A KINGS RANSOM : McNall’s $35-Million Gamble Wasn’t Just a Great One, It Was Golden
Bruce McNall learned at an early age, when he started collecting and then dealing the ancient coins that so fascinated him, that it takes money to make money and that he had to be willing to gamble a little and trust his instincts a lot if he wanted the best.
Too, he has always said that the key to success is having fun, sticking with the ventures that bring personal satisfaction.
So far, those philosophies have paid off for him.
For instance, he outbid Valery Giscard D’Estaing--who later became president of France--for the Athenian Decadrachm, one little coin that was struck about 460 BC. McNall really wanted that rare coin and he was willing to pay $420,000 for it. It made him happy.
It’s now worth more than $1 million.
And he bought a colt named Trempolino, just before it won the $1-million Prix de l’Arc de Triomphe and finished second in the $2-million Breeders’ Cup Turf. He also backed such movies as “War Games” and “Mr. Mom.”
But how about his buying the Los Angeles Kings from Jerry Buss?
The Kings had never made money. The franchise has lost $3.7 million to $5 million a year over the last few years.
But McNall was a hockey fan, and he had always loved the Kings. Owning the team made him happy.
So McNall took a chance.
In August, he agreed to pay Edmonton owner Peter Pocklington $15 million for the right to trade for Wayne Gretzky. And he later reached an agreement with Gretzky for a contract that would pay Gretzky about $20 million over eight years.
So in all, McNall committed $35 million to bring the best player in the National Hockey League to Los Angeles.
Did he make that deal as a fan or as a businessman?
Well, he says he started out thinking that he was going to make a sound business deal, but by the time those big figures were worked out, he wasn’t so sure.
“By the end of the day, it was an emotional decision,” McNall said. “When I started out, I felt it would probably pay off. But by the time we finished, I wasn’t sure it would be worth that much.
“At that point, I just felt I had to take a chance both from an entrepreneur’s standpoint and a fan’s standpoint. Not just for the team’s value and the value of a player like Gretzky to the city, but as a pure fan. A lot of factors went into the decision, but there is no question the fan factor came into it. I just thought, ‘If I can maybe make it pay off, what the heck?’
“I knew we’d win more and we would boost the value of the franchise. I knew we would have more credibility. But whether it would really pay off? I didn’t know it would be anything like this.”
McNall paid $20 million for the franchise a year ago. Just a few months ago, it was appraised at more than three times that.
“That’s what they tell me, that the franchise is now worth in the $60- to $70-million range,” he said. “But I wouldn’t sell it for that. I think that because of the way television rights are going, the franchise is going to be worth multiples of that in the very near future.
“The Kings franchise is one of my best investments.”
And the turnaround started with the Gretzky trade.
Ticket sales skyrocketed, of course. Season-ticket sales tripled.
Also, there have been jumps in radio and TV revenues, what amounts to kickbacks from concessions and parking, a remarkable increase in licensing and marketing income, and a chance to turn training camp and exhibition games from a major expense into a major profit.
With the Kings’ sellout last Saturday night against Edmonton, there have been 22 this season. That’s compared to five a year ago.
And the Kings have drawn 547,952 fans this season, compared to 427,721 a year ago. The average crowd this season has been 14,810. That’s compared to 11,560 a year ago.
Ticket revenues are up even more because the Kings raised ticket prices--with no apologies, since prices had ranked 18th in the league--both before and after the trade. A ticket that had been $18.50 went to $19.50 before the trade. Afterward, that ticket went to $22 in a season package or $25 at the window.
Roy Mlakar, the Kings’ executive vice president, had worked out some ticket promotions before the trade that were very promising, promotions that were dropped in midseason because there were no more tickets to be sold.
For example, the Kings had never before concentrated on group sales. Mlakar promoted group sales and tripled previous numbers. On “Daily News Night” Mlakar had 2,500 extra people in the Forum, people Mlakar sees as potential fans.
But, he said: “We haven’t been pushing group sales lately because we haven’t had enough seats to sell.”
Then there were the 10-game plans and the coupon books, both popular forms of what might be called mini-season tickets.
“That was all set to happen even before we got Wayne, and those promotions were going to give us increased attendance,” Mlakar said.
But with Gretzky drawing sellout crowds, those plans were dropped in January.
Mlakar will have to take another look at ticket packages again after this season. He has been consulting Buss, a man Mlakar calls “the master” at keeping the Forum packed. He doesn’t want to overprice tickets, but he doesn’t want to underestimate his product, either.
Suddenly, the Kings are no longer trying to persuade people to come to games. Now it’s a question of ticket packages and ticket prices. It’s a whole new game. A game much easier for the guys in the front office to play.
As Mlakar put it: “The Waynes and the Magic Johnsons of sports are in a separate class that puts them on a marketing pedestal. Athletes like that make all of our jobs that much easier. We now have a player who is the most publicized, the most sought after, the most watched in his sport.
“Those kinds of players are rare, and when you get them, you have to maximize all the opportunities. Wayne Gretzky is giving us a window of opportunity, and we have to know what to do with it.”
Before the trade for Gretzky, McNall and Mlakar consulted some of the people who stood to share in the profits of such a trade, and lined up some deals to be sure that those organizations would be willing to share some of those profits.
They made a deal with Prime Ticket, for instance, to increase the number of games televised. Scheduled telecasts almost doubled, from 37 games to 62. And the rights fees went up substantially. Advertising time and fees were increased for both television and radio.
Before trading for Gretzky, McNall also worked out a deal with Buss, as owner of the Forum, to get back a percentage of the increase in rent McNall would be paying, since the rent increases as attendance increases.
He also made a deal with Ogden Allied Services Corp. to get a percentage of the increased profits that concessions company would make from an extra 3,000 or more people a game parking and buying hot dogs and beer.
Rough estimates are that Ogden will return about $500,000 and the Forum about $250,000.
The Kings’ Slap Shop--their section of the Sports Den--which sells King and NHL-licensed merchandise, brought the Kings about $250,000 in the first six months after the trade.
Mlakar said the team expected increased sales in King shirts and jerseys because of the change in colors--from purple and gold to silver and black. But the combination of the color change and the Gretzky trade has made for what Mlakar calls “mind-boggling” increases in sales.
King jackets alone have sold more this year than in the last decade.
And the Kings have made a bid to buy the entire Sports Den.
Other stores that sell NHL-licensed merchandise also report huge jumps in the sales of their King merchandise--which also pays the Kings a royalty.
“The only club that rivals the Kings right now for merchandise sales is Montreal, and their shop is right in the (Montreal) Forum,” Mlakar said. “Our shop is three miles away.”
Sales have increased on every possible item, from golf bags to drinking glasses to baby clothes. Why, even Paulina Gretzky wears baby-sized King sweat suits.
There seems to be no end to the financial impact the trade for Gretzky has had, not only for the Kings but for everyone touched by the trade.
At every stop around the league, the Kings are now drawing either sellout crowds or the top crowds of the season, whereas they used to be one of the worst draws. Sports inc. magazine estimated that Gretzky has drawn 100,000 fans to other arenas, over and above what would have been expected for King games if he hadn’t been on the roster. At an average ticket price of $20, that’s an extra $2 million for teams around the league.
And his teammates are cashing in, too. Gretzky has lifted the level of play and the level of attention for everyone. It helped make Steve Duchesne an all-star defenseman this year. And that helped Duchesne make a deal for a $1.4-million contract signed just last month.
Bernie Nicholls says that playing with Gretzky is the best thing that ever happened to his career. Nicholls has already set the club scoring record this season. Not coincidentally, Gretzky has 109 assists. That scoring record will be Nicholls’ ace in the hole when he asks for a new deal this summer.
And every member of the team stands to profit from the team-oriented incentive bonuses that will start to pay off as a result of the success the Kings have had this season.
Promoters of arenas all around the country are trying to get a piece of the action, too, by bidding on one of the four exhibition games the Kings have available for negotiation.
“I can’t believe the interest in our exhibition games,” Mlakar said. “Training camp and exhibition games used to be a major expense for us. Now, I’m sitting back and letting these guys bid against each other, and we stand to make a lot of money on those games. The promoters know that people will buy tickets to see the Kings.”
Even in September.
So will the franchise make money this season? Did Gretzky put the Kings over the top in his first year?
“A lot depends on how far we go in the playoffs,” McNall said. “I think we’ll probably break even, or at least be close.
“But I can say this. Having Wayne this season didn’t cost us money. We’re still millions of dollars ahead of the game.”
In very round-figure guesses, McNall figures it this way:
Take the $15 million paid to Pocklington and spread that out over the eight years that Gretzky could play with the Kings. With the interest, it’s a little over $2.2 million a year. Then take Gretzky’s salary and call that, roughly, $2 million a year. That’s $4.2 million being paid out.
Then figure an increase in gate receipts of between $4.5 million and $5 million, and he has already more than earned his keep. Add $1 million of increased advertising revenue. Add $1 million of increased television revenue. Add about $500,000 from the marketing of jerseys and such. And that’s about $2.5 million to help chip away at the usual loss. The loss was about $4 million last year.
“I didn’t think he would make that kind of difference quite this fast,” McNall said. “I don’t think we’re anywhere near what we’ll be making two or three years from now. Remember, we got him in August. A lot of our contracts, like a lot of our advertising contracts, were already made before that.
“Training camp and exhibition games were already set. Nobody had a chance to bid on them. That’s another $1 million next year. We’re going to develop our Senate Seat program. . . . We just didn’t have time to get a lot of these things in place before this season began.”
WAYNE GRETZKY’S IMPACT WITH THE KINGS
1987-88 1988-89* Average Attendance 11,560 14,810 Total Attendance 427,721 547,952 Sellouts 5 22 Average Ticket Price $18.50 $22 Team Wins 30 39 Team Losses 42 31 Team Ties 8 6 Standing 4th 2nd