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Leafs fan Mike MacDonald from Mississauga, wearing his STANLEYCUP named team jersey. Peter Power/The Globe and Mail. (Peter Power)
Leafs fan Mike MacDonald from Mississauga, wearing his STANLEYCUP named team jersey. Peter Power/The Globe and Mail. (Peter Power)

Part 2 of 3

MLSE: Losing at all costs Add to ...

The Toronto Maple Leafs passed on their chance to be the New York Yankees of hockey. They could have crushed NHL opponents with their financial might before the 2004-05 lockout, paying whatever it took to attract the best players on the planet.

They did spend: From 1998-99 through 2003-04, the Leafs jacked payroll to $61.8-million from $34-million and were rewarded with 41 home playoff dates, trailing only the Colorado Avalanche and New Jersey Devils in that department. During that same period, however, their payroll never ranked higher than fifth overall, and they failed to reach the Stanley Cup finals even as the Avalanche and Devils brought the Cup home.

Ownership supported payrolls just high enough to ensure respectability each season, and then came the lockout. Even as parent company Maple Leafs Sports and Entertainment was becoming ever more powerful financially, planning to build condos and expanded its arena business, the Leafs supported a salary cap during the labour negotiations. That hard cap wiped out the Leafs' potential financial advantage over competitors.

Current and former executives are consistent in describing a company willing to spend; but some also describe a corporate environment that made it difficult to clearly define objectives.

Mounting evidence suggests that MLSE's first priority for its hockey, basketball and soccer franchises is to hit certain financial targets on an annual basis, arguably at the cost of winning. In contrast to teams run by the likes of the late George Steinbrenner of the Yankees, Jerry Buss of the Los Angeles Lakers and Ted Leonsis of the Washington Capitals, MLSE clubs have been reluctant to roll the dice and paper over mistakes with cash.

The question: Does MLSE, majority-owned by Ontario Teachers' Pension Plan, have the corporate nerve to do what it takes to win? Does operating in a conventional corporate environment negate the opportunity for its teams to become exceptional by following riskier, entrepreneurial strategies?

The current NHL cap system favours teams that bottom out, as did the Capitals, in order to acquire top young talent through the draft. But the Leafs, in order to appease a subscriber base that pays the highest rates in the NHL, continue to strive for annual respectability - at worst. To wit: In his highest-profile move, Leafs general manager Brian Burke traded two first-round picks and a second-rounder to the Boston Bruins for Phil Kessel, a one-dimensional sniper. With that first first-rounder, the Bruins drafted Tyler Seguin, a player drawing comparisons to a young Steve Yzerman.

In contrast, the Capitals fell to the bottom of the NHL, in order to bounce back up and become a dynamic contender with top draft picks and select acquisitions.

"I basically said I don't want to be good, I want to build something that is really great," said Leonsis, who also owns the NBA's Washington Wizards and the MCI Center, where both teams play. "And there is a lot of risk to that, because being good is a lot less painful than it is to be really bad, but I felt that the only way to be great is to be bad. That's the way you get the Alex Ovechkins of this world."

Will MLSE spend whatever it takes?

In its basketball division, MLSE's Toronto Raptors have never taken advantage of the loophole in the NBA's labour agreement that allows teams to spend over the payroll limit. The cost of doing so is a dollar-for-dollar luxury tax. In contrast, the two-time defending champion Lakers will pay approximately $25-million (U.S.) in luxury tax in the 2010-11 season, for a total of $120-million in payroll compared with the Raptors $61.3-million.

And in soccer, Toronto FC is one of a handful of clubs fielding two designated players that are exempt from salary cap restrictions. But while the New York Red Bulls are paying French superstar Thierry Henry $5.6-million and Mexican international Rafael Marquez close to $5.5-million annually, TFC used the slots on relatively minor talents such as Julian de Guzman for $1.7-million this year and Miguel (Mista) Martinez for $980,000. TFC is close to being eliminated from the playoffs for a fourth consecutive season.

In salary-cap leagues, a route to success is to shed contracts and players in a race to the bottom. It's a more certain strategy in the NBA, where one or two players picked high in the draft can change the trajectory of a franchise for a decade. But the Raptors have eschewed that path.

Tellingly, team president and general manager Bryan Colangelo, following two successive seasons out of the playoffs, signed mid-range talents Amir Johnson and Linas Kleiza to long-term deals in the summer after losing franchise player Chris Bosh.

"I'm not buying the losing approach," Colangelo explained vigorously this summer. "I'm not planning to lose. Plan to win. Plan to compete. ... Justify the investment that the people put into season tickets, corporate partnerships."

John Ferguson, Burke's much-maligned predecessor, said he tried convincing the MLSE board of the wisdom of rebuilding following the lockout - short-term pain for long-term gain. But the board, which routinely budgeted revenue from as many as five home playoff dates, shied away.

"That [idea]wasn't met with excitement, let's put it that way," Ferguson said.

After the lockout, Burke took over a team well past its best-before date, bare of prospects and draft choices, most of them having been traded in deadline deals during the Pat Quinn era.

Now handcuffed because of salary-cap restrictions, MLSE has countered by investing millions in staff and training facilities as tangible signs of commitment. Getting bad to get good takes time, and MLSE is shy to follow that uncertain path.

"They made a philosophical decision to rebuild on the fly and there is so much pressure in that marketplace to win [that]I think rebuilding at first was not an option," said Tim Leiweke, president of Anschutz Entertainment Group, owners of both the NHL's up-and-coming Los Angeles Kings and with interests in the NBA champion Lakers, among other sports holdings. "They had to be competitive and rebuild at the same time. We learned the hard way, and I think they learned the hard way, it's very difficult to do."

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