Bain Capital Offered To Buy The NHL In 2004. Where Would The League Be If It Happened?

During the lockout of 2004-2005 season, Bain Capital made an offer to buy the entire league for four billion dollars. The owners, being the self-made titans of industry they are, dismissed it out of hand. Instead of evaluating the proposal and determining the business rationale, they made an emotional response. Similar to their claims the teams are losing money while they offer 10 year 97 million dollar contracts to players and doing all they can to circumvent the Collective Bargaining Agreement.

This old news story regarding Bain Capital has come out due to President Barack Obama being asked about the lockout by Jay Leno and replying,

"“Y’all should be able to figure this out. Get this done.”"

Let’s go back to the original question. Would the NHL be better off with Bain owning the league vs. the owners? You would have one person at the top of the organization as the CEO. An assortment of the owners could be on the Board of Directors along with partners such as broadcast partners NBC,CBC, Rogers Sportsnet, and  SiriusXM. International sponsors such as Bauer and Budweiser would have their interests represented. The leagues would put a couple of teams where the demand is high. Hello Markham, Ontario and Quebec City. This makes the perfect case to expand by two teams. Now you can realign by geographic concerns and time zones. The league would receive a payment for putting the teams in these cities. You can charge more for advertising due to more people are seeing your ads. The merchants have a greater reach for their products.

The current structure of management that serves at the behest of the 30 owners is a system that does not serve the interest of all 30 teams and the fans. Owners, who write and agree to the CBA, immediately try to find ways around it. Relocating franchises puts no additional money in the league coffers like a 500 million dollar franchise cost does. And Gary Bettman says the league has no plans to expand. This I find dishonest. The 30 owners do not have the collective interest of their league at heart. They have the interest of their franchise. The fans of the Maple Leafs will sell out every game and pay to watch a practice. Their television ratings are astronomical. Leafs gear is always a top seller. And they miss the playoffs every season. What is the desire by Maple Leafs management to put a winning product on the ice? Additional dollars of revenue earned will go into the league. A profit sharing system that returned the money above a predetermined earnings level would give the front office motivation to make the playoffs instead of settling for their current results.

Mr. Campbell of The Hockey News wrote a column on this subject October 26th with this paragraph.

"“A private equity firm is in the business of maximizing its return. That would mean that, instead of fighting to keep a money-losing team in Phoenix, it would have moved that subsidiary by now to a place such as Quebec City, Toronto or Seattle where it would have immediately become a revenue generator instead of a drag on all its partners. And it would have done the same for the other teams that survive on revenue sharing."

A private equity firm running the NHL would never had made the business decisions that allowed the Phoenix Coyotes to get into their current situation. One, a board of directors would never have appointed someone with no head coaching experience at any level of organized hockey as head coach of their product. Wayne Gretzky could be an investor, but he would not have been allowed to put his agent as general manager. Why are the Coyotes losing money? Low attendance and god-awful player contracts from years ago. Paying aging superstars at the end of their career may give you some fans short-term, but it doesn’t build for the future. The product on the ice the past three years has the potential to make money. You could not say that four years ago. The team had no depth and rushed players into the NHL before they were ready. They played a system of hockey not suited for their talent level. And you could argue they never truly marketed their product in an efficient fashion.

Mr. Campbell looks at the NHL as a zero sum game. To give a franchise to Quebec, you must take one from someone else. If you strengthen your current assets, they will provide additional value that gives you the capital to expand past your current boundaries. Corporate dollars are not going the way of the Coyotes because a business will not emotionally and financially invest in an enterprise that could be leaving thanks to the whims of the Glendale City Council and a mayor who truly has given up. Fans are not going to invest when the team would be out of the playoff race at the trade deadline and your valuable assets are shipped off. A business will maximize its profit, invest in potential, and strive to succeed. No one has run the Coyotes as a sports business. The previous owners treated this as a real estate investment opportunity, a way to write off losses on the shipping business, or the “Hey, we own a hockey team” mentally. Mr. Greg Jamison is not that type.

Finally, Mr. Campbell of The Hockey News opined that President Obama should be able to get a deal worked out.

"“But that’s the best he could do? “Y’all should be able to figure this out”? Maybe the guy who bailed out the auto industry and the banks, led the force that killed Osama bin Laden and managed to pass a national health care bill has the right to think this should be easy to settle."

One could argue with the bank being bailed out was started with TARP under President Bush. The real statement I have trouble with is the “led the force that killed Osama Bin Laden.” I seem to recall the image from the war room at the White House with the President in a jacket seated in a chair while the Navy Seal Team Six was assaulting the compound and killed Osama Bin Laden. He didn’t lead the force. He did not fastrope from the Blackhawk into the compound. I don’t recall him being the second man in the stack outside the door or popping a frag grenade once they breached the doorway. Given an order from the safety of an office is not leading an assault team. Leadership is from the front, not the rear. His statement is an insult to the brave operators in the Special Forces community.

And it is not a partisan rant because I dislike most politicians.