Breaking into the club - Macleans.ca

Breaking into the club

RIM boss Jim Balsillie is hell-bent on bringing another NHL team to Canada—even if it costs him his reputation

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Breaking into the clubLike every heartwarming narrative, this one required a certain suspension of disbelief. After years in the desert, the team that Canada lost 13 years ago would return to native soil, sending joy through the streets of a downtrodden city, Hamilton, Ont. The lords of the National Hockey League would bow to financial logic, and the team’s deliverer—a fiery-eyed patriot—would quickly reach terms with the Toronto Maple Leafs. The prodigal franchise would then set up shop a few miles down the road, and together the new rivals would share the spoils of hockey’s richest market.

The script was far-fetched enough that even the intended audience acknowledged doubt. Fully 41 per cent of those surveyed by Harris-Decima last week admitted they didn’t think Jim Balsillie could pull off his bid to buy the Phoenix Coyotes (née the Winnipeg Jets), however devoutly they wished he would. Balsillie maintained his customary self-confidence. But desperation was creeping into the message. By late last week, the BlackBerry tycoon was asking for the biggest leap of imagination yet from the 100,000 faithful who registered their support on a website he created to boost his cause. “I take on entrenched interests,” he said in one interview. “It’s my character quirk. I don’t quit. I don’t get scared.”

Maybe not, but when a man worth $2 billion claims underdog status, it’s safe to assume he’s running out of options. On Tuesday, those dwindling odds came into sharp focus as an Arizona judge began hearing arguments into Balsillie’s controversial offer to pluck the Coyotes out of bankruptcy. Not only was Gary Bettman, the NHL commissioner and Balsillie’s nemesis, pulling every lever to block the sale, it seemed increasingly possible that the Waterloo, Ont., tech magnate had no deal at all. Coyotes owner Jerry Moyes, it turned out, had surrendered at least partial control of his money-losing franchise to the league in November, which meant the judge’s first task would be to determine who actually holds the reins of the destitute club. If the NHL wins that call, the Hamilton proposal is as good as dead.

But even if Moyes were found to be in control, the sale of the Coyotes would by no means be final. Balsillie’s proposal, after all, hinges on the condition that he can move the Coyotes to southern Ontario, and transfers of teams require league consent. To put it mildly, that seems unlikely. Three times now Balsillie has tried to buy NHL teams, and three times his bids have dissolved amid accusations that he tried to circumvent the league’s relocation procedures. Redfield Baum, the judge hearing the bankruptcy case, tried this week to smooth over this long history of hostility, ordering Moyes and the league into mediation over the issue of control. But if the past is any indicator, NHL involvement in the disposition of the Coyotes will be a bad thing for Balsillie.

Still, the 48-year-old businessman has promised to fight on, with implications that could reach far beyond Phoenix or, for that matter, the National Hockey League. A few days before the hearing, the Coyotes filed a civil complaint alleging the league’s machinations against Balsillie amount to anti-competitive behaviour. The suit is a long shot, but its implications could prove seismic: by painting the NHL as an “illegal cartel” conspiring to protect regional monopolies, it aims to smash the cement that has held sports leagues in their positions of privilege for more than a century. “Other leagues in the United States are going to be looking at this very closely,” says Matthew Pace, a sports law attorney with the New York law firm Herrick, Feinstein. “A league has to have the right to manage where and when they place a franchise in the best interests of all of its members.”

That Balsillie sees himself in the role of outsider should not come entirely by surprise. The glowing profiles that have charted his rise as chief executive of Research in Motion (RIM) make as much of his passion for beer-league hockey as the wave pool in his house, invariably invoking the “everyman” aesthetic that until a few years ago saw him driving a Honda and living in a four-bedroom home. The blue in his collar has inarguably faded: by his late teens, Balsillie was rubbing shoulders with such future luminaries as the writer Malcolm Gladwell and filmmaker Atom Egoyan at the University of Toronto’s hallowed Trinity College. He went on to Harvard Business School and now ranks as Canada’s 18th richest person. Still, say friends, the son of a Peterborough electrician is never far below the surface. “Being part of some wine-and-cheese country club is the last thing he wants,” says Ron Foxcroft, a Hamilton businessman who golfs with Balsillie. “He wants to own a hockey team because he has a great passion for sport, teamwork and being with the guys.”

Certainly Balsillie’s career remains defined more by tenacity than social connection. “He was never an Olympic athlete, but he has that kind of drive,” says Joan Fisk, a friend and head of the Kitchener-Waterloo Chamber of Commerce. “If he sets his mind to something, he’s the kind of person who really goes and gets it.” His part in RIM’s success story is a case in point. In 1992, Balsillie mortgaged his house to invest in the idea of using pager technology to create a system for wireless email. Leveraged to the teeth, scrambling to keep partners on board, he and partner Mike Lazaridis took seven years before shipping their first device bearing the BlackBerry name. From the outset, they were competing with industry giants like Motorola and Apple. By the early 2000s, their revenue was growing more than 100 per cent a year, and their company has since become one of Canada’s greatest corporate success stories.

Sadly—and surprisingly—these are not the sort of credentials that win you entree into the mason’s lodge of NHL ownership. That much became clear in October 2006, when Balsillie tried to purchase the financially ailing Nashville Predators, and ran up against the group-think of NHL owners. By then, he had already tried to purchase the Pittsburgh Penguins in a US$175-million deal, which failed only when he refused to guarantee he wouldn’t move the team for seven years. Balsillie maintains he merely wanted the option as leverage to get a new arena built in Pittsburgh. But the league stood firm while Pens’ owner Mario Lemieux, the legendary player, declared himself “shocked and offended” by Balsillie’s decision to back out. As public shamings go, it was pretty hard to top.

So when the chance to buy Nashville came up five months later, Balsillie decided to play hardball. This time, he made no pretense of keeping the team in place, offering a stunning $220 million to owner Craig Leipold and selling “reservations” for season’s tickets at Copps Coliseum in Hamilton. The message was hard to miss: not only was Balsillie back, he was mobilizing public opinion in the heart of hockey country to get his way. Yet once again, the gambit fell flat. Even as anticipation of a new NHL team reached a fever pitch in southern Ontario, the owners fell into line behind Bettman, rebuffing Balsillie in favour of a consortium of owners that would keep the club in Tennessee. That group included William “Boots” Del Baggio, a Silicon Valley financier who last week pleaded guilty to fraud for forging documents to get loans from banks and two NHL fellow owners. Leipold, meanwhile, was placated with part ownership in the Minnesota Wild, a successful franchise located in a traditional hockey market. Evidently, Bettman would do almost anything to stop Balsillie from getting an NHL franchise.

No wonder, then, that the tech magnate took a scorched-earth approach when the Coyotes came calling this spring, doing everything he could to make Bettman look bad. He began by attaching a condition to his $212-million bid that he be able to move the team to Hamilton, a move that pitted the commissioner not only against Moyes but against his own bosses. It turns out the NHL counts among the Coyotes’ biggest creditors, having extended the team more than $30 million in loans and advances since last fall. Then Balsillie played the nationalism card, claiming that the NHL was stiffing the country that is “the source of the game, the players, the money.” His website became an outlet for pent-up Canadian frustration, inviting fans to go on “rants” that often as not devolved into personal attacks on the commissioner. “Stop being an ass, Bettman,” wrote one poster on Monday. “Hamilton can fund and support a team. Just stay the hell out of the way.”

Balsillie has repeatedly cast his actions as one more sign of his doggedness. “I spent five years looking for a front door,” he told the Hamilton Spectator last week. “We couldn’t find a front door.” But at what point does tenacity turn to self-defeating stubbornness?

In this case, say some observers, right about the time Balsillie began questioning the raison d’etre of his prospective partners. Asking the court to approve a sale in bankruptcy was one thing, explains Larry Grimes, a Maryland-based consultant who specializes in the acquisition of sports teams; asking it to approve one that included a move was an open challenge to the NHL’s power of self-determination. “The league set up ground rules for the sale of teams for good reasons,” says Grimes. “While I personally doubt the long-term viability of teams in the southern and southwest United States, I think Balsillie has gone about this all wrong. He’s botched it.”

More incendiary still is the lawsuit alleging cartel activity on the part of the league—a complaint filed by the Coyotes but one that serves Balsillie’s short-term aims. Like any league, the NHL is loath to put its rules governing the placement of franchises to a legal test, as a decision finding them guilty of anti-competitive behaviour would clear the way for any owner having financial trouble to move his team, or sell to buyers in another city. The NHL has no shortage of cash-strapped franchises these days (recent reports cite Atlanta, Dallas, Tampa Bay and Nashville among those with money problems, or debt-ridden ownership). Where is there to move other than the fertile territory controlled by more successful teams, or unserved markets where the league hoped to expand?

It is, in short, a recipe for pyrrhic victory. While it maximizes pressure on Bettman to make a deal, the anti-trust suit represents a direct threat to the monopolies enjoyed by the current owners. If he follows it to its logical end, Balsillie will have broken down the door to a club where he is Public Enemy No. 1, and where membership just became a whole lot less attractive. This explains why league officials paint him as a loose cannon and a backstabber every chance they get. “This has everything to do with respect for the league’s rules and processes,” Bill Daly, the league’s deputy commissioner, said recently. “It has everything to do with respect for contracts and upholding the public trust. Balsillie cares nothing about any of that as he has demonstrated over and over and over again.”

The irony, say people who know him, is that Balsillie is all about camaraderie once he is in your camp. “The sports analogies really apply to him,” says Fisk, the Waterloo chamber of commerce chief. “Jim is the sort of person who takes one for the team. He is very, very loyal.” The rest of the NHL owners would learn this if they would let down the drawbridge, agrees Balsillie’s friend Foxcroft, a former NBA referee who made his own fortune after patenting a specially designed whistle. “They’ve said he wouldn’t be a good partner to the other 29 NHL owners. Well, I don’t much like partnerships, but if there was one person in the world I’d go into a partnership with, it’s Jim. He would be a great ally. He would create wealth for the other owners, too. He would have a winning team making money in Hamilton that they aren’t subsidizing.”

The question now is which party, if any, will blink. It might well be in the NHL’s interest to make peace with Balsillie to preserve its own business model, says Grimes. “I could see them going into some backroom and saying, ‘Look, why don’t you run the team in Phoenix for a couple of years, and if you still can’t make money then we’ll discuss a move.’ ” But Bettman has made up his mind—so firmly, court documents reveal, that he would rather move the Coyotes back to Winnipeg, the city they left in 1996, than sell them to the RIM boss. With strong support among the league’s established owners, he’s unlikely to relent.

Balsillie, meanwhile, has staked his pride and reputation on a promise to bring another team to Ontario, whatever happens in Judge Baum’s courtroom. “It’s my firm commitment to Hamilton hockey fans,” he said in a weekend email to supporters. “It’s the best unserved hockey market in the world and it deserves an NHL team.” Already, there is speculation that he will target teams like Atlanta or Nashville if the Phoenix deal fails, and it’s entirely likely some “rogue” owners will approach him, as Moyes did last month. Yet any of these scenarios pits Balsillie in a series of court battles and publicity campaigns, spending millions more to attack the very business model he wants to be part of. To date, he has nothing to show for his efforts.

When he tried to buy the Penguins, Balsillie charmed many hockey fans by promising to get his name on the Stanley Cup “one way or another.” At the time, few had an inkling that they were witnessing quintessential Balsillie, a man who will spare no sum of money, no amount of sweat to realize his boyhood wish. The ambition and cunning that made him a billionaire may lead him yet to rewrite the ownership rules of professional sport. But now, as the clock winds down on the third period of this exceedingly bitter contest, it seems just as likely to prevent his dream from coming true.

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