Maple Leaf Sports and Entertainment: ‘We are hitting the reset button’

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Within days of closing their $1.3-billion deal for a majority stake in Maple Leaf Sports and Entertainment Ltd., top executives at BCE Inc. and Rogers Communications Inc. were presented with a stack of blue three-ring binders, each about an inch-and-a-half thick.

Inside were the secrets of the company, including its crown jewels: the Toronto Maple Leafs hockey team and the Toronto Raptors basketball franchise. The pages contained the strategies, successes, challenges and missteps – and there were many of those – for each team over the years. It was a primer of sorts, financially and operationally, for the new owners.

The problems facing the Leafs and Raptors were no secret. Anyone paying attention knew the teams were perennial losers, among the worst performers in their leagues. So when executives from each company sat down to pore through the material, several flipped directly to the sections detailing how each team planned to dig itself out.

As blueprints go, the Raptors section was a disappointment, but the Leafs strategy was even less inspiring.

After years of futility on the ice and on the court, the teams offered few solutions beyond vague promises of cultural shifts and better recruiting. If there was a road map for fixing two of the longest-suffering pro sports teams in North America, it wasn't in these documents.

The binders confirmed to MLSE's new owners that dramatic steps were needed to rebuild a sports organization that for years has struggled with leadership issues and boardroom conflicts. On Wednesday, fans got the first clear signal that the BCE/Rogers era has officially begun, when MLSE president Tom Anselmi announced the firm was firing Maple Leafs president and general manager Brian Burke – a move that stunned much of the hockey world, since it came just four days before training camps were set to open after the lockout.

"Clearly the timing was strange," Mr. Anselmi said Friday in an interview. "Obviously the timing of when the sale closed, the timing of the lockout, the start of the season mid-year, all of that conspired to make it bad timing."

The sacking of Mr. Burke, according to sources familiar with MLSE who spoke to The Globe and Mail, is part of a longer-term series of strategic changes by the two communications giants. Rogers and BCE are an unusual pairing – fierce rivals in the wireless, telephone and cable TV business who together acquired 75 per cent of the franchises in August. Their ambition is to rebuild a sports organization that they hope will deliver bigger audiences for their portfolio of television and wireless customers, and more profit to their bottom lines.

But there is risk in the effort, too. For generations, Toronto hockey fans have cast blame for the Leafs' lack of success on its owners – first the meddling Harold Ballard, who turned the club into a circus; then the Ontario Teachers' Pension Plan, which was accused of caring only about financial returns and being indifferent to the team's performance.

But Teachers, accountable only to its members and the Ontario government, could safely ignore the catcalls from fans. For BCE and Rogers, each with millions of customers in the heart of Leafs country, the public-relations stakes are somewhat higher. Losing could rub off on their brands. They bought control of these teams, paying a price that values the Leafs alone at $1-billion. Now they have to show they're capable of fixing them.

"We are hitting the reset button," said a source close to MLSE's board, speaking on condition of anonymity, about the significance of the firing of Mr. Burke. Long-time understudy, Dave Nonis, has been handed the GM reins, but that is more of a battlefield promotion than a deliberate succession plan.

Though BCE and Rogers are now facing heavy criticism for the optics of making hasty moves, the companies are of the belief that if the teams return to winning, "it will cure all blemishes," the source said.

It is the beginning of a restructuring of a company designed to bring more accountability to MLSE, which has always operated as a private entity not subject to the kinds of scrutiny that public companies must answer to.

Firing Mr. Burke not only points to new management of Maple Leafs, but also to an act of solidarity against an MLSE shareholder who has been a dominant force on the board for years. Construction magnate Larry Tanenbaum, who owns 25 per cent of the company and has been chairman since 2003, was vigorously opposed to dismissing Mr. Burke, according to a source familiar with the situation.

Facing off against Mr. Tanenbaum is another key shift. At most corporations, his smaller ownership stake would limit Mr. Tanenbaum's influence. At MLSE, he has enjoyed unusual sway in many aspects of the sports company over the years. "He thinks he runs the business," said a former MLSE director who declined to be identified.

Sources said Mr. Tanenbaum was surprised when Rogers and BCE proposed jettisoning the GM. "There is a war going on at MLSE right now," said a person familiar with the decision.

Losing hits the Raptors and the Toronto FC soccer club in the pocketbook – it creates empty seats. The Leafs, on the other hand, are a profit machine thanks to a large, loyal fan base. "The last time the Leafs won the Stanley Cup I was one year old, and you know what? I watched them [growing up]," said Greg MacDonald, head of research at Macquarie Securities Group. "This seems like a fool-proof business model – they don't have to put a good product up and people watch it."

Yet, losing takes its toll in other ways. Andrew Zimbalist, a professor at Smith College in Northampton, Mass., who has written about sports economics and worked as a consultant in the industry, said one of the "dangers" of large companies owning sports teams is that the relationship between the franchise and the community can suffer.

"If the corporation plays its cards right, they realize the sports entity is very much an emotional product. You know, it is not like buying a good hamburger or buying a good car. Fans that like a sports team are opting into it because it is something that they enjoy, it is something that makes them feel a part of a community."

The remake of MLSE is expected to come from the top down. After former MLSE CEO Richard Peddie announced his retirement and Teachers completed the sale of its stake, MLSE began to search for a new person to run the business. Mr. Anselmi, who is president and chief operating officer, is the face of the organization for now, but the search for a CEO remains active, a source close to the board said.

"Obviously, I would aspire to the CEO title," Mr. Anselmi said. "Who the CEO is, is the most important decision any board makes. They have the right to test me and see if I'm the right guy."

For Rogers and BCE, the choice of the next CEO is important. The surest way to ensure their investment pays off is to build winners.

"All owners want to win," said communications entrepreneur John Bitove, who founded the Toronto Raptors. "But when you have TV and radio and other media properties riding on the success, and the ownership is the same, all the more reason why winning is essential."

"Without owning the media properties it was about ticket prices, hot dogs and hopefully making the playoffs," Mr. Bitove said. "Now it's much bigger. It's about getting and keeping people's interests."

As they bring new leadership to MLSE, it's still an open question which direction Rogers and BCE are headed. But they are showing sings of wanting swift action.

On Wednesday night, less than eight hours after the announcement Mr. Burke had been fired, fans arrived at the Air Canada Centre to find the sign at popular hot dog stand "Burkie's Dog House" had been hastily taken down. No sign had been put up in its place.

Changing the names will be the easiest part of the job for MLSE's new owners. Changing the performance will be much harder.