Back In Black: Profit In The Stillman Era

Cash flow hasn’t been one of the Blues strengths throughout most of the franchise’s existence. The early years started out well. A fresh new NHL franchise purchased by Chicago insurance moguls, the Salomon family came in with money to spend on their hand-me-downs of Canadiens and semi-retired players. The early success of the franchise in the “expansion conference” saw the Blues go to 3 straight Stanley Cup finals and lose every game in each of those series. Popularity of the sport in St. Louis grew and the hard-nose Blues made the game exciting for all to watch.

Red Berenson once scored 6 goals in a game on Nov. 7, 1968, ownership presented the outdoorsman a new car, a canoe attached to the top and a Browning 20-gauge shotgun inside the car. That’s a heck of a gift for scoring 6 goals in a game. Granted, it’s a tough accomplishment that’s likely never to be repeated since the most recent occurrence by Darryl Sittler in 1976. The cash-rich Salomons were willing to wine and dine their players with all-expenses paid vacations to Florida! As if living the dream of playing in the NHL wasn’t good enough.

The Salomons would own the Blues through the late-70s until Sid Salomon Jr. stepped away from control of the team and instilled his son, Sid Salomon III (who convinced his father to purchase the team in the first place), to take over. The descent started at that point as the declining revenue reached a critical stage in the late-70s and “Sid III” reduced the management staff of the team to just three people.

The Salomon family convinced R. Hal Dean, then CEO of Purina Food Co., to invest in the team to keep it afloat. The insertion of Dean brought about the birth of the Checkerdome. The Purina CEO put his stamp on the team and had the old arena re-painted and dubbed it the Checkerdome from then on. The initial results of the team weren’t good as the average attendance dropped from ~18,000 per game in the early-70s to just over ~10,000 in the latter half of the decade. Once the 80s rolled around and new names like Federko, Sutter, and Babych revitalized the franchise and hockey in St. Louis. The revitalization was short lived as the team had another downturn and only managed 65 points in the 1982-83 season. R. Hal Dean retired and his successor, William Stiritz, had no interest in continuing the involvement in hockey. The franchise was looking at over $10M in losses over the previous 6 seasons, Purina put the team up for sale in January of 1983.

In stepped Saskatoon-based Batoni-Hunter Enterprises, Ltd., the perspective buyer of the Blues. This was bad news for the St. Louis franchise as Batoni-Hunter stated they were ready to break ground on a $43M arena that would be ready for the “Saskatoon Blues” before the start of the 1983-84 season. Reluctant to give up on the St. Louis market, the NHL blocked the sale, starting turmoil for the franchise and leading to a legal battle between the NHL and Ralston Purina Co. Purina was so incensed that they locked up the arena and abandoned the franchise.

Ten days prior to the deadline for the franchise to be dissolved, Harry Ornest, a Los Angeles-based entrepreneur, stepped up with the only formal bid. Ornest paid $12M for the team and player contracts and $5M for the Checkerdome. Ornest would own the team for the next 3 years and strip it down to its bare bones. The team kept 26 players on the payroll at the time, 23 on the Blues roster. The standard amount of contracts in the league at the time was 60 players. Even after being stripped down to a skeletal budget, the Blues were competitive with Ron Caron in the GM role, Jacques Demers as head coach, and quality players like Federko on the team.

Soon after the “Monday Night Miracle,” Demers bolted for Detroit’s head coach vacancy and Ornest put the team up for sale. Ornest made out the best in the transaction that saw him net $3.4M in profit on the sale of the Blues and $8.2M in profit on the sale of the Arena. The team was purchased by a group led by Michael Shanahan, head of Engineered Support Systems Inc., who led the team into a myriad of good years. With the Shanahan group at the helm the team dove into free agent signings and made trades to bring in stars like Brett Hull, Scott Stevens, Brendan Shanahan, Grant Fuhr, and Al MacInnis. The surge in team performance led to the Shanahan group being bought out by a conglomerate of corporate leaders who also built the Kiel Center in 1994 after purchasing the team.

Things started to get hot when the desperate Blues made a questionable hire in Mike Keenan. We all know what happened next.. Keenan was given too much control and the Blues were dismantled under his command. Gretzky was ready to retire a Blue, but Keenan’s egregious management tactics forced “The Great One” to leave as a free agent for New York, where he would end his career. Keenan was subsequently fired in 1996 and the team was able to revive itself once more to return to prominence.

In 1999 Bill and Nancy (daughter of Wal-Mart co-founder Sam Walton) Laurie purchased the team and Savvis Center lease for $100M. The team would win its one and only Presidents Trophy in the 1999-2000 season while players raked in the individual awards, but nonetheless, became the first team in NHL history to finish first in the standings and lose in the first round of the playoffs. The broken record of major disappointment continued. After the lockout season of 2004-05, the Laurie family decided to put the team up for sale, citing losses totaling $60M the previous two seasons. The Laurie’s streamlined the process by selling off the team’s high-salaried players like Pronger, Weight, and Mike Sillinger. Demoralizing the fan base, the average attendance plummeted from more than 18,000 a game in 2003-04 to around 12,000 in 2006-07.

In March 2006, the Lauries completed the sale of the team and the Savvis Center lease to SCP Worldwide, a consulting and investment group led by Dave Checketts, and a private equity firm, TowerBrook Capital Partners, L.P. The sale made the Blues the only major sports team in North America to be owned by a private equity firm. Checketts followed the Ornest approach and cut the team budget to a minimal level and sold the fans on hopes of a bright future through the draft. The Checketts group and the team’s group of young stars like Oshie, Perron, and BERGLUND never produced the championship hopes they were looking for and Checketts put the team and arena lease up for sale in March of 2011.

Hello Mr. Stillman and company! Tom Stillman and his ownership group, made up entirely of St. Louis based people and companies, stepped up to the plate and purchased the Blues for a slim price of $120M. Stillman and his group came into a questionable situation with the team in a great position on the ice, but off-ice was a different story.

The Checketts group made some terrible business decisions to try and offset the loss that was incurred on an annual basis. Checketts sold out the concessions contract to obtain a $10M upfront payment to pay the ballooned loan payment he owed for the purchase of the team. They were near the bottom of revenue in the league. Basically, Stillman inherited a dumpster fire of a business model. When the Stillman group purchased the team in 2012, the team revenue sat at $77M which was at its lowest since a couple seasons of $66M in 2005-07. The Blues have been operating at a loss all those years. In 2012, the end of the 2011 season, the deficit sat at a $10M loss. Once Stillman’s group took the reigns, they were able to reduce it to a slim $2.5M loss (mostly due to staff/employee cuts of about 40 people). Another change that the Stillman group made was to remove the annual $1M “management fee” that the Checketts ownership group paid out to themselves. Stillman reduced this to $1. That’s a one with no zeroes after it.. In a 2013 Q&A column with Stlmag.com Stillman said, “Our idea is not getting in here and dressing it up, so we can make a big pop on a sale in a few years. We’re 16 St. Louisans who think the Blues are good for St. Louis and want to make sure they’re here for a long time. We’re not looking to pull money out. Nobody’s asking for dividends.” The statement said a lot about the direction of the new ownership group. This is their hometown team, not just another business outlet to profit from (though that is the ultimate goal, to make the franchise relevant financially). They came together to protect and revive a staple of this city. Can you imagine St. Louis with no Rams and no Blues? Winters would be longer and colder than they already are. In that regard, be blessed to have this team in good times and in bad.

In years past, the player expenses (contracts) have had a direct correlation with the operating income (deficit) of the team. When the player expenses went up, the deficit became larger as a result. Stillman dropped those player expenses from $59M in 2012 to just $36M in 2013 – the reason he was able to cut the deficit by 75% as well. Over the next couple years the deficit would level out to $6.5M and $7.1M in 2014 and 2015, respectively. The revenue in those years also gradually increased. The 2012-13 season was the weakest point of revenue of the Stillman area, mostly due to having to restructure the business side of the franchise and the lockout shortened season didn’t help an empty Scottrade Center in the money-making process. The following season saw the revenue jump ~36% from $72M to $98M. That’s after raising those player expenses from $36M to $64M, with the Stillman group showing the willingness to spend.

Since the initial jump, the revenue would raise an average of 15% every year up until it reached $150M last year. As a comparison, that ranked 11 out of the 30 teams in 2017. The New York Rangers lead the way with $246M in revenue. They also ranked 1st in operating income, pulling in ~$94M, while the Blues came in at $9.2M. Different markets, different franchises. Fear not, there is reason for hope! Last season (talking 2016-17) was the second season in a row that the Blues were operating in the black (finance terms!), after operating at a deficit for nearly a decade prior to that. In a more recent note, the franchise saw its team valuation go up from $310M in 2016 to $450M in 2017, a 45% increase. That 45% 1-year valuation increase was the 2nd highest total in the league, Carolina had a valuation increase of 61%.

The trend has been set during Stillman’s time as the head of the Blues ownership group. Consistency. Progress. Careful management of finances. Even with those optimistic traits, the franchise is still locked into the bad deals of owners past. The Blues are locked into their current TV and concessions deals until 2020 and 2028 (UGH), respectively. However, Stillman was recently able to restructure the concessions deal in order to gain a little more revenue from it. The ownership group has also started to infuse more of a local spin to the concessions at the arena, adding local favorites such as Sugarfire SmokeHouse, Byrd & Barrel, among others. Blues fans also shouldn’t be shocked to see ticket prices start to rise over the next couple years. The Blues have consistently had some of the lowest average ticket prices in the league. That cannot continue if they are to keep the team on the profit-train. Prices will go up, but do not be deterred! You want success, you pay for it. The Blues ownership group has paid for it, as we sit today, the Blues have the highest payroll in the league. So keep up the support Blues fans! This ownership group is here for the team and the city.

The Blues have an owner who is invested in the team, but also invested in the city. The Minnesota native, who moved to St. Louis in the 90s, spent many years as a lawyer on Capitol Hill previous to his move. Stillman needed a new adventure after moving to St. Louis and purchased Summit Distributing in 1994. He built it into a regional powerhouse, because who doesn’t love a good beer, and transferred his lessons of creating a growing label into the hockey scene. Stillman saw a need with the Blues. A need to keep a major league sports city just that. The Blues needed an owner to come in and care about the city, not just the team. The owner that cares about the city as a whole is concerned about the progress of that city. Stillman is an ambassador to progressing the city forward rather than holding it back to nitpick semantics. If only the city’s leaders would fall in line with his ideals..

Did You Miss It?

Heavy on the misses this week!!

Jeff Skinner was traded to the Buffalo Sabres. Carolina received Charlie Pu (pants), a 2019 2nd round pick, 2020 3rd & 6th round picks. Skinner will be in that 25-30 goal range on a consistent basis. If he plays with Jack Eichel, that number could skyrocket.

John Gibson signed a massive 8-year extension at $6.4M AAV. Gibson has one of the best save percentages in NHL history of goalies with at least 100 NHL starts at .922%. A list that the highest paid goaler in the NHL, Carey Price at $10.5M, can’t crack.

Tom Wilson received an extension for all of his grit on the Stanley Cup Champions. How a 20-30 point player gets $5M+ AAV is beyond me. Im just glad Doug Armstrong isn’t that naive.

Jack Hughes dominated at the world junior summer showcase. Keep an eye on this kid as the season progresses. He’s the projected 1st overall pick in next year’s draft and he looks every bit worthy of that top pick.

We finish off with one that hits close to the childhood hearts. Shaun Weiss, the actor who played “Goldberg” in the Mighty Ducks movie was arrested early Saturday morning for public intoxication. Take a look at the 39 year-old’s mug shot. He’s 39 going on 70, quick. Unfortunate, but I hope this is a wake-up call for the guy and he gets the help he needs.

Thanks for reading!

LGB!!

@LehgoMyGreggo 

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