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May 26, 2018
Florida sports business: Hockey power play

Photo: Bob Croslin

Jeff Vinik bought the Tampa Bay Lightning in 2010 for $110 million. League and team executives say Vinik deserves credit for turning the team around.

Sports Business

Florida sports business: Hockey power play

Tampa Bay Lightning owner Jeff Vinik has plans for his team -- and downtown Tampa.

Jason Garcia | 10/28/2014

A National Hockey League arena is, by necessity, a chilly place. The building encloses a 200-foot-long, 85-foot-wide sheet of ice that radiates cold air; the temperature in the stands can drop as low as 50 degrees. Controlling the climate is obviously an important task.

And yet: “When we walked in here, the thermostat didn’t work,” says Tampa Bay Lightning President Steve Griggs, who joined the team in 2010, after Jeff Vinik, who ran Fidelity’s Magellan Fund before starting his own hedge fund, bought the hockey club. 

The Lightning still face a number of challenges. Executives Say the team is still losing money.

Today, the heating and air-conditioning and most everything else appear to be working much better for the 22-year-old franchise, which is in the midst of a renaissance. Four years after Vinik rescued a team that appeared to be careening toward insolvency, the Lightning have become one of the most stable organizations in hockey, particularly among teams playing in the league’s non-traditional markets across the southern United States.

Season ticket sales have more than tripled, from 3,000 to more than 10,000 today. Attendance has risen 20%, to nearly 19,000 per game. Television ratings have doubled, and the Lightning has a new, 10-year regional TV deal with Fox Sports that pays the club about $16 million per year.

Meanwhile, Vinik has assembled more than 20 acres of prime real estate around the Lightning’s arena in downtown Tampa, including the Channelside retail complex, and the team is now working on plans to redevelop the area into a new residential, retail, entertainment and commercial district.

On the ice, the Lightning feature one of the most marketable stars in the league in 24-year-old Steven Stamkos. Once devoid of young talent, the team now has one of the strongest farm systems in the NHL — it produced two of the three finalists for the league’s rookie-ofthe- year-award last year, and is expected this year to add a 19-yearold regarded as one of the top prospects in professional hockey. The Lightning could challenge for the Stanley Cup this season.

“From day one, I cited my desire to make this organization into a world-class organization, on and off the ice. I think we’ve made great progress toward achieving it,” says Vinik, 55. “We’re not there yet. But I believe we’ll get there.” 

A number of challenges still loom. Executives say that the team is still losing money, though they say the losses have narrowed significantly. The 2003-04 season, when the Lightning won their only Stanley Cup, remains the only year in which the team turned a profit, according to people familiar with team finances. And Lightning management must negotiate a new contract with Stamkos within the next two years — a deal that could require a commitment of $100 million or more — or risk losing him to unrestricted free agency and wealthier clubs.

Those problems are still preferable to the kind of issues the team faced when Vinik bought it.

“The turnaround has been dramatic,” says Steve Bartlett, an NHL player agent whose clients include Ryan Callahan, who this summer signed a six-year, $34.8-million contract with the Lightning. “As someone who looks at the stability of a franchise and management and ownership when I advise a player, I think they’ve gone from pretty low on the totem pole to very near the top.” 

It’s difficult to overstate just how much of a mess the Lightning were four years ago. The team was owned by OK Hockey — a group led by former film producer Oren Koules and former NHL player Len Barrie — who had bought it in 2008 from longtime owners Palace Sports. But the new ownership essentially ran out of money. The NHL was forced to step in just so the Lightning could make payroll while the team cut outlays on things like arena maintenance and marketing.

Meanwhile, Koules and Barrie feuded over control of the team. One player agent recalls receiving different offers from each owner for the same player. “It was a gong show,” the agent says.

The Lightning was never in any real danger of being relocated to another market because Palace Sports, in its zeal to unload the team, had agreed to self-finance the sale to OK Hockey and to backstop excessive losses. But the losses reached as much as $30 million annually, says Tampa Mayor Bob Buckhorn, who describes the team as having been “on the emergency room table.”

Credit for the Lightning’s recovery, people around the team and league say, rests squarely with Vinik, who has a reported net worth of around $500 million. Unlike the previous regime, Vinik has reinvested in the Lightning and the broader Tampa Bay community. In fact, he has spent more on and around the team over the last four years than the $110 million he paid to buy it. Among some of the bigticket expenditures: 

About $60 million to renovate the county-owned Amalie Arena (formerly known as the Tampa Bay Times Forum). The upgrades included one of the largest indoor scoreboards in North America, expanded common areas for fans, an outdoor patio overlooking downtown Tampa, an organ and a Tesla coils that shoot lightning bolts whenever the home team scores. In addition, there were with about $8 million worth of heating and air-conditioning improvements.

More than $10 million in charitable donations, much of it doled out in $50,000 installments at each Lightning home game through a program known as “Lightning Community Heroes.” The civic spending has also included funding for the University of South Florida to establish a graduate level program in sports and entertainment management and grants to organizations ranging from the United Way to the Florida Aquarium.

$35 million to buy a pair of players out of their contracts, including $33 million alone for former team captain Vincent Lecavalier. The buyouts gave the team freedom under the NHL’s salary cap to spend even more on player salaries: The Lightning’s payroll has grown more than 40% under Vinik, from about $46 million in 2009-10 (about 20% below the salary cap) to about $66 million last year (right at the cap).

About $30 million to buy the 20-plus acres around the arena, including $7.1 million for Channelside, which Vinik bought in a bankruptcy auction. Tentative plans include a hotel, office space and a pedestrian-friendly entertainment district. Vinik, who has enlisted an investment firm controlled by Microsoft founder Bill Gates as a partner in the redevelopment, just completed his biggest deal yet: The $150-million purchase of the 719- room Tampa Marriott Waterside hotel near the arena.

Hockey-business experts say the arena upgrades, in particular, have had a powerful impact on the Lightning. Because the Lightning play in a warm-weather market, where there is more competition for entertainment spending and a long history of hockey loyalty isn’t ingrained in the community, maximizing the fan experience during games is crucial.

“When you don’t grow up with hockey, there’s just not that loyalty. When you win, you attract a lot of people. But there’s 30 teams trying to do the same thing, so if you’re only counting on winning, you’re not going to have success,” says Don Waddell, president of the Carolina Hurricanes, an NHL team in Raleigh, N.C., and the former president of the now-defunct Atlanta Thrashers hockey team.

“You’ve got to entertain people. When they walk out of the building, regardless of whether you win or lose, they want to feel like they got value,” says Waddell.

Aside from Vinik’s check-cutting, hockey experts also credit the owner for assembling what is regarded as a strong management team. The team includes CEO Tod Leiweke, whom Vinik hired away from the National Football League’s Seattle Seahawks, and President Steve Griggs, who joined the team from the NBA’s Orlando Magic.

To run the hockey operations, Vinik recruited General Manager Steve Yzerman, a Hall of Fame hockey player for the Detroit Red Wings before retiring and joining that team’s front office.

Other key hires have included Jim Shimberg, the former Tampa city attorney who is now the Lightning’s general counsel, and Julien BriseBois, a University of Montreal- educated attorney who serves as assistant general manager and oversees the Lightning’s farm team in Syracuse, N.Y. 

“My philosophy is you try to hire the best, you give them full, 100% authority to do their jobs,” Vinik says. “And then you hold them accountable afterward.” 

The group oversaw a total rebranding of the franchise, spending an estimated $1 million to design more classically styled logos and uniforms and to manufacture microchip-embedded jerseys that were given to all season-ticket holders, entitling them to discounts on arena food and merchandise.

Once forced to discount to compensate for a poor team and arena, the Lightning now employ a fourperson analytics team to maximize pricing yields. The team has begun using dynamic pricing, adjusting prices based on demand right up until game day. The result: The Lightning’s average ticket prices rose 9% between 2011-12 and 2013- 14 — from $47.55 to $51.81. 

“The value of a game on Thursday versus Montreal in February is higher than a game against Anaheim on a Tuesday in October,” Griggs says, though he says the Lightning are still “significantly below” league average prices.

More television revenue has certainly helped. In addition to the team’s new regional TV deal with Fox’s Sun Sports network, which kicked in last season and runs for another nine years, every NHL club is receiving more money in national TV money following lucrative new deals between the NHL and Comcast in the U.S. and Rogers Communications in Canada.

One person familiar with league finances said national TV fees have jumped from a few million dollars per team per season to more than $10 million per team annually.

Tags: Sports Business

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