The $1Billion Brand that Defies Logic: The Toronto Maple Leafs

leafs-badWhen we look at the Most Valuable sports franchises around the world, whether it’s Ferrari, Manchester United, Real Madrid, New York Yankees, Los Angeles Lakers or New England Patriots, they usually have one thing in common:  THEY WIN.  And in most cases, they win a lot.  We’ve never really found out what happens to those brands when they lose.  

And then there’s the Toronto Maple Leafs who recently joined the ranks of the most valued brands, now worth an estimated $1 Billion.   The last time the Leafs won a hockey championship was 1967, when Lyndon Johnson was President, The Beatles were releasing the Sgt Pepper’s album and Wal-Mart only had 24 stores (all still in Arkansas).  It was even 8 years before Justin Bieber’s mom would be born.   The Leafs have not even made the playoffs  since 2004.   None of their current players were even in the league in 2004.  And they are the only NHL team not to make the playoffs during those years.  There were two major work stoppages in the NHL in 2005 and 2012–one wiped out an entire season, the other a half season.  In both of those years, the value of the Leafs jumped up.  

And yet, since 2004, the value of the Toronto Maple Leafs has gone up from $280 Million to $1 Billion.  Only Apple’s market value has gone up at a faster pace, but they’ve launched the iPhone, iPad and the Macbook during that time.  

So clearly for the Leafs, actually playing and winning the games doesn’t really matter to value of the brand.  

What’s the Leafs Brand Vision?

Up on the Leafs wall and every communication coming from the PR staff says they want to win a Championship.  But they were owned by a pension fund for the past 15 years, whose only desire has been profit.  And now they are owned by a Media Conglomerate who sees the Leafs as content with millions of insane Leafs fans watching in person, on TV and on-line.  Winning?   Does that matter?  I believe a more appropriate Brand Vision for the Leafs is to be the Most Valued Sports Franchise in the World.  Everything they do seems more aligned to the “most valued” than winning a championship. 

Holding the Leafs up to the Principles of a Beloved Brand

My Business School Professor once said “economics proves what happens in real life can actually happen in theory”.  In the theory of Beloved Brands, you need 5 sources of connection to build a tight bond with your consumers.  You need a Brand Promise, a smart Strategy, a Brand Story, a freshness of Innovation and a Culture that helps deliver the promise.  

Arguably, the Leafs might be defying all 5 of these sources of connectivity. 

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What is the Leafs Brand Promise?  Most Beloved Sports Teams can say “we promise to deliver an on-field team that will always be competitive enough to win a championship”.   The Yankees, Man U, Ferrari, the Lakers and Real Madrid can easily say that.  Even when these other teams have a good and not great season, there is a price to be paid.  The Leafs say “we want to build a team to win a championship” but is that a reality?   If that was their promise, the brand would be a complete failure.  Fans would walk away and the value of the team would fall.  Well, at least for a normal team.   

The only real promise the Leafs offer is hope for the hopeless.  The Leafs are the eternal underdog, where the pursuit of victory is greater than the victory itself.  Maybe if you have that underdog spirit in your own life, you see hope in the Leafs where no one else sees hope.  There’s no real rational benefit you get from being a Leafs fan.  You’re never rewarded for your energy.   So it must be irrational.  Purely emotional.  Then what emotional benefit do you get from loving the loser team?  A friend of mine who is a Leafs fan had a baby a few weeks ago, and I said “when do you break it to the kid that the Leafs won’t win a Championship in his life time?”   I know that kid will be a Leaf fan.  He now bleeds blue.   And will pay thousands of dollars towards the leafs coffers over his life time. 

So what’s the benefit?   You don’t get to ever yell “we win”.  It comes back to “Hope”.  Or maybe you figure the celebration party will be so big when they finally do win, that you want to make sure you’re on that bandwagon.  That’s still hope for the hopeless–it just has alcohol involved.   

The strategy is to appear to be doing things to win a championship.  The story is more about history than it is about the present.  I don’t see any innovation in player selection or coaching.   I do see innovations in merchandising, advertising, sponsorship and fan experience.  And the culture of the Maple Leafs is clearly aligned more to making money than it is to winning.   

The Leafs Business Model

Let’s look at how the Leafs business model works.  

  1. Getting tickets to a game is nearly impossible for the average fan.  Every game is a sell out.   It’s a 40 year wait for Leaf seasons tickets. These end up in people’s wills.  They have strong luxury box sales and a strong base of seasons tickets.  If you do have tickets, you can easily scalp them for twice the value on game night.
  2. Every game is on TV, with exceptionally strong ratings.  While the ratings totally in Canada, they are such a dominant ‘country brand’ that it makes the local market all of Canada, which means it has access to 30 Million people.  The Leafs receive added earned media with 2 sports TV stations, 3 radio stations and 3 major Newspapers constantly covering every move the team makes. 
  3. The team’s sponsorship drive is incredible–carrying an astounding 50+ sponsors on its roster–including separating out the banking category into Core Banking, Wealth Banking, Credit Card banking, which allows them to get money from three separate banks.  
  4. Merchandise sales are very strong.   The Leafs have just announced it was changing its third jersey to be a replica of the 1967 jersey.   Which means all those fans have to go out and drop another $129 on a new jersey.  This past year, the Leafs have added a sports bar to the ACC, just outside the arena that has hundreds of TVs and seating for two thousand people.  
  5. Control of Costs works for the Leafs.  The NHL has a salary cap that holds teams to $60 Million per year, which is 6% of the team’s brand value.  For the other hockey teams worth $200 Million, that’s 30% of their brand value.   That’s a huge competitive advantage for the Leafs–still defies why they can’t win. 
The P&L

In 2011 with the world facing a global recession, following up on a 29th place finish in the standings, the Leafs revenue went up ELEVEN PERCENT!!!  And because of the player strike a few years ago, player costs have gone down from $69 million to $57 million.   Revenue up, costs down.  That’s a P&L the people of Price Waterhouse dream about.    A lot of the value is now connected to how much money will be made in the future.  The NHL just signed a 10 year contract giving the Leafs cost certainty.  While I still don’t think the Leafs will win a championship in the next 10 years, I would bet they will hit $2 Billion.  

It’s not easy being a Leaf Fan. Yet like a drug, it’s not easy to stop being a Leaf fan.

 

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To read more about how the love for a brand creates more power and profits:

 

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  2. How to Write a Brand Plan:  The positioning statement helps frame what the brand is all about.  However, the brand plan starts to make choices on how you’re going to make the most of that promise.  Follow this hyperlink to read more on writing a Brand Plan:  How to Write a Brand Plan
  3. Consumer Insights:  To get richer depth on the consumer, read the following story by clicking on the hyper link:  Everything Starts and Ends with the Consumer in Mind

 

Brand LeadershipI run the Brand Leader Learning Center,  with programs on a variety of topics that are all designed to make better Brand Leaders.  To read more on how the Learning Center can help you as a Brand Leader click here:   Brand Leadership Learning Center

 

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About Graham Robertson: The reason why I started Beloved Brands Inc. is to help brands realize their full potential value by generating more love for the brand.   I only do two things:  1) Make Brands Better or 2) Make Brand Leaders Better.  I have a reputation as someone who can find growth where others can’t, whether that’s on a turnaround, re-positioning, new launch or a sustaining high growth.  And I love to make Brand Leaders better by sharing my knowledge.  Im a marketer at heart, who loves everything about brands.  My background includes 20 years of CPG marketing at companies such as Johnson and Johnson, Pfizer Consumer, General Mills and Coke.  My promise to you is that I will get your brand and your team in a better position for future growth. Add me on LinkedIn at http://www.linkedin.com/in/grahamrobertson1 so we can stay connected.

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