The Blackhawks Great Gamble: Revenue Generation vs. Spending

Blackhawks

It’s true about any business: cash is king.

In this economy, when businesses of all shape and size are losing money, making money is one of the great struggles in America. There are well-educated people all over this country trying to re-invent the wheel to make a square peg fit into a round hole for the sake of driving the bottom line.

In professional sports, the bottom line has been drawn down by everything else in the country going under. If mom and dad are deciding between a tank of gas and a new jersey, they’ll make sure they can get to work (if they still have a job). Tickets are an even greater luxury, especially in this age of $5 hot dogs and $8 beers.

You can read in any newspaper about Major League Baseball teams losing revenue at record rates in 2009, and the NFL has struggled for the first time in a strike-free scenario to fill stadiums. And those leagues are well run.

Enter the Gary Bettmen-run National Hockey League. A wonderful, classic game that’s been misrepresented for a generation and continues to struggle from poor marketing. The Phoenix Coyotes are working their way through bankruptcy, while the first-place Colorado Avalanche can’t get their stadium filled to 50 percent of capacity many nights.

This is a world built for cynics like “Dollar Bill” Wirtz. “Hug that dollar and never let it go, even if the product on the ice suffers” could easily be the mantra of owners all over the NHL.

And then there’s the NEW Chicago Blackhawks.

Bill’s gone, and his son Rocky has taken a completely different approach. His first order of business was to bring in a marketing jedi in John McDonough, who publically fixed most of the issues the fans had with the Hawks.

Home game on television? Done. Fun atmosphere at a sterile United Center? Sure, why not.

The Braintrust: Rocky Wirtz and John McDonough

But ultimately in sports, it’s the product on the ice (or field) that makes you money. Anyone can buy a Clark Griswold jersey; give the fans players they want to believe in, and you’ll unload truck after truck of Patrick Kane and Jonathan Toews items.

So last summer, McDonough and then-GM Dale Tallon made a bold step and spent money on big-time free agents. They assessed their position as a franchise, and decided that they needed a power play quarterback on the blue line and depth in goal. Brian Campbell and Cristobal Huet were the top names on the free agent market, so Tallon went out and threw a $12 million-per-year bandaid on the Hawks’ problems.

Their gamble paid off.

The Blackhawks jumped from nearly missing the playoffs to skating their way to the Western Conference Finals for the first time in nearly two decades, and the buzz was back in Chicago. Hockey had returned with a force, and the Blackhawks were set.

So, after a great season, McDonough and Tallon used the same philosophy in bringing in the premier name on the free agent market again, this time throwing another huge contract at a player to fill a perceived need. Marian Hossa got a king’s ransom to replace/improve the role that Martin Havlat had played in the Chicago offense.

They were making their move, taking their shot at the big one. 1961 was a number burned into each of their souls.

Fast forward to today. It isn’t July any longer, and reality is starting to set in on the Hawks. They’re on the verge of keeping three of their young superstars, Kane, Toews and Duncan Keith, with what appear to be fairly good contracts that are certainly more logical both immediately and long-term than the paper Tallon gave Huet, Campbell and Hossa.

Couple this news with a report from Forbes that was published last week. Forbes, of course, is all about money; they care about the business, not the game. Indeed, this is the very publication that just a half decade ago called these Chicago Blackhawks one of the worst-run organizations in professional sports. Bill Wirtz was annually flushing his fan base down the drain in favor of profit.

But last week, Forbes wasn’t hating on the Blackhawks any longer. They released their annual rankings of franchise value in the NHL, and the Hawks made some noise. A lot of noise. They jumped to the seventh highest team value in the entire NHL, with Forbes estimating the team to be worth $258 million.

More remarkable is a different column on their spreadsheet, though. According to their report, 13 of the 30 teams in the NHL lost money last year, with three losing better than 10 percent. The economy killed the NHL last year.

Except the Blackhawks.

Forbes estimates that the Hawks’ value grew by 26 percent last year, a number that dwarfs the rest of the report and jumps off the page like Michael Jordan leaving the free throw line. Consider the Pittsburgh Penguins, who have their own young tandem of stars and won the Stanley Cup, increased their value by only 14 percent. McDonough was earning his keep.

But now GM Stan Bowman stands at a crossroads where the product and revenue are skyrocketing, but the limitations of the game and the product on the ice are facing a reality check. In the 1990s, when Bill Wirtz was killing the organization on an annual basis, the great sin the team committed was sending popular players away. Now Bowman faces a similar task.

With the estimated contracts of Keith, Kane and Toews being added to the projected bottom line for 2010-11, the Hawks stand roughly $6 million over the estimated salary cap for next year. Young, popular players might become trade pieces to keep this team under the cap, all while larger deals like those of Campbell, Huet and Hossa hold the potential of staying on the books.

The next years in Chicago will serve as a great case study for all of professional sports. How the Blackhawks manage their talent, continue growing revenue, and attempt to maintain their competitive play will be both frustrating and fascinating. If the Hawks can bring the Stanley Cup to Chicago for the first time in nearly 50 years, the revenue will certainly be there. But how the Hawks spend that money moving forward will ultimately prove to be the legacy of not only this management group, but the players on the ice.

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