There's no denying that the New Jersey Devils have been a very successful organization for most of the past two decades, with president Lou Lamoriello building three Stanley Cup championship teams and two other finalists. Few other NHL clubs have played that well during that time, but the Devils are now at a crossroads, drowning in red ink and attracting the interest of what could be a very interesting ownership group.
The NHL's Board of Governors has approved the sale of the franchise to the owners of the NBA's Philadelphia 76ers, a group that has abundant resources at their disposal and lots of fiscal brainpower to go with it. They're going to need all of it to solve the problems that have long plagued the franchise.
As well as the Devils have done on the ice, they've remained a low-profile operation, continuing to live in the shadow of the nearby New York Rangers, who have accomplished far less over the last 20 years. Unlike its cross-river rivals and many other consistently good NHL teams, New Jersey has not been able to sustain a fan base that can fill its arena night after night, year after year, regardless of how well the team plays. Except when playing heated rivals like the Rangers or Flyers (and enemy fans buy up the unsold seats), the Devils have only sporadically been a "hot ticket," despite the hugely loyal fans they have. Some of that is because, even when they've won, the Devils have done so mostly by playing exceptional defense, not the kind of hockey that regularly brings fans to their feet or packs the building.
Then there's the matter of the team's debt, which is thought to be in excess of $230 million. As Forbes magazine outlined in June, that amount is tied to Vanderbeek's ownership of the franchise and the Prudential Center (which he controls and originally went into debt in order to build). Forbes adds that some of the money owed is tied to nearby real estate. The Devils' annual debt service is about $14 million. Forbes believes the team itself is doomed to fiscal difficulty unless it makes the playoffs, which it didn't do last year. That renders selling every seat for every regular season game almost a necessity. The lockout-shortened schedule also hurt the Devils, since fewer games were played.
The uncertainty about its finances certainly played a role in the departure of three core players -- Zach Parise, Ilya Kovalchuk and David Clarkson -- during the last 14 months. No team in any sport can have a bright immediate future when it loses its best players. On top of that, owner Jeff Vanderbeek's cash flow woes have led to a steep decline in events at the Prudential Center, the team's arena. As Forbes reported when it suggested that the NHL was about to take over the Devils (which the league denied and now seems inaccurate), non-hockey bookings at "The Rock" have evaporated because Vanderbeek's company that runs the building, Devils Arena Entertainment, lacks the cash to pay the necessary advances to schedule rock acts, circuses and other events. The arena had been the 11th busiest building in North America. In the first quarter of this year, it wasn't in the top 50. Getting those dates is essential to making the whole enterprise, including the hockey team, successful.
So who are the new guys and what clues do they offer as to how they might rescue and operate the Devils?
As John Gonzalez of CSNPhilly.com reported last week, the Sixers' managing partner, Joshua Harris, has a personal worth estimated at $2.1 billion. He's a founder of Apollo Global Management, a highly successful investment firm that specializes in -- and this is the key for the Devils -- acquiring distressed assets. Harris purchases companies that are in bankruptcy or headed that way and turns them around.
Harris' cohort in the ownership group is David Blitzer, a fellow Wharton School of Business alumnus who graduated magna cum laude. A senior managing director and head of tactical opportunities for Blackstone, Blitzer manages a $1.5 billion fund for the world's biggest private equity firm in terms of assets. It reported $3.3 billion in revenue last year. So these guys are heavyweights in the world of finance, and "at the top of the food chain" in their field as one observer in Philadelphia characterized them.
In 2011, backed by an ownership group that includes Hollywood star Will Smith and his wife Jada Pinkett-Smith, Harris and Blitzer bought the 76ers, a franchise that was considered to be undervalued, for a reported $287 million, not much for a major market East Coast NBA team.
Reconnecting with fans by recalling the Sixers' glory days, the new owners boosted attendance, and today the team is valued by Forbes at $418 million. That's quite a jump from the original purchase price and they did it while the team played poorly -- except for an unlikely playoff run in 2012. That indicates this group knows how to make money.
Unease in Philly
Not surprisingly, the 76ers owners bidding on the New Jersey Devils is not a situation that Philadelphians are greeting with brotherly love. There are suspicions that the Sixers' owners really want to move the team out of town to Newark, which seems unlikely since, as Gonzalez reported, they signed a lease to keep the team "long term" at the Wells Fargo Center. Plus, there's already some sniping on Twitter that no one with any feel for Philly sports could own a rival hockey club like the Devils. But these are businessmen; they aren't going to let Flyers orange stop them from the potential green they can make in Newark.
Just what the Devils' sale will mean for Vanderbeek is unclear. There is some thought that the man who oversaw the construction of the Prudential Center in downtown Newark will still maintain a piece of the club, perhaps even with some clout in the new ownership group. It has often been noted that Vanderbeek should never be underestimated. He's appeared to be out of the picture before, only to survive and keep control of the Devils. But there's little doubt that he will be supplanted this time as the big money man in the new scheme.
Harris and Blitzer are not micromanagers. They seem to prefer hiring good people and letting them do the job. They initially put Adam Aron in charge of the Sixers. As Philadelphia Magazine summarized, Aron "pumped some voltage into the once-moribund franchise in just one season: Lowered ticket prices. Hired a Broadway company to transform the arena lighting. Added more dancers. Created a section for lunatic fans. Invited an honor roll of Sixer alums to return for a bow. Brought Dr. J back as a consultant."
This summer, they've taken the next steps to improve the Sixers. They hired Scott O'Neil, one of sport's top young executives, to be the CEO, replacing Aron (who wanted to do other things, but believing in the club's direction, he remains on the board of directors and increased his stake in the franchise). O'Neil ran the business operations as Madison Square Garden's sports president from 2008 until 2012, securing major corporate partnerships with JP Morgan Chase, Delta Airlines and Coca-Cola. He's credited with stabilizing the Knicks' dysfunctional front office after their fiasco with Isiah Thomas.
Just this week, the group hired a new head coach, Brett Brown, who was a longtime assistant for the San Antonio Spurs, and gave him a four year deal. That's somewhat long for a first-timer, but it allows him more time because they are also overhauling the roster.
Perhaps most interestingly, they hired a new GM in Sam Henkie, considered to be an innovative thinker who favors a "Moneyball"-style statistical analytics approach to team management.
The point is that this potential ownership group can be aggressive and innovative, and not the slightest bit hesitant to make changes it deems necessary. And it may judge that things will have to change with the Devils.
Does that mean the new ownership group will replace Lamoriello and look for an advanced-stats approach as it has done with the Sixers? Many NHL clubs examine and consider advance stats now, but to have one of its disciples in charge of a club would be revolutionary. And do you really want to replace Lamoriello, who is considered to be one of the most crafty GMs in the league? Of course, trying to project what the Harris-Blitzer group might do is, at this point, entirely speculative. But it seems reasonable to expect there will be changes. They're not going to invest all this money to keep things the way they are now.
Will they want the Devils to become a more exciting product on the ice? Acquiring Kovalchuk and developing Parise were rather groundbreaking moves for this franchise, which has rarely boasted elite offensive talent. Now those two players are gone and that could necessitate a renewed emphasis on defense, unless ownership suggests a change in direction. But regardless of the style the Devils to play, this team needs -- and has needed for a long time -- a higher profile in its own marketplace.
The Devils may not be as moribund as the Sixers were, but if Harris, Blitzer and their associates do buy them and the Prudential Center, they are not merely doing it with the intention of booking more attractions on the nights the Devils do not play there. They are going to want the team to fill the Prudential Center as well and they are going to change what they think are the obstacles to that happening. It's the only way this franchise can get back on its feet.