Do the Sens have it tough here in Ottawa?
Vito Pilieci, Ottawa Citizen
Published on: September 17, 2014, Last Updated: September 17, 2014 7:35 PM EDT
There have long been rumblings when it comes to the difficulties of operating a major sports franchise in Ottawa.
The latest came this week from Ottawa Senators’ owner Eugene Melnyk, who told Toronto’s Sportsnet 590, “We’ve got a tough job to make hockey work in Ottawa, but we’re trying to make it work.”
“We are a very regional market,” he added. “Our biggest employer (the federal government) can’t buy tickets, nor can they buy tickets or give tickets. The number two biggest employer is the city and they can’t buy tickets or give tickets. We’re number 29 out of 30 (in the NHL) in corporate opportunities, and it’s not easy.”
Melnyk’s comments reflect concerns raised earlier this year in a report by the Conference Board of Canada. The report, called Power Play: The Business Economics of Pro Sports, described the long-term success of the Ottawa Senators as being “favourable” but said due to the market, the team will face challenges in raising revenues.
“The Ottawa sports market is smaller than in many other Canadian cities,” said Glen Hodgson, the conference board’s senior vice-president and chief economist, in the report. “It has a smaller corporate sector and many fewer head offices than a city of comparable size like Calgary. This puts added pressure on team ownership and management to put a quality product on the rink or field.”
The Ottawa Senators are ranked 15th in the National Hockey League when it comes to valuation, according to business and financial magazine Forbes. The magazine, which produces an annual ranking of sports franchises and their value, said the Senators are currently valued at $380 million and annually draw more than $83 million in revenues. The team owns the arena (Canadian Tire Place) it plays in.
The Senators have a payroll of $54.345 million, which places it 28th out of 30 teams in the league in terms of what it spends on players.
Former team owner Rod Bryden expressed his own concerns more than a decade ago while facing serious financial struggles with the Senators. In a news conference at that time Byrden said, “What this city needs to do is fill the building” adding, “If we can’t sell the tickets, this team will have to go.”
So really, what makes things challenging for the Senators in Ottawa? Here are a few examples:
Corporate Sponsorships
- Ottawa has lost all the Nortel Networks, JDS Uniphases and Corel Corps. that once plastered their name over the building, and no new mega corporations have emerged to pick up those sponsorships, which is why the team is almost dead last in the NHL when it comes to attracting corporate cash. While Ottawa’s once vibrant technology industry is beginning to bustle again, the small and medium sized startups that make up that industry aren’t spending on the Sens, instead they are focusing their marketing budgets and corporate spending on things that have a more immediate impact on their business.
Government restrictions
- In Ottawa, the largest employers are the federal, provincial and municipal governments. All of those organizations have policies in place aimed at cutting down on anything that could be perceived as a bribe, and that includes hockey tickets. Employees in the public sector are not allowed to receive hockey tickets from a private company. As a result, the shortage of corporate sponsorships becomes worse for the Senators as Ottawa-based businesses looking to woo government clients see little value in buying season tickets. Former Senators owner Rod Bryden has said government ticket policies have cost the team about $1 million a season in revenue.
Location of the stadium
- When it was first opened in 1996 in the middle of a rural area far in the west-end of the city, critics lamented the distance between what is now Canadian Tire Place and downtown Ottawa. While there is now development happening around the building — a major outlet mall is scheduled to open across the street next month and housing development in Kanata North is finally reaching a fever pitch — there is still no denying that travelling to the arena marks a significant trip for many Ottawa residents. Having an arena downtown, where the likelihood of walk-up business is far higher, would help with single-game ticket sales.
Tough days of the ice
- Any team that wants to attract ticket sales and increase revenues needs to be competitive. Prior to the 2013-2014 season, the Senators lost their long-term captain and one of the team’s most popular players, Daniel Alfredsson. The team then skated through a sub-par season that left fans frustrated. It also left the team without its newly minted captain, Jason Spezza, who was traded to Dallas. The all-time high for Senators’ season-ticket sales was 13,500, which came in 2007-08, immediately following the Senators’ run to the Stanley Cup final.
Carrying Costs
- As opposed to billionaires sports team owners such as Steve Ballmer, who can drop $2 billion US on a sports franchise, or giant corporations such as Rogers Communications and Bell Media, who hold joint ownership of the NHL’s most profitable franchise, the Toronto Maple Leafs, Melnyk has more finite resources behind him. In 2011, Melnyk was carrying $130 million in debt — held by a syndicate of banks. He renegotiated the terms of that debt with another consortium of backers and in 2013 he managed to piece together a four-year deal that would see $150 million in fresh financing flow into the organization. For a team that Forbes values at around $380 million, although other estimates put it lower than that, a $150-million investment is a significant financial commitment.
Vpilieci@ottawacitizen.com
Twitter.com/vpilieci
http://ottawacitizen.com/news/local-...here-in-ottawa
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