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David Freeman's Address to Nashville Kiwanis Club

by Staff Writer / Nashville Predators
David Freeman's Address at Kiwanis Meeting in downtown Nashville (Oct. 17, 2008)

State of the Predators Address – 2008

Financial Performance
Club had a positive cash flow for 2007-08. Barely, but it was positive.

This is a remarkable turnaround from the $15MM cash loss in 2006-07 that prompted the sale of the Club.

The challenge is still very much there. Perhaps more so than ever. The single largest factor in last year’s financial turnaround was the payroll purge that occurred prior to the sale of the club. That purge dropped $9MM of payroll. We have added back $13MM in player payroll since purchasing the team 9 months ago. These player contract extensions represent long-term commitments to the future of the franchise.

We believe very strongly in our management team’s ability to identify and sign talented young players. We believe very strongly that the culture of our organization and the culture of our city have allowed Nashville to become a very desirable destination for the world’s top hockey talent.

Our goal is to Win. Everything else (attendance, profitability, etc.) will take care of itself.

The Economy
Yes, the economy is hurting our sponsorship opportunities. The pain is global and we are not immune. It will not be too bad for the Predators. We are in a position to handle it.

No, we do not expect a soft economy to diminish ticket sales. If anything, tough economic times often result in less extravagant travel and more local entertainment outings. If anything, we expect to sell more tickets, not less. League-wide, ticket sales are up 4% so we are seeing some very positive reinforcement of our outlook.

The Lease and the Sommet Center
As most are aware, last year the city of Nashville renewed its significant commitment to the NHL, the Nashville Predators, and our city’s entertainment options.

Under the club’s amended lease, the City committed an additional $3MM annually to the Predators.

Upon a review of the first year of operating result, we have discovered some positive bonuses for both the team and the city.

First, the city saved hundreds of thousands of dollars in incremental arena expenses that were incurred as a result of increased activity at the arena……..expenses that the city otherwise would have been responsible for under the old lease.

Second, as a result of the increased activity at the arena, we have also generated and paid hundreds of thousands of dollars of (i) incremental business taxes (ii) incremental local sales taxes earmarked for Metro schools, (iii) incremental state sales taxes earmarked for education at the state level, and (iv) incremental state sales taxes for the state’s general fund. All of these sales taxes were generated inside the arena.

On the other hand, while we incurred additional expenses operating the arena, the increased activity also generated millions in additional arena operating revenue for us. As we stated last year, operating the arena in the most profitable and efficient manner will be a key component of our success.

Bottom Line: the aggregate 2007-08 out-of-pocket cost to the city of restructuring the team’s lease was less than $2.5MM.

Bottom Line: including the $3MM of additional funding, the hockey club was able to generate over $5MM of new money out of the restructured lease.

Hopefully, this deal is working out exactly like everybody envisioned (actually better than envisioned for both parties) and hopefully we have been good stewards with the city asset that has been entrusted to us.

While we will leave it to others to estimate the total impact on the city’s economy and tax base, we can report a total of 1,400,000 visitors to the Sommet Center in 2007-08 (90,000 more than the prior year) for sporting events, concerts, and a variety of other entertainment options from circuses to bull riders to ministries.

Our new partnership with the city is enabling the arena to continue to host high profile events, such as the CMA Awards and SEC and NCAA basketball events, that otherwise would have had to be eliminated under the old lease structure. Without our restructured partnership, the hockey team would have been unable to give up sold-out Saturday nights to make room for these other great events. Again, we are striving to fulfill a self-imposing obligation to maximize the entire community’s enjoyment of the Sommet Center.

Our Future Role in the Community
“Music City” is an important brand for Nashville. We hope to be able to expand the CMA’s use of the arena during the CMA Music Festival in upcoming years. We would like to find a role in assisting the creation of a Labor Day weekend music event.

We are also working with the CVB and the Sports Council to establish Nashville as a more preferred destination for SEC events. Nashville is the heart of SEC County and a popular destination for all SEC fans. We will seek to expand the SEC brand in Nashville whenever and wherever possible.

Look for the Sommet Center to integrate with the new convention center by possibly creating retail opportunities in the arena in coming years. We believe that possibly redesigning the arena to add restaurants and other retail stores will satisfy our need for additional, private (i.e., no taxpayer dollars) revenue streams while expanding the appeal of the convention center and our city’s other downtown offerings.

Ticket Sales
Last Year: 13,000+
Goals for this year are much higher, including a focus on our Saturday night games.

Outlook: Yes, we have a ton of work to do. Yes, this will be hard. As I’ve told our staff, we relish the opportunity to turn this business into the unlikeliest of success stories.

Hockey Issues
Most important goal is to make the playoffs for the 5th straight year. Once we’re in, anything can happen. “We’re due.”

Radulov: Let’s move forward. He’s playing in Russia and we assume he isn’t coming back this year. We wish him well. End of story for this year.

Ownership Issues
Boots Del Biaggio: We are moving forward aggressively to completely eliminate the entire Forecheck ownership position. Unfortunately, some with other agendas have misinterpreted this exercise of power as a sign of weakness.

This will probably take many years to play out. I am not concerned about that ownership stake at all. In a best case scenario, the Del Biaggio position will be eliminated. In a worst case scenario, we will buy him (or anyone else) out in three years. Our lawyers will argue with their lawyers. In the end, we will win that battle. In the meantime, we would really like to move forward and play some hockey.

Public School Issues
As I wrap up, I want to take a moment and applaud the Mayor’s efforts to improve public schools and tell you why, from a very selfish perspective, it’s important to the Nashville Predators.

Our business wants to sell all of its inventory, which just happens to be hockey tickets. With higher income levels in Nashville, we should expect to sell more hockey tickets.

Continuing to recruit companies with higher paying jobs into Middle Tennessee requires a high quality workforce.

To grow and prosper as a city, and with the emphasis on prosperity, we must continue to produce a strong pipeline of highly educated young folks to assimilate into the workforce. Educating our future workforce is not just the right thing to do for the next generation, it’s critical for the prosperity of our own generation. Our own sales and marketing efforts will be fruitless without an affluent and vibrant consumer base for us to sell to. I suspect each of you can tell the same story. An Educated Workforce equals an affluent and vibrant workforce.

Thank you inviting me here to the Kiwanis Club today.
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