Business

The troubled state of sport

Like the Blue Jays, many Canadian pro teams have been losing money—and fans

D’Arcy Jenish September 11 2000
Business

The troubled state of sport

Like the Blue Jays, many Canadian pro teams have been losing money—and fans

D’Arcy Jenish September 11 2000

The troubled state of sport

Like the Blue Jays, many Canadian pro teams have been losing money—and fans

D’Arcy Jenish

The Edmonton Oilers do not open the regular hockey season until Oct. 6, but general manager Kevin Lowe and some of his coaches are already putting in long days on the road. Last week, they joined other team officials on promotional tours of Fort McMurray, Cold Lake and other northern Alberta communities. And there will be more such excursions in the coming weeks, some as far afield as Saskatoon and Fort St. John, B.C. At each stop, the Oiler entourage tries to visit a mall, meet the mayor, socialize with business leaders and sell their product. “People in these communities think nothing of driving 250 km in 40below weather to see a game,” says Bill Tuele, the Oilers’ vice-president of public relations. “This would not occur in any other country on earth.”

Maybe so, but even diehard fan support is not enough to ensure a healthy bottom line. The Oilers have struggled to break even while the other Canadian-based NHL teams, except the Toronto Maple Leafs, are losing money, largely because of escalating salaries and, club officials say, high taxes. Hockey isn’t the only sport hurting, as Ted Rogers’ acquisition of the unprofitable Toronto Blue Jays baseball team highlighted last week. In Montreal, where brewing giant Molson Inc. has put the hallowed Canadiens up for sale, baseball’s Expos are running up losses on the field and the balance sheet. The Vancouver Grizzlies of the National Basketball Association lost $30 million last year, and expect more red ink this season. Meanwhile, the Toronto Raptors, Canada’s other NBA

team and corporate sibling of the Leafs, finished their season with 19 sellouts in the final 20 games and an undisclosed profit. “We’re doing great,” says Tom Anselmi, senior vice-president of

HOT TICKETS? {

Price per seat, including taxes Calgary Flames $15.75-$123 Montreal Canadiens $17.25-$ 135 Ottawa Senators $ 19 - $ 145

Edmonton Oilers $22~$110 Vancouver Canucks $26.75-$118 Toronto Maple Leals $35-$325

Toronto Blue Jays $7-$42

Montreal Expos $ll-$36

Toronto Raptors $20-$500

Vancouver Grizzlies not yet set for 2000

Maple Leaf Sports & Entertainment Ltd., which controls the Leafs, the Raptors and the Air Canada Centre where they play. “We’re focused on going up.”

Hockey executives say they face a common problem whether they operate in big markets—as do the Leafs, Canadiens and Vancouver Canucks— or smaller cities—in the case of the Oilers, Calgary Flames and Ottawa Senators. Player salaries, the largest single expense, have risen rapidly over the past decade due to free agency, and they are paid in U.S. dollars. But the majority of team revenues—derived through ticket sales as opposed to television rights— are earned in Canadian dollars. “The currency differential,” says Canucks president Brian Burke, “is having a catastrophic effect.”

There are other built-in disadvantages to being in Canada, he adds. Municipal taxes—about $3 million annually in the case of the Canucks, $ 11 million for the Canadiens—are much higher than they are south of the border. Canadiens president Pierre Boivin, who has lobbied for changes, says the 24 U.S.-based NHL teams are paying a combined $5.5 million (Cdn.) in local taxes this year. “Were getting whacked over the head,” says Boivin. “American governments understand the benefits of pro sport. Its very unfair.”

‘When only 5,000 come to the park some nights/ the Expos' chief says, ‘it doesn’t bode well’

Meanwhile, federal and provincial governments have been reluctant to provide financial assistance—witness Ottawa’s $20-million tax-relief package, which was announced and withdrawn within the space of three days last January after an enormous public backlash. Team executives also say their organizations have had to finance new arenas—Vancouver’s GM Place cost $165 million, Montreal’s Molson Centre $270 million and Toronto’s Air Canada Centre $265 million—whereas

U.S. state, county and local governments have put up as much as 75 per cent of the money in some places. The impact is apparent on the ice, team officials say, where only three Canadian teams—the Leafs, Senators and Oilers —qualified for last spring’s playoffs, but lacked the legs for a serious mn at the Stanley Cup.

Despite the red ink, team owners say they’re staying put for now. But two NHL clubs, the Senators and the

Flames, have gone to their communities with ultimatums—season-ticket sales had to increase or the franchises would move south of the border. After Ottawa’s financial-aid package was withdrawn, Senators majority owner Rod Bryden launched a 21-day campaign. By day 18, fans had met Bryden’s targets, bringing the team up to the league average of 12,500 season tickets.

The Flames adopted a similar strategy in mid-April after finishing the regular season without making the playoffs for the fourth straight year. Harley Hotchkiss, part of the Calgary team’s nine-member ownership group, revealed that the Flames could lose between $58 million and $72 million over the next four years. Season-ticket sales had slipped to 9,000 last year, and the Flames set a deadline of selling 14,000 by June 30, a goal which has been exceeded. The club has asked the city to lower or forgo $750,000 annually in rent for the Calgary Saddledome, where the Flames play home games. And it is in discussions with the province about getting a share of lottery revenues generated by wagers on NHL games.

The Canucks, meanwhile, are anticipating losses of $30 million in the coming season, says Burke. They have avoided ultimatums, but have a seasonticket campaign under way and hope to start with 8,500 sold. The Canucks had

just 6,000 season-ticket holders last year, down from 12,000 in 1995-1996. The team’s owner, Seattle businessman John McCaw, has instructed his staff to make hockey work financially in Vancouver, Burke says, but profitability is still several years off

The Grizzlies also have an American owner, Chicago billionaire Michael Heisley, who announced a deal to buy the team from McCaw in January for $231 million. Heisley has told Vancouverites he wants to keep the team in their city, but has stipulated that attendance—just over 13,000 last season, or 27th in the 29-team NBA—must improve. He has reportedly renegotiated the team lease at GM Place, converting a 15-year agreement into five years guaranteed, followed by two five-year options. After finalizing the deal for the team in May, he told reporters: “I don’t run my businesses to lose $25 million a year forever.” If there is one Canadian professional franchise whose departure appears imminent, it is the Expos. The team has been out of playoff contention since late June. Attendance has averaged just 12,000, though that is up from last year’s 9,500, the lowest figure in majorleague baseball. The Expos are also a rarity in pro sport—a team without any television coverage. Controlling shareholder Jeffrey Loria, a New York City art dealer who owns 35 per cent and is trying to buy out 13 minority partners, refused to sell TV rights because the Canadian networks offered too little money. As well, plans for a new ballpark to replace the decaying Olympic Stadium have been shelved, at least until the ownership is sorted out. “I am ever the optimist,” Loria told Macleans, “but when only 5,000 or 6,000 people come to the park some nights, it doesn’t bode well.” Empty seats, mounting losses and an uncertain future—unfortunately, that has become an all-too-familiar story in Canadian pro sports. ESI