Interview with a team builder

Two years ago Maple Leaf Sports and Entertainment president and CEO Richard Peddie sat down with his senior management team to develop a strategic plan to double the company's enterprise value over the course of five years.
The two teams run by the company, the Toronto Maple Leafs and Toronto Raptors, were both strong brands. The plan was to strategically extend that success into logical new areas.

Two years ago Maple Leaf Sports and Entertainment president and CEO Richard Peddie sat down with his senior management team to develop a strategic plan to double the company’s enterprise value over the course of five years.

The two teams run by the company, the Toronto Maple Leafs and Toronto Raptors, were both strong brands. The plan was to strategically extend that success into logical new areas.

One area that made immediate sense was to launch a pair of digital channels to leverage the strong equities of the Leafs and Raptors.

Research indicates that the Leafs enjoy a fan base of 52% of Ontario. A playoff run could move that figure to 70%.

While the Raptors are around 30%, that figure is based on research done prior to the team making the playoffs last spring. As well, with the demise of the Vancouver Grizzlies last winter, the Raptors now have a market of over 30 million coast to coast, making it the NBA’s largest single market.

Gate receipts at the Air Canada Centre, which MLSE also controls, are the largest revenue generator. The company also draws revenue through broadcast rights, corporate partnerships, suite sales, food and beverage sales and merchandise, in that order.

A who’s who of Canadian marketers including IBM, Coca-Cola, Molson, Ford, Kellogg and Pizza Pizza are counted among its corporate partners. MLSE offers silver sponsorship packages for under $100,000, gold packages worth $500,000 to $1 million and platinum, which are worth well over $1 million a year.

Peddie came to MLSE with 19 years’ consumer packaged goods experience beginning in 1970 with Colgate Palmolive. He later was president of Hostess Snack Foods, Pillsbury Canada and SkyDome owner Stadium Corp.

Now at MLSE, he’s focusing on growth. One brand extension under consideration is a chain of Maple Leaf branded restaurants in smaller Ontario markets such as Barrie and London. But the new play this year is the launch of two new digital channels, Leafs TV and Raptors TV.

While the new channels, which launched in September, are still a long way from being profitable, they do help market the brands and attract young fans.

The channels could also provide MLSE a significant bargaining chip in negotiations when the Leafs’ lucrative TV contracts come up for renewal in three years. The company could also bring game broadcast production in-house along with ad revenue.

For now, the channels will run team oriented programming including exhibition games, post game press conferences, practices, interviews and, in the case of the Raptors, up to 30 live games.

Strategy sat down with Peddie to discuss the new channels and the marketing of two of Canada’s premier sports brands.

Q: Raptors TV and Leafs TV will be competing in a massive universe of channels. How will you assure that you are heard above the din?

RP: We think we have it the easiest among all the digital channels. We probably receive more free publicity than all of the other 38 digital channels combined. I made a cold call to Rogers (Cable) and told him I want to order a digital box and what is the first thing the guy talks about? Leafs and Raptors TV. Two years ago we realized that we had three things going for us. We had immediately recognizable and well-established brand names, an established consumer base and quality content that people want to see. Of the 38 brands a lot of them have really no brand idea at all. ESPN Classics is not bad, but it’s nothing like Leafs and Raptors TV.

Q: How do you market these broadcast properties?

RP: You see it in our elevators and on our Jumbotron. We have almost 50,000 sign-ups for our ‘Leaf Insider’ consent e-mail. That’s number two in all of sports, second only to the Yankees. Every day these fans will receive information on what’s showing that day. We’ve got it on both of our Web sites. We’ve got our games on radio and television and we’ll use those to market it. We’re building it into everything we do, every piece of collateral we have.

Q: How do the two brands differ?

RP: The Raptors (brand) is urban, hip, new kid on the block, culturally very diverse. It’s a total entertainment package — two hours and nine minutes of near mayhem with players bigger than life, playing above the rim. The Leafs [brand] is 75 years old, traditional yet contemporary and [strong on] alumni. It’s a very fast game but still very traditional. You would not use cheerleaders.

Q: What are your goals for, say, a year down the road for the channels?

RP: We know we’re getting the carriage that we want. That has exceeded expectations. The way it’s being packaged, I think were looking to be, when the dust settles, in about 25% of the digital homes. I think we’ll beat that. In a few years we’ll be in 50%. But I also think in a few years there won’t be such a thing as analogue. It will all be digital.

Q: Is penetration the bottom line?

RP: Penetration is one thing. We see [the channels] as an investment in the long term. It’s to attract future fans, it’s a revenue stream and it is a marketing channel. We’ll lose money the first couple of years like any new product in any new category – like any new television channel. But we expect it to be making money sooner rather than later.

Q: What about the current economic situation? Does that worry you at all in regard to these new channels?

RP: The economic state of the world is making advertising sales tougher, no question. But we’ll get over that. The other thing is, we’re spending millions of dollars on this and it looks like a lot of money. But look at what it costs to sign a basketball player or a hockey player in American dollars. Frankly, it’s cheaper to launch a television venture.

Q: How are you attracting sponsors? Are you bundling packages with other in-rink properties?

RP: We’ve got 41 blue-chip sponsors. They buy a total package from us, everything from television and radio to rink boards to the game program to promotions to community events. One of the things we pride ourselves in is we really understand what our partners’ strategies are and we craft something especially for their needs. Each one is crafted differently. Now we are trying to up-sell those. For the first time we are going to be using a rate card where you will be able to buy a spot on Leafs and Raptors TV.

Q: After 19 years in consumer packaged goods, what lessons did you bring to your current position?

RP: Branding, market research and I’m a great believer in vision and values. It’s about being the best box office; it’s about internal recognition and being a safe and clean building. We do that by exciting our fans, inspiring our employees and bringing pride to the community. We give over $2.5 million back to the community a year. I learned that at Pillsbury and brought it here. Our annual plans look like they’re right out of packaged goods. My two sports teams write strategic plans each year: Objectives, strategies and tactics. A lot of how we do business is like Pillsbury.

Q: How do you keep the all-important youth demographic interested in your team brands?

RP: In brands, you’re taught if you’re the No. 1 brand, you have the responsibility to fuel the market. We take that very seriously. We also know from research both in basketball and hockey that if you play the sport as a kid, you’re more likely to buy tickets and watch the sport as an adult. So we want a basketball in their hands, we want a hockey stick in their hands. Our web site is very, very good and that appeals to kids, our channels will appeal to kids, we have the Kids Zone on Leaf TV. We have both a Leaf van and a Raptor van crossing the province in the summertime attending festivals. We have over 10,000 kids playing Bell Raptor Ball. Two weeks ago we had 1,200 [kids' hockey] coaches in for a coaches clinic before the Ottawa [Senators] game. [Leaf coach] Pat [Quinn] was there and the coach of Ottawa was there helping the coaches be better so they can help the kids be better.

Q: Hockey is the established top-of-mind sport in Canada. Why is it necessary to put emphasis in this area?

RP: One of the things we talk about here is complacency. Hockey participation actually plateaued five years ago. Why is that? WWF, Playdium, the Internet, the Raptors, there’s a lot for those kids. Ten per cent of Toronto has come here in the last five years. Often they’re not from Canada. They’re from countries where, believe me, they’re not playing hockey. What they are doing is playing soccer and basketball. We cannot take it for granted that hockey will always be here.