COVER

A SPORTING PRICE TAG

ANATOMY OF A $30-MILLION DEAL

JOHN DALY,JAMES DEACON May 6 1991
COVER

A SPORTING PRICE TAG

ANATOMY OF A $30-MILLION DEAL

JOHN DALY,JAMES DEACON May 6 1991

A SPORTING PRICE TAG

ANATOMY OF A $30-MILLION DEAL

The balding, bespectacled accountant was easy to overlook amid the bright lights, balloons and jostling reporters. But few of the spectators at the news conference, held last week to announce Raghib (Rocket) Ismail’s decision to play for the Toronto Argonauts, have more at stake than Canadian Football League commissioner Donald Crump. Since he assumed his position in January, 1990, the soft-spoken Crump, 58, has been working to revive the sagging fortunes of the eight-team league, particularly in southern Ontario. Crump, previously the treasurer of Toronto’s Maple Leaf Gardens Ltd., became irritated when reporters badgered him with questions about the league’s 10-monthlong attempt to negotiate a new television contract. But his face quickly melted into a smile when he spotted new Argo owner Bruce McNall departing the room. Crump reached out and warmly shook the businessman’s hand. “We’ll see you again soon,” Crump said, beaming. “And thanks, Mr. McNall.”

At a potential $30.1 million, $20.7 million of which is guaranteed, the personal-services contract that binds McNall and Ismail is one of the most expensive in the history of professional sports. It obliges McNall—and, indirectly, his two 20-per-cent minority partners in the Argonauts, Wayne Gretzky, the hockey superstar who plays for McNall’s Los Angeles Kings, and actor John Candy—to pay the 21-year-old wide receiver and kick returner $16.1 million in salary and bonuses over the next four years. As well, McNall has guaranteed that Ismail will earn at least $4.6 million, and possibly millions more, from endorsements, unspecified joint business ventures, future gains in Argonaut ticket revenues and any increase in the market value of the team.

Credibility: In Edmonton last week, between NHL playoff games, Gretzky told reporters that he backs McNall’s decision to lure Ismail to Canada. According to the NHL Players Association, the veteran Gretzky earns about $3.5 million a year from McNall’s Los Angeles

Kings, about $1.7 million less than Ismail’s guaranteed annual income of $5.2 million. But says Gretzky: “Bruce just feels that the league needed credibility. People told him that they weren’t going to get a good television deal without [Ismail].”

Impact: McNall and his advisers acknowledge that they are uncertain exactly how they will generate the millions needed to pay Ismail. But they know from firsthand experience that star athletes can have a huge impact on team revenues. In 1988, McNall traded two players and three first-round draft choices—and paid $18 million—to the Edmonton Oilers to obtain Gretzky and two other players for the Los Angeles Kings. According to Su-

In fact, McNall’s contract with Gretzky appears to have paid off handsomely. With Gretzky, the Kings went from a fourth-place finish in the NHL’s Smythe Division in 19871988 to second in 1988-1989. As well, the team’s revenues increased by about $13 million during Gretzky’s first season, and the team earned a small profit after posting a $6-million loss the season before. During the negotiations with Ismail, McNall said last week, Waks “kept a tighter rein on me. But at the end of the day, I still went with my gut.”

The challenge confronting McNall this time appears even more formidable than with the Gretzky deal. On top of the $5.2 million he promised to pay Ismail each season, McNall and his partners will also have to meet the Argonauts’ regular team payroll of $3 million. If the Argonauts fill all 53,595 seats in the SkyDome for their one exhibition and nine regular-season games this year, total ticketsale revenues would reach about $12 million. But under the league’s gate-equalization plan, the Argonauts will have to share part of any additional seat sales generated by Ismail with other CFL teams. At the end of each CFL season, teams with higher-than-average gate receipts pay a portion of those receipts into a pool that is used to compensate teams with lower-thanaverage revenues. The Argonauts will retain the lion’s share of any increase, however, since no team is required to give up more than 10 per cent of its home revenues.

zan Waks, vice-chairman of McNall Sports & Entertainment, McNall’s advisers studied 16 possible financial scenarios before cementing the deal. Said Waks: “The numbers didn’t work. But we did it anyway.”

Still, McNall says he will have to augment the Argonauts’ gate receipts with increased television and sponsorship revenues. He plans to help the league obtain a contract with one or

more U.S. cable networks, and has mused publicly about trying to help the CFL expand into one or more U.S. cities in order for the league to build a following in that country. Says Waks: “There are a lot of intangibles, and a lot has to come together financially to make it work.”

Promotion: In recent years, the Argonauts have performed well on the field but failed to attract many new supporters. In the 1990

Calif., home is near McNall’s, did little to promote the team.

Declared Hugh Campbell, the Edmonton Eskimos’ general manager: “The problem in Toronto was that they had a great product and nobody knew it.”

season, the team scored an average of 38.2 points a game—a CFL record—and finished in second place in the league’s eastern division before losing to the Winnipeg Blue Bombers in the eastern conference final. But critics say that the team’s previous owner, entrepreneur Harry Ornest, whose Beverly Hills,

Fan support for other CFL teams also declined through much of the 1980s, but picked up slightly in the past two seasons. At times, sportswriters and even some CFL executives have voiced fears that the league was in danger of dying. The most serious blow came before the 1987 season, when the Montreal Alouettes disbanded after drawing an average of only 11,212 fans per game in 1986 at the 61,000seat Olympic Stadium. The B.C. Lions, Cal-

gary Stampeders and Ottawa Rough Riders also came close to folding in the 1980s.

Another big problem for the league has been reduced television revenues. In 1986, the last year of the league’s three-year, $33-million contract with Carling O’Keefe, each team received $1.22 million as its share of the CFL’S Canadian television rights. The league produced and sold its own package of games in 1987 and 1988, before signing a two-year deal with Molson Breweries that paid each team only $650,000 for each season.

Last week, executives throughout the league hailed Ismail’s signing and predicted that the Notre Dame star will rekindle fan interest in Toronto and across Canada. Said the Eskimos’ Campbell: “McNall had to make a bold move to get the attention of the people of Toronto, and that’s exactly what he did.” Ottawa Rough Riders general manager JoAnne Polak also praised McNall’s strategy. “Toronto is obsessed with becoming a worldclass city and seeing itself in The New York Times and the other U.S. media,” she said. “McNall has taken advantage of that obsession and brought them a world-class athlete.”

Dividends: The publicity surrounding the signing produced immediate dividends for the Argonauts. The team sold 1,300 season’sticket packages in the three days following Ismail’s Toronto news conference. Said the team’s ticket manager, Janet Stewart: “The phones were absolutely crazy and we had to bring in more lines and more people.” In total, she said, the team has already sold 19,500 season’s tickets, up from 17,000 last season.

Still, CFL commissioner Crump will have to work fast to secure a better TV deal this season. To maximize his bargaining power, he postponed making a commitment with the CBC, CTV and TSN, the cable sports channel, and waited

until McNall completed the purchase of the Argos last week. But with the CFL regular season opening on July 11, with a game between the Argonauts and the Rough Riders in Ottawa, there is little time for the networks and potential advertisers to adjust their schedules.

Excitement: Moreover, the network officials who will negotiate with Crump say that they have no current plans to increase their bids as a result of Ismail’s signing. “McNall and Ismail have created a sense of excitement,” said Alan Clark, head of sports for CBC TV, “but how that will translate into real dollars remains to be seen.” For his part, CTV’s vice-president of sports and business development, Peter Sisam, said that he doubts Ismail will have an immediate impact on advertising revenues. Added Sisam: “Advertisers are people who say, ‘Yeah, that sounds really good. But show me the numbers.’ Right now, we’ve got a league that hasn’t exactly set the world on fire.”

McNall’s plans also extend beyond the Canada-U.S. border. Already, he has discussed selling CFL broadcast rights to Prime Ticket, a Los

The Argonauts’ new minority owners, Gretzky and Candy, are preparing to use their considerable popular appeal to promote the team. Candy, the rotund comic actor who is currently on location in Europe shooting a new movie, Only the Lonely, has reportedly filmed several Argonaut television commercials, including one in Rome’s Colosseum. As well, Argonaut general

manager Mike McCarthy says that Gretzky “will get more involved when his season is over.” He added that Gretzky’s wife, actress Janet Jones, will oversee the May 4 tryouts for the team’s cheerleaders, the Sundancers.

Angeles-based sports cable network with 4.2 million California subscribers. Representatives of several other U.S. sports cable networks have also expressed qualified interest in purchasing the rights to CFL games. The largest, Bristol, Conn.-based ESPN, the national cable sports network that has 58 million subscribers, garnered poor ratings for CFL games in 1989, the

last year it has shown them. Still, ESPN spokesman Curt Pires said last week that the network is prepared to “listen to offers” from the CFL. The Long Island, N.Y.-based SportsChannel America, a string of regional sports cable networks that reaches 16 million subscribers, showed 25 CFL games last year and was negotiating with the CFL before McNall signed Ismail. SportsChannel spokesman Dan Martinsen said that Ismail will likely draw fans across the United States. “Ismail is one of the best players ever to come out of the college system,” Martinsen added. “And playing at Notre Dame, he got constant national exposure.” Sensational: Martinsen’s view is shared by Joe Theismann, a former Notre Dame quarterback who played for the Argonauts from 1971 to 1973, before jumping to the NFL’s Washington Redskins. Theismann, now an ESPN color commentator, predicted that Ismail will bolster the Argonauts’ performance— on the field and financially. “I think the Rocket is going to be sensational,” Theismann

said. “He is going to do things that the league has never seen before.” And McNall, Crump and other CFL team owners appear confident that they can ride the Rocket to new financial heights.

JOHN DALY

JAMES DEACON

JERRY LANGTON