JANUARY 26, 1978
The Business of Playing Hockey
AN ADDRESS BY John A. Ziegler, Jr., PRESIDENT, NATIONAL HOCKEY LEAGUE
CHAIRMAN The President, Peter Hermant
Ladies and gentlemen: Our guest of honour today, Mr. John A. Ziegler, Jr., is one of those extremely fortunate people who find themselves in a position which they thoroughly enjoy--and which affords them a living. As "King" Clancy of the Leafs says, "Imagine getting paid for doing something you love."
When asked by Frank Orr of The Toronto Star what would inspire a man to take over a hockey league in financial turmoil following a season in which only six of the eighteen teams made money, Ziegler replied, "It must be a misplaced gene. Really the job allows me to combine my vocation, law, with my avocation, hockey. Not many jobs do that."
Indeed they do not--but then not many chief executives can be accurately described as "hockey nuts".
"I played in Detroit recreational leagues a couple of times a week until I was 36," Ziegler admits. "In fact it browned me off when I had to give it up because of business pressures."
As president of the National Hockey League, John Ziegler must certainly know about pressure. Hardly a day goes by when the league and its problems are not discussed by North American media. Nothing, except perhaps relatively minor economic problems such as unemployment and inflation, gets more news coverage. At the centre of this storm--and living in the well--known goldfish bowl--is the president of the National Hockey League, only the fourth man to hold that position and the first American citizen.
John Ziegler was born in Grosse Pointe, Michigan, where he was an all-sports athlete at Lakeshore High School and graduated from the University of Michigan in arts and law. Almost immediately, his career became entwined with his favourite sport, hockey, and he became connected with the Detroit Red Wings hockey club. He served that organization as general counsel and as alternate governor, as well as serving on many NHL committees, eventually rising to become chairman of the National Hockey League Board of Governors.
Throughout his involvement with the League, John Ziegler has participated in negotiations, both internal and external, in all phases of hockey development. With such a background and such an obvious love for the game, he should have been an automatic choice for president once it became certain that Clarence Campbell was definitely retiring.
And this was indeed the case--except that he turned the job down.
Many club owners had advocated a stance for their president similar to such positions in other sports, notably baseball, basketball and football. "What's the word?" said Harold Ballard of the Maple Leafs (and now the Tiger Cats), "a dictator."
John Ziegler's interpretation of the presidency didn't agree.
With the passage of time, however, the NHL selection committee changed the emphasis that rests with the president of the League and re-approached Ziegler. This time he agreed-on his own terms.
"I will be the chief executive officer, not the commissioner of the League. Because the structure of the NHL is such that it doesn't need a commissioner. The power of the League is still within the clubs. . . . Idealistically, my aim is to bring economic and competitive vitality to the game. In short, we have to get more people into the seats and the best possible product on the ice."
Anyone who saw the NHL all-star game played Tuesday night last will agree that the level of play can occasionally reach peaks of excellence. These peaks have also been reached in international play which is a continuing story, the final chapters of which have yet to be written and perhaps we will hear more of that from Mr. Ziegler today.
Many believe that the future of ice hockey is in the international arena, and yet as Canadians we will probably always regard hockey as "our game", despite the lack of official national sport status.
As Anatole Tarazov, the exemplary Russian hockey coach said in 1969, "Canadian professional hockey is proud and touchy. Canada is the birth-place of this tremendous game. You invented it and you always want to be the best."
And Canadians want to see the best, as well. It is, therefore, a pleasure for me to introduce to you the president of the National Hockey League, John A. Ziegler, Jr., who will speak to us under the title, "The Business of Playing Hockey".
Ladies and gentlemen: When I received your very kind invitation, being a misplaced or displaced Yankee, I wondered "What is the Empire Club?" I was suspicious that it might be a front organization for the Monarchists, dedicated to recolonizing the United States. I called my friends, Bob Sedgewick and Alan Eagleson, and they assured me that I was absolutely correct!
Alan and I were at the all-star dinner the other night, and Frank Selke (who is I am sure well known to all of you), one of the great contributors to the National Hockey League and to the game itself, was being honoured and was honouring the National Hockey League. We have a new trophy called the Frank Selke Trophy. At the beginning of his address, he said "I was wondering what you might like to hear ... and then I thought, probably as little as possible."
My friends Bob and Alan tell me that this is the most impressive club in North America, that it boasts in its membership the leaders in business, industry, finance and the professions. That made me very curious. Certainly most of you must have read that last year in the National Hockey League, ten of its clubs lost eighteen million dollars. So I wondered what all of you, who have enjoyed success, could hope to learn from me, the head of an organization that lost eighteen million dollars. Then it occurred to me that you might like to hear about the tremendous decisions and the wisdom that brought us to that position. And I thought maybe we might take a few moments and talk about that history, which will tell us where the National Hockey League is today and how we got there, with a few comments about where I think the National Hockey League will be in the next few years.
As probably most of you know, before 1967 the National Hockey League was a small club of six franchises which existed basically upon whatever they could do in their own buildings and solely dependent upon gate receipts. The National Hockey League is an unincorporated association, not for profit. I'm sure all of you know exactly what that means. If you don't, ask your lawyers, and if they tell you would you please call me and tell me. The National Hockey League is a business. Its business is entertainment. The entertainment it presents is sport.
It is the braiding of those three interests, those three concepts, that make it unique, that create its problems, and create the difficulties in solving the problems we are facing, the obstacles that we have to overcome. It is in its history, moving from a business providing entertainment when there were only six member clubs, operated somewhat as a private business club, that we find the genesis of some of the problems we face today. In the late 50s and early 60s, we were playing at a low of 90% capacity, over 100% capacity in some of the arenas. This was before Alan Eagleson. Wages were at a reasonable level. And there were no bounds to what hockey could do. You may also remember that in the 50s, all the sports were into expansion; big television dollars were being flashed in the newspapers as being paid to sports. The National Hockey League wanted to be part of that, and particularly to grow in the United States. So we conceived expansion and put it into effect.
I suggest to you that you consider your business or profession. If you contemplate expanding it in one year by 100%, and think of the problems that may present to you, you may have some idea about the problems that were presented to us.
Unfortunately, looking back, we can see that we did not plan well enough; we did not foresee those problems. However, we did know that there would be the accusation and the fact of a dilution of product. There would not be as many good hockey players per team as our public had come to expect. But we knew that over a period of two to three years, that would take care of itself. And I believe that we were correct in that.
We did not plan, though, for the business problems, the tax problems, the legal problems that we had, and we did not plan for the management and coaching development. Nevertheless, we were still getting along pretty well. Vancouver and Buffalo came in. We are very proud of that expansion. As a matter of fact, so far as total failures are concerned, we have only had two: Kansas City and Oakland. As you know, Oakland was a failure we refused to admit for a long time, and it has cost the League about eleven or twelve million dollars, which is part of our problem today.
Even with this, we were still coming along fairly well. But with expansion, came lawyers. I'm proud of my profession, and I also think I am a realist, but if I wasn't, my introduction at the National Hockey League Board of Governors imposed realism on me. My good friend, Bruce Norris, asked me in 1966 if I would act as an alternate governor with him at the Board of Governors meetings. As I mentioned before, the League was like a private club. There weren't many lawyers around. Mr. Jennings, President of the New York Rangers, was a lawyer and a governor, but he didn't act as a lawyer; he acted as president of his club. Mr. Campbell was a lawyer, but he acted as president of the League. So when I was introduced to the small group, I was introduced as Bruce's friend, a man who liked hockey, who was a lawyer but "don't hold that against him".
As soon as we expanded, we were faced with lots of legal problems. The expanding teams had legal considerations, tax considerations, and they all showed up with lawyers, so not to be outdone, the other clubs had to get their lawyers. So now we have eighteen governors and eighteen lawyers at every meeting! Somebody said that in 1966 and 1967, the years when the lawyers came in, that we were anticipating the Chinese Year of the Rat.
At the same time, there came on the scene lawyers for players. At that time, Alan Eagleson was introduced, and the National Hockey League's Players' Association, a formalization of the owner-player arrangement that had gone on before. At the time, we viewed it with great trepidation, but I think our fears were misplaced; at least they were in the wrong direction. We were still in the position of being able to overcome some problems that we hadn't planned for.
Then, out of the west, came the thundering genius and financial acumen of those gentlemen who had brought the world the American Basketball Association and had gone on to mountains of unpaid bills with the World Football League, and thus was created the World Hockey Association. And out of that came the biggest cause of that eighteen million dollar loss last year.
With the war, and it was a full-fledged war, we went into a war posture. That posture was, "Thou shalt not take our player talent; thou shalt not beat us at this game we have worked hard to develop." That war moved into the courts at an expense of well over one and a half million dollars in legal fees and litigation, a burden that none of us had planned for or anticipated. If I had anticipated it, I would not have been with the League; I'd have been out acting as a lawyer! With it came the need to protect and retain our players. Whereas our payrolls may have been half a million dollars in the early 60s, today they are over two million dollars. I would suggest that you think about that kind of growth in expense in your own business over a period of four or five years, and you may have some appreciation of the problems of the owners and the League.
In protecting and securing our players, we had to pay them more to meet the competition. But that wasn't enough. We had one more idea of genius. In our contracts, for years and years, we were able to terminate a contract by giving notice. Our contracts were part of our assets; as a matter of fact, the major part of the assets of our clubs. With one stroke of the pen, and without any urging from Alan or the Players' Association or anybody else other than advice of counsel, we struck out voluntarily our right to terminate a contract. There were approximately four to five hundred standard player contracts in the National Hockey League--those were our assets--and by that stroke of the pen we immediately created no-cut contracts, four or five hundred obligations or liabilities.
It did another thing. Whereas a player could have been terminated before, and thus have to look for a job somewhere else if his performance wasn't up to standard, he now had security regardless of whether he played at 50% or 75% or 80% of his capacity. He would still get paid and he would be paid for the duration of his contract. I am sure you see that our coaches and our managers had a motivation problem from that point on.
That problem stayed with us through at least part of last year. With Alan's leadership, with the leadership of the Players' Association, the players began to realize that they are responsible for the product on the ice. I think we have that problem well on the way to being solved.
Last year, nine million people paid to see our games. That does credit to the kind of business, entertainment and sport that we have. From a percent of capacity in the arenas where we demonstrate our sport, we probably have the greatest percentage of any professional sport.
In the United States we hear that we must be a minor league sport because we are not on a major television network. That logic always escapes me. This year we will have 577 telecasts of our games. Next to baseball, we probably televise more games than any other professional sport. We will have 1,200 radio broadcasts in North America, so that those who suggest that we are less than a major league sport speak from a logic that is totally falacious.
Our product today is bigger--it plays in more places, it is seen by more people than ever before. The competition on the ice is better than it was last year. Some of our severest critics are our general managers, and they tell me this, so I believe them. I think the games I have watched are better. Nobody is sure of two points when they go into any arena today.
The actors in our performances, those very talented young men, are bigger, stronger. They are better hockey players than ever before. They shoot harder, they have been better trained, they are in better physical condition. More science goes into their training, more sophisticated coaching technique, than at any time in the history of the National Hockey League.
The product is going to get even better. Alan and I were noting the other day the number of first round draft choices who were playing so very well for our teams this year. We have to go back a long way to see that large an influx of twenty-year-old players into our League. We even had two on the All-Star Team in their middle twenties, and the major portion of our outstanding players are between twenty and twenty-six or twenty-seven. If Guy Lefleur wants to follow in the footsteps of Gordie Howe, we will have the pleasure of seeing him play for another twenty-four years!
In the presentation of our product, we are involved in a dialogue, between the owners, the players, the general managers. I am not certain that we are satisfied with our present presentation. At least, it is under examination. By presentation I mean, do we keep our present divisions? We now play what we call a balanced schedule. We try to play each team an equal number of times. There is a proposal that we should play an unbalanced schedule, playing some teams more and others less. We have heard criticism that our audiences don't know the players like they used to. They don't have a chance to identify with the good guys and the bad guys, and perhaps if they saw certain teams more often the "we versus them" concept would have more chance to develop.
This is a debate that is going on right now. There is no clear-cut answer. Part of the reason is this unique creature we have in the League--this business, entertainment, sport aspect. You can do something one way which makes sense from a business standpoint, but it may not from an entertainment standpoint or from a sports standpoint. It may from the point of view of sport and pure entertainment be in the best interests to eliminate twelve teams and reduce to six again and take all the best talent. But that logic suggests that you then go down to four, and then to two, and from a business standpoint that doesn't make sense.
Looking ahead, if I were outside of the League and had some interest in the game, these are the kinds of questions I would be asking about the future. When you read about the answers, which may be termed "idiotic" by the media, I ask you to remember that they are the result of the mixture of these three concepts. If they don't make 100% sense from a sports standpoint, always remember to add in the entertainment and the business aspect, and perhaps you can come to a closer understanding of the decisions we will make.
I want to talk about the consumer--you--the person who buys our season tickets and goes to the games. Our audiences are the kind of audiences advertisers like to see. 62% of our audience are in the income bracket of $20,000 and above; 21% of that audience has had post-graduate training; 26% are college graduates; 21 % have had some college and 22% are high school graduates. In other words, close to 90% are high school graduates or above. Over 62% are at the career levels of mid-managership, ownership or professions. As for age, 18 to 24 make up 12%; 25 to 34, 33%; 35 to 49, 40%. 1 also have another statistic:
72% are married. I don't know quite how that fits in, but I guess if you earn over $20,000, you are a high school graduate, you are in mid-management or a profession, and you're over eighteen, there's a good chance you're not single!
As we go into the next ten years in the National Hockey League, we must be aware of who our consumer is. Those of you who deal with consumers probably know more about this than I do. The men in advertising and sales tell me that we have changed as consumers. We are more flexible than before, but we are more demanding. We want more value. A person isn't so much interested in just going some place as he is in what he is going to be doing when he gets there.
Ernie Jones, a friend of mine and head of Darcy McManus Advertising Agency, addressed the Detroit Bar Association last summer. He had a description of our consumer which I found both pointed and entertaining and I want to share it with you. Ernie said, "The consumer has become a wary canary. Circumstances have made him the complete cynic. Everything he likes or wants, from saccharine to cigarettes, is doomfully reported as causing cancer or cholesterol. He is beginning to believe that the laboratory rats are the only ones having fun."
We must be concerned with our product on the ice. I am convinced that with the talent of the young men (and 85% of our players still come from Canada), the continued enthusiasm with the sport in Canada, the continued growth of hockey in North America, that our product is going to get better. But we can't just sit back and expect it to happen. We must improve our coaching techniques. They have improved somewhat, but I think it is an area in which we have fallen behind or not kept up with the times. Our management techniques must improve and I think as we see more management people coming in we find that they are more thoroughly trained than in the past, they have more education, they have worked harder at their profession than in the past. At the management level, we are seeing more professionalism which encourages me that we are going to get better at that level.
We have a number of problems to solve, and we must choose our directions for the future. One of our largest assets, and I think we stand far above all the other professional sports, is our relationship with our players. The owner-player relationship is one that has been developed basically in the last ten years. It has been developed both from the owners' standpoint, and from the players', led by Alan. When the Players' Association was in its early stages, I think players were reluctant to be identified with it. They were afraid management would send them to Siberia, and in the early years those fears might have had some justification! By the same token, ownership looked at a player who joined the Association or became a player representative as an enemy or as disloyal to his team. Fortunately, for the most part, both players and owners have gotten past that rather Neanderthal type of thinking.
What we have seen take place in the Players' Association, and I know as a result of Alan's encouragement and persuasion, is that the player who shows up as the player representative of his team is now in one of the star or leadership categories. So now we not only have leadership of a business standpoint there but we also have the people who are starring on the ice. Thus they can speak with authority. The most obvious example is Bobby Clarke, the President of the National Hockey League Players' Association, and I don't have to tell you the kind of leadership that he has provided on the ice for the Philadelphia Fliers. He has provided that kind of leadership with Alan at the Players' Association.
You may think I am taking a lot of time on this subject, but I repeat, that as we go into the future this is the biggest asset that we have, and it places us far ahead of the other major-league sports. We were pioneers in developing the collective bargaining agreement between the Players' Association and ourselves, and even though we had a set five-year agreement we have been able to continue a relationship that has called for amendments which we think are improving the game. The players have made some substantial concessions just this last year. They have agreed to eliminate the no-cut contract, that provision which placed us in the very difficult economic position in which we found ourselves. In effect, they gave up their security and agreed to rely on their performance, and that was a tremendous concession from them to our sport.
The reason we have this, though, is not because of the leadership of the owners, not even because of the leadership of Alan, but because this sport fortunately commands a love of the sport. When push comes to shove, when we are sitting on opposite sides of the table, so far we have always been able to work out a compromise on the basis of what is best for the sport. As long as that attitude remains with the players and the owners, I know we will be able to make the right decisions.
We are going to be on major network television in the United States, if not this year, then next. The League may have some contraction first, but it is going to continue to grow. So many people have done so much to make the National Hockey League what it is, I feel very privileged to be involved. I feel great pride to have the opportunity to associate with this sport because I know it is going to get bigger and better.
Thank you for letting me take your time to talk about something I like so much.
The appreciation of the audience was expressed by Lt. Col. R. G. Douglas, O.St.J., C.D., a Director of The Empire Club of Canada.