The Business of Playing Hockey

I want to talk about violence. What a great term. It means something different to different people but when it comes to deciding rules and penalties it doesn't describe anything. And I have no respect for the people that use it helter skelter without definition. Let me give you an example. I took my daughter to a game a number of years ago and the Detroit goal keeper got knocked on his fanny with a slap shot. It knocked him right down and she said: "Daddy, it's so violent:" So if I were to ask her what is violence, it would be a slap shot that knocked a goal keeper over.

High-sticking and intentional injury are acts of aggression and the National Hockey League is proud of its record of continuing legislation and discipline to take these elements out of the game. This year there is less high sticking than ever before. We had less supplementary discipline - that is the intentional injury or the attempt to injure.

Now when it comes to how we deal with it, that's the discipline process. One, it has to have a fair process built into it. There has to be a system of justice involved in it. Ours is based on a contract with the players in which there will be a fair hearing and in which penalties will be imposed after that process. We have the toughest penalties in any professional sport for acts of aggression by one player against another. Compare it sometime - the others don't even come close. In the last 10 years, the National Hockey League has passed more legislation dealing with the aggressive behaviour of players on the ice, more legislation in the last 10 years than in the 63 years before that.

Now, fighting. This will be, always has been, and always will be, an issue that the fans, the investors, the players, will continue to deal with. It is a question that will come before us again: should we have stiffer penalties with respect to fighting? It is not a black and white issue - it never has been, but we have a process through which we deal with the issue. And it will be dealt with.

Eleven years ago when I was last here, I was completing my first year as president and the National Hockey League had accumulated a loss of $100 million. Well, as the late Senator Everett Dirkson said, we're talking about a million here and a million there and a few million over there and pretty soon we're going to be talking serious money. I assure you $100 million to the National Hockey League was pretty serious money. It is today and it was then. Our existence was threatened.

Today we have accumulated a $60-million profit over the last three years. From a business standpoint, we are proud of that turnaround.

As I mentioned before, if you really want to understand hockey, remember it is composed of three elements; it is a business first; the form of business is to entertain; and the form of entertainment we present is the greatest game in the world, hockey.

Eleven years ago we had sold 72 per cent of all available seats. Not bad for a live entertainment and a great base to build on. This year for the season we will have sold 87 per cent of all those seats.

As a matter of fact, I was just told today that in the last five weeks of this season, we sold 96 per cent of all the seats there were to sell. For the last five years in the playoffs, we have been running at 96-per-cent of capacity. I don't think there is another live entertainment business in the world that does that well. Now, if I sound like I'm a little proud of that, you bet your bippy I'm proud of that. Not because of me, but because hockey is the greatest team sport ever invented.

All of these good things are the result of a team effort. It is a team of owners, a team of players who have worked together. We've had to take some bumps; we had to make some investments; we had to lose some money; the players had to give us back some things so that we could economically straighten things out. But as a team we put this together.

This year, 13 million people in North America will have watched NHL games. When I was here 11 years ago, it was nine million. Back then, we had three teams in Canada, this year we have seven. The players average salary 11 years ago was $92,000 per year. This year, it's over $200,000 per year, plus an accumulation of other benefits that makes the National Hockey League player, from a security standpoint, one of the best provided-for players in any professional sport.

Part of our business plan to turn this baby around back 11 years ago was an age-old formula. It is very secret and I hope you'll promise not to tell anybody. What we had to do was get a hold on costs and the incoming revenues. Now, that's a very secret formula - just don't let it out of the room. We adopted a business plan, to make the game more attractive to the customer. We had to raise prices, we had to make the product more attractive. We had to do it in two ways.

First, there were too many teams playing hockey in North America. Our old enemy, the World Hockey Association, was out there presenting games purporting to be major league hockey. It was taking talent and there wasn't enough talent to support World Hockey Association teams and the NHL teams. We were giving the people in the middle 1970s a very bad product. We were able to consolidate. My friend, Alan Eagleson, always called it a merger, I always called it expansion. We've moved closer together; I now call it the expansion-merger of 79. In any event, the WHA went out of business and we added four teams. With that consolidation, there was also a consolidation of job opportunities. At the same time, there was an influx of players - new and younger players coming into the League - who were competing for jobs and making the product better. The player coming into the League has been better trained. He has better nutrition; he was a bigger and better athlete; he was better educated; he was more ready for coaching. The Metro junior league here and leagues all over Canada and colleges in the United States began to feed in better and better players to present this product.

We then looked at our ancillary revenues. When I was here 11 years ago, 92 per cent of our revenues came from gate receipts. Today it's 70 per cent. Twenty per cent comes from television, 10 per cent from marketing and other activities. When I was here 11 years ago our gross revenues were $82 million from all sources. This year our gross revenue will be over $350 million. It's a much bigger business and it's going to get bigger from now on.

In television, we set up a business plan.

In Canada, hockey being Canada's passion, through Hockey Night In Canada, with the Molson support, you and I for years were able to watch Hockey Night in Canada on Saturday nights. There was a national package and there was support for our local teams in Canada. There was a dearth of television dollars and support in the United States and that had to be addressed 11 years ago. In Canada there were 25 games across the country in national telecasts and approximately 10 would be telecast on a local basis. In the U.S., 500 on a local basis and approximately 25 on a national basis.

This year, in the United States, there will be more than 800 telecasts locally and nationally we will telecast 50 across the country. In Canada, the local telecasts have gone up to 150 and we more than doubled the national telecasts. There will be approximately 56 by the end of the playoffs.

In the United States, we knew that we would not become a sport for the national networks. The people in the south and southwest don't want to watch hockey and, as a business, it would be bad for the networks.

We had to find an alternative. One thing we saw when we examined hockey in our markets was that where hockey was played, where the NHL was present, there was great support for the team, great loyalty of the fans to this team. Cable came into being about this time and became deregulated. We restructured our internal legislation within the League so we would be in a position to take advantage of the opportunities that we believed cable would present to us. The reason that 20 per cent of our revenues are coming from broadcast today is the leveraging in Canada of the product and our position of going into cable in the United States.

There are some who say we are shortsighted that we don't have vision, that we don't plan. Our broadcast plan was drawn 11 years ago to be ready for cable deregulation, and the advantages we saw. It is beginning to show the returns. As a matter of fact, I was on a panel in Boston, talking about sports and broadcasting. And the president of sports at one of the major networks told the audience that the National Hockey League has one of the most enlightened broadcast strategies of any of the professional sports. That was quite a compliment and we appreciate it.

I would like to talk about our product. We changed our product to try to create rivalries and also to create a product for cable, local, regional identity which we believed was going to leverage our business and our sport.

As you may remember, we used to play a balanced schedule. We went to an unbalanced schedule playing within divisions; creating the rivalries; keeping the playoffs within the divisions, up through and into the conferences. This has paid off.

If you look at our attendance rise, it went up directly when we changed. Our increase in playoff attendance goes directly back to the point and time when we made that change. That was our business plan. Like all of you who make business plans, you have to have a lot of luck to make it work. We're proud to say we had a lot of luck and it did work.

Where are we going? What about the future? First of all one of the key factors that has got us here is the National Hockey League Players' Association. They had to make some sacrifices in the beginning for us to be even able to put a business plan into effect and they did that. One of the things I'm proud of, and I know AI Eagleson is too, is that we have taken the owner-player relationship and used it as the means to solve problems. We do not go out to confront or compete.

The question that we have between us is, what is the fair share of this business that should go to the players? What is a fair compensation for the players? That's a subject that we have legitimate differences on. And we sit at the table and work it out.

Part of that process is, how do we make our business better so that there is more to share? Our players' association has been the leader in this field. In all professional sports we are willing to sit down and consider how it can be made better for everybody.

One of the things that I'm particularly proud of is that the hockey players, including stars, are usually at the bargaining table. They are making sacrifices in the present for the future. That's a legacy they are passing on because it may be nine or 10 years before all of the fruits are realized and their careers will be over. But these young men love hockey. They have a feeling for it and they're willing to make that sacrifice and have done it and that is why we've been able to prosper. Of the $350 million which we will generate this year, if you take all of the benefits that go to the players, approximately 45 per cent of those revenues will be returned to the players in some form - salaries, bonuses, awards, insurance, pensions, and so forth.

Now our challenge for the future is how we maintain that relationship. In order to do the things we want to do, we are going to need a very solid partnership with our players. It's a challenge to ownership and it's a challenge to me. l mentioned this to Alan the other day. We have a basic conflict. You see it in the other professional sports. They've not solved it, they've tried to solve it by confrontation. Just look at Mr. Garvey with his football association when he was leading them to two strikes. It cost those players, in salaries they will never get back, more than $100 million. That's what confrontation does at the bargaining table.

Here is the challenge to anybody in professional sports today. A player's career is short and he has this belief and feeling and it is legitimate. He says: "I must get as much out of this as quickly as I can because in four, five or six years, my career is over and I get no further benefits".

The ownership approach, of course, is different. It comes from an investment standpoint. It is long-range and you want to keep your costs as low as possible in the short-term. So there is a basic conflict. This is what I've challenged Alan with and what I've challenged the owners and myself with.

How can we give this player a participation in the future growth of this League? How can we say yes we are going to pay a fair salary and yes we're going to give you the benefits, but we also want to give you something so that you know that as this League grows, despite the sacrifices you make now, you're still going to be a participant in that financial growth.

Those of you who have followed the negotiations with our players' association will know that we started on this at the last contract. We did a historic thing last year, unprecedented in professional sports. What we did is called our security package and we bargained with the players that any player who basically plays 400 games (a five-year span) essentially is guaranteed at age 55 a quarter of a million dollars. This is in addition to his pension and in addition to all the other benefits. The player gets this by giving five years of his life to the NHL. Then, he knows that he has a quarter of a million dollars when he's age 55.

I don't think any other business does that. But that was part of that partnership, part of that concept of doing something so the player knows that he has something in the future and he knows that he is going to benefit from the growth as a result of the sacrifices we asked him to make.

There is another unique aspect of our relationship with our players. We have, again, the only case in professional sports, a partnership. Our players are entrepreneurs. They are, for example, joint venturers in international hockey. Profits from international hockey are divided 50 per cent to the players and 50 per cent to the owners.

All of the profits go into the players pensions. Not only regular pension, but also supplemental pension. This partnership has produced for players more than $10 million over the last 11 years and we expect it will continue to produce at an ever-increasing rate.

The international arena is where we will see the NHL making new and bigger steps and a great deal of growth. Most growth will come out of the broadcast area. Second will be in our marketing. For the time being, we will be presenting some events, but they will be on a limited basis.

This year, another piece of history: for the first time in the NHL, two teams will be visiting the Soviet Union - Calgary and Washington. They might even be the finalists in the Stanley Cup. We think that Europe, Asia, the entire world are a marketplace for hockey. But we are not going to neglect North America.

We are going to continue on our business plan with television and, yes, Virginia, there will be expansion. We will be adding new teams. We are going through a process right now of assessing how many, how we will add them, where we will add them and when we will add them.

We are going through a business process of analysing the market both internally and externally. I was looking at the requests for considerations that have come in the last six years and the list now runs to about 25 to 30 cities throughout

North America who want to be considered. So we know there is a demand. This time we want to make sure that we avoid the mistakes we made in the past. We want to make sure that when we do expand, it's part of our business plan.

This last year, a committee of owners with me and with professional help, set the goals for the NHL for the next 10 years. Basically those goals, from a business standpoint, are growth, commitment to the continued improvement of the game and, one that was most pleasing to me, a commitment to invest in the development of the game at the youth level.

We are beginning to draw plans since we now seem to be moving into a profit picture which has some stability-to put more back into that growth, more back into seeing young hockey players such as we have here today, continue to come in. Even if they don't make the NHL we know that every young man or young woman who plays the game of hockey, becomes a hockey fan for the rest of their lives because it's the greatest game to watch as well as play.

Sgt. Pelletier is here. You've seen the Drug Awareness booth. We've had a partnership with the RCMP and the Drug Enforcement Agency in the U.S. I want to mention that because our drug policy is very simple it could only be a policy of the League if it was supported by the players. When it was first declared, our players' association, unlike any other players' association, stepped forward and said they support the policy.

The policy is a simple one. It says if you are involved with illegal drugs, you are suspended. We don't want you. Now a lot of people find that lacks compassion. I'll admit that it does, but I'd rather stop five young men from even trying it than worry about rehabilitating somebody who has violated this rule. Our clubs will help the players, but I don't want them playing in this business, not while they're involved with illegal drugs.

The support we've had from the RCMP and their programs, and I think they would agree the support they've gotten from our players, probably lead all of the Leagues as far as stepping out and saying: "No to drugs."

The last subject I want to chat about, and I'll be brief, is one I feel very special about. The Hockey Hall of Fame.

We're moving, and as you know we're going into one of the treasures of this city, and as a matter of fact perhaps one of the treasures of North America. The historic Bank of Montreal building at Yonge and Front Streets in the heart of Toronto is going to be the site and the future home of the Hockey Hall of Fame. It's not just going to be a museum. It's going to be an entertainment facility. It's going to be something that Torontonians are going to be proud of. Anybody connected with hockey will be especially proud of this.

It is an $11-$13 million investment that we will be making. We'll be looking to community and business support to carry this investment. We think it will be on an ongoing paying basis. We think it will be the centre of attraction - certainly for Toronto, for Ontario, for Canada and certainly throughout the hockey world.

As I look at it, it will be the world's cathedral of hockey and if you've ever entered that old Bank of Montreal building, you will know what I mean. The tradition of hockey and the tradition of this great country are right there. Thanks go to the city that saw it must be a landmark building and preserved. And those traditions and that feeling that you get as you walk in there will be preserved under our care. As I say it's the world's cathedral of hockey, it'll be the shining light for Canada and as I say it's going to be the shrine in which we place that "holy grail:' That's where the Stanley Cup will rest. If you have ever been on the road with the Stanley Cup, whatever hotel we take it to, lines form outside, just to walk by and look at the Stanley Cup.

Well I respect that, so that's going to be a treasure. It's a treasure for the National Hockey League. It's a treasure for Canada and I thank the Mayor and I thank Johnny Wayne who led the committee. I thank the council that saw to it that we could have this special building for the enshrinement of perhaps the greatest trophy in all sports.

Thank you very much - it's a privilege to be back.

The appreciation of the meeting was expressed by Barnett Danson, P.C., a Director of the Empire Club of Canada.