Confidential files reveal fortunes of Leafs empire: Parent company's ventures have generated an astonishing 22% profit marginRick Westhead
Thestar.com
Hours after Mats Sundin collected his 500th NHL goal last season, the nylon mesh net that corralled the landmark puck was removed from the Air Canada Centre and shipped to a factory where workers cut it into 2,000 pieces.
The small bits of net were mounted on a board next to a photo of Sundin and slipped into a matted frame. In an instant, otherwise worthless scraps of nylon had been transformed into valuable sports memorabilia. One Toronto sports marketing executive estimates the Maple Leafs' parent company, Maple Leaf Sports & Entertainment, generated $40,000 from the promotion.
That episode demonstrates the one sure fact sports fans understand about MLSE: It knows how to make money. And now, confidential documents reviewed by the Star reveal the sports empire is poised to earn a lot more – much of it coming from increased ticket prices.
Internal financial statements show MLSE generated profit of $83 million on revenue of $383 million in the year ended June 30. The internal documents also show the company forecasts a profit of $105 million by 2011 on revenue of $477 million. Over the same period, ticket revenue is expected to increase 30 per cent, to $166 million.
The documents also reveal that, for every dollar Maple Leaf Sports generated in fiscal 2007, 21.8 cents was profit. (By contrast, Royal Bank of Canada, the country's largest bank, reportedly had a profit margin of 13.3 per cent for its last fiscal year.)
Asked to confirm the figures, Maple Leaf Sports president Richard Peddie said, "I'm not going to say yes or no. However you got your numbers you got them. I'm not going to discuss any financials. That's been my consistent stand for the past 10 years."
Peddie acknowledged the team's financial forecast for upcoming years is "rosy but with some challenges."
While its owners include the publicly traded Toronto Dominion Bank, details of Maple Leaf Sports' finances have long been a closely guarded secret. Besides the company's management committee, only its shareholders – TD, CTVglobemedia, the Ontario Teachers' Pension Plan Board, and real estate developer Larry Tanenbaum – have had access to the figures.
It isn't clear whether the Maple Leaf Sports figures, marked "Highly Confidential," had been audited and the financial statements did not appear to take into account several of the company's recent ventures such as the fledgling Toronto FC soccer team or Maple Leaf Square, a real estate development featuring twin towers that is being built steps from the Air Canada Centre.
Peddie confirmed a separate company has been established for Maple Leaf Square, which includes a hotel, condominiums (already sold out), retail and office space. Peddie said profits from Maple Leaf Square would be realized as soon as 2010.
"These are very healthy numbers," said one investment banker who specializes in the sports industry. "They're making money with the appreciation of the company and generating a great annual profit. Where else are (Maple Leaf Sports shareholders) going to get that?"
However, former MLSE vice-president Jeff Newman warns that repeated ticket-price hikes could mean trouble ahead. "The NFL has it all figured out," Newman said. "The average guy living in Detroit working on the GM line can still afford season tickets for $500 or $1,000."
The Maple Leafs, by contrast, have increased prices to the point where many of the team's most loyal fans probably feel disenfranchised, Newman said, a fact that was underscored during a recent Maple Leafs playoff push.
"We encouraged everyone to wear blue but it didn't work at all," he said. "It was still a lot of investment bankers coming to the game in suits. It's Bay Street that goes to those games. Leafs Nation can't afford it."
While it's hard to value the company as a whole, several sports industry executives said based on its financial makeup, Maple Leaf Sports would likely attract at least $1.5 billion should it ever be put on the block. Maple Leaf Sports has shown a flair for marketing ever since its predecessor company bought basketball's Raptors and the Air Canada Centre in 1998.
During the Leafs' final game at Maple Leaf Gardens on Feb. 13, 1999, team staff collected ice shavings the Zamboni had scooped off the ice between periods. The melted ice was cleaned and purified, and poured into about 2,500 acrylic pucks. Within days, the entire lot had been sold for $50 apiece for a net profit of roughly $125,000.
"It's really about trying to sell pieces of the game," said Caroline Wright, a Maple Leafs vice-president who oversees merchandising efforts. "I think when they shut down Maple Leaf Gardens, they even sold the trough from the bathroom."
While Maple Leaf Sports has made millions through investments in digital TV networks, arena management and real estate, one question looms: Where does it go from here?
"I don't know and if I did know I wouldn't tell you," Peddie said. "I don't know what our next big project is going to be."
Peddie said Maple Leaf Sports has snubbed the idea of starting a team-themed restaurant chain. "We've done the (profit and loss estimates) on this a number of times and the numbers just are too low," he said.
Maple Leaf Sports similarly has rejected the idea of buying a Women's NBA, indoor soccer or arena football franchise. It's also not interested in investing in a European soccer team, Peddie said.
"I joked with (Major League Soccer commissioner) Don Garber about whether he'd consider giving us a second team for Toronto," Peddie said. In its first year, Toronto FC sold an average 20,000 tickets at 15 home games, some 5,500 more than it expected.
Maple Leaf Sports is poised to expand its soccer investment, following in the footsteps of Real Salt Lake, another MLS franchise that recently announced plans to build a $25 million (U.S.) youth soccer academy in Utah that could attract as many as 200 players as young as 13 to train with coaching staff and attend private school.
Peddie on Thursday reviewed plans to build a soccer youth academy here and said it's a promising development.
Soccer teams typically generate a large portion of their revenue selling players, often homegrown, to other clubs. In July, for instance, Real Salt Lake sold American teenage soccer phenom Freddy Adu to the Portuguese club Benfica for $2 million.
While soccer has made strides in Canada in recent years, the Leafs – who haven't won a Stanley Cup since 1967 – remain the engine that drives Maple Leaf Sports.
And while Peddie and other company executives said they're uncertain over the best ways to buttress the hockey team's revenue, Jeff Newman, a former Maple Leaf Sports senior marketer, said a natural move would be for the Leafs to adopt so-called variable ticket pricing. The move might mean a ticket to a Leafs-Montreal Canadiens game could cost much more than a Leafs-Phoenix Coyotes contest. The practice could also see Toronto raise ticket prices at particular parts of the season.
The small bits of net were mounted on a board next to a photo of Sundin and slipped into a matted frame. In an instant, otherwise worthless scraps of nylon had been transformed into valuable sports memorabilia. One Toronto sports marketing executive estimates the Maple Leafs' parent company, Maple Leaf Sports & Entertainment, generated $40,000 from the promotion.
That episode demonstrates the one sure fact sports fans understand about MLSE: It knows how to make money. And now, confidential documents reviewed by the Star reveal the sports empire is poised to earn a lot more – much of it coming from increased ticket prices.
Internal financial statements show MLSE generated profit of $83 million on revenue of $383 million in the year ended June 30. The internal documents also show the company forecasts a profit of $105 million by 2011 on revenue of $477 million. Over the same period, ticket revenue is expected to increase 30 per cent, to $166 million.
The documents also reveal that, for every dollar Maple Leaf Sports generated in fiscal 2007, 21.8 cents was profit. (By contrast, Royal Bank of Canada, the country's largest bank, reportedly had a profit margin of 13.3 per cent for its last fiscal year.)
Asked to confirm the figures, Maple Leaf Sports president Richard Peddie said, "I'm not going to say yes or no. However you got your numbers you got them. I'm not going to discuss any financials. That's been my consistent stand for the past 10 years."
Peddie acknowledged the team's financial forecast for upcoming years is "rosy but with some challenges."
While its owners include the publicly traded Toronto Dominion Bank, details of Maple Leaf Sports' finances have long been a closely guarded secret. Besides the company's management committee, only its shareholders – TD, CTVglobemedia, the Ontario Teachers' Pension Plan Board, and real estate developer Larry Tanenbaum – have had access to the figures.
It isn't clear whether the Maple Leaf Sports figures, marked "Highly Confidential," had been audited and the financial statements did not appear to take into account several of the company's recent ventures such as the fledgling Toronto FC soccer team or Maple Leaf Square, a real estate development featuring twin towers that is being built steps from the Air Canada Centre.
Peddie confirmed a separate company has been established for Maple Leaf Square, which includes a hotel, condominiums (already sold out), retail and office space. Peddie said profits from Maple Leaf Square would be realized as soon as 2010.
"These are very healthy numbers," said one investment banker who specializes in the sports industry. "They're making money with the appreciation of the company and generating a great annual profit. Where else are (Maple Leaf Sports shareholders) going to get that?"
However, former MLSE vice-president Jeff Newman warns that repeated ticket-price hikes could mean trouble ahead. "The NFL has it all figured out," Newman said. "The average guy living in Detroit working on the GM line can still afford season tickets for $500 or $1,000."
The Maple Leafs, by contrast, have increased prices to the point where many of the team's most loyal fans probably feel disenfranchised, Newman said, a fact that was underscored during a recent Maple Leafs playoff push.
"We encouraged everyone to wear blue but it didn't work at all," he said. "It was still a lot of investment bankers coming to the game in suits. It's Bay Street that goes to those games. Leafs Nation can't afford it."
While it's hard to value the company as a whole, several sports industry executives said based on its financial makeup, Maple Leaf Sports would likely attract at least $1.5 billion should it ever be put on the block. Maple Leaf Sports has shown a flair for marketing ever since its predecessor company bought basketball's Raptors and the Air Canada Centre in 1998.
During the Leafs' final game at Maple Leaf Gardens on Feb. 13, 1999, team staff collected ice shavings the Zamboni had scooped off the ice between periods. The melted ice was cleaned and purified, and poured into about 2,500 acrylic pucks. Within days, the entire lot had been sold for $50 apiece for a net profit of roughly $125,000.
"It's really about trying to sell pieces of the game," said Caroline Wright, a Maple Leafs vice-president who oversees merchandising efforts. "I think when they shut down Maple Leaf Gardens, they even sold the trough from the bathroom."
While Maple Leaf Sports has made millions through investments in digital TV networks, arena management and real estate, one question looms: Where does it go from here?
"I don't know and if I did know I wouldn't tell you," Peddie said. "I don't know what our next big project is going to be."
Peddie said Maple Leaf Sports has snubbed the idea of starting a team-themed restaurant chain. "We've done the (profit and loss estimates) on this a number of times and the numbers just are too low," he said.
Maple Leaf Sports similarly has rejected the idea of buying a Women's NBA, indoor soccer or arena football franchise. It's also not interested in investing in a European soccer team, Peddie said.
"I joked with (Major League Soccer commissioner) Don Garber about whether he'd consider giving us a second team for Toronto," Peddie said. In its first year, Toronto FC sold an average 20,000 tickets at 15 home games, some 5,500 more than it expected.
Maple Leaf Sports is poised to expand its soccer investment, following in the footsteps of Real Salt Lake, another MLS franchise that recently announced plans to build a $25 million (U.S.) youth soccer academy in Utah that could attract as many as 200 players as young as 13 to train with coaching staff and attend private school.
Peddie on Thursday reviewed plans to build a soccer youth academy here and said it's a promising development.
Soccer teams typically generate a large portion of their revenue selling players, often homegrown, to other clubs. In July, for instance, Real Salt Lake sold American teenage soccer phenom Freddy Adu to the Portuguese club Benfica for $2 million.
While soccer has made strides in Canada in recent years, the Leafs – who haven't won a Stanley Cup since 1967 – remain the engine that drives Maple Leaf Sports.
And while Peddie and other company executives said they're uncertain over the best ways to buttress the hockey team's revenue, Jeff Newman, a former Maple Leaf Sports senior marketer, said a natural move would be for the Leafs to adopt so-called variable ticket pricing. The move might mean a ticket to a Leafs-Montreal Canadiens game could cost much more than a Leafs-Phoenix Coyotes contest. The practice could also see Toronto raise ticket prices at particular parts of the season.
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