By taking inspiration from another great North American sporting franchise, however, the Canadiens may very well be able to alleviate some of the pressure faced by its employees while keeping their war chest filled for many NHL seasons to come.
Earlier this week, I was having lunch with a friend, an auditor at a Big-Four accounting firm here in Montreal. He also happens to be the tough-minutes centerman of my men’s league team, so the topic of discussion soon turned from dollars and cents in our usual fields of business to the economics of professional hockey. Between bites of sashimi, he challenged my assertion that the Habs, or any other NHL team for that matter, brings in less money on an annual basis than a single Costco. What he doubted even more, though, was that the idea that making a profit is really beside the point when you are running an NHL franchise.
The book Soccernomics is a must-read for anyone looking to see team sports in a new light. Besides being a fun and informative look at the beautiful game, the book also proposes a host of ideas which could be applied to the sport of ice hockey.
One of the most important economic principles advanced in Soccernomics is that, unlike traditional businesses, professional sports teams in general should not aim to make a profit. Indeed, while a bank or a fast food chain’s raison d’etre is to put more money in the pockets of its shareholders, a well-run sports team is actually in the business of using all available revenue streams to buy wins at the expense of the bottom line.
The successful NHL team earns a ton of revenues annually via TV contracts, sponsorships, ticket sales and merchandising, and would do best putting all that money toward hiring the best players, the best management staff and building the best facilities in an effort to boost their championship aspirations. Breaking even or posting a loss does no damage to the future of a team if the spending yields a couple of Stanley Cups in the meantime. Most owners in major league sports seem to understand the principle – they have made their money in traditional industries such as brewing, pharmaceuticals, or non-renewable energy, and bought sports teams for reasons beyond adding to their wealth.
Once we accept the theory that profits actually mean very little, we can look at the implications of such a conclusion. If an NHL owner is indifferent toward profiting financially from his team and instead aims to win as many Cups as he possibly can in a lifetime by reinvesting every last penny into franchise players and a large analytics department (for example), then perhaps he would consider the benefits of registering his team as a Non-Profit Organization.
"A nonprofit organization (NPO) or not-for-profit organization is an organization that uses surplus revenues to achieve its goals rather than distributing them as profit or dividends.
While not-for-profit organizations are permitted to generate surplus revenues, they must be retained by the organization for its self-preservation, expansion, or plans."
Sound pretty much exactly like what a professional sports team is supposed to do.
Which brings me to the Green Bay Packers, the only "non-profit, community-owned major league professional sports team in the United States." The team has never had a single owner, and has sold stock to its fans whenever it needed money for a new stadium in order to avoid a move.
"Shares of Packers stock do not include the same rights traditionally associated with common stock or preferred stock, although the shares are referred to as "common stock" in the offering document. They don't include equity, dividends, can not be traded, have no securities-law protection, and stock ownership brings no season ticket privileges. While newly purchased shares can be given as gifts, once ownership is established, transfers are technically allowed only between immediate family members. Packers shareholders, however, are entitled to voting rights, an invitation to the corporation's annual meeting, and the opportunity to purchase exclusive shareholder-only merchandise. A 1,000-to-one stock split prior to the 1997 sale ensures that the original 1950 stock buyers hold the vast majority of the voting power
Green Bay is the only team with this form of ownership structure in the NFL; such ownership is in direct violation of current league rules, which stipulate a limit of 32 owners of one team and one of those owners having a minimum 30% stake. However, the Packers corporation was grandfathered when the NFL's current ownership policy was established in the 1980s, and are thus exempt." (source)
The Packers have clearly set themselves apart from its competitors not only due to their unusual management structure, but because they have won a league-record 13 championship titles and remain a thriving team despite being located in the smallest professional sports market in North America. There must be something to the concept.
One way to recreate the Packers’ community buy-in, while conforming to modern league rules, is to make the management of an NHL team a more representative affair. During my time working in the Montreal Canadiens’ marketing department, one of the priorities of the department was to increase membership of the team’s First Line fan club. An annual membership of a hundred or so dollars guarantees access to playoff tickets and provides members with a chance to meet Habs players, alumni and management staff at special events – a good value if you’re a die-hard Habs fan. But imagine how much more interesting things would get if ownership actually began allowing fans to buy, at a premium price, the voting rights on important team issues such as the identity of the next team captain or general manager.
At first glance, the move would seem to seriously affect the team’s traditional power structure (mixing what happens on the ice with back-room commercial activities, for one) and invite the allegedly poor decision-making skills of hockey outsiders. However, tapping into the power of crowds is perhaps the smartest thing a team can do in a field where the vast majority of the information is freely available to the public. The hockey analytics revolution 10 years in the making has only really exploded recently because more people are paying attention thanks to mainstream media coverage and a wealth of free online resources. As things develop, having the movement’s brightest minds isolated in 30 different front offices, rather than crowdsourcing each other for new solutions to old problems, may actually stall the advancement of data-driven hockey management or move it toward an entirely different direction. All in all, the same basic principles should hold true for deciding which coach to hire, especially if you are polling a committed, loyal group of fans who are willing to put their money where their mouths are.
Even if the voters happen to pick average, if popular, candidates, there are future benefits to letting those buying the tickets and paying to wear the crest in on the decision-making process. During the first extended losing skid of any season, rather than siding with the yellow press and calling for wholesale changes inside the locker room, the nucleus of "voting fans" may actually interpret media criticism as an attack on their personal judgment and rally casual fans around them in support of the team and against the press. There’s no way to be sure that this will be the reaction, but funny things can happen when you give people a different incentive. And if that comes to pass, it would surely make life a lot easier for those working to put wins on the board.