Of the 130 companies that are owned and operated by Platinum Equity in areas ranging from technology and distribution to manufacturing and logistics, Palace Sports and Entertainment is something of an anomaly. It’s an entertainment business that includes a sports franchise and an arena, but also comprises a robust schedule of concerts and events at two other venues, DTE Energy Music Theatre in Clarkston and Meadow Brook Music Festival in Rochester Hills.
When Platinum owner Tom Gores and his core team were evaluating the Pistons, The Palace, and Palace Sports and Entertainment as a potential investment, they went through exactly the same process they utilize for any company on their radar.
“We’re a private equity firm and, in that context, we’re a buyout shop,” says Mark Barnhill, a Platinum Equity partner. “But we’re very different from others … in that we have a very operations-intensive process, where it’s really all about identifying companies that may be underperforming from an operational standpoint.
“We have what seems like a very eclectic mix of businesses in fairly divergent sectors, but at their heart they all have one thing in common: they are businesses that have a tremendous amount of potential and value locked inside them. And that value is locked because there’s an operational underperformance component. So our goal is to come in and fix — and, therefore, unlock — that value.”
That’s where Palace Sports President and CEO Dennis Mannion plays a prominent role. Hired in September 2011, soon after Gores bought the Pistons, Mannion oversees all aspects of business operations for the team and the arena, including sales, marketing, finance, and administration. In a career spanning more than 30 years, Mannion holds the unique distinction of having business and marketing experience in all four major sports.
A big part of his job — Manninon most recently was president and CEO of the Los Angeles Dodgers — is supervising the three-year renovation of The Palace at a total cost in the vicinity of $50 million, “if we manage it right,” Mannion says. The upgrades range from a new logo, color scheme, and less signage — “it was almost like Toys R Us,” Mannion cracks, “colors all over the place.” Other capital improvements — some completed last November — include the refurbishment of all of the office space, the main lobby and causeways, and seven new clubs for fans at every ticket level.
“The goal was to bring in a new sense of energy and urgency about bringing this business into the 21st century,” Barnhill says. “It needed a refresh on all levels.”
Which is where the other part of Mannion’s job comes in.
“The big change in the last 20, even 30 years, in sports is there’s been this descending curve on brand-building sponsorships, like the big Coke signs.” Mannion says. “They’ve been on the slide. These guys want to be active and move bottles of Coke; they don’t want to just put a sign up.”
He says the team’s fans have changed dramatically, as well. “In the past, the strategy had been open the gates and sell tickets. And that works when you’re winning. It doesn’t work so well when you’re not, or when you get where you’ve raised ticket prices to a point where it’s painful to go.”
So how to resolve the dilemma? “You have to recognize not all your fans are alike,” Mannion says, “and all the businesses you serve aren’t alike, either. And the businesses you bring in as sponsors don’t fit every customer. So you’ve got to customize.”
Mannion oversees 255 full-time employees working on 56 separate teams in an array of specialized areas including operations, revenue, and communications. Most recently, Mannion’s team created specialized packages for virtually every ticket-holder and potential customer.
“Whether it’s men, women, kids, courtside, suite-holders, full- or half-season ticket holders, or corporate partners, we try to divide them up and determine who’s the target, what are the things they love to do, what kind of memories or experiences are we offering, and how do we build a bold brand around that?” Mannion says.
So the premium ticket-holders at courtside are designated “Pistons Black, like the American Express Black Card,” Mannion says. Such fans, along with their corporate suite counterparts, receive glossy brochures extolling the virtues of “The Suite Life.” But there are also promotions for those with thinner wallets, like the “Power Hour” on game nights, where early-arriving fans are offered food and drink discounts along with opportunities for everything from meeting former Pistons greats to getting a complimentary window scrape before heading home on an icy night.
For Mannion, it’s all about the three Rs — Relevance, Relationships, and Revenue.
“The funny thing in sports,” he says, “is a championship season immediately gives you relevance, and then you jump to the revenue. But if you miss developing relationships and you go from the championship to the cellar, you drop off in attendance dramatically. I’ve been with clubs like the (Philadelphia) Phillies (baseball team) where we had five out of six last-place seasons and nine out of 10 losing seasons, and we barely dropped our fan base from the championship years. But it’s because we had a deep relationship with our fans.”
Mannion says that critical relationship factor has been missing with the Pistons and their fans. Last season, the first under Gore’s ownership, and just three years after leading the National Basketball Association in attendance, the Pistons dropped to 28th in the 30-team league, playing most nights in an arena that was sparsely filled while limping to a woeful 25-41 record. This year’s team dug itself an early hole, starting with a 0-8 record. As of Dec. 12, the team’s record was 7-17.
Not exactly the best way to get the fans through the turnstiles. And a daunting challenge for Joe Dumars, the team’s president of basketball operations, who has been with the organization since he was a first-round pick in 1985. He went on to become one of the state’s most beloved players, as well as a two-time champion (1988-89) and MVP of the 1989 finals. Those glorious “Bad Boy” days are long gone, and it’s up to Joe D to bring them back. There’s no pressure, he says, from Gores or anyone else at Platinum to change the game plan for building a winner.
“What’s happened from the basketball side is we’ve talked about a plan to build with young guys, and the process of that and how it takes time,” Dumars says. “We had a run. It went for a long time, but then you have to rebuild.”
Dumars pauses and lets out a long sigh.
“It is the necessary evil of running pro sports franchises,” he explains, “unless you’re just going to be the Yankees and go out and spend, you know, $200 million every year. And that’s not the philosophy here. We want a young base so we can sustain success for a long period of time, like we did before.”
That’s one reason why the upgrades at the Palace include a ton of amenities for a young team that is hoping to attract more talented free agents in future years: state-of-the-art audio/visual systems for the players in their locker room, a major practice facility, a spacious stretching area, and a lounge that includes a fireplace. There’s also massive plasma TVs and interactive capability for iPads and laptops, all of which are designed to create an environment where the players want to hang out before and after practices.
It all looks great — Mannion’s marketing strategy, the building improvements, the facilities for the players. But can everyone hang on for what is sure to be a long haul?
“We are patient,” Barnhill vows. “At the same time, there’s an urgency to that, right? We’re not in a position where we are happy waiting, or hoping or crossing our fingers that this is going to work. There is an urgency attached to everything the management team is doing, and they’re making sure we are making meaningful progress every day, that we’re not just happy sitting in place.”
So what about the guy in charge of the overhaul on the hardwoods?
“In all of my years in Detroit,” Dumars says, “the people here have proven time and time again that they will support a winner, and they will support doing things the right way. And that’s what I hang my hat on every day. I don’t worry about anything else. Are we doing it the right way? Are we building a winner? I never get off of that. I never lose focus on that. And that’s what I know people will support. I’ve stated that to Tom and everybody else here, that these fans and the people in this community have always done that. That’s what they come to expect here.” db