Freeman helps right sinking Preds ship

Sunday, October 25, 2009 at 10:45pm
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David Freeman employs a bit of gallows humor as he looks forward to the second anniversary of the day he and his group of local investors took control of the Nashville Predators.

“I don’t know if this is an omen or not — we closed on Pearl Harbor Day ‘07,” he said with a chuckle.

At the time the Predators were viewed very much as a sinking ship.

Founding owner Craig Leipold had claimed that annual losses made it impossible for the franchise to compete and be profitable in the National Hockey League. First in line to write a check was Jim Balsillie, who had plenty of money to spend and clear-cut plans to move the team to Hamilton, Ontario.

Despite those obstacles and within a span of six months, Freeman assembled a group of 10 investors — nearly all of them locally based — and executed the purchase of the franchise.

“It was such a whirlwind,” he said. “There was absolutely no forethought that went into this. It was literally like walking down a street, seeing a house on fire and just doing what you do, which is what we did when it became clear what was going to happen to the Nashville Predators if Jim Balsillie bought the team.”

But that was merely the first step.

In the ensuing months, Freeman led negotiations that drastically altered the team’s lease of the Sommet Center with Metro government, dealt with the fallout from the fraudulent business dealings of one of its investors and worked to strengthen existing ties as well as to build new ones between the team and the community.

The storm of uncertainty that once surrounded the future of the franchise has quelled, but the long-term prospects for success — be it the bottom line or the top of the standings — remain unclear.

“Yes, we now have the ability and we have the model that will allow this franchise to be successful,” he said. “That said, we still have to sell tickets and we still have to sell sponsorships.

“Nissan can have the greatest business model in the world, but it still comes down to selling cars. I realize that much like Nissan has to build quality cars in order to sell them, we have to put a winning team out there if we want to be able to sell our inventory of tickets. No one wants a lousy car, and no one wants to watch a losing team.”

On Metro lease negotiations

Upon the transfer of ownership, Freeman, whose personal investment is the largest among the group, immediately set out to renegotiate the lease with the city. It was his belief that there were certain minimum concessions that needed to be made on the part of state and local governments for the team even to have a chance to be financially viable.

On April 15, 2008, Metro Council approved changes (retroactive to the previous July) that included an increase to $7.4 million (up from $4.4 million) a subsidy given to the team, a reduction in rent for the building and favorable concession and advertising deals not tied to NHL events.

“Metro gave us $3 million,” Freeman said. “More importantly, they gave us incentives and said if you can truly make that arena come to life, you can keep what you earn. That was critical.”

The belief was that under the previous arrangement, there was no incentive for the Predators or Powers Management, which operates the arena, to book events other than hockey games.

Freeman said that at a recent meeting, Hugh Lombardi, the senior vice president/general manager of Powers Management, noted that some type of event, hockey or otherwise, already has been booked at the Sommet Center every weekend from now until mid-April 2010.

That sort of sustained use not only has provided the expected benefits for the Predators but has reaped a return for Metro government as well.

“This last year alone, we produced $4.7 million in new money — inside the building — of brand-new dollars for Metro,” Freeman said. “It’s good for us and it’s good for Metro. In a year where the economy struggled, in a year where the hockey team was struggling to stay flat, the arena was breaking records.

“That has turned out to be a win-win. I think the mayor did a good job of negotiating a lease that both put money back in Metro’s pocket and allows us to stick money in our pockets that was never there before.”

Enough money came in, in fact, that the team made “a very small profit” in 2007-08, the first season under new ownership. It endured “a small loss” in 2008-09.

On spending money

An important distinction between those two seasons is that the Predators made the playoffs in the first profitable one and fell short in the latter. That speaks clearly to the unique challenge of ownership of a professional sports franchise, particularly one that is not supported by an overwhelming national television package the way the NFL’s 32 franchises are.

“We have a huge chicken-and-egg question,” Freeman said. “Do we spend the money, win the games and then people buy tickets? Or do people buy tickets, we get the money and we spend it on players?

“It’s a theoretical chicken-and-egg question, but in reality I know what comes first.”

Freeman needs the money before he can spend it. Under his direction the team has maintained a relatively conservative approach to player salaries and acquisitions.

The largest contracts have been given to those such as Martin Erat (seven years, $31.5 million), Ryan Suter (four years, $14 million), Shea Weber (three years, $13.5 million) and David Legwand (six years, $27 million), all of whom were drafted and developed by the organization.

Nashville’s participation in the most recent free agent market was to re-sign two of its own players, Steve Sullivan and Joel Ward, for two years each. Then it added four players from outside the organization, none at an NHL salary of more than $600,000.

Freeman said he expects this season’s salaries to increase slightly more than five percent over last season’s approximate $43 million.

That still puts the Predators slightly below the median point under the league’s salary cap rules. For the current season, the cap is $56.8 million and the floor is $40.8 million, which sets the mid-range limit at $48.8 million.

“I realize that because of where we spent that money, it didn’t make a big splash,” he said. “Signing Shea Weber and Ryan Suter, they weren’t new toys, but I think our organization believes they were the best conceivable toys we could buy anywhere at any price even though they were already ours.

“I’m very happy with where our organization decided to spend our money again this year.”

On the future of the franchise

The challenge now, according to Freeman, is to get the local fan base to spend its money in support of the franchise.

Although clearly comforted by the success he has had thus far, Freeman is unwilling to offer any long-term assurances in regard to the Predators’ presence locally. Instead, he sees additional challenges that must be confronted, ones for which the solutions require sustained effort and action on the part of the organization, rather than the swift and immediate steps of the purchase and lease renegotiation.

“We’re not anywhere close to victory,” he said. “I would say we’ve cleared the critical stage, but we’ll have a long way to go to feel safe and secure.

“Until we can find 17,000 people, 41 nights a year that care enough to support us with their pocketbook and their presence, then I don’t think we have been successful with what we set out to do. We didn’t set out to just keep the team here. We set out to make this a franchise that the entire city loves, wants to be a part of and that we have success.”

Success, though, is relative.

For the players, coaches and hockey operations department, it’s obvious. Win games. Get to the playoffs.

For Freeman and the rest of his group, success in owning the Nashville Predators is a far less tangible thing. First of all, revenues are so closely tied to the team’s performance that they are impossible to predict from a month-to-month or even a week-to-week basis.

Then there is the fact that challenges for ownership aren’t scheduled like games.

The conviction of one-time investor Robert “Boots” Del Biaggio, for example, led the team’s lead bank in New York to claim default, which, Freeman said, needed to be cured.

“It’s unfortunate, it’s embarrassing to have him associated with us but it really doesn’t affect the franchise at all,” Freeman said. “He was a minority partner with a non-voting interest. … All of the local guys …we all made some additional sacrifices that we hadn’t foreseen. We all made personal, financial sacrifices, but we shared that in a way we’re all comfortable with.”

Similarly, Freeman is comfortable with the fact that ownership of the Nashville Predators will not add — directly, at least — to his personal fortune. (Freeman is founder and CEO of 36 Venture Capital.) Instead, he is content with the idea that he and his fellow investors served the best interest of their community with their decision to act.

“The bottom line is: This is not a good financial investment,” Freeman said. “This was absolutely not done for a financial return. This was something that we saw as important from a community standpoint, but also important from a business standpoint — not the hockey business, but just the overall economic engine of Nashville, Tennessee. ”

Part of the drive to attain ownership was to avoid seeing Nashville lose a professional sports franchise, which many believe can be a crushing blow to the cities that lose them.

“It’s one thing to not have (a pro sports franchise). It’s a whole other level of failure to have one and then lose it. … If things had gone a different way two years ago, I can imagine all the jokes and all the stereotypes and all of the misperception,” Freeman said.

That kind of humor he simply couldn’t have.

4 Comments on this post:

By: frank brown on 10/26/09 at 5:51

Freeman has done what any good businessman does. He has lowered the operating cost to meet the cost of doing business. I think the Predators will do continue to muddle on as a viable part of Nashville. As more Davidson Countians move into adjacent counties to avoid the heavy tax burden placed upon them by a naive government more discretionary income will be available to see ice hockey.

With Davidson County taxpayers picking up a huge part of the operating cost I think the Predators are going to be a mild winner.

By: producer2 on 10/26/09 at 6:41

“This last year alone, we produced $4.7 million in new money — inside the building — of brand-new dollars for Metro,” Freeman said. “It’s good for us and it’s good for Metro. In a year where the economy struggled, in a year where the hockey team was struggling to stay flat, the arena was breaking records."

All you need to know

By: OneTimer on 10/26/09 at 12:17

thanks for sharing, Frank. your posts are always welcomed and enjoyed by us all.

By: frank brown on 10/26/09 at 3:02

One Timer

I always do what I can for those whose emotions are greater than their comprehension.

In your case, it is nothing more than good humor and good sport.