By

–Greg Patterson

–Kate Livesey

–John Watson

ase Study

Agenda• Senators Now…• Issues to be solved• Background - Ottawa Senators and Corel Center• Problems Involved

– The Senators and The Corel Center

– NHL in Canada

• Financials and sensitivity analysis• Recommendations• Conclusions

The Senators now…• Established on December 6, 1990• Last year they clinched a playoff spot• 2 Seasons highs – goals scored• They finished 41-30-11-2 with 95 points• Finished 2nd in the Northeast Division (5

points Behind Toronto!!!)• Averaged 17,509 fans/game (out of a

possible 18,500 fans), 13 sell-outs, 3% growth rate in attendance.

Issues to be solved…• Question #1: What are some of the negative

factors affecting the Ottawa Senators and the Corel Center currently?

• Question #2: Are the Ottawa Senators and the Corel Center a profitable investment?

• Question #3: Regardless of whether or not it’s profitable, what are some possible recommendations to make it more profitable?

Background

A vision was formed…NHL in Ottawa

A letter was written

Press Conference

Plans unveiled for Kanata, 600 Acres

Horizon Investments & David Peterson

- Full support

Horizon receives invitation

100 acres rezoned for MCF

1987:

June 12/89:

Sept 6/89:

Nov. 28/89:

May 7/90:

May 31/90:

June 30/90:

To get a Perspective…

Horizon Development Plan

• Legend:•  • Green: Hi-tech sector• Yellow: Residential • Red: Palladium• Pink: Shopping

Background Cont…

11,000 pledges for seasons tickets

Lease negotiated with Civic Center

Horizon Officials, 150 Supporters,marching

band travel to Palm Beach

45 min. presentation to board of Governors

Awarded the NHL franchise

Nov 6/90:

Nov 14/90:

Dec 2/90:

Dec 5/90:

Dec 6/90:

Problems

• The tough taxes (PAT, GST,PST, property, infrastructure) which give American teams a benefit over Canadian teams.

• TV Rights (National vs. Local)

• West Side of the Corel Center (no signage)

• US/CAN exchange differential – (Cdn$64.5 / US$1)

1) Do these problems cause the Ottawa Senators and Corel Center to be an unprofitable investment?

2) Would you buy the Senators and Corel Center NOW?

Some Numbers… Year 2000

Team Revenues: $ (000's) General Financial Notes: Ticket Sales 43,296 Original price of land: $12000 / Acre Local Televsion and Radio 9,000 Current Price of Surrounding Land: $120 M /Acre Television Rights 7,000 (After rezoning)

Miscellaneous 6,000 17,600 fans average each game

Building Revenues: Signage 12,500 The building and team together would produce an EBITDA Suit Revenues 15,000 of $14M for the 2000/2001 season (without playoffs) Parking 2,247 Food and Beverage 3,740 If the team makes it to the finals there would be 15 Additional Parking 939 more home games therefore increasing their EBITDA Events 3,500 to $29 Million. Miscellaneous 2,000

If the team makes it to the second round of playoffs they

Expenses: make a positive cash flow. Total payroll (administrative) 6,500Interest on debt (bond) 18,000 Distressed Preferred Shares were issued which helped to Players salaries 43,350 decrease their interest payments from 4.5% to 10% and also Taxes: helped to decrease propert taxes. PAT 4,000 GST 2,800 EBITDA: -$2 Million 2000/2001 (Team) + $16 Million (Building) Property 5,400 = $14 Million (Net) Infrastructure 1,804

Financial Data

• Stable Growth Model Spreadsheet• Assumptions

• Sensitivity Analysis

• Value of the firm• The future of the Ottawa Senators and Corel Center

– If everything remains the same

– EBITDA

Why else would one buy the Ottawa Senators and Corel

Center?Core Competencies:• Winning games: points, good quality players• Having different events at the Corel Center• Excellent Management–tight budgets, good

marketing and signage• Excellent marketing with manipulation of the

Senators appearance• Use to be “Come see your favourite team play the

Senators”, Now it’s “Come see the Senators”

Why else?• 30% population growth over the next 10

years.

• Ottawa is the third largest tourist city in Canada with many tourist attractions including museums, Winterlude, beautiful parliament buildings, etc.

• Large population within 70 mile radius

• Major international airport

• Government workers and high-tech

Recommendations

• Treat owning a hockey team like owning a business, apply all other business practices you would if you wanted it to be profitable.

• -“You’re selling sizzle not steak” - Barb

Smith. It’s a service industry

Recommendations Cont’d.

• Pro-Line sharing profits (trademark)• Lobbying

– TV rights (National vs. Local)– Signage on West side– Taxes (amusement, infrastructure)

• Gambling on-line: NHL.com• Hockey Channel or website• NBA to share the Corel Center

Recommendations Cont’d…Marketing and Sales Strategies

• Market to higher salaried individuals• Want to teach viewers that keeping salaries

down keep ticket prices down: • increase the happiness our fans if they

understand and also make them understand with an increase in salaries the fans have to pay for it.

• Sale and Lease Back to City

Ottawa loves its hockey!!!– All the difficulties

– Economic Impact

Conclusions

• Value of the firm is positive• The EBITDA will be positive this year if Senators

make the playoffs• Ottawa is a good market for another Professional

sports team -> Increased Profits• The team and building weren’t bought to make

money on, it was bought to increase the value of the surrounding land therefore increasing their profits on the whole.

The End