Biotech player turned Ottawa Senators owner Eugene Melnyk faces off against COVID-19

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Of all people, Eugene Melnyk knows how difficult it can be to make a buck off hockey, even in Canada, even pre-COVID.

Eugene Melnyk is leafing through a 112-page document at his home in Barbados, sipping on a caffeine-free, citrus-flavoured drink. The document, he said, was a plan, the master plan detailing how, position by position and player by player, the Ottawa Senators, of which he is the sole and oft-maligned owner, will be rapidly transformed into Stanley Cup champions from a non-playoff team.

“I truly believe that we are a Stanley Cup winner within four years,” he said. “It can happen any time, but within four years.”

Melnyk speaks with certainty and obvious enthusiasm for his subject, all but guaranteeing victory and boasting of his team’s bright young stars, Thomas Chabot and Brady Tkachuk, the fistful of top prospects the Senators would snap up at the 2020 NHL draft and the cut-rate payroll he has constructed by design, long before COVID-19 collided with an NHL business model where ticket sales, concessions and game-day merchandising drive the majority of team revenues and arenas, including the Senators rink in suburban Kanata, have largely sat dark since mid-March.

Hockey’s billionaire owners and millionaire players are going to make it through the pandemic — as evidenced by the dollars being thrown at even middling free agents this month — but consider the people who sell the merchandise, food and beer or work as ushers at games who don’t have jobs. Bars in arena districts have suffered, or closed outright. Hotels have lost out-of-town fans as guests. Such has been the negative knock-on-effect of the pandemic pressing pause on live sports.

It’s not just about the dollars and cents: fans, entire cities, can get swept up in their teams. We cheer, we weep and then we talk about the results the next day, which in Canada generally means talking about the new season right about now.

Sure, there was a bubble-edition of the NHL playoffs in August and September. But clicking on the television, laptop or smartphone to cheer at a screen, alongside only immediate family members, isn’t the same as watching in-person or gathering with your buddies at a local watering hole. A new NHL season is on the horizon, but the puck isn’t scheduled to drop until Jan 1.

Of all people, Melnyk knows how difficult it can be to make a buck off hockey, even in Canada, even pre-COVID. The running joke around the nation’s capital last spring was not to fret too much about the season being interrupted: Ottawa fans had been practising physical distancing from the Senators for years.

© Wayne Cuddington/Postmedia News files
Ottawa Senators owner Eugene Melnyk chats with defenceman Thomas Chabot at the 16th annual Eugene Melnyk Skate for Kids at Canadian Tire Centre on Dec. 20, 2019.

Of all NHL owners, Melnyk may also have the most informed grasp of what it will take to bring hockey all the way back to its cultural and financial happy place, with full buildings, fans drinking overpriced pints — and arena staff pouring said pints — jerseys selling like hotcakes from arena gift shops and patrons not fearing for their mortal selves should they venture out to the rink or local sports bar.

Years before Melnyk was the target of a “MelnykOut” billboard campaign in Ottawa, he was a pharmaceuticals industry insider and the founder of drug-maker Biovail Corp. For a brief time, he owned a vaccine manufacturer, and he has had a liver transplant, meaning he is immunosuppressed. Should he ever contract COVID-19, he would be a goner.

“I need to stay away from people,” he said.

Melnyk hightailed it to an improvised office with a view of the Caribbean Sea in mid-September, from a cottage north of Toronto as case counts of the virus began creeping up in Ontario. Lately, he has been clocking 12-hour workdays at a glass dining room table with photos of his two daughters and 87-year-old mother displayed nearby.

Melnyk has always understood that the road back to normal for hockey, for humanity, was going to be long, and recalls dashing off a 3,000-word memo to an extremely important NHL somebody — he won’t say who — in March, when “they were chirping about getting right back to playing.”

His memo said a vaccine would take at least 12 to 18 months to develop, but that that wasn’t the greatest challenge. Those who know the Senators owner may have heard his omelette-as-vaccine analogy, but for the rest of us it goes like this:

Say Eugene, a guy who loves his eggs, prepares the most delicious omelette one could ever imagine and serves it for brunch. Say his guest gushes over the taste and asks him to make a million more, each identical to the first. That is called scaling up, and the COVID-19 vaccine, whenever it arrives, is going to be the mother-of-all-omelettes. The first dose needs to be identical to the millionth dose and the billionth dose. And, at the end of the day, people will still need to roll up their sleeves and agree to get a shot.

“We’ve got trouble vaccinating people for the flu with six million doses. Now you start adding three zeros to that,” Melnyk said. “I am not saying it is insurmountable, but I understand the hill that has to be climbed and it is Mount Everest times 100.”

In other words, fellow NHL owners, best buckle up and get creative operationally, with sponsors, advertisers and, critically, the fans the league and its players hope to welcome back to its arenas at the start of the new year.

Tossing a bunch of strangers together in an NHL rink sounds suicidal given present conditions. Ottawa, like Toronto, Montreal, Boston and several other NHL cities south of a border that remains closed to all non-essential travel, is aflame with new virus cases. Indoor dining at bars and restaurants in Ottawa, Toronto and Montreal is currently banned. Movie theatres are closed, as are gyms. Sports programming for kids has been restricted, if not postponed until the new year.

“The biggest challenge the NHL and all sports leagues have is that we really don’t know where we are with the community rates of disease,” said Andrew Morris, an infectious disease specialist in Toronto.

Six weeks ago, Morris would have said the fans could come back in Toronto. Now, he “wouldn’t even have an NHL bubble in Toronto,” and refers to the current situation in his hometown as an unmitigated “disaster.”

© Tony Caldwell/Postmedia News files
Eugene Melnyk in 2018.

By January, however, given the virus-fighting innovation arms race underway, NHL owners could, in theory, have a cheap COVID-19 saliva test waiting for ticket holders at the point of admission. Fans could be made to sign waivers stating they haven’t knowingly been around any COVID-positive people for a defined period of time. Masks could be made mandatory at all NHL events, concession offerings scaled back, arena seating engineered to allow for physical distancing and the virus in full retreat.

Or we could all be getting washed under by the third wave, and then what? Melnyk, a betting man — Google “Mohegan Sun Casino Sues Senators Owner” — wagers fans are coming back, most likely in February. To that end, Ottawa has mapped out a safe seating plan for 6,000 at the Canadian Tire Centre, with fans bubbled in small groups, and with at least two empty seats plus a row between bubbles.

“I can assure you that even the Ottawa Senators, who don’t have a great record of bringing fans in over the past few years, will have a sellout crowd,” Melnyk said, chuckling.

With 6,000 fans and modest food and beverage sales, the Senators can be a break-even operation. The objective isn’t trying to make a profit. “It’s: can you survive?” he said.

A brief note about the Senators’ survival: contrary to the rumours that forever swirl around Ottawa, the 61-year-old Toronto native is not interested in unloading a team he values at US$600 million (Forbes last December pegged the franchise’s value at $583 million). “Even though the value of the hockey team continues to increase, I am not interested in selling — at any price,” Melnyk said.

Instead, he hopes to build a new arena in five years’ time, and isn’t counting on any government funds to help pay for it. He already owns enough land in Kanata to keep the franchise right where it’s been ever since he bought it (and the current rink) out of bankruptcy for US$92 million in 2003.

Debt accounts for about 33 per cent of the Senators’ current valuation, Melnyk said, which is a hangover from the initial startup costs. He is not losing money, he added, the team has cash reserves and the necessary cost structures are in place to weather the COVID-19 storm.

Like it or not, the “MelnykOut” billboard crowd is stuck with Eugene Melnyk, while the Senators and every other NHL team are stuck with the challenge of sustaining fan engagement at a time when fans won’t be allowed to gather in the numbers and in the ways they traditionally would.

“Sports bond us with other people — it is a common link,” said Sam Sommers, a psychology professor at Tufts University in Massachusetts and a baseball fan desperately missing going to baseball games. Watching at home by one’s self just isn’t the same as watching sports with your buddies.

“We are inherently social animals,” he said.

Without that eye-to-eye, elbow-to-elbow connection, bonds can get frayed, and less diehard fans may turn away altogether, and invest their time and money in some other form of happy distraction.

“Younger people, especially, they need to be better engaged,” said Bruce Neve, the president of Toronto-based True Media Canada, and an expert in media strategy.

Neve has two 20-something-year-old children. Much as they love their hockey, neither would sit through three periods of a game pre-COVID-19. Engaging them requires getting creative, experimenting, trying stuff that hasn’t already been done.

© Ian Kucerak/Postmedia News files
Hockey fans sing Oh Canada before the Edmonton Oilers play the Minnesota Wild during a NHL hockey game at Rogers Place in Edmonton, on Friday, Feb. 21, 2020.

For example, he said, viewers on multiple platforms could be encouraged to guess the scorer on a power play, and how the goal gets scored. Off a shot, a deke, a lucky bounce? Guess correctly and your name automatically gets entered into a raffle, with fan prizes awarded in real time.

Food sponsors could create game-night meals. Who wouldn’t want a Senators Salami Pizza, Maple Leafs Tacos or some Flaming Hot Flames Chicken Wings delivered to their door courtesy of Uber Eats?

“If people aren’t buying hot dogs and beer at the arena, how can teams access that disposable income — that’s the question?” said Rick Powers, an associate professor at the University of Toronto’s Rotman School of Management.

Other suggestions include broadcasters offering viewers more custom camera angles. Joe Fan, at home, could get to be Joe Fan, the guy who announces the goal scorer, sponsored by, say, Ford Motor Co. And the players could be prodded to be, well, less boring. The NBA is a league of mega-stars, of dash and flair. The NHL is a league of “giving it 110 per cent,” “believing in the group we have in this room,” and the like.

“NHL players, I love them dearly,” Neve said. “But I don’t think the personalities shine the way some of the NBA personalities do.”

There could be a #Senators Tweet, a Vancouver Canucks TikTok and a Boston Bruins Instagram of the week. Before the pucks drop on Saturday nights, teams could dispatch a bunch of vans to a given neighbourhood in their given city armed with T-shirt cannons, firing out autographed players’ jerseys as they go.

“A lot of stuff might fall flat, but…” Neve said.

But working with sponsors and delivering measurable bang for their bucks pays off, and has been a key factor in helping diversify revenue streams for a league long tethered to ticket sales and game-day receipts.

A decade ago, sponsorship deals netted the NHL US$356 million, according to market research firm Statista. Two years ago, that number was US$560 million.

Perhaps most telling of all: the NHL, the poor cousin of professional sports leagues, charged the new ownership group in Seattle a US$650-million expansion fee in 2018.

Business, for the league, had arguably never been better, until COVID-19 came along, an unforeseen curve that could either be seen as an out-and-out disaster or an opportunity for some creative destruction to keep the old fans watching and attract new fans and sponsors in novel ways.

Out-of-the-box thinking is the order of the pandemic. On that front, the guy with the view of the Caribbean and a franchise in the nation’s capital scored huge during the NHL’s draft night.

In a virtual draft event with virtually no charm, the Senators generated an instantly viral pop culture moment by having Alex Trebek of Jeopardy! fame, and a University of Ottawa alum, announce its first-round pick, Jeopardy-style on the Jeopardy! set.

“The correct response: Who is Tim Stuetzle?”

The Trebek stunt was Melnyk’s idea, and most observers thought it was brilliant.

© Ben Hilder/Getty Images files
Alex Trebek on the set of Jeopardy! in 2011.

Other surprises: the Senators have revived their vintage, centurion-logo jersey; the team hosted a pop-up COVID-19 drive-thru test at its parking lot and gave away Daniel Alfreddsson bobbleheads to test-takers; Melnyk bought lunch for frontline workers; retired Senators fan favourites, Chris Phillips and Chris Neal, delivered Pinty’s Thanksgiving turkeys — Pinty’s is a team sponsor — to people in need; and plans are afoot for an outdoor Halloween event for the kids.

It is not hockey, but community outreach won’t hurt.

“We are hoping we can get back to the thrill of being at a game,” Melnyk said.

Until then, the Senators owner has a few other things keeping him busy, including Clean Beauty Collective, his New York-based cosmetics company. According to Melnyk, he has the top selling fragrance in Sweden — and South Korea.

He is also turning his 1,000-acre Florida racehorse farm into a commercial/housing development, and he is bullish on a tech company he owns that has developed a concussion assessment tool using VR-type goggles and high-speed cameras to track eye movements.

“I have to diversify the income, somehow,” Melnyk said. “But the thing I enjoy the most — by far — is the hockey.”

And he has a 112-page master plan to prove it.

Financial Post

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