Teachers Increase MLSE Stake

While the Balsillie battle escalates, the Ontario Teachers Pension Plan quietly increased its ownership in MLSE by buying out the 7.7% stake of CTVGlobemedia. The understanding is that CTVGlobemedia wanted to pay down some of its debt from the CHUM acquisition and strengthen its bottom line due to the general softening in the media market.

The knee jerk reaction is to shudder at the teachers obtaining more control of MLSE. They have been vilified for a long time for not caring about the performance of the teams that they owned and only caring about the financial results. This view was not totally wrong, but I have seen a new approach over the past few years which is encouraging.

The problem a few short years ago was that Richard Peddie had a tight control over the sports operations of the Leafs and the Raptors. Peddie is no doubt a great businessman, but he likely craved some of the media spotlight that is associated with running the prime Toronto sports franchises. Instead of hiring experienced managers to run the teams, Peddie hired people like Babcock and Ferguson Jr.

These managers were not sought by other teams to run their franchises and were very indebted to Peddie for getting the change to run teams here. They did not have the strength to run the teams as they saw fit, and were very susceptible to influence from Peddie and the board. A player like Domi could go to an owner and the resulting pressure from above would effect the team. With weak managers in place, Peddie continued to be the face of the franchises and was constantly in the media spotlight. While the spotlight was not flattering, it still allowed Peddie more fame and recognition then a business executive would normally receive.

The results on the ice and on the court were however a disaster. Both the Leafs and Raptors became more of a laughingstock as the ineptness of the managers was revealed. Peddie stayed loyal to them as long as he could but soon the situation became untenable and risked his position.

The Raptors suffered first because they were new and needed to be perceived as a winner to build a following. The bungled Carter trade was an embarrassment and made the team the butt of jokes across North America. This low, was likely the catalyst that MLSE needed to realize that it had to hire professionals to run their sports teams. Their concern was not so much that they wanted to win, but they had to protect the “Maple Leaf” brand since they were using that to sell condos and develop other projects. If MLSE was perceived as a joke, then the brand would suffer and the value of their overall investment would start to crumble.

Colangelo’s hiring brought instant dividends. The team improved on the court, but more importantly the image improved. The Raptors were no longer a joke in the NBA and by extension MLSE gained credibility which can be translated as brand loyalty. This forced Peddie off the court so to speak and last year MLSE followed that successful model by handing the hockey operations over to Brian Burke. With two articulate professionals running the teams the credibility and image of MLSE is back on the rise.

With salary caps in effect in both leagues, MLSE can not be asked to outspend other teams. The only thing they can be asked to do is spend to the cap and to hire the best possible managers to run their teams. With Colangelo and Burke they have finally not gone the cheap route and have done exactly that.

I believe that MLSE has finally come to realize that for financial success their teams can no longer be allowed to become jokes. If that is the case, then the increased stake of the teacher’s pension fund is not the bad news that some would think.