchise but before Balsillie’s purchase is going to be approved the Kitchener/Waterloo native would be well advised to mend the fences he broke when he walked away from his letter of intent to purchase the Pittsburgh Penguins.

Bettman made it clear he understands there are issues in Nashville but suggested those problems could be fixed and it was far from certain the Predators were heading to the Frozen North anytime soon.
“That's a terrific question for two reasons. One, the reason the clause that's in question, the one that says if attendance is at a certain level and then there's no cure, Craig actually - Leipold actually put in the lease, because he was concerned as to whether or not this particular non-traditional market could support a team long-term.

“And we will find out the answer to the question, I suppose, over the next year assuming he gives the appropriate notice which I believe he needs to do by June 19th.

“I met with Mr. Balsillie last week. Bill Daly and I both did, and I specifically asked him whether or not he had specific plans or intentions with respect to moving the franchise, and he told me he did not.

“And so I think there's been entirely too much speculation in terms of what comes next.

“What's clear to me from meeting with Mr. Balsillie is that he's passionate about the game, would like to own a franchise and certainly has the resources to do it.

“Beyond that, there have been no promises. There have been no predictions. And I think if anybody believes that this franchise is destined to a particular location, that's more a matter of speculation.

“With respect to a franchise returning to Canada, that's something that intrigues me. Because with the partnership we have with the players and the revenue sharing, that's something, while we haven't studied it, seems to be more likely than it was three, four, five years ago.

“I believe there was actually an editorial in today or yesterday's National Post suggesting if we do return to Canada, we should go back to Winnipeg first because they have a new building and we owe it to them since this is a market that has had a club.

“I'm not opining on whether or not that is an opinion that I agree with, but it is an interesting and intriguing thought.”

What was interesting with so many Canadian media in attendance, when asked, Bettman made it clear he’s very open to the possibilities of the NHL returning to markets it has left in Canada (the NHL left Winnipeg and Quebec City in the mid-90’s).

“When I say it intrigues me, it's something I haven't spent a whole lot of time thinking about or researching. As with intrigue, it's sometimes a fanciful notion. But it's something that if the right circumstances presented themselves and there was an interest in a real and meaningful material way, it's something that we would have to obviously look at seriously. But beyond that, we haven't gone to the next step, whatever that might be.”

Before anyone in Canada gets excited about NHL teams returning to Canada, Bettman reminded the assembled media, like every sports commissioner he’s not a fan of franchises relocating.
“Intrigued is in the sense that I don't like franchise relocation. I think my view on that and my record on that has been clear to everybody in this room for as long as I've been doing this job.

“So, for example, when we had the chance to go back to Minnesota, we did. Because it made sense. The right ownership, the right building situation, the market was strong and vibrant.

“We haven't studied Quebec City or Winnipeg or anywhere else in Canada. But the notion that if it could work to put a franchise back in a place where one was lost feels good, provided we don't wind up in a situation where we've created a prescription for another failing franchise.

“So intrigued is: it's obviously something that I've thought about in terms of trying to make right something that at one point in our history went wrong.

“Now, again, Quebec City and Winnipeg we wound up leaving because there was no new building, there was no prospect of a new building and there wasn't anybody there who wanted to own the teams there at the time.”

As is often the case with Gary Bettman once he believed he was on a roll, he made that one slip on a banana. When reminded there are two NHL franchises in the Los Angeles market and three in the Greater New York area, it makes perfect sense for Southern Ontario currently the home to only one NHL franchise (the Toronto Maple Leafs) to gain a second NHL team (Balsillie’s real goal).

“It's not something that I have given any thought to. I'm not so sure. Well, I'm not advocating moving any clubs, because I don't like to do that. And the world we live in now, I'm not sure what our footprint would be if we were starting from scratch on a clean slate. Having said that, we love all our franchises where they are.

“We haven't given any thought to your question. I, frankly, think - and I live in the New York, New Jersey metropolitan area, I think it's tough for all the clubs to get media attention, particularly when they're having tough years on the ice. There's some real downsides to multiple teams in the market.”

Here’s where Bettman made no sense. There are close to seven million hockey crazy Canadians living in Southern Ontario. Comparing hockey interest in Southern California and the Greater New York area to the most populated region in Canada is nonsensical and insulting to how Canadians feel about hockey. Offering that weak of an answer was silly on Bettman’s part. He would have been better advised to suggest the NHL is open to possibilities that make the best business sense for the NHL.

Of greater significance, Bettman offered that the changing economic landscape of the NHL could be a key to the NHL returning to Canadian markets it left before the current CBA was negotiated that includes a salary cap.

“The combination of a salary cap and revenue sharing. Markets that couldn't afford to compete now can be more competitive. Instead of having teams with payrolls of 20 million and teams with payrolls at 80 million, we now have a $16 million range within which everybody has to be.

“We also have revenue sharing. Some teams can get double-digit millions in revenue sharing in a given year. The combination of those things - we don't believe that - when I say we, Bill Daly and I in particular - that you have to spend to the cap to be competitive.

“There were teams that tried to be competitive at 25 million or 30 million against 80 or 60 or 70 million, and so we don't think if you're anywhere in that ($16-million) range how much you spend is really an issue.

“So the combination of having a range that shouldn't make a competitive difference coupled with revenue sharing, again, we haven't studied it because it isn't before us.

“At the present time we're not looking at expansion. At the present time we're not looking at relocation. So from our standpoint, these are more theoretical questions, as I said before, perhaps even intriguing questions.

“But they seem to be something, depending on the circumstances, we may have to deal with. We are - as I said, we've been getting lots of expressions of interest in expansion. “And as I said, while we're not dealing with expansion as a formal process right now. We're listening to what people have to say.”

One issue Bettman couldn’t and didn’t avoid the debacle two weeks ago when NBC left game five of the Ottawa Senators – Buffalo Sabres eastern conference final when overtime ran into NBC’s Preakness coverage.

“We are what we are. And we think we're pretty darn good. And we like where we are. And this is a business that will do close to $2.4 billion in revenues. We have over 20 million fans six seasons in a row, each year setting an attendance record, come to our regular season. We play to virtually 100 percent of capacity in the playoffs. Our visits to NHL.com are growing dramatically. Nielsen TV ratings is but one metric.

“It doesn't define us. And, by the way, the research also says that we probably have somewhere around 50 million fans. Some avid, some casual.

“What it tells you is people who follow this game who are passionate about the game don't watch it on TV in the United States as much as we'd all like. But you know what, there are probably two or three other sports that do it better than we do, and you know what, there are a bunch of niche sports that don't even come close.

“We don't have to apologize to anybody for what we are. We think we can continue to grow across all media platforms. We believe that we will. But I think it's a little unfair to define us based on traditional television ratings.

“We've had a difficult history on television, which included 20 years of not being on national television. We have been trying to swim upstream against the declining current for the last 15 years.

“Listen, my first Stanley Cup Final in 1993, we were on cable, and it was blacked out in the local markets. So we've come a long way in the last 14 years on television. For people who want to knock us on the basis of that, go ahead. But we're not going to apologize for what we are.

“We like what we are. And we think we're special. And this game and the players associated with it are the best in all of sports and we'll find our own level over time. But this isn't a 60-minute game. This game gets played year after year, generation to generation. We've been around since 1917. We'll be around for hundreds of years going forward. I'm not concerned. In fact, I'm optimistic about the future. But thanks for asking.”

A touch of arrogance from Bettman? Not really, more an acknowledgement that the NHL isn’t perfect but as Bettman put it ‘we like what we are’. And that was further driven home when Bettman suggested the NHL is going to take a good hard long look at how to better handle the challenges presented by television.

“In hindsight there may be lots of things we could do. You have to remember that we made the NBC deal before we made the Versus deal. NBC deal was made before the work stoppage. The Versus deal was made after the work stoppage. And so we were looking to get as much exposure as we could, because we didn't know what our national cable arrangements were going to be.

“We're going to look at everything, starting earlier, switching the East and West to see if there are ways we can do it. The problem is you can't play on the West on Saturday and start early because we won't start a game before noon. Our schedule, particularly in the playoffs - and if you remember, we re-seed after every round. It's not impossible, but it's difficult as we look at building availabilities and the like.

“We're obviously going to have to see if we can do what we did better. Having said that, we took a gamble and three out of the four days we gambled on it it was fine and the fourth one didn't work out.

“But, again, let's not make too big a deal out of this. Overtime was on Versus. If we didn't do this, the entire game would have been on Versus. With respect to people who got to see the game on NBC, they were in a position, perhaps worse, because NBC has broader distribution than Versus, more people got to see the game than might otherwise have been. And that was the overriding consideration.”

For Sports Business News this is Howard Bloom . Wednesday in the second part of our look at the current state of the NHL, we’ll look back at the year that was for the NHL and offer a follow-up to an Insider SBN published earlier this year, one where SBN suggested Gary Bettman should be fired. Now that the current NHL season is coming to an end, has Bettman done enough to keep his job or should he be fired, Wednesday in Sports Business News.

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Monday, May 28, 2007

Critics aside – UFC is having an amazing impact

Friday afternoon Primetime Sports, a Canadian nationally syndicated sports show, featured a roundtable discussion between host Mike Toth, Toronto sports reporter Doug Smith (NBA beat reporter for the Toronto Star), James Deacon (a freelance writer), and Gord Kirke (renowned NHL agent). The four well spoken and knowledgeable industry veterans spent the final part of the first hour of their program collectively pounding mixed martial arts and in particular the Ultimate Fighting Championship (UFC). The four men (three of them fathers) suggested their sons never watched the UFC and went as far as comparing UFC athletes to animals in cages. Toth admitted the conversation would have been more balanced if someone had taken the other side of the discussion but was an active voice in the 15 minute debate that insulated mixed martial arts and the UFC on every possible level. (Note, yours truly has appeared on the same show and I personally and professionally know the four men).

Saturday night the UFC held their latest PPV, UFC 71. Four young men, the strongest demographic who enjoy and support the UFC and MMA (men aged 18 to 34) got together to watch UFC 71. They have all made their fathers very proud of what they have accomplished and what they will accomplish. What made the comments Smith, Kirke and Deacon offered on Primetime Sports their suggestions how they were bringing up their sons was a big reason why their sons (at least as far as Smith, Kirke and Deacon were aware of) knew little if anything about the UFC or MMA. The four young men I speak of are all students of mine at Ottawa’s Algonquin College, two are student interns who have helped produce Sports Business News this year – all four are outstanding people any man would be very proud to call their sons. The fact that they enjoy the UFC has nothing whatsoever to do with their parents and their fathers (all good citizens). So why then did Toth, Smith, Kirke and Deacon besmirch the UFC and MMA, one word and one word alone – ignorance on their part. All too often when we don’t understand something we choose to do exactly what these well respected gentlemen did – insult the product.

The growth of the UFC in the last few years has been remarkable. If you haven’t been paying attention you are missing what clearly has become one of the hottest trends in the sports industry. Last week Sports Illustrated (you can’t get more mainstream than the cover of SI) featured the UFC on its cover. ESPN the Magazine featured Chuck Liddell on the cover earlier this month. Liddell who lost the UFC Light-Heavyweight Championship to Quinton "Rampage" Jackson Saturday night at UFC 71 at the MGM Grand Garden Arena. It’s hard to argue Liddell may have been the UFC’s “Golden Boy” but unlike the world of professional wrestling the UFC is very real and impossible to predict. It may have been in the UFC’s best interests if Liddell had won but more often than not the best man always wins and Saturday night Jackson was the better man.

UFC features a monthly pay-per-view labeling each one in numerical sequential order. According to one media report: Ten of the last 11 UFC pay-per-view shows (dating back to May 2006) have produced live gates in excess of the US$2 million Dana White and his two partners -- brothers Lorenzo and Frank Fertitta -- paid for the ailing company in January 2001. And those live gates don't even take into account the accompanying eye-popping pay-per-view revenue, reportedly worth US$223 million in 2006.

The UFC is ever-present on Spike TV, where it is hammering other sports in TV's 18-34 male demographic. A deal also with HBO is in the works.

UFC merchandise is red-hot. A company official reckons the UFC had 17,000 to 18,000 branded items for sale at UFC 68 in Columbus, Ohio, in March.

White is the face of the UFC, and is the spokesperson at virtually every UFC media conference. To suggest White is abrasive would be an understatement. But that might be part showman (borrowing a little from the persona Vince McMahon has created for himself within the WWE) but to not believe White doesn’t care deeply for the UFC and its image would again suggest you haven’t been paying attention.

One of the biggest success stories associated with the UFC has been their Ultimate Fighter series. Currently Ultimate Fighter 5 is being televised on the Spike Network. The fighters all live in the same house. During the latest episode three of the participants became embroiled in a ‘street’ fight in the backyard of the house with one participant slamming another into the ground opening up the head of the fighter who hit the pavement.

White had could have edited out the material but choose to not only show what had taken place but allowed the producers to film and show his reaction. The next morning, White entered the house, and again, the UFC boss wasn’t happy. He told of his disappointment that the fighters didn’t conduct themselves as professional athletes, and he made his point even clearer when he booted Sims, Thomas, and Allen Berube (one of the ringleaders of the house fight) from the house. A small moment, but an important message sent out by White – you want to be treated as athletes, you want to be seen as athletes, you had better act like athletes. Not a defining moment but White offered a clear understanding how focused he is when it comes to the UFC’s image.

Saturday night’s UFC 71 followed the recent mega boxing event between Oscar de la Hoya and Floyd Mayweather. Also held in Las Vegas, the boxing event is everything the Vegas of old is about. High rollers filling the town, big celebrities vying for ringside tickets and a record pay-per-view with well over 2 million buys. That said big boxing events are the Las Vegas of yesterday, they are few and far between. Boxing as a sport has few if any marketable names, the UFC clearly has made a connection with males who enjoy the combative sports.

Before Saturday’s PPV the media savvy Dana White held a national conference call as he often does. In what shouldn’t come as a surprise – boxers are looking at moving from boxing to the octagon (MMA compete in an eight sided octagon). Two of the names that have been bandied about from the boxing world -- Kermit Cintron and Tommy Morrison. However for his part – White doesn’t seem interested.

“I’m not really interested in that. Floyd Mayweather is probably the greatest boxer ever. You might think what you want to think about his personality and he might not always put on exciting fights but there is no doubt that he is the most talented guy, probably in history. A challenge by somebody like that means something. Every guy that boxes and wants to put out a challenge doesn’t really mean anything to me.”

Nor should he, as White suggested should he pay attention to every guy that boxes looking at the UFC but as is so often the case with the bombastic White its how he delivers his message where he becomes his own worst enemy.

White made it clear he’s very happy with the mainstream media coverage the UFC enjoyed in the days leading up to UFC 71, but didn’t have a great deal to say about the UFC’s much anticipated agreement with HBO.

“It’s over. It’s the last nail in the coffin for the media that has not given us the credibility and not looked at us as a real sport. It’s over now. I mean, ESPN is covering us constantly now. Sportscenter just did a big thing on Chuck. The weigh-ins are being covered live by ESPN, etcetera, etcetera, the cover of Sports Illustrated, talk shows … I mean, we’re there now. We’ve finally arrived.”

“We’re still negotiating (with HBO). Nothing has been finalized, yet.”

The HBO agreement is a key when you look at the UFC’s future. HBO is instant creditability when it comes to pay-per-view and combative sports. When the deal was first reported White allegedly had ceded creative control of any events HBO was involved with to HBO, but the deal has yet to be signed and there are now reports White wants control of the creative presentation. White knows what he’s doing, watch for the deal to happen and expect HBO to have control but White to have a strong say (as he should) as to the talent HBO selects and how the product is presented. White knows his audience, HBO knows how to present a pay-per-view, and working together they’d be a very strong team.

Remember Chuck Liddell lost Saturday night making the comments White offered Thursday (before he lost to Jackson) that much more prophetic on the impact Liddell losing would have on the UFC.

“How it all happened is we’ve been at the tipping point for a while now. We finally got to the point where we couldn’t be denied anymore. We’ve been kicking boxing’s (butt) and (pro) wrestling for the last year and a half. We’re selling out venues. We’re breaking records everywhere we go. … It’s to the point now where we can’t be denied anymore. We were at that tipping point and here we are.

“As far as Chuck goes, there is always going to be new stars. There is always going to be new champions. If Chuck loses, it depends on how the fight goes, then maybe, there is a third fight between him and Rampage. I don’t know. It’s definitely a tough fight for Chuck.

“Chuck is a big superstar. What Chuck has right now is that Mike Tyson aura about him. You know. He seems invincible. People love to show up to see how fast he is going to knock people out. I think what makes this fight so intriguing is this is the only guy to beat him in the last three-and-a-half or four years. I don’t think the UFC is going to collapse if one guy loses.”

That clearly is the challenge White and the UFC face in the coming months. Liddell’s loss Saturday night follows Mirko Cro Cop the Serbian former ‘secret policeman’ who was knocked out last month, but as far as White is concerned is up, up and away for the UFC, especially in their battle with boxing, and as far as White is concerned boxing has many issues the sport has to deal with.

“Boxing has a lot of problems. It’s more than just one problem. They’ve got a ton of problems. The thing with boxing is it’s all about the money. It’s all about money. At the end of the day, every decision that gets made, everything that they do, it’s all about money. I don’t talk about money. People always want to know how much are you making? How much are they making? How much is this and how much is that? Who gives a (darn)? Who really gives a (darn) at the end of the day, what the financials are, how much is everybody making? I want to talk about the next fight. Who does everybody want to see fight? Why do we want to see them fight? The big problem with sports today is everybody talks about (stinking) money. You’ll never hear me talk about money. Ever. It’s not because we’re trying to hide everything. It’s just that’s not what we’re about.

“Three guys bought the UFC when the UFC was dead. It was over. The sport was dead. Nobody cared. And we didn’t buy it because we thought we were gonna turn this thing around and make billions of dollars. We saw something in this sport and in the fighters that we thought was incredible and we thought was amazing. We thought if we got it to the mainstream people would enjoy it and would like it. I think that’s one of the things when you go to a UFC event live you see the energy in the place. It’s crazy because people are there because they are passionate about it.”

Six years ago on the brink of bankruptcy, Semaphore Entertainment Group (SEG) then the owners of UFC was approached by Station Casinos executives Frank and Lorenzo Fertitta, and boxing promoter Dana White in 2001, with an offer to purchase the UFC. A month later, in January 2001, the Fertittas and White bought the UFC for $2 million and created Zuffa, LLC as the parent entity controlling the UFC. With ties to the Nevada State Athletic Commission (Lorenzo Fertitta was a former member of the NSAC), Zuffa secured sanctioning in Nevada in 2001.

“Originally, me and my partners, the way we got into it is we started taking Jiu-Jitsu, and I was a boxing guy. I thought the UFC was (bogus). I thought it was everything that the rest of the world thought it was. Then we started to meet some of these fighters, and these guys weren’t just a bunch of gorillas that rolled in off of bar stools. These guys were educated guys. They were great athletes. When we started to do Jiu-Jitsu we started to realize what an incredible athlete you had to be to be good at that sport.

“When we went to the first UFC event, there was a small little event outside of New Orleans. We started looking around and watched some of the matches. We were like this really is an incredible sport. Imagine if they did this and imagine if they did that. Then it ended up we owned the company not too long after that and we started implementing all the things we thought could make the sport great. We started putting these incredible athletes out in front and telling there stories.

“You know Vince McMahon and the WWE, he creates a guy and he builds a persona for him and gives him a name. They go out and act a certain way. These guys (in the UFC) have their own different personas and they are interesting and real. In boxing, you always hear the same old story: “I came from the mean streets of such and such. If it wasn’t for boxing, I’d be dead or in jail.’ These guys in the UFC, I mean, Chuck Liddell is an accounting major from Cal Poly. Matt Hughes graduated from college. Randy Couture and they all have these great stories that are real. It’s refreshing in the fight game to deal with people that are in the UFC.”

The gigantic chip on White’s shoulder – never more apparent when asked how he felt about being on the cover of Sports Illustrated.

“Yeah, Bob Arum’s office called me 675 times yesterday. Bob’s mad at me. Let me tell you what, and I’m serious when I say this, when we started doing this we wanted the rest of the world to see this as the amazing, incredible sport that it is with amazing, incredible athletes. You dream of certain things when you start doing something like this. One of them is to be written up in Sports Illustrated and the other is to be on Sportscenter with all the other sports and in a million years we never dreamed we’d be on the cover of Sports Illustrated. Seriously, we were in New York yesterday, me and my partner Lorenzo, and we were walking around with Sports Illustrated all day in our hand. I can’t tell you what it means to us. The story was fantastic. Six years ago, if you would have thought, even ESPN The Magazine and Sports Illustrated, Chuck on the cover of the magazine would have been him covered in blood and it would have said “Crazy Ultimate Fighter,” and it was “Ultimate Fighter: What’s Not to Love about Chuck Liddell.” And you guys write the story you wrote yesterday. It was a great piece and it was an educated piece and it’s very refreshing.”

White’s boasting aside (he’s earned his day in the sun) one clear challenge White and his partners face – keeping what makes UFC and MMA unique and ensuring the sport doesn’t become too mainstream for the taste of its supporters.

“People ask that. I met with the Spike guys yesterday, and when you think about this, and you think about all the sports networks, ESPN, ESPN2 and Fox Sports Net, those are the three and if you are a sports junkie you are flipping between those three. People don’t really think of Spike TV as a sports network, but let me tell you what, and HBO because they put on boxing, Spike TV has the best fights on television. They are the best fight channel on television. You wanna see great fights. The thing about Spike TV is we’ll take some of our big caliber fights that should be pay-per-view, because I believe in giving big fights to people for free. It’s not that greedy boxing model where every great fight has to be on pay-per-view and I’ll put a bunch of (bad) fights on ESPN or Fox Sports Net. High quality, high caliber, big-time fights for free on Spike TV. I don’t worry about it at all. Is there too much football on TV? Is there too much baseball on TV? Are they too main stream? This is a sport. It’s a great sport with great athletes and I think anytime you can put together a great fight between two guys that people want to see, they are going to tune in.”

White has to be concerned is UFC the flavor of the day. A few years ago poker was hotter than ever. Network television fell all over itself in buying or creating made-for-television events. Still White and has partners have to move their business model forward, strengthen their brand or face the problem of the UFC and MMA being branded a niche sport stuck forever between a bright future and its reputation of being called ‘human cock fighting’ by Arizona Senator John McCain. The good news for White and his partners – they’ve paid attention to what’s gone wrong with boxing and don’t want to make the same mistakes that have crippled professional boxing.

“Pretty much every UFC fight is damn exciting. The difference is we showcase nine fights that night, not just one. Let me tell everybody on this call something and go off on a rant for a second. I always talk about how much trouble boxing is in. Boxing is in trouble for one reason, and one reason only … Greed. They are all greedy. Everybody in it is greedy. Bob Arum and Don King have absolutely destroyed that sport, stuck their hands in there, ripped the life out of it and stuck it in their pockets. OK, and Bob Arum can call me 500 (more) time tomorrow and I’ll say the same thing. That’s the reason boxing is in trouble. Oscar De La Hoya had the opportunity. I’m sure a lot of people thought Floyd Mayweather was going to beat Oscar De La Hoya. There were people wishing and hoping Oscar De La Hoya would win, but reality tells you Floyd is going to win this fight.

“Now, Bob Arum and Don King weren’t promoters of this event, Oscar De La Hoya was and, apparently, his career after boxing is going to be a fight promoter. Now, he has Winky Wright, Shane Mosley, Bernard Hopkins and a bunch of other talented guys that he has fighting under his promotion. We got a lot of press the week of the De La Hoya fight because everybody was saying could this be the fight that saves boxing. Hell no, it couldn’t be the fight that saves boxing because Oscar did the same thing that Bob and Don did. All he wanted to do was shove the money in his pocket. He should have stacked the card with Shane Mosley, Bernard Hopkins and Winky Wright on the undercard. The promotion for that fight should have been, ‘Boxing’s not dead. Golden Boy Promotions is going to bring it back and we’re going to go head-to-head with the UFC. We’ve stacked this card and put all these guys on the card.’ But they won’t do it because they are too (darn) greedy.

“It’s never going to change and it’s never going to end. They could have built storylines underneath with all these fights, and let’s say half the people came back for the next fight. They just did 2 million buys. Maybe, they could have done 1 million or half a million or 750,000 with these other fights. This is what I’m talking about, about these boxing guys. They don’t think about the future. It’s how much money can I make right here, right now. Anyway, sorry guys.”

One key decision White and his cohorts need to make – ignore the mainstream media who ridicule, insult and offer ignorant statements about mixed martial arts and the UFC. Whether or not sports media types appreciate the athleticism offered by UFC athletes isn’t the issue. If media members choose to berate White and the UFC move forward. Those who choose to ridicule MMA and the UFC seem to have forgotten the cherished demographic group the UFC has found – men aged 18 to 34. That’s a group advertisers and companies want to associate with. That’s where their dollars are heading.

For Sports Business News this is Howard Bloom.

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Friday, May 25, 2007

Feared but respected – Roger Goodell ready to shine again

Not quite through his first full year as National Football League commissioner earlier this week Roger Goodell managed the latest quarterly NFL Board of Governors meeting. Not a great deal of new business was decided (except for the decision to award Super Bowl XLV to the Dallas Cowboys and their new 100,000 seat stadium). However once again when offered the opportunity to address the media (and therefore NFL fans everywhere) Goodell once again proved who’s running the NFL and doing an effective job.

“Super Bowl XLV has been awarded to North Texas. We also had a good discussion about concussion management and our conference that we’ll be having in June. We think that we are making some very significant progress in this area. We had a lengthy discussion about the medical needs of our retired players this afternoon. I think we’re making some significant steps there as well. We are making a $4 million investment, with the potential for the number to be as high as $8 million, in the Hall of Fame facility, which is an investment in the history of our game. The other highlight comes from an idea generated by the Player Advisory Council, which focuses on the importance of team captains taking a leadership role not only on their teams, but also in their communities. We’ll be putting more emphasis on that at the club level and the league level. Those are some of the highlights.”

The one day meeting was held in Nashville the current home of Adam “Pacman” Jones, the Tennessee Titans player suspended for the 2007 season for his deviant off-field behavior. While Goodell made it clear he hasn’t considered Jones appeal of the suspension, Goodell’s directness suggested if Pacman’s looking for a break he’d be advised to look elsewhere. Jones and his lawyers have suggested they’ll challenge Goodell’s decision to suspend Jones for an entire season through the courts if need be. Again while he didn’t discuss the topic you can almost sense Goodell would relish any appeal Jones intends to file. Goodell knows he has the full support of the NFL Players Association and Hall of Fame member Gene Upshaw the NFLPA’s executive director. Good luck Pacman keep on digging your grave.

Nonetheless Goodell was quick to admit decisions involving the NFL’s conduct code are easier said than done.

“It’s quite difficult. I mentioned to some players recently that my job is to look at them individually – look at each of the individual facts, each of the individual circumstances, and make a judgment on the consequences to the NFL. My job is to see how these actions impacted the integrity of the NFL. I have to also look at, as it relates to the other players, being fair-minded. What is appropriate discipline to issue?

“It is a difficult job. It’s probably the least-favorite part of my job. It’s difficult, particularly when you see young people who have made mistakes recognize those mistakes and try to improve themselves. I’m hopeful that they will.

“If they have the right to pursue it in federal court, and they choose to do that, it’s their prerogative. I’m worried about the National Football League.”

Is Goodell ready to address the legal ramifications of the NFL’s conduct code? Couldn’t a lawyer argue that it’s illegal to discipline or could a team release a player after he is arrested but before he is convicted?

“It is something that we have thought through very thoroughly. I certainly want to respect the rights of our players, and I intend to do so. We are not going to rush to judgment. I’ve said before that this is about players who are repeatedly finding themselves making mistakes. When that happens, you can be in the wrong place once, twice, maybe three times, but after a certain point, you are reflecting very negatively on the National Football League. It is my job – not law enforcement’s job – to protect the National Football League.”

It’s easy to understand why Goodell is finding support among the NFLPA. One of Goodell’s goals in the past few months as he made clear earlier this week is to ensure players aren’t forced to play when they’re injured.

“I have emphasized for several months now that medical needs and medical decisions must override competitive decisions. I think that’s critical. The whistle-blower concept is there to ensure that if anyone feels undue pressure or sees undue pressure to return to play before they are physically capable, then we will find that out on a confidential basis and look into it.”

On the eve of Super Bowl XLI former New England Patriot Ted Johnson told The New York Times and The Boston Globe at age 34 having retired and left football he was the shell of the man he once was. In a heartbreaking story Johnson recalled the 2002 season a year when he believed he suffered a serious of concussions and the Patriots never gave Johnson the chance to recover.

"Officially, I've probably only been listed as having three or four concussions in my career," Johnson said. "But the real number is closer to 30, maybe even more. I've been dinged so many times I've lost count."

For his part Goodell did his best to downplay the comments Johnson made to the Times and the Globe earlier this year.

“The most important part of this issue is that this does not begin with those reports. We have been studying this issue for close to 14 years and made significant medical advances. We are looking at this on a factual basis with outstanding doctors – some of whom are independent from the National Football League and our own doctors as well – who have made outstanding decisions.

“But you can always look forward, and this is an area that is evolving. We want to be ahead of the curve here. The safety and health of our players is most important.”

One issue made crystal clear by the man in charge – Goodell’s NFL Player Conduct Code isn’t going anywhere, at least as long as Roger Goodell is in charge.

“When you issue a conduct policy, that’s not the end of the issue. That’s the beginning of the issue. We made it very clear what was expected of players, coaches and anyone affiliated with the NFL. That standard is clear. From our standpoint, people understand that. I think they are responding to that.

“Any time there’s an incident, you’re disappointed in that, but that’s going to happen. We wanted to have a mechanism in place so that players know clearly what will happen, and that we will be aggressive in this area and deal with it. But incidents are going to happen, and we’ll deal with them. This isn’t the end of the road, it’s the beginning.”

The trials and tribulations of Michael Vick have been well documented in the pages of Sports Business News and everywhere else in the media. Goodell didn’t tip his hand when it came to discussing if he’s reached any decision about Vick’s immediate future.

“We are following it very closely. As you know, I met with Michael at the draft. I am very concerned about the issues revolving around Michael. He knows that. He pledged to me that he’s going to make changes in his life to address those. We’ll continue to monitor those.”

The latest ‘escapade’ involving Vick are allegations Vick was involved in an illegal dog fighting incident one that has drawn the attention of California Congressman Tom Lantos. Lantos sent a letter to Goodell, a letter he later made public.

“I am outraged that one of the National Football League’s superstars is affiliated with such a heinous enterprise as dog fighting,” Lantos wrote in the letter to Goodell. “Your strong rebuke of dog fighting – and those who promote it – will send the message that this all-too-prevalent practice has no place in a civilized society. I will view anything less than the strongest repudiation of Mr. Vick’s involvement as tacit support for this atrocious activity.”

Lantos is a senior member of the Oversight and Government Reform Committee. In 2005, the committee used its oversight powers to expose and to halt the use performance-enhancing drugs in professional sports. In his letter, he expressed his hope that the issue of animal fighting will not require further investigation into the behavior of NFL athletes.

“The commissioner has embarked on a laudable mission to promote responsibility among his players and to renew the notion that professional athletes are, in fact, role models,” Lantos said. “This is why I felt it important to write to him on this matter. Unless he means to condone animal exploitation and the criminal element that follows this nefarious practice, I suggest he keep a tight leash on his players.”

“I did get Congressman Lantos’ letter on late Friday afternoon. I appreciated his letter. I am sending him a letter back to make sure he understands my concern also in this. I do share his concern. On the other hand, I want to make sure we understand the facts before we make a decision on this, and the facts are still unclear.” Goodell offered on Lantos’ letter.

Leadership is not only making the tough decisions but making the right choices when enacting a new policy especially one filled with as much potential controversy as Goodell’s conduct code. Pacman Jones, Chris Henry both men have been arrested more than five times each following various run-ins with the police. To date, Michael Vick hasn’t been arrested once. Vick is guilty of bad judgment, but there aren’t grounds for Goodell to suspend Vick.

There have been recent reports suggesting the NFL is going to shorten the decision time between NFL draft picks in the first and second round. Whether or not it’s a good football or marketing move it will be Roger’s decision to make as he told everyone. And the time frame of any change is up to Goodell.

“I asked the Competition Committee to give me its position on shortening the rounds in the draft. It is a decision of the commissioner to dictate how the draft will be conducted. I wanted to get their view of the competitive aspects. What’s important from a team’s perspective to make sure it has the proper ability to make good decisions as far as selecting personnel?

“The other side of that is – what’s best for our fans? That is something I’m balancing now. What’s in the best interests of continuing to grow something that has become an extraordinary offseason event? We had nearly 40 million people watch this year. We think there is an ability to grow beyond that. We’re looking to see how we can do that in a responsible fashion for our fans. That could be everything from having the draft in primetime to shortening the rounds or some combination thereof.

“I didn’t give the owners any expectations other than I would look at the research, look at any other information or evaluations we have, talk to our partners and probably make a decision by early fall.”

The measure of a sport should be how they treat the men (or women) who built their sport. The National Football League maybe a business that generates more than $6 billion annually, maybe a business that collectively brings in $3.75 billion annually in TV revenues but the NFL’s owes much of its success to the pioneers who led the way in the NFL’s early years. Many former NFL’ers must wonder if they where born 30 or 40 years too early. Nothing can change that, but Goodell appears determined to not only respect the legacy these Gridiron greats left, but ensure they get a well deserved taste of the NFL’s business success.

“What we’re trying to do with the alliance is to make sure we pool our resources and efforts to make sure we’re being responsible in this area. We each are making individual efforts with respect to each group’s membership. The NFL Alumni is looking at alumni; the Hall of Fame is looking at its members; the NFLPA has a retired membership. We are doing some programs jointly. We have NFL Charities, which is committing a significant amount of money in this area.

“What we wanted to do is pool these different groups together, put a focus on this, and try to find responsible steps. We’ve outlined some of the steps that we’ve been talking about, including finding healthcare facilities that can provide quality medical assistance at reasonable cost to our former players. We think that’s something that might have some potential. Assisted living facilities – could you create assisted living facilities that would provide the type of necessary care for some players that may be facing those issues?

“The cost of it is certainly a big issue. Health care is a huge issue in this country and worldwide, and it’s an issue for us. We’re going to look at how to do this responsibly. We’re not looking to increase our player costs right now, but we’re trying to be responsible in this area.”

For Sports Business News this is Howard Bloom

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Thursday, May 24, 2007

Here we go again – Jim Balsillie reportedly buys the Nashville Predators

If at first you don’t succeed try, try again. According to Nashville Predators owner Craig Leipold has reached an agreement in principal to sell the Predators to Canadian billionaire Jim Balsillie. It should at the very least be amusing, more likely alarming Leipold met with the NHL Board of Governors Wednesday afternoon informing the Lords of the Rink that he had reached an agreement in principal to sell the NHL franchise to Balsillie. Both The Tennessean and a Nashville TV channel reported the sale and linked Balsillie as the buyer. The reported sale price for the franchise is $200 million, which if true would establish a new benchmark for the sale price for an NHL franchise.

"Both parties intend for it to happen, subject to final negotiations," said the source, who spoke on condition of anonymity to The Tennessean. "The purpose of the letter of intent is to demonstrate the degree of seriousness of both parties."

Before anyone gets too excited its well worth recalling the path of destruction Balsillie left in the wake of his failed attempted to purchase the Pittsburgh Penguins. Let’s just say it would have been interesting to see how Penguins owner Mario Lemieux reacted when Leipold told the Lords of the Rink Balsillie was back as a potential NHL owner.

Just days before the Pennsylvania Gaming Association was set to award the sole gaming license for the Pittsburgh region one of the keys to the bid made by the Isle of Capri’s casino bid took a dramatic step backwards Balsillie announced he had decided he was no longer interested in buying the Penguins.

Mario Lemieux released a pretty calm statement that day: “Jim Balsillie delivered a notice of termination Friday, and it is our understanding that he has stopped negotiating with the National Hockey League to get the necessary consent to buy the Pittsburgh Penguins”

And NHL Commissioner Gary Bettman added: “Friday’s development was unfortunate. If the Isle of Capri is not granted the license on Wednesday, then an already difficult and volatile situation will be aggravated. It is imperative that the Penguins have a new arena on economic terms that make sense for the franchise for the team to remain in Pittsburgh.”

Balsillie and Lemieux announced an agreement in principal to purchase the Penguins on Thursday, October 5. The announcement of the purchase coincided with the Penguins season opener at the Mellon Arena, the oldest facility any NHL franchise in playing in. Built in 1961, the arena features few of the amenities NHL franchises need to survive economically. Now Penguins reached an agreement to build a new arena and have broken ground on that arena but Balsillie created a sea of turmoil in the days and weeks after he bailed on his plan to purchase the Penguins.

What seems even stranger now varying accounts from Balsillie and the NHL’s executive vice-president (number two on the NHL food chain) as to how and why Balsillie’s purchase of the Penguins imploded in the face of the NHL.

Daly appearing on Primetime Sports (a syndicated radio sports show) discussed Balsillie’s decision to withdraw his bid to buy the Penguins. Daly’s comments followed, a front page expose in Canada’s National Post on how Balsillie’s saw his failed bid fall apart.

The National Post report refuted in its entirety by Daly, suggested Balsillie’s decision to end his bid to buy the Penguins was in large part based on what unnamed sources The National Post used for their front page report was a series of new conditions were presented "without any warning or discussion" on Dec. 8 as part of the NHL's consent to his offer. Daly told Primetime Sports there was nothing presented to Balsillie on December 8 the two sides hadn’t discussed previously.

The report asserted Balsillie would be forced to keep the franchise in Pittsburgh until 2013. Daly made it clear with the failure of the Isle of Capri’s arena/casino deal, if the new owner of the Penguins couldn’t reach a similar arena funding plan in the near future, that owner would be free to relocate the team to another city as early as next year. That alone suggests Balsillie and the National Hockey League at the very least are suffering from a total breakdown in communications. The two versions of the truth are so different, it defies logic.

Daly told Globesports.com the NHL did not impose last-minute conditions.

"Obviously, there is a much bigger picture here, including that Mr. Balsillie had verbally and in writing agreed to everything that was in the letter," he said in a e-mail.

He added that Balsillie "was asked by [the league's] executive committee whether he would give the league an option to buy back the team and he said he would. The 'unreasonable' condition is one he participated in creating."

Balsillie hasn’t offered a great deal since Friday’s withdrawal and hasn’t commented on The National Post report or Daly’s comments Wednesday that it was Balsillie and not the NHL who didn’t seem to understand the agreement.

On December 21, Balsillie told Globesports.com he was prepared to make another bid for the team.

"All it takes is three motivated parties and a five-minute phone call to get this deal back on track," he said in an e-mail referring to himself, the NHL and the Penguins' current owners. "We've fully studied the situation, and are prepared to complete the purchase and immediately commence good faith 'Plan B' negotiations with the government officials to keep the team in Pittsburgh."

Given that Lemieux suggested he was so angry with Balsillie he intended to keep the multi-million deposit Balsillie had made to Lemieux and the distain Daly had for Balsillie when he spoke to the media days after Balsillie’s botched attempt at buying the team, it’s really is amazing any NHL owner would suggest he was ready to sell his franchise to Jim Balsillie. That said, Predators owner Craig Leipold made it clear earlier this year he was ready to look at all of his options when it came to the Predators future.

The franchise reportedly is facing serious challenges both in selling tickets and more importantly in reaching Nashville’s corporate base. The Predators according to a report in the Globe and Mail fell well short of the benchmark ticket sales goals needed to ensure the teams’ future in Nashville.

The Globe and Mail’s Stephen Brunt broke it down the following way: Under the club's 30-year lease with the city, its owner could walk away if average attendance in consecutive seasons after the club's fifth year in the league dropped below 14,000 a game.

This past year, the Predators fell just short, attracting 13,815 a game. Coupled with the 11,350 average they drew in the 2003-04 season (the lockout year and the year after were excluded from the calculation under the terms of the lease), that meant by exercising their option within 60 days of the final game of the season, the Predators could relocate.

That hasn't happened yet. The deadline is June 19, by which time Balsillie's deal will almost certainly not be completed. So it would be up to the current owner to pull the plug — and even if the owner does, the city would retain the option to guarantee a 14,000 average for next season by buying unsold tickets and thus closing the escape route.

When the National Hockey League awarded the City of Nashville a franchise, the Predators ownership group received a very lucrative deal. The City of Nashville paid 31.25% of the $80-million fee to join the league. The city also absorbs operating losses from the arena, despite the fact that the Gaylord Entertainment Center is operated by a subsidiary of the team.

And the City of Nashville is the gift that keeps on giving to the Predators. In the last six months taxpayers agreed to $8 million in renovations to the Gaylord Entertainment Center which included a new state-of-the art taxpayer paid scoreboard. The breakdown according to taxpayer records – a $3.6 million scoreboard, a $2.4 million digital control room and $1.85 million in other facility improvements. The current lease (the one the team may try to break) guarantees that any loses the arena accrues as a direct result of the arena operations are covered by taxpayers. The teams’ lease also allows the Predators to keep a significant portion of the revenue generated by the arena.

"It's a very positive deal for them because they're not placed at any risk associated with the operation of the facility itself," Metro Finance Director David Manning told The Tennessean.

On the surface the Predators are filling more than 80 percent of the Gaylord Entertainment Center the teams’ home. However when the franchise averages over the last four plus seasons (the previous four complete NHL seasons and the 21 home games the Predators have played this year) stands barely above 14,000 fans per game, the challenges the Predators are facing begin to surface.

Nashville Predators owner Craig Leipold announced he believed for the franchise to remain economically viable, he had to sell 40 percent of the franchise for as much as $50 million. Given that the City of Nashville paid more than $25 million of the Predators $80 million franchise fee, in essence if Leipold managed to sell 40 percent of the team for $50 million he would own 60 percent of the team for pennies on the dollar. Needless to say with reports Leipold is ready to sell 100 percent of the franchise to Balsillie, he may have tried to sell a minority interest but after failing decided to sell the team and move forward. It’s easy to understand how and why Craig Leipold reached the decision he did.

It was a Tuesday in early January when the Predators then first in the NHL Central Division and second in the NHL’s Western Conference met the Anaheim Ducks (the team with the best record in the NHL at the time) in Nashville. Two of the NHL’s best teams and less than 12,000 in attendance caught Leipold’s attention.

"Attendance has been an issue for six or seven years," Leipold told The Tennessean.

"I think our players were very disappointed in the attendance when the No. 1 team is playing the No. 2 team in the league."

And here’s the kicker in the teams’ opt-out clause – the clause is based on paid attendance and according to what Leipold told The Tennessean in January, the Predators actual paid attendance is just over 13,000 per game (the team gives away 1,500 tickets per game).

Leipold told The Tennessean at the time he believed one or more local owners with influence in the community could "open doors to get businesses involved. We don't have that. We need some local owners."

"Who it is will make a lot of difference. ... A country star, someone along those lines, would get attention, and that would work for at least the short term," said Jim Grinstead, publisher of Revenues From Sports Venues (a Nashville based industry trade magazine). "But it depends on how much they are at the games and how involved they are with the team.

"If you bring in the right folks with the right company, those folks will buy a block of tickets, and that company will set an example for others."

One interesting name that hasn’t been offered, but remains a hockey fan is ‘retired’ country superstar Garth Brooks. Brooks has worked with NHL chantries on several initiatives and would be the perfect music icon that could help build the franchises base.
“Local ownership typically makes a difference, particularly if they've got a relationship with the corporate community and with the civic community that they're able to tap into," Marc Ganis president of Chicago based Sportscorp told The Tennessean.

That local investor either never emerged or didn’t have enough to keep Leipold interested opening the door of an NHL franchise again to Jim Balsillie.

Mark Bloom, a minority owner of the Nashville Kats of the Arena Football League (who also call the Gaylord Entertainment Center home) believes securing local minority ownership for the Predators will be easier said than done.

"I've lived here for 25 years now and one thing I've noticed is that the most prominent families here are not necessarily too interested in sports ownership," Bloom said. "There are a lot of wealthy families here, but traditionally it seems like they've been more involved in philanthropic things. We've never really had a big sports family."

The NHL’s revenue sharing plan (part of the current CBA) dictates that for the 2007-08 season, the Predators must average 13,200 in paid attendance (almost where the team currently stands in the number of paid admissions) or they will miss out on 25 percent of the total money available to them from the league's revenue-sharing plan.

Upon further examination it’s easy to understand why Balsillie who has made it clear he wants to buy an NHL franchise to move that franchise, found what he was looking for in the Predators opt-out lease clauses.

In 2008-09, the Predators must average 14,000 in paid attendance or they will miss out on 50 percent of the money available to them from the NHL’s revenue sharing plan. The Predators received more than $10 million in revenue sharing from the NHL at the end of the 2005-06 season, invaluable capital to a team unable to sell more than 13,000 tickets in a gate driven sports league.

A breakdown of the Predators ticket base current ticket based paints a picture as to what the challenge is. On average most NHL teams believe 60 percent of their ticket base is corporate (businesses) with the remaining 40 percent individuals (fans). The Predators ticket base is 70 percent individuals (fans) and 30 percent corporate (businesses).

“That’s why you see the upper bowl filled and the lower bowl sometimes half empty,” Steve Violetta, executive vice president of business affairs for the Predators told The Nashville City Paper “It is exactly the opposite of other NHL cities.”

“I’ve had conversations with people in Nashville, but no one was really interested in being part of an ownership group,” Leipold said. “Nashville is a market with significant wealth. It is probably one of the wealthiest cities in America. There are a lot of very wealthy individuals and companies with high net worth’s. We would like to share this with four or five people who each come in for five or 10 percent.”

“It is not the local ownership that is the problem,” Leipold told the Nashville City Paper. “We need local owners to help us get into the doors of the corporate business community. We have talked on numerous occasions about having local ownership to help with this.”

Violetta is one of the best in the industry. His background includes working with Roy Malkar to build the Ottawa Senators into one of the strongest NHL business operations and most recently Violetta worked with the San Diego Padres in helping launch Petco Park. In the not too distant future expect Steve Violetta to become president of a major sports franchise.

One of the ideas Violetta tried when he moved from the Padres to the Predators was a sales plan that targeted 250 Nashville based businesses. Of that number, the Predators were able to actually make a 30-minute sales pitch to about 70 of the companies. He said that 10 companies actually bought ticket packages.

“We sent them a pretty nice direct mail piece,” Violetta said. “We sent them each a DVD player with a portable DVD already loaded. Each one had batteries in it. They were all charged up. All they had to do was press play.”

When one of the industries best and certainly a marquee NHL executive like Steve Violetta managed to only connect with less than 5 percent of a highly targeted market in a well organized campaign its easy to understand the concerns Leipold has about the Predators future in Nashville.

"We were not disappointed in how many we got in to see, but we really weren't happy with the number of people we were able to close," Violetta told The Tennessean Monday.

Violetta and his sales staff followed up their initial campaign by producing 10,000 additional DVD’s (this time without the DVD players included). The 10,000 DVD’s was a case of throwing more good money after a failed idea.

“Part of the challenge of this market is that the Predators have only been around nine years and the Titans have only been around eight years,” Violetta said in The Nashville City Paper. “So there is not a huge history here about how to use pro sports team tickets to drive your business. When you compound the short life span of the franchise with the fact that hockey is not native to the area it makes it very difficult to get the interest of businesses.”

Jim Balsillie may be worth a reported $7 billion but what he actually does with the Predators is going to be very interesting. Balsillie has purchased the option on a parcel of land in the Kitchener/Waterloo area where he could build an arena, but it’s a pretty good bet the National Hockey League has had enough of Jim Balsillie, and are going to have a great issues if Leipold as expected announces that he will sell his team to Balsillie in the coming days. Just what NHL commissioner Gary Bettman needed on the eve of the Stanley Cup Finals – the sale of an NHL franchise to someone slammed in the media just months ago by the NHL’s deputy commissioner and reviled by Mario Lemieux one of the sports most beloved players.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: The Tennessean, The Globe and Mail and Nashville’s NewsChanel 5

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