Conspicuously absent from yesterday’s regional broadcast agreement announcement was Senators owner Eugene Melnyk. Although his absence was duly noted, he did however make his feelings on the deal be known to both major newspapers in this city. I highly encourage readers to check out his comments in the Ottawa Citizen and the Ottawa Sun.
Besides some newspaper features, Melnyk made his customary radio appearances to talk about the implications of this new regional broadcast deal with Bell Media.
The following transcripts are from his two media appearances on TSN 1200 in Ottawa and TSN 1050 in Toronto. Unfortunately, I was only able to grab audio from TSN 1050, so you can listen to that interview using the embedded file at the bottom of the post.
As always, my thoughts in bold.
Here is the first interview from TSN 1200:
On taking the listeners through the negotiations from the organization’s perspective…
“Well, it’s the most significant deal that was ever transacted by the franchise and for us, it’s extremely important. It’s a great partnership and it’s a long-term partnership and we’re looking forward to making sure that everybody benefits. That it is a win-win (deal) all around and I’m sure it’s going to be because we have been working together since day one of the franchise. And everybody is very, very excited. We just know that we’ve got a very solid partner in Bell Media and TSN has always put on a wonderful, great product and we couldn’t be happier about it. It’s really, really… it was a great day.”
On the long-term stability of the franchise in light of the fluctuating Canadian dollar…
“Well, it helps substantially. What it does is assure us of a revenue stream and it assures us of a lot of stability within the organization and from a financial perspective. And it allows us really, to play outside of where we have and that is focusing our attention strictly on development and actually, scouting and development. It gives us the flexibility of being able to go into some of these UFA markets, if we want to. If we think it’s a smart thing to do. If there’s value to be had. But, that’s something that we are still going to focus on, spending our dollars on, what we think has been a successful story for us and that is to ensure that we develop the best players possible and draft very well. And we’ve done that, so what this does is, it allows… it certainly ensures stability within the franchise being a mid-market team. That’s basically what it does for us, it’s very, very important for us.”
Here’s the thing that is going to aggravate fans. Melnyk, and the organization for that matter, can talk about investing more money and resources into scouting and player development (and this is and would be a great investment by the way), but fans will never tangibly see this investment take place. Some fans will only believe the organization is spending money when they see it be invested directly into the team’s payroll.
On what this television deal means relative to the rest of the mid-market teams (ie. Winnipeg, Edmonton) and how it must favour the Senators considerably…
“Well, I think it does. I don’t know their numbers. It’s not something that necessarily everyone discloses or how they disclose it. We’re just very, very pleased that we were able to put together a deal that is long-term and that combined with the national deal, which is extremely substantial, and along with the invasion rights for that fees that are being paid, it puts the franchise on solid footing. I think we’ve done very well. The team that negotiated the deal did very well and when you combine that deal with the other deals, plus the growth of our fan base and the growth of our season ticket holders, it bodes well for the whole organization. The other thing that I want to add to that though, putting all that aside, we do have, right now, a great team on the ice. We’ve got huge depth in (Binghamton) – players that should be playing in the NHL now that just can’t get onto the roster because of the talent pool. We’ve got guys in college. We’ve got guys in junior. We’ve got Europeans that are available or that will become available. Plus (!), now we’re going to go through another draft and we’re going to have people there, and you add that to the experience of a Bryan Murray and the development team of Randy Lee and his whole team and the scouting of Pierre Dorion… and in my opinion, those two guys are the best in their fields and throw on an award winning coach and some really great rising stars and a very young team… I think we’re going to have a great decade coming up. It’s really going to be a lot of fun.”
Don’t get me wrong, I like a lot of what Ottawa has done and by and large, I really like most of what the front office, coaches, scouting staffs and player development teams have done. If you’ve been a regular reader of this blog for the last while, you will have inevitably seen praise for the collection of young assets and players that this team has assembled. However, this team’s best prospects, with the exception of Curtis Lazar, are all at the NHL level.
Perhaps some different player usage, better luck and improved peripherals that were in line with Craig Anderson’s career averages could have put this team in a better position with the same level of talent, but the truth of the matter is that we’re praising a team that is currently on the outside of the playoff picture and has flirted with the playoffs for the past three seasons. We shouldn’t be bragging because Colin Greening and Matt Kassian are acting as roadblocks for what ultimately might be just a collection high floor/low ceiling prospects in Binghamton.
On being more flexible going after UFAs and whether the internal payroll will go up as a direct result of this deal…
“Not as a direct result, at all. Any business and anybody who has run a business or even anybody who has been in charge of the chequebook at home, knows that you have a budget. Just take it to the home level – you have groceries, this is what we can spend on a vacation, this is what we can spend on gas, this is what we can spend on school. We have a budget, that’s all it is and if you don’t, how are you managing your business when you don’t even know what you’re spending? Your expenses go through the roof and your revenues, you can do whatever you can do, but we are limited because of the size of our market place. So you have to put some semblance of structure in place that gives you the ability to be flexible and opportunistic. And we will be opportunistic when the need arises. We have a HUGE commodity that I didn’t mention that is going to be more and more important in the coming years and that is cap space. This was not something that just came out of nowhere. This was well thought through three years ago – is that we would sit, there would be a point in time, we knew this date was coming, that all these deals were all going to come at the same time and our whole objective was to ensure that we have a young team at the time and that we have cap space. Those were the two things and we did that and we were able to put a great team on the ice and an exciting team on the ice. The plan is working and there’s no need to rush. But if we can be opportunistic, and we will be, there are people who will need to unload some serious players. We ourselves, we have to sign some elite players to contracts, so will it increase? Possibly, maybe even probably, but it’s going to be well thought through before anything like that happens.”
Funny that he’s praising the importance of opportunity and business. Strongarmed into taking that Dany Heatley trade with San Jose, history and previous performance indicated that Milan Michalek would have an incredibly difficult time replicating his 35 goal performance after riding shotgun to Jason Spezza and Erik Karlsson’s impressive 2011-12 campaign.
Now maybe the organization tried to trade him but maybe the market never developed in a way that was beneficial to the Senators. Whatever the case, the Senators held onto him and he has deteriorated into a replaceable player who has barely contributed over the past season and a half. The Senators could have sold high and capitalized on his value being at an all-time high, and now he’s probably going to leave this organization as an UFA.
As a mid-market, mid-cap team that should pride itself on doing things the right in every facet of its decision-making, they erred.
To put it quite frankly, this organization, with the exception of the 2011 NHL trade deadline, has never sold high on many of its veteran players. And even with the veterans like Chris Kelly, Mike Fisher and Chris Campoli, none of these players were the elite building blocks that this team built itself around.
The team never bit the bullet. It kept its most productive guys.
This was never a true ‘rebuild’ in the sense that this team was gutted of its most talented veterans. It simply capitalized on a time of year when Stanley Cup contenders are willing to overpay to acquire niche players who fill a specific need.
‘Rebuild’ was just a buzzword that the Senators could cling to and push in the press.
In keeping this team’s most productive vets, the Senators papered over the bottom of the roster with placement holders like Peter Regin, Ryan Shannon, and Bobby Butler until this team could draft and develop better talent to replace them. Or better yet, if the organization could keep hitting on prospects in the draft, it’s stockpiled picks could be packaged to bring in better talent.
Unfortunately, we’re at a point in which this team’s most productive vets are declining or have already left. Alfie bolted for Detroit. Spezza hasn’t scored an even strength goal in 25 games and Milan Michalek looks like a shell of his former self.
The decision to trade for Bobby Ryan was defendable. The only way to get elite talent in this league is to draft or trade for it, so the Senators, probably partially driven by PR motives created by the unfortunate Alfie departure, pulled the trigger to bring a reputable goal scorer. Sure, the assets could have been used to move up in the draft or bring in a similar or younger player who has more controllable years, but to their credit, the Senators went for it.
The problem is, the decision to acquire Ryan may blow up in their face. Like Spezza and many of the team’s other vets, Ryan is up for UFA at the end of the 2014-15 season and should he walk and test those waters, the Senators will have jack to show for it.
So Melnyk can paint the picture of this franchise as rosy, but like a choose your own adventure novel, there are a number of ways in which this organization can navigate that can potentially set this team back further and waste the prime years of many of this team’s better younger players.
Melnyk’s status quo right now isn’t all it’s cracked up to be, but it’s how opportunistic this organization will be that will define it’s future success.
On whether he could have ever envisioned signing a television deal this big when he originally bought this franchise…
“Not this big, no and hats off to the (Gary Bettman) and his team on the national deal. It’s tough to be at the top like he is and to take criticism for a lot of things that he has done and then at the end of the day, everybody looks back and says, ‘What a genius!’. To bring in that kind of money, it’s not the NFL yet. It’s not even close to what the NFL guys get or some of the more established leagues in big markets, but we’re getting there. We’re getting there slowly, but surely. For Canadians, it’s a religion here and I truly believe it’s gaining traction in markets where nobody thought it would succeed.”
And now, here is his interview with Dave Naylor that ran on TSN 1050…
On how significant deal this is for the economics of the Ottawa Senators…
“Well, it’s the largest deal that we’ve done to date in the history of the franchise. It’s a very substantial long-term deal that is going to impact the financial health of the organization in a significant way. It gives us a lot of flexibility in what we want to do in the future. We didn’t believe that it was going to get into the kind of numbers it did, but it did. And that’s mainly due to the precedent that the league did in the big deal. But, we’re very pleased with it because it just adds to the organization’s ability to compete effectively against big market teams.”
On the Senators losing a lot of money and why making the Senators profitable has been such a challenge over the years…
“Well, there’s a couple of reasons. One would be, for starters, one would be that we went through two lockouts. Welcome to the (owner’s) club, two lockouts in ten years will do that for you. Then there’s the recovery from the lockouts, so those… you can’t straightline and take the hundred millions (in claimed losses) and say it’s ten million (in losses) per year. We’ve been healthy some years and in many of the years, except when you have a lockout, it hurts. It’s a big, big, big hit. At the end of the day, it all works itself out in the long run, but you have to have that long-term view, otherwise it all doesn’t make any sense. Now with this deal, with the national deal, with the invasion rights that we’re going to be paid, our (season ticket holder) base has been rebuilt. It’s nowhere near what the big markets have, but we’re getting there slowly, but surely. We do not have the ability to just randomly raise prices. It is a mid-market team. It is a government town, so people do watch how they spend their entertainment dollar. So we have to deliver a product on the ice in every which way and we’ve got to be able to do it prudently. And I think we’ve done that prudently and we’ve turned things around three years ago into a three-year plan and now this is the last year of that plan. We’ve done well so far, even though we were in a complete rebuild.”
Finicky fans in a government town. Please see my comments from earlier regarding this complete rebuild propaganda.
On being the only NHL team in Canada that does not have a downtown arena and whether the team suffers from it or thinks it is a disadvantage…
“You know, you could make that argument and it’s a good argument to make. Does (the arena location) hinder us? I think to a certain extent it does. It’s an effort to get out to Kanata and that’s one of the reasons why I’ve been pushing very, very hard and very publicly to try to expand the activities out in Kanata. I know that the residential areas and a lot of the commercial and business and industrial areas have grown, but we need more entertainment out there. We need more than just one place to go to and I’m trying desperately to do that. If I can get some more cooperation, it could get accomplished. But, I would say it’s a disadvantage but it’s not a disadvantage that can’t be changed. It can turn because I’ve seen other places where… for example, if you go just outside of… to Baltimore. They took a place that was a dump area and they turned it into one of the most beautiful parts of Baltimore. So you can do a lot of things, it just takes time. It takes cooperation from City Hall. It takes cooperation from a lot of people to get this done and we’re going to keep plugging away until we do.”
It sounds like Melnyk’s casino battle is far from over.
On the fluctuations of the Canadian dollar and how the terms of the new regional deal help mitigate against that and when, as an owner in Canada, grow concerned about the level of the currency…
“Well for starters, not that I’m a currency expert, but speaking with people that are, they don’t see that happening. It’s just not going to happen when you’re going to get into the low 80’s – that would be unfathomable almost. We are hedged (against this depreciation) to a certain extent and we are looking for a bit of a rally to continue hedging. A lot of our debt is all hedging (note: interview cuts out a bit here)… which means that it doesn’t affect us at all. But the thing about the Canadian dollar is, there’s a natural hedge because if our revenues are coming down in Canadian dollars, and Canada, it means a lot to the (NHL’s) revenue side of things, the whole cap system, the dollars come down on that as well because the cap system is what it is. People get paid in U.S. dollars. The players get paid in U.S. dollars. And if the Canadian dollar goes down, that cap goes down right with it. So it would be concerning if it did go through 80 cents. I don’t see that happening. None of my experts have even said… they’d be shocked at anything under 85 (cents). But these are very cyclical and you could easily see within the next 24 months things change economically and the exchange comes right back. It doesn’t concern me yet, but it would concern me if there’s a radical drop very quickly on the dollar.”
The takeaway from this is that a lot of the team’s debt is being hedged.
On the possibility of the cap being scaled down for the 2014/15 season because of the diminished dollar…
“That’s correct and that’s the way the system works. It was designed to make it work that way – to make sure that there is that natural hedge against the U.S. dollar dropping because again, we pay out in U.S. dollars and the revenues just simply, if they’re in Canadian (dollars), they just simply come down. There’s nothing you can do about it.”
On the Senators being a budget team and how the regional television deal affect things in the short-term and long-term…
“Nothing is going to change that much, other than the fact that we’re going to be very opportunistic. We don’t believe that we need to spend to the top of the cap. I know some teams do. Some general managers have that latitude, we don’t. Even if we did, we would not be spending (to the cap). There’s just simply no need to. You can organically grow your hockey team, as we have. We have tremendous depth. And usually when you have to spend to the cap, you’re making up for a lack of depth. It’s that simple. We probably have half a dozen guys in Binghamton, our farm team, that should be playing in the NHL right now, tonight. And we simply don’t have room on our roster to put them in because our roster is full. We’ve got great players onboard. You add to that all the prospects that we have in college, the OHL, well not just the OHL but in junior, Europeans and that’s the future currency. And the other thing is, we purposefully planned this out that at this time, we all knew that this date was coming. That all these things would converge at the same time and our plan was to make sure that at this point, you have cap space because that’s going to become a very, very valuable commodity. Cap space. Now, I’ll tell you something, if you think I would have a nightmare if the Canadian dollar drops down there, imagine the teams that are at the cap and all of a sudden the cap comes down. They’re paying you to take their stars. They’re going to be dumping like left and right. Right now, right now, it’s difficult. That’s one of the reasons you’re not seeing so many trades – because somebody says, ‘I will give you a three-million dollar player but you have got to take three million dollars in salary back.’ It just doesn’t happen. Nobody will do a deal where they add to their cap. It’s just not happening and those are some of the smart GMs. But yeah, you wait until that Armageddon starts… if, IF, the Canadian dollar goes under 85 (cents).”
I’m going to come back to this tomorrow.