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Richard Peddie says NHL lacks financial transparency

Richard Peddie, former pPresident and CEO of Maple Leaf Sports and Entertainment, says, ‘As the lockout continued through the fall of 2012 and into January 2013, I found myself siding with the owners on most issues.’

Deborah Baic/The Globe and Mail

What I have noticed is that newspapers love to run photos that cast Gary Bettman in a dark light. If they can make him look bad, they will. By 2013, he had been commissioner for twenty years. He is not a basketball guy – he is now a hockey guy, and he knows and loves the sport. Canadian media and fans are really down on him.

I read and hear the ugly things they say about him in letters to the editor or online comments or on talk radio. Yet Gary soldiers through. He gets it much worse than I ever did.

When he was badly booed while presenting the Stanley Cup in Vancouver, I immediately emailed him and apologized for the boorish behaviour of the Vancouver fans. Perhaps some of them were the same ones who rushed out and trashed the city after the game. I also found the way that Gary has been interviewed by Ron MacLean unacceptable (I'm thinking especially of the now infamous June 2010 exchange on Hockey Night in Canada, which was both vitriolic and confrontational). I guarantee that none of the NFL or NBA rights holders in the United States would ever treat a league commissioner that way. If CBC-TV loses its Canadian TV rights, that interview – it was an attack, really – might well factor in the league's decision.

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If he feels threatened by you, Gary Bettman may do something to hurt you, and he has many ways to do that: national broadcast deals, how many games he gives the CBC, the venue for the All-Star game, the venue for the annual outdoor game, another franchise coming into your territory.

I really like Gary. He was always good to me. He was always approachable, always returned my calls and was always willing to hear my ideas and give me advice. But Gary and I did not always see eye to eye. I was always pushing for more financial transparency. What gives Gary some of his power is the lack of transparency. I was a pit bull on numbers. My whole career was based on marketing, but I got good on finances. I'd ask deputy commissioner Bill Daly, "What are we making as a league?" I never got an answer to that question.

I would say at meetings, "I, as CEO of the Leafs, must provide full financial disclosure to our shareholders. Why doesn't the league do the same?"

New owners and GMs and their staff who go to NHL meetings are sometimes struck by the governance model. Like the NBA, the NHL is not a democracy. In the fall of 2012, the league locked out players who were asking for too much money. At one point, players wanted to continue getting 57 per cent of revenue at a time when professional football and baseball players were getting 50 per cent. But because there isn't enough transparency, the players don't trust the NHL's numbers and the fans don't understand how unprofitable the league actually is. In a report late in 2012, Forbes magazine listed the values of the thirty teams in the NHL. The magazine thought the Leafs were worth $1-billion, and valued the New York Rangers at $750-million, the Montreal Canadiens at $575-million. The St. Louis Blues, on the other hand, were worth only $130-million.

I question these figures – and the suggestion that the Leafs have operating income in the range of $82-million. It's actually more complicated than that. The Leafs' operating profits number is a little lower than the figure listed in Forbes – but again that is operating profits, not net income. I agree with the assertion that at least eighteen teams lose money, and again that is at the operating line. The team losses and the total league losses would be much more at net income (after interest, depreciation, amortization and taxes – all legitimate expenses). What I really don't agree with is trying to compare revenue sharing between the NHL and the NFL.

The NFL has a broadcast deal that gives each team about $110-million per year. That money essentially pays for each team's payroll. By comparison, the NHL U.S. broadcast deal is tiny and distributes only $5-million per team. The impact of this amount of media revenue and the difference between operating income and net income are things that most sports writers simply do not understand.

As the lockout continued through the fall of 2012 and into January 2013, I found myself siding with the owners on most issues. For one thing, revenue sharing is not the answer when the entire league is losing money. That would be like moving deck chairs around on the Titanic. For another thing, the NHL simply spends too much on its players. And big clubs such as New York and Toronto have spent millions in capital to generate their high revenues. As I write this, the Rangers are spending $1-billion of their own money redoing Madison Square Garden.

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The NBA also had about eighteen teams losing money, but now with lower player costs they are able to share more money, and almost all teams should be able to make money with this new collective bargaining agreement. I just wish NHL owners wouldn't go on shooting themselves in the foot by writing outrageously fat cheques to star players. This is the hot potato that the NHL commissioner has to handle.

Some fans want to know what Gary Bettman's salary is. I actually don't care what his salary is. I want to know about Phoenix. Why are we as a league keeping that franchise afloat? Should the Toronto Maple Leafs be helping out a chronically losing franchise? What's happening with the New Jersey Devils? Are they in trouble? The problem is that some 100 people attend when every franchise is invited to NHL meetings, and there are always leaks to the media. Maybe that's why Gary is not prepared to be fully transparent.

The NBA offers a useful lesson in the value of transparency. When David Stern came out and told the owners, fans, media and the National Basketball Players Association that the league was losing almost $300-million a year at the net income line, it quantified the financial challenge facing the negotiating parties and helped get a deal that will make the NBA's financial future more secure.

The NHL is a healthy league on the ice, with incredible parity (seven different Stanley Cup winners since 2005), and thanks to an excellent sales and marketing effort by COO John Collins, the revenue picture is solid too. But any talk of more revenue sharing makes sense only if the league collectively makes money.

The other thing Gary Bettman and I disagreed about was the size of the league. A lot of good people are trying to make the Southern U.S. clubs succeed, but I simply don't think that some of them will ever make it. I remember sitting in Gary's office about three years ago talking about contraction. I said we should have only twenty-four clubs, but we agreed to disagree. Gary won't talk about contraction, and to the best of my knowledge it was never fully analyzed – and, if it was, it never came to the board.

Excerpted from Dream Job. Copyright © 2013 Richard Peddie. Published by HarperCollins Canada. Reproduced by arrangement with the Publisher. All rights reserved. Hardcover and ePub editions of Dream Job will be available in stores and online Oct. 22.

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