WTYKY Podcast: Episode 14 – The Cursed Amulet

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In Episode 14 of Fifth Liners: The Podcast Whose Name or Hosts are Never the Same, Luke and James do a lot of swears, talk about various trades, compare Matt Duchene to an unlucky talisman, get acquainted with a few of the newest Senators prospects, bid a fond medium farewell to Guy Boucher, and try their hand at numerology by breaking down the Belleville Senators jersey numbers.

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Breaking the Cycle: Public Ownership of Pro Sports Franchises

I learned something on Twitter the other day. Once the shock of having engaged in a meaningful interaction on that social media platform wore off, the substance of what I’d learned began to sink in: the Green Bay Packers are a publicly-owned nonprofit corporation.

This was of immediate interest to me. Anybody unfortunate enough to have followed me on this site and on Twitter (@thisthreetime: come join the pointlessness) will know that my particular bugaboo is the NHL’s reliance on whacky billionaires to own and manage their franchises. While it’s true that most of these billionaires are just fine, and that the NHL is hardly unique in this reliance, the business model does have a tendency to occasionally blow up in the league’s face. Tying a team’s fortunes to an individual’s wealth is how you get Charles Wang meddling in hockey operations, Oren Koules running the Lightning into the ground after the real estate market collapsed, and Eugene Melnyk challenging old-school whack-a-doos like Harold Ballard and Bill Wirtz to rule their Mr. Monopoly fiefdom with the most iron-y of fists.

My uneducated speculation in this area has led me to valorize the idea of the consortia of local business interests, like those that exist in Winnipeg and Nashville. In these arrangements, the risk is spread out among more investors so if, say, your pharmaceutical magnate runs into liquidity trouble as a result of a worldwide contraction in the pharmaceutical market, it doesn’t affect your nice little hockey club.

But then a nice person on Twitter told me about the Green Bay Packers. Here, from the esteemed Wikipedia.org:

The Packers are the only publicly owned franchise in the NFL.[1] Rather than being the property of an individual, partnership, or corporate entity, they are held as of 2016 by 360,760 stockholders. No one is allowed to hold more than 200,000 shares,[2] which represents approximately four percent of the 5,011,558 shares currently outstanding.[3] It is this broad-based community support and non-profit structure[4] which has kept the team in Green Bay for nearly a century in spite of being the smallest market in all of North American professional sports.

Green Bay is the only team with this public form of ownership structure in the NFL, grandfathered when the NFL’s current ownership policy stipulating a maximum of 32 owners per team, with one holding a minimum 30% stake, was established in the 1980s.[5] As a publicly-held nonprofit, the Packers are also the only American major-league sports franchise to release its financial balance sheet every year.

What obviously interests me about this structure is that it takes the idea of making risk more diffuse among a few local interests and turns it up to eleven. The risk would be spread out between everyone and anyone who owns shares, with the consolidation of shares limited by the shareholder agreement. Locals would be incentivized to support the team by buying tickets because they, or people they know, would feel a literal degree of ownership of the team. If the team runs into liquidity problems, it could also issue more shares and spread the risk out even further.

What would this look like, in practice? Would we have hundreds of thousands of people debating the merits of trading for Gary Roberts? Not really.

Again, from Wikipedia:

Shareholder rights

Even though it is referred to as “common stock” in corporate offering documents, a share of Packers stock does not share the same rights traditionally associated with common or preferred stock. It does not include an equity interest, does not pay dividends, cannot be traded, and has no protection under securities law. It also confers no season-ticket purchasing privileges. Shareholders receive nothing more than voting rights, an invitation to the corporation’s annual meeting, and an opportunity to purchase exclusive shareholder-only merchandise.[4]

Shares cannot be resold, except back to the team for a fraction of the original price. While new shares can be given as gifts, transfers are technically allowed only between immediate family members once ownership has been established.[3]

In other words, being a shareholder first and foremost empowers one to contribute to the sustainability of one’s team and mitigates risk. It essentially takes the concept of season ticket holders and makes it more affordable and guarantees some voice. There’s nothing requiring Melnyk to hold season ticket town hall meetings. Shareholders are entitled to certain rights, however.

This goes to the immediate benefit of such an arrangement: it immediately makes possible a level of transparency and accountability that currently does not exist among the more dictatorial ownership groups. The fact that the team most not only release a balance sheet every year but that shareholders can attend an annual general meeting at which general governance is voted upon reduces the likelihood of, say, the general manager announcing one day that he’ll make a decision on the coach at the end of the season and then firing the coach the next day. It’s not that he’ll need to bring that sort of decision to a vote, but if he acts in that manner he must answer to the shareholders during the AGM as opposed to only answering to his whacky billionaire boss (who may or may not have ordered the firing in the first place). Shareholders would not be involved in the day-to-day of the draft, trades, or getting a hockey team on the road, but could ask for justification of strategy and, should there be enough votes, vote to approve broad changes in management.

Secondly, this structure would act to reinvest the profits into the community. While shareholders would not receive dividends (which could incentivize shareholders to reduce costs as much as possible to maximize returns), as a nonprofit the corporation must carry a limited surplus. Any excess profits could be reinvested in the teams’ infrastructure or in the community via the corporation’s foundation after, say, adhering to an agreement to spend within a certain percentage of the cap or privileging re-signing one’s drafted players.

Finally, the idea of a publicly-held entity may incentivize government to help with the construction of an arena. As opposed to the ephemeral notion of economic growth as the spillover result of arena construction (something that’s been pretty thoroughly debunked at this point), the city, province or feds may be more amenable to contributing revenue knowing that the economic benefits of team ownership will not be conferred first to a whacky billionaire who winters (and probably does his taxes in) the Bahamas but instead to constituents. I don’t know if the math works out, and it’s probably always a safer bet to invest in public transportation, schools, and housing, but at least the ephemeral promise of growth is guaranteed to confer more directly than it would if it traveled first through the bank account of a pharmaceutical magnate.

How likely would any of this be? Oh lord, not at all:

Any new purchase of an NHL team must be approved by the league’s Board of Governors, which is comprised of some of the more established owners in the league. The board not only establishes the rules of membership in the NHL ownership fraternity, but decides what, if any, help the league may offer franchisees in negotiating arena leases or other related legal matters. Balsillie’s bid to buy the Phoenix Coyotes out of bankruptcy in 2007 was essentially sunk when members of the board, such as Minnesota Wild owner Craig Leipold, painted Balsillie as deceitful and uncooperative.

The NHL’s current ownership rules exist to make possible the long-term economic benefit of an elite group of whacky billionaires. It seems unlikely that the same group would vote to allow an innovative ownership structure that cuts them out of the equation rather than, say, simply identifying another whacky billionaire to invite to their club. The only reason Green Bay’s arrangement exists is that it was grandfathered in from a time when unions and collective ownership were considered essential components of our economy as opposed to the tools of despicable socialists.

But in Melnyk, we’re seeing the tragic trade-offs of the league’s current reliance on cartoon villains with formerly deep pockets. We may romanticize whoever comes along and saves Ottawa from this endless cycle of misery – as we once did with Melnyk – but by then the damage will have been done to the brand, to the community, and to the sustainability of hockey in Ottawa. I can’t imagine anybody at NHL head office is arguing that what’s happening at the moment is ideal.

This Time It’s Different

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I’ve noticed a tendency to think of this round of Ottawa Senators trades as the latest chapter in a coherent, linear narrative: Ottawa trades or allows to walk some of their best players because the owner doesn’t have the money to pay them. I have to disagree, somewhat, that this is only the latest in a constant theme. I offer, instead, that what’s happening right now is much worse. What’s happening right now is the final emptying out of the idea of the Ottawa Senators as a shared experience, a local narrative, and a hub around which Ottawans build community.

During the 2010-2011 season, which resulted in the Ottawa Senators finishing fourth last in the league, the feeling was that the time was right for a rebuild. The team had older veterans who might garner picks and prospects – Daniel Alfredsson, Jason Spezza, Mike Fisher, Chris Phillips, Alex Kovalev, Chris Neil, Milan Michalek, Sergei Gonchar, Chris Kelly, and Zack Smith. In the end, only Fisher, Kovalev and Kelly would be traded for futures. Goaltender Brian Elliott would be traded for an older goaltender, Craig Anderson, who was extended. The team elected to keep several key veterans in the fold, either because no deals came along to their liking or out of fear of losing long-time Ottawa players.

In other words, the team was loyal to a fault and maintained a higher payroll thinking they might soon return to contention.

When Daniel Alfredsson walked to the Detroit Red Wings before the 2013-2014 season, it was viewed as an inability or unwillingness to pay a franchise player who’d taken team-friendly deals (and been screwed by salary rollbacks during CBA negotiations, to boot). But on the same day, GM Bryan Murray traded for Bobby Ryan, a younger, scoring winger (theoretically; this was before his hands turned to dust) who would soon require a big-money contract. The fans felt anxiety, at the time, that Ottawa would not pay up. Instead, the team signed Ryan to a massive seven-year, $50.75 million deal.

When Jason Spezza was dealt in 2014 it came in response to a request for a trade and with the veteran on an expiring deal. He was extended by Dallas, an extension that has not looked great for the Stars who now pay him north of $7 million to play select minutes.

Ottawa made decisions that would not turn out particularly well in some cases and would alienate long-time fans with affection for their homegrown talent, but at least these decision existed in the world of logic: if your team is not contending with your current roster, you sell off your older players for futures in the hope that a future iteration will contend. Ottawa might have turned off a few because of bad decisions, but they maintained the narrative on which hockey relies: the team, and as an extension, its community, are always building toward the future.

What is happening to the Ottawa Senators right now is different, for the simple reason that teams that are lucky enough to draft good players, and lucky enough to develop them into good players, and lucky enough to still have them on their roster in their prime do not typically trade those players unless it’s for other players with the same or higher potential. For Ottawa to trade Erik Karlsson, Mike Hoffman, Matt Duchene, Mark Stone, and Ryan Dzingel – all players who are still young and could contribute to a rebuild – is a perversion of the natural cycle of team development. It is mortgaging the future on which sports mythology rests.

You amass futures and develop them so that you can compete when your window opens. You don’t amass futures and develop them so that you can sell them off for more futures prematurely. If you do the latter, it alienates your fans even worse than losing a player we feel nostalgic about because it dilutes the very premise of the sport, the underlying narrative that informs our long-term loyalty to the game. If the team is not building to anything in particular, then why should we spend any time on it? If the heroes of a particular narrative are not in pursuit of some commonly-understood objective, then why should we see that narrative through to the end?

The current state of the Ottawa Senators is not unpredictable; we’ve seen this throughout the world of sports. This is a natural byproduct of any business model that relies on sole ownership by people whose wealth is concentrated in markets that can, occasionally, bottom out. If and when Melnyk sells the Ottawa Senators, if it’s to another sole owner or small group and if their wealth is derived from a single source – real estate, pharmaceuticals, a traveling circus, whatever – we are at risk of returning to this endless cycle of building to nowhere.

The fault for this lies in part with the NHL. As I’ve written before on this site and on Twitter, until the league starts focusing on building up consortia of local business interests that make risk more diffuse among partners, we’ll always be at risk of a billionaire owner becoming less than a billionaire or, at the very least, going senile and interfering with management decisions.

I, more than some, have been able to ‘gotta-hear-both-sides’ many of the decisions made by the Ottawa Senators management over the years. While I might disagree with a particular trade or signing, I have, in most cases, been able to understand the assumptions that were made that led to it. This time, it’s different: the financial status of the owner has interfered with the natural cycle of sports narrative to disrupt our shared sense of purpose.

As a result, this is the lowest moment in the history of the Ottawa Senators, including those early expansion years. This is the moment those leading the team acknowledged that the Ottawa Senators as an idea, as a hero in their own story, as a community, are meaningless.

WTYKY Podcast: Episode 13

 

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This episode features special guest Poppy Fitzgerald of the amazing and indispensable This Amelnykan Life podcast. In addition to a discussion about their work (seriously, just fuggin subscribe) we talk about Gritty and Spartacat both being Libras, Melnyk’s bizarre statements about spending to the cap, the impending doom of Stone and Duchene at the trade deadline, and something about an Australian reality TV show that I refuse to Google to learn more about.