The cancellation of the National Hockey League season because of a labor impasse has taken a financial toll on both players and owners who have hardly seen their negotiating leverage get any better for a new television contract.
But one owner stands out as a potential winner: Broadcom Inc. chairman and co-founder Henry Samueli.
Samueli purchased the Anaheim Mighty Ducks in late February for $65 million to $75 million, far below the $150 that Walt Disney Co. was asking when the team was put on the market in 1999. It was also under the $108 million value placed on the team last year by Forbes magazine.
“Our price was pretty good,” acknowledged Mike Schulman, managing director of H & S; Ventures, the investment vehicle through which Samueli purchased the team.
While his ownership won’t become official until the sale is approved by owners, there is no indication they will reject the deal.
Samueli has positioned himself to become an important player in the region’s sports market, especially after his December 2003 agreement with the city of Anaheim to take over management of the Anaheim Pond, where the team plays.
“It makes perfect sense to control the venue and also own the team that plays in the venue,” said Jeff Marks, senior consultant with Redondo Beach-based Sports Business Group. “Now you can control the product.”
Big losses
Samueli, who did not return calls, is far from becoming a sports magnate with his two deals, but his timely moves have him standing out from other hockey owners.
Consider Ed Roski, chief executive of L.A. developer Majestic Realty Co., who bought the Los Angeles Kings with Philip Anschutz in 1995.
Since then, NHL teams have had combined losses totaling $1.8 billion in the past decade, including $224 million during the most recent (2003-04) season the teams actually skated.
By the time this year’s season was cancelled in mid-February, team owners wanted a player salary cap of $42.5 million per franchise, with an escalating luxury tax, in the hopes of creating what they labeled “cost certainty.”
The NHL players union countered with a $49-million cap, with the stipulation that all teams would be able to surpass that amount by 10 percent and be subject to a luxury tax. Both sides had previously agreed to a 24 percent across-the-board cut on existing salaries as the need for the concessions became clear.
The Kings have been losing $5 million to $10 million annually, according to Mike Altieri, a Kings spokesman. And during 2003-04, the Ducks lost a reported $28 million, just one year after making it to the Stanley Cup Finals.
“The salaries have just out-stripped the revenues and that needs an adjustment,” said Roski. “I think most people understand that this (lockout) is nothing that anybody wanted to happen.”
It won’t be easy, though, for teams to rebound from the lost season, especially in Southern California, where the sport is less popular than in portions of the Northeast and Canada.
“In Canada (hockey) is almost a religion,” said Jeff Cable, president of Saratoga, Calif.-based Pro Sport Marketing. “Down here, it is almost an afterthought. You talk to a lot of people on the street and they say there’s no hockey this year and they say they just didn’t know.”
After the 1994-95 Major League Baseball players strike wiped out portions of the 1994 and 1995 seasons (including the 1994 post-season), overall attendance had dropped to 60 million in 1996, down from 70 million in the year preceding the strike.
Attendance was flat even for the popular Dodgers, while the Angels drew 1.8 million fans in 1996, down from 2.1 million fans in 1993.
“More than likely, (hockey teams) will lose 30 percent of their fans in the first year,” said Becky Wallace, executive editor with the Team Marketing Report, a Chicago-based sports marketing firm.
Samueli hasn’t disclosed his plans to lure fans back, but Roski said his team will consider reduced ticket prices and heavy promotions. The big question is how the league fairs as it attempts to renegotiate its broadcast contracts.
The NHL’s contracts with ESPN and NBC generate a pittance of what major league football, baseball and basketball make by selling their broadcasting rights. The league cut a one-year $60 million deal with ESPN in 2004, and NBC agreed to broadcast just seven regular season games and six playoff games.
For Samueli, however, entering the league at such a discount could well mean that he will eventually see a substantial payoff for his investment.
“If nothing else, he bought a huge brand name that has a huge amount of equity with it,” said Joel Cohen, founder of Cohen Hockey Marketing Group of Raleigh, N.C. “I can’t see how he can go wrong. The NHL is going to resurface again as a better product, so he is going to realize a return on his investment,although it may take a few years.”
