It looks like the Phoenix Coyotes are going to be around Glendale, Arizona for at least another year. TSN's Dave Naylor writes that the city council there voted 5-2 to give the team a $25 million subsidy if they haven't found a buyer by the end of the 2011-12 season. As Joe Yerdon writes, that subsidy should keep them there for at least another year, if not longer, and that means Winnipeg probably isn't getting a team this summer. Of course, that won't make everyone happy; it was only decided after a hilarious council meeting (described perfectly by friend of the blog Dennis Tarwood) that featured plenty of comments both for and against the idea, and it's sure to meet with criticism from the Goldwater Institute, many Canadian hockey fans and media outlets, economists and others. However, while there are substantial issues around hockey in Phoenix that still need to be addressed, keeping the team there is a good thing from this perspective.
It's not that economic arguments should be written off entirely. Having a league directly subsidize a team (as the NHL has been doing with Phoenix over the last while) is very problematic for the perception of that league, and it's also troubling from a financial point of view. Having a city council potentially hand out that kind of money to what's supposedly a professional, for-profit sports franchise isn't necessarily a great idea either; I can't speak for the taxpayers of Glendale, but they can decide if that's the best use of their money or not. It's certainly not the greatest long-term solution. However, there are positives to keeping the team in Phoenix, and those need to be recognized.
Showing posts with label Phoenix Coyotes. Show all posts
Showing posts with label Phoenix Coyotes. Show all posts
Wednesday, May 11, 2011
Tuesday, June 16, 2009
On David Braley, the Argonauts, the CFL and the NHL
[Photo: B.C. Lions owner David Braley (left) with the Grey Cup, B.C. Premier Gordon Campbell, former CFL commissioner Tom Wright and 2005 Grey Cup Committee Chair Dennis Skulsky in 2004. From gov.bc.ca].
Quite the story in this morning's Globe and Mail from David Naylor and Matthew Sekeres. According to the Globe, B.C. Lions owner David Braley "secretly put up half of the $2-million franchise fee when David Cynamon and Howard Sokolowski purchased the Toronto Argonauts out of bankruptcy in the fall of 2003, and continued to lend money to the CFL club". The story says the deal was made without informing then-CFL commissioner Tom Wright (who I spoke with not that long ago about the Coyotes-to-Hamilton situation) and has continued to the present day without the knowledge of current CFL commissioner Mark Cohon.
No sources are named and all sides appear to be denying the story, but in very carefully worded terms. For example, consider these comments from Sokolowski:
"When asked yesterday if Braley had an ownership interest in the Argos, Sokolowski vehemently denied it.
'Absolutely not, David Cynamon and myself are the owners,' he said. 'There are no formal financial records whatsoever in terms of him being an owner.'
When asked whether there were any financial arrangements between the Argos and Braley, Sokolowski replied: '[Braley] is not an owner. He has never been an owner. It’s a private company. That’s it.'
That's quite the non-denial denial; Braley doesn't have an "ownership interest", but there's
no denial of financial arrangements between the parties. Later in the story, Braley says he's loaned money to various CFL owners from time to time, including the Sherwood Schwarz group that sold the Argos to Cynamon and Sokolowski in 2003. That would support claims of his involvement in the franchise transfer. Like the one offered by Sokolowski, Braley's denial of ownership interests is also very limited:
'I don’t have any ownership interest at all with the Toronto Argonauts and I never have. … There is no paperwork and there’s nothing to be able to prove that.'
Those comments certainly doesn't prove the Globe story, but there is enough there to give it some credence. The full truth of the matter certainly is still up in the air for the time being, though. The bigger question is what it means if these allegations are true, and that's one Globe columnist Stephen Brunt tries to address with this piece. Brunt makes some good points about how Braley may have become involved and how his involvement may have preserved the Argonauts (and by extension, the league; without a Toronto franchise, say goodbye to national sponsorship and television deals). I'm not sure if I agree with the last part of his piece, though:
"In stepped Braley with a solution – one that he could certainly afford, but one that would be controversial in most leagues. He offered Cynamon and Sokolowski some financial assistance – and no one would have to know. ...
Almost all good – except that, on an absolutely fundamental level, you can’t do that in professional sports. Not even if it’s just a “loan” between businessmen. Not even if you’ve done it before for other owners in the past. Not even if there’s no paper trail, no formal partnership agreement."
It isn't entirely true that "you can't do that in professional sports". Almost exactly the same thing happened in Nashville when Craig Leipold sold the Predators to a "local" ownership group featuring noted huckster Boots Del Biaggio. As the Nashville Tennessean's Brad Schrade reported last year after Del Biaggio went bankrupt, Leipold loaned money to both the local group and Del Biaggio. The $10 million he loaned to the local group (in short-term financing) was disclosed to the league; the extra $10 million he gave Del Biaggio apparently was not. Moreover, if Del Biaggio's group hadn't become involved, Leipold would apparently have had to loan the local group $40 million.
Just over a month after completing the Predators' sale, Leipold bought the Minnesota Wild. The league obviously knew of the $10 million loan he still had out to the Predators, as it was listed in those sale documents. They didn't know about the extra $10 million he gave Del Biaggio, but NHL commissioner Gary Bettman told the Tennessean that it might not have made a difference.
"It isn't clear how having a continued stake in the Predators would have affected Leipold's ability to purchase the Wild or another NHL team. The league, like most major pro sports leagues, frowns upon owners having significant stakes in multiple teams.
Asked whether this would have affected Leipold's ability to buy another NHL team, Bettman said: 'Not necessarily. It's something that would have had to be evaluated at the time.'"
Rumours of a similar seller-financed deal in Tampa Bay when Oren Koules and Len Barrie took over the team have also arisen, and the league has loaned massive amounts of money to the Phoenix Coyotes to keep them running. Thus, it might not be all that uncommon to see this in the NHL. Moreover, ownership interests in multiple teams isn't exactly verboten everywhere; consider MLS, where Clark Hunt owns both the Columbus Crew and FC Dallas (and used to own the Kansas City Wizards) and the Anschutz Entertainment Group owns both the LA Galaxy and Houston Dynamo, as well as arenas and sports teams all over the place. Loaning money to another owner is considerably below owning franchises in two separate cities, and it sounds like the Braley deal may be more of a loan than anything else.
Furthermore, consider the people involved. David Braley is not Jerry Jones or Al Davis, looking to make himself the team's de facto general manager. The portrait of him that emerges in Bob Ackles' excellent book The Waterboy is a limited one of a reclusive owner who hires good people on the business and football side and lets them run the show. That certainly happened in B.C. under Braley's tenure with Ackles and coach/general manager Wally Buono. If the story of massive loans to the Argonauts' owners is true, it isn't difficult to imagine Braley being even less assertive on the football side when he's only partly involved (and well-known as the owner of another team). It would be very hard to see him as some sort of tyrant that marched down and started telling the football guys how to run things.
Therefore, I don't think there's any substance to the competitive concerns. The deal's image is still problematic and it's certainly not a good idea in general to have an owner involved in multiple franchises if it can be avoided, but this is perhaps the exception that proves the rule. For one thing, the CFL absolutely needs a strong, successful Toronto franchise. With the Argonauts doing well, it's a national league; without them, it's much more of a regional one. There's zero question of relocating the franchise, but it was certainly difficult to find a buyer for it in 2003 thanks to the disastrous Schwarz era. Thus, something had to be done to sweeten the deal. Moreover, if you have to have an owner involved in multiple franchises, a guy like Braley who's largely hands-off on the football side would be the perfect candidate.
What's concerning is the secrecy surrounding the deal and the (apparent) lack of information on it received by two separate commissioners. Presume for a moment that the allegations reported in the Globe are completely accurate as to Braley's involvement. If that information was known by everyone in the league and released at the time of the sale, would it really be a big problem? Imagine a press conference where Wright explains the situation and says that Braley has generously offered to step forward with the necessary cash as a loan to allow Cynamon and Sokolowski to purchase the team and keep it local. The CFL could say that it's not ideal, but given the importance of the Argonauts and Braley's reputation, it makes sense. Tweak the deal slightly so Braley's only putting up 49.998 per cent of the money (and thus Cynamon and Sokolowski have a majority interest), make it clear that he can't make any decisions for the franchise without their approval, and you don't have much of a problem. Sure, it reduces Cynamon and Sokolowski's status in the Toronto pecking order somewhat (which may have been why this was kept so secret), but you don't have competitive concerns, you have the league and the fans aware of exactly what's going on and you have a strong Argonauts franchise. That seems like a good solution from this corner.
Keeping the league and the fans in the dark is a substantial problem. There has been far too much infighting and jockeying for position in the CFL over the years, with individual owners often doing what's best for themselves and ignoring what's best for the league. Often, the commissioner and the league office have been undermined, an all-too-frequent situation that former league president Jeff Giles described very well in his book Bigger Balls: The CFL And Overcoming the Canadian Inferiority Complex. (By the way, Giles is now the athletic director at McMaster University, where Braley is one of the most influential alumni and has an athletic centre named after him). The owners need to step back and do more to support commissioner Mark Cohon, and that means keeping him in the loop on these sort of deals. The CFL needs a strong, united front more than ever at the moment, given the rising threat from the NFL and the Buffalo Bills' potential relocation. Secret deals between owners that undermine the commissioner's role do not help with that.
As a final note, it's interesting to consider this in light of Cynamon and Sokolowski's supposed bid for the Phoenix Coyotes (who are still in limbo after Judge Redfield T. Baum's most recent decision). Any interpretation of this story suggests that that bid was a sham, certainly in the way Bettman presented it. If this was a straight loan, there's no way in hell Cynamon and Sokolowski have the cash to afford an NHL franchise; if they can't raise $2 million to buy a CFL franchise on their own, how would they get into the NHL? If it was an ownership interest to minimize their potential exposure and losses from owning a CFL team in Toronto, it's highly unlikely they'd want an NHL team in Phoenix, as that's a much worse situation. Of course, the thoughts from this corner were always that their bid was either a stalking horse to help inflate the franchise value or a plan to buy the team, run it for a season or two and then either move it to Toronto or sell it to be moved somewhere else, picking up an expansion franchise in Toronto for their service. This certainly doesn't help anyone take Bettman's claims about their interest in operating a team in Phoenix seriously, though.
Wednesday, June 03, 2009
NHL to Hamilton conference call, part II: Vagaries of the application
One of the interesting things that came out of yesterday's media conference call on the filing of the official application to move the Phoenix Coyotes to Hamilton was the information about the NHL's application process. The application covers the territory required by NHL By-Law 36.5, and there are some curious inclusions and omissions there.
First, the application includes substantial information about the Coyotes' financial picture in Phoenix. Here are four of the key points made in the application, excerpted word-for-word from the media backgrounder I received:
"- Since inception the Club has recorded cumulative EBITDA losses in excess of $316 million.
- The Club has been unable to generate a significant fan base in Glendale demonstrated by a lack of interest in attending a game live, with the Club ranking 5th in attendance interest in that market behind the NFL, MLB, NBA, and NCAA Football. Historic support is weak, attendance is low, ticket sales continue to decline and broadcast ratings are low.
- Management of the Club has attempted to restructure its operations in an effort to increase revenues and decrease costs to reduce operating losses, and bring a greater probability of financial sustainability. Even with the most optimistic of planning assumptions the five-year horizon in Glendale projects further losses of over $40 million.
- In an effort to secure additional investors or a buyer to help meet responsibilities towards all creditors, current owner Jerry Moyes engaged an experienced adviser and retained Citibank’s Private Banking Group. There was not one expression of interest or an offer of any magnitude that would pay most of the creditors and keep the Club in Phoenix/Glendale."
There's enough material in those four points for a whole series, and some of it will be discussed in greater detail in my upcoming posts on the matter. However, the key thing to notice for the moment is the specific numbers included: cumulative EBITDA (earnings before interest, taxation, depreciation and amortization) losses of $316 million and projected future losses of $40 million under "the most optimistic of planning assumptions."
What are "the most optimistic of planning assumptions"? Application author Tom Wright (whose role I explored in more detail here) had some interesting comments on the Coyotes' past and future financial prospects on the conference call, including those details.
"We had access to all the financial details of Mr. Moyes," Wright said. "In its 13 seasons [in Phoenix], the club has never approached a profit. ... The club is not financially viable and the prospect for it to become financially viable is not there either."
Wright stated that "the most optimistic of planning assumptions" case considered almost doubled ticket prices and an attendance increase of 20 per cent, both of which would be highly unlikely to succeed on their own but appear ludicrously unbelievable in combination. "Even then, the club is projected to lose $40 million dollars," he said. If anyone still believed that the Coyotes were viable in Phoenix in the long run, those details probably crushed that idea.
What's interesting is that the application goes into nowhere near as much financial detail about the new market. Here's some excerpts from the part concerned with Hamilton:
"Research clearly demonstrates Hamilton is a vibrant and viable hockey market. Based upon population, demographics, and the result of quantitative research conducted in May 2009, the support for an NHL team in Hamilton will be strong and substantial.
- Hamilton and the surrounding area have 1.4 million people and favourable demographics to support a team. While by itself, Hamilton and surrounding area is a large enough hockey market to viably sustain an NHL franchise, this specific market area is situated in Southwestern Ontario, a market area of more than 7 million where hockey is deeply entrenched and widely supported.
- The median after-tax income of Hamilton Area Residents is 14% above the Ontario average and is a key indicator of residents’ ability to spend for sports events and merchandise.
- The Club will play its home games in Copps Coliseum. A complete renovation plan has been prepared by Stadium Consultants International (SCI), of Toronto, a subsidiary of BBB Architects. The fully renovated arena will comply with the design requirements set out in the NHL’s Facility Standards.
- The owner of PSE is Jim Balsillie. Mr. Balsillie is the Co-CEO of Research In Motion (RIM.) He is a businessman, philanthropist, community leader, and passionate hockey fan. He has been recognized throughout North America and internationally as a visionary entrepreneur, influential CEO, and an extremely competent business leader. His roots in Southwestern Ontario are deep and his community contributions exemplary.
- Under Mr. Balsillie’s direction, PSE has represented, to the extent that it would even be required, its willingness and ability to sustain losses during the initial years of operation."
It's curious that the application involves so much detail about the financial history and prospects of the team in Phoenix, but only includes data about the Hamilton market and arena without any concrete estimates of the team's profitability. The last point about "a willingness and ability to sustain losses" is also interesting. Wright and Balsillie spokesman Bill Walker made some good points on that subject, and indicated that the last commitment there was mostly a pro forma one expected by the league rather than a prediction that the team could lose money initially.
"Mr. Balsillie thinks the team would be profitable immediately," Walker said. "Mr. Balsillie's view is that the team in Hamilton would be an immediate success, a sellout or close to sellout."
"We know it's a large market, we know hockey is the number-one sport in that market," Wright said. "There's every indication the team will be profitable right from the get-go."
That's what I'd certainly imagine too. Even Bettman's NHL recognizes the value of the Southern Ontario market, something I've written about a lot. It is interesting that their application doesn't appear to require specific financial estimates, though. Obviously, those would be difficult to make before ticket prices are set, broadcast deals are made and arena renovations are complete, but I would still have expected to see a few more details.
This series will continue tomorrow with more information gleaned from the conference call.
First, the application includes substantial information about the Coyotes' financial picture in Phoenix. Here are four of the key points made in the application, excerpted word-for-word from the media backgrounder I received:
"- Since inception the Club has recorded cumulative EBITDA losses in excess of $316 million.
- The Club has been unable to generate a significant fan base in Glendale demonstrated by a lack of interest in attending a game live, with the Club ranking 5th in attendance interest in that market behind the NFL, MLB, NBA, and NCAA Football. Historic support is weak, attendance is low, ticket sales continue to decline and broadcast ratings are low.
- Management of the Club has attempted to restructure its operations in an effort to increase revenues and decrease costs to reduce operating losses, and bring a greater probability of financial sustainability. Even with the most optimistic of planning assumptions the five-year horizon in Glendale projects further losses of over $40 million.
- In an effort to secure additional investors or a buyer to help meet responsibilities towards all creditors, current owner Jerry Moyes engaged an experienced adviser and retained Citibank’s Private Banking Group. There was not one expression of interest or an offer of any magnitude that would pay most of the creditors and keep the Club in Phoenix/Glendale."
There's enough material in those four points for a whole series, and some of it will be discussed in greater detail in my upcoming posts on the matter. However, the key thing to notice for the moment is the specific numbers included: cumulative EBITDA (earnings before interest, taxation, depreciation and amortization) losses of $316 million and projected future losses of $40 million under "the most optimistic of planning assumptions."
What are "the most optimistic of planning assumptions"? Application author Tom Wright (whose role I explored in more detail here) had some interesting comments on the Coyotes' past and future financial prospects on the conference call, including those details.
"We had access to all the financial details of Mr. Moyes," Wright said. "In its 13 seasons [in Phoenix], the club has never approached a profit. ... The club is not financially viable and the prospect for it to become financially viable is not there either."
Wright stated that "the most optimistic of planning assumptions" case considered almost doubled ticket prices and an attendance increase of 20 per cent, both of which would be highly unlikely to succeed on their own but appear ludicrously unbelievable in combination. "Even then, the club is projected to lose $40 million dollars," he said. If anyone still believed that the Coyotes were viable in Phoenix in the long run, those details probably crushed that idea.
What's interesting is that the application goes into nowhere near as much financial detail about the new market. Here's some excerpts from the part concerned with Hamilton:
"Research clearly demonstrates Hamilton is a vibrant and viable hockey market. Based upon population, demographics, and the result of quantitative research conducted in May 2009, the support for an NHL team in Hamilton will be strong and substantial.
- Hamilton and the surrounding area have 1.4 million people and favourable demographics to support a team. While by itself, Hamilton and surrounding area is a large enough hockey market to viably sustain an NHL franchise, this specific market area is situated in Southwestern Ontario, a market area of more than 7 million where hockey is deeply entrenched and widely supported.
- The median after-tax income of Hamilton Area Residents is 14% above the Ontario average and is a key indicator of residents’ ability to spend for sports events and merchandise.
- The Club will play its home games in Copps Coliseum. A complete renovation plan has been prepared by Stadium Consultants International (SCI), of Toronto, a subsidiary of BBB Architects. The fully renovated arena will comply with the design requirements set out in the NHL’s Facility Standards.
- The owner of PSE is Jim Balsillie. Mr. Balsillie is the Co-CEO of Research In Motion (RIM.) He is a businessman, philanthropist, community leader, and passionate hockey fan. He has been recognized throughout North America and internationally as a visionary entrepreneur, influential CEO, and an extremely competent business leader. His roots in Southwestern Ontario are deep and his community contributions exemplary.
- Under Mr. Balsillie’s direction, PSE has represented, to the extent that it would even be required, its willingness and ability to sustain losses during the initial years of operation."
It's curious that the application involves so much detail about the financial history and prospects of the team in Phoenix, but only includes data about the Hamilton market and arena without any concrete estimates of the team's profitability. The last point about "a willingness and ability to sustain losses" is also interesting. Wright and Balsillie spokesman Bill Walker made some good points on that subject, and indicated that the last commitment there was mostly a pro forma one expected by the league rather than a prediction that the team could lose money initially.
"Mr. Balsillie thinks the team would be profitable immediately," Walker said. "Mr. Balsillie's view is that the team in Hamilton would be an immediate success, a sellout or close to sellout."
"We know it's a large market, we know hockey is the number-one sport in that market," Wright said. "There's every indication the team will be profitable right from the get-go."
That's what I'd certainly imagine too. Even Bettman's NHL recognizes the value of the Southern Ontario market, something I've written about a lot. It is interesting that their application doesn't appear to require specific financial estimates, though. Obviously, those would be difficult to make before ticket prices are set, broadcast deals are made and arena renovations are complete, but I would still have expected to see a few more details.
This series will continue tomorrow with more information gleaned from the conference call.
Tuesday, June 02, 2009
Hamilton conference call, part I: Tom Wright
Photo: Former CFL commissioner Tom Wright authored the Balsillie group's official relocation application. From daylife.com.
Thanks to Brenna Flynn of Jim Balsillie's media relations team, I was invited to take part in a media conference call this afternoon on the Balsillie group's official application to the NHL(filed yesterday) to relocate the Phoenix Coyotes. It was a highly informative discussion featuring many of the usual suspects who have been covering the story, including Kevin McGran of the Toronto Star, Ken Peters of the Hamilton Spectator and friend of this blog Norm James of A-Channel London. I've got plenty of material to discuss from the call, so I'll spread it out over several posts. First up, a piece on the man who wrote the relocation application, former CFL commissioner Tom Wright.
It was perhaps an unusual situation for Wright to be speaking in favour of moving a franchise. Only three years ago, he was still the CFL commissioner and probably would have been espousing the Gary Bettman position of protecting franchises in their current location at almost all costs. Unlike Bettman, Wright did know when to cut his losses, though, as he folded the Ottawa Renegades in 2006 after four straight seasons of losing money. That situation was likely more due to appalling ownership from the Gliebermans than the kind of market problems faced in Phoenix, though.
In any case, Wright has been a high-powered business executive as well in the past. He was the president of adidas Canada before his stint as the CFL commissioner and also served as the president and CEO of Salomon North America, a famed ski manufacturer. He's currently the Managing Director at LEVEL5 Strategic Brand Advisors and was contracted to draft this application for Balsillie's group (PSE Sports and Entertainment) and the Coyotes; more on that later.
Wright said his diverse experiences qualfied him for the role. "My experience in business and in sports league management is highly relevant to this document," he said. That goes without saying; over the course of the call, Wright demonstrated a detailed understanding of exactly what topics are covered in said document and how they fit into the NHL's bylaws.
More importantly, though, having Wright involved appears to give the bid a sense of legitimacy and respectability that it hasn't always been portrayed as possessing. His experience on the other side of the fence as a league commissioner makes it seem less likely that he would get involved with a maverick move, an impression he reinforced with his opening comments about how he thoroughly studied and followed the subsections of the league bylaws pertaining to this kind of move.
"I am a play-by-the-rules kind of guy," he said. "The application that was submitted yesterday responded very specifically to the questions outlined in those subsections. ... I have the utmost respect for the commmissioner's role in reviewing this application."
Wright's also a well-known and generally well-respected figure in Canada, and don't discount the importance of that to a bid that's been very concerned about its image from the get-go. There's a reason Balsillie's investing so much in his website and his extensive PR team, as well as lining up sponsors such as Labatt Blue and Home Hardware and producing merchandise; a big part of this bid has always been to try and get the Canadian public as a whole to strongly support bringing another team north. Wright's involvement will likely aid that cause as well, certainly more than just hiring a law firm or consulting agency to get the needed information and fill out this form would have.
However, don't assume that Wright's involvement and skillful application suddenly makes Balsillie's bid palatable to Bettman. For one thing, he's a hired consultant now, not a current league commissioner. In fact, when he was asked by a CBC-TV reporter on the call about how he would have responded if a similar relocation proceeding covering the Hamilton Tiger-Cats had come up during his time as commissioner, he adroitly dodged the question, saying "This is about the application that's been submitted."
For another thing, the CFL and NHL are quite different leagues. The CFL has eight teams; the NHL has 30. Their franchises have many things in common, but their revenues and expenses are substantially disparate. Also, there's the NHL's powerful allies: I doubt that Bettman's too worried about a former CFL commissioner's opinion when he has MLB, the NFL and the NBA in his corner on the relocation front.
Still, Wright's involvement is probably a good sign for the Balsillie bid overall. He's a capable businessman and did an impressive job on this application, and there are the aforementioned image benefits of his involvement as well. He also did a strong job of answering most of the media questions today and represented the group well. They picked a good man for the job.
I'll have more on other aspects of the call over the next couple of days.
Thursday, May 07, 2009
The Ballad of Jim and Gary
Well, the Jim Balsillie story continues to develop. The most interesting news since my last post is that of Gary Bettman's apocalyptic reaction yesterday [James Mirtle, From the Rink]. I'll have more analysis on this one later, but for now, I figured I'd start the day with an appropriate song. Here is my version of "The Ballad of Jim and Gary" (apologies to The Beatles):
Standing on the plane down to Phoenix,
Trying to get the team refinanced.
The man in the back said, "Jim Balsillie's back".
I said "Hell no! Just give us a chance."
Jim, you know it ain't easy,
You know how hard it can be.
But the way things are going
You're gonna crucify me.
At first, things with Jim went so well,
In Pittsburgh, we thought he'd be fine.
But then the press called to say,
"He wants to move away,"
So I told him he had to refrain.
Jim, you know it ain't easy,
You know how hard it can be.
But the way things are going
You're gonna crucify me.
Bumped into him at the Nashville Hilton
Talking with Leipold for a week.
The newspaper said, "Will the move go ahead?"
I said, "No, our teams aren't Canada geese."
Jim, you know it ain't easy,
You know how hard it can be.
But the way things are going
You're gonna crucify me.
Saving up your money for a rainy day,
Spending so much time on trickery.
Way back when, I said,
"Oh boy, your bid's dead
You won't take a team with you
To Hamilton - think!"
So I made a lightning trip down to Phoenix,
Reading a Canadian rag.
The newspaper said, "Power's gone to his head,
He looks like the man stuck with the bag."
Christ you know it ain't easy,
You know how hard it can be.
The way things are going
They're gonna crucify me.
Caught the early plane back to New York.
For a meeting with fifty hacks.
The men from the press said, "You won't find success,
But it's good to have the both of you back".
Christ you know it ain't easy,
You know how hard it can be.
The way things are going
They're gonna crucify me.
The way things are going
They're gonna crucify me.
Standing on the plane down to Phoenix,
Trying to get the team refinanced.
The man in the back said, "Jim Balsillie's back".
I said "Hell no! Just give us a chance."
Jim, you know it ain't easy,
You know how hard it can be.
But the way things are going
You're gonna crucify me.
At first, things with Jim went so well,
In Pittsburgh, we thought he'd be fine.
But then the press called to say,
"He wants to move away,"
So I told him he had to refrain.
Jim, you know it ain't easy,
You know how hard it can be.
But the way things are going
You're gonna crucify me.
Bumped into him at the Nashville Hilton
Talking with Leipold for a week.
The newspaper said, "Will the move go ahead?"
I said, "No, our teams aren't Canada geese."
Jim, you know it ain't easy,
You know how hard it can be.
But the way things are going
You're gonna crucify me.
Saving up your money for a rainy day,
Spending so much time on trickery.
Way back when, I said,
"Oh boy, your bid's dead
You won't take a team with you
To Hamilton - think!"
So I made a lightning trip down to Phoenix,
Reading a Canadian rag.
The newspaper said, "Power's gone to his head,
He looks like the man stuck with the bag."
Christ you know it ain't easy,
You know how hard it can be.
The way things are going
They're gonna crucify me.
Caught the early plane back to New York.
For a meeting with fifty hacks.
The men from the press said, "You won't find success,
But it's good to have the both of you back".
Christ you know it ain't easy,
You know how hard it can be.
The way things are going
They're gonna crucify me.
The way things are going
They're gonna crucify me.
Tuesday, May 05, 2009
Basillie's back, and a new Toronto team may ride with him
The perfect storm continues to build and a second NHL team in Southern Ontario comes closer by the day. Back in October, this was only informal discussions among NHL governors; late April saw NHL deputy commissioner Bill Daly engage in protracted meetings with interested parties about a team in Vaughan. I predicted a while back over at Out of Left Field that NHLPA executive director Paul Kelly would have to be heavily involved for this to have any chance, and lo and behold, the players' association jumped in full force [Tim Wharnsby on the side of this relocation. The next crucial element was a team in significant trouble; enter the Phoenix Coyotes, a team heavily in debt, apparently run by the league [Greg Wyshynski, Puck Daddy] and entering bankruptcy protection [Craig Harris, The Arizona Republic].
All that remained to be found was a prospective owner rich enough to buy the team, throw enough cash into the black hole to keep them operating in Phoenix until he could buy or sue his way out of the Coyotes' ironclad arena lease, pay off the Leafs and Sabres for invading their territory and offer a substantial enough premium on the franchise fee that El Supremo Gary Bettman would overlook his aversion to fleeing the scorching desert for the welcoming tundra of Canada. Moreover, this owner had to have the backbone for a potentially prolonged legal battle with Phoenix and the guts to take Bettman to the wall over this. Who could meet such a demanding description?
Is that... Jim Balsillie's music?
[Photo from dalnews.ca]
Yes, it's Bettman's worst nightmare, returned from obscurity after failed attempts to buy the Pittsburgh Penguins and Nashville Predators. Balsillie is the Mark Cuban of the NHL, a rogue who doesn't stick to the traditional rules of running a sports franchise when he sees a good economic opportunity going unexploited. In his previous appearances, Bettman was able to convince the other owners to combine forces to keep Balsillie out in favour of local deals. This time, he may not be so orlucky.
The battlefield has shifted significantly from Balsillie's previous appearances. For one thing, the sinking economy is a huge factor in his favour. Previously, Bettman was able to find alternative options; there are far less people out there interested in and capable of buying sports franchises than there were last time around.
Of course, it also helped that both Pittsburgh and Nashville had substantial hockey fanbases and were only in moderate financial difficulty; it was possible to bring in investors interested in preserving those teams in their present locations because there was the potential to eventually make a profit there. With Nashville, even that was difficult and led to the Boots Del Biaggio fiasco, but the team's found some success since that time with the local ownership group [James Mirtle, From The Rink].
Phoenix is a vastly different scenario. Looking at the losses current owner Jerry Moyes has racked up over his tenure there, there doesn't appear to be a good way to make a profit in that market given issues with arena location, the deal with the city and just selling hockey as a whole in the area. In Forbes's profile of the franchise this fall, the team was valued at $142 million, dead last in the NHL. They were estimated to be losing $9.7 million a season and had only increased their franchise value by $15 million over the seven years since Moyes bought the franchise in 2001. That's not a winning recipe for economic success in that location.
Previously, Bettman was able to hold the owners together in the name of preserving franchises in their existing locations even if that meant taking lower offers. With the Penguins, this approach made a great deal of sense given their history and their market. It made less sense in the Nashville case, but it was still workable. This time, however, Bettman may not be able to find an alternative. Basillie has already bid $212.5 million [James Mirtle, From The Rink] significantly above most estimates of the franchise's worth, and Moyes is saying he's not likely to settle for anything less.
These are all just flesh wounds, though. Bettman's real Achilles heel is the collective bargaining agreement, and it may prove the difference in this case. The CBA makes Kelly and the players effectively partners with the NHL and gives them a great deal of incentive to maximize the league's profits, given how revenues and salaries are now directly linked. They've got a lot at stake here and a lot of leverage to work with; a new Southern Ontario team would bring a lot of money into the league that could be distributed to the players through an increased salary cap, important in an era when many franchises are running into fiscal difficulties and the cap is anticipated to fall dramatically. Plus, the latest proposed location would likely not significantly hurt the Leafs or the Sabres, a potential obstacle that reared its ugly head before.
Moreover, the revenue-sharing aspects of the league mean that other franchise owners have their own rationale to maximize league profits. You can bet they don't want to see the league pouring money into Phoenix indefinitely, especially when that franchise could be increasing the size of their own revenue-sharing chequest instead of diminishing them. Balsillie has tried and failed at this game twice before, but the third time may well be the charm. The board is set, the pieces are moving, and a seventh Canadian NHL team may be the eventual endgame.
All that remained to be found was a prospective owner rich enough to buy the team, throw enough cash into the black hole to keep them operating in Phoenix until he could buy or sue his way out of the Coyotes' ironclad arena lease, pay off the Leafs and Sabres for invading their territory and offer a substantial enough premium on the franchise fee that El Supremo Gary Bettman would overlook his aversion to fleeing the scorching desert for the welcoming tundra of Canada. Moreover, this owner had to have the backbone for a potentially prolonged legal battle with Phoenix and the guts to take Bettman to the wall over this. Who could meet such a demanding description?
Is that... Jim Balsillie's music?
[Photo from dalnews.ca]
Yes, it's Bettman's worst nightmare, returned from obscurity after failed attempts to buy the Pittsburgh Penguins and Nashville Predators. Balsillie is the Mark Cuban of the NHL, a rogue who doesn't stick to the traditional rules of running a sports franchise when he sees a good economic opportunity going unexploited. In his previous appearances, Bettman was able to convince the other owners to combine forces to keep Balsillie out in favour of local deals. This time, he may not be so orlucky.
The battlefield has shifted significantly from Balsillie's previous appearances. For one thing, the sinking economy is a huge factor in his favour. Previously, Bettman was able to find alternative options; there are far less people out there interested in and capable of buying sports franchises than there were last time around.
Of course, it also helped that both Pittsburgh and Nashville had substantial hockey fanbases and were only in moderate financial difficulty; it was possible to bring in investors interested in preserving those teams in their present locations because there was the potential to eventually make a profit there. With Nashville, even that was difficult and led to the Boots Del Biaggio fiasco, but the team's found some success since that time with the local ownership group [James Mirtle, From The Rink].
Phoenix is a vastly different scenario. Looking at the losses current owner Jerry Moyes has racked up over his tenure there, there doesn't appear to be a good way to make a profit in that market given issues with arena location, the deal with the city and just selling hockey as a whole in the area. In Forbes's profile of the franchise this fall, the team was valued at $142 million, dead last in the NHL. They were estimated to be losing $9.7 million a season and had only increased their franchise value by $15 million over the seven years since Moyes bought the franchise in 2001. That's not a winning recipe for economic success in that location.
Previously, Bettman was able to hold the owners together in the name of preserving franchises in their existing locations even if that meant taking lower offers. With the Penguins, this approach made a great deal of sense given their history and their market. It made less sense in the Nashville case, but it was still workable. This time, however, Bettman may not be able to find an alternative. Basillie has already bid $212.5 million [James Mirtle, From The Rink] significantly above most estimates of the franchise's worth, and Moyes is saying he's not likely to settle for anything less.
These are all just flesh wounds, though. Bettman's real Achilles heel is the collective bargaining agreement, and it may prove the difference in this case. The CBA makes Kelly and the players effectively partners with the NHL and gives them a great deal of incentive to maximize the league's profits, given how revenues and salaries are now directly linked. They've got a lot at stake here and a lot of leverage to work with; a new Southern Ontario team would bring a lot of money into the league that could be distributed to the players through an increased salary cap, important in an era when many franchises are running into fiscal difficulties and the cap is anticipated to fall dramatically. Plus, the latest proposed location would likely not significantly hurt the Leafs or the Sabres, a potential obstacle that reared its ugly head before.
Moreover, the revenue-sharing aspects of the league mean that other franchise owners have their own rationale to maximize league profits. You can bet they don't want to see the league pouring money into Phoenix indefinitely, especially when that franchise could be increasing the size of their own revenue-sharing chequest instead of diminishing them. Balsillie has tried and failed at this game twice before, but the third time may well be the charm. The board is set, the pieces are moving, and a seventh Canadian NHL team may be the eventual endgame.
Thursday, April 23, 2009
New NHL team to Toronto takes another step
There's big news in today's Globe and Mail from columnist David Shoalts (as well as Jeff Blair, Roy MacGregor, Paul Waldie, Andrew Willis and Jane Taber) on the idea of another NHL team for Toronto, which I initially wrote about back in October. Then, it was informal conversations between NHL governors; now, it's moved on to a two-and-a-half hour meeting between deputy commissioner Bill Daly and a group of interested businesspeople. Sounds like it's getting more serious by the minute.
The primary problem involved in bringing a new team into southern Ontario is getting the Maple Leafs and Buffalo Sabres to go along with it thanks to their territorial rights. This is where location becomes a key issue, and it's more of an issue for the Sabres than it is for the Leafs. The Leafs already have a huge market to draw from with the massive suburban population of Toronto, and they're in incredibly good financial shape. There's an almost inexhaustible demand for their product (despite the downturn in their on-ice fortunes of late), so another team in the region is not going to kill them. Their main concerns are to keep the team from being placed in downtown Toronto (leaving them with a sizeable competitive advantage, as that's where the big money and the highest concentration of people are) and to get a suitably massive territorial rights fee.
In Buffalo, it's a different story. There's substantial cross-border support for the team, particularly from the Hamilton and St. Catherines areas. Tickets for Sabres' games are easier to come by and much cheaper than the equivalents for Leafs' games at the Air Canada Centre. Thus, a team in Hamilton (as previously suggested by one Jim Balsillie) would be a considerable blow to the Sabres' cross-border fanbase, and a team in Kitchener (as also mentioned in the Balsillie discussions) would be a similar, if lesser, blow. That's been the main sticking point in these discussions so far.
The new proposal suggests putting an arena in Vaughan, which is a suburb north of Toronto. This is considerably different from the Hamilton and Kitchener proposals, as the Leafs are now between the new franchise and the Sabres. Thus, in theory, most of the Southern Ontario fans who currently go to Sabres' games from Hamilton and St. Catherines would continue to do so. The new franchise would draw from Toronto proper and the northern suburbs. Of course, that doesn't take into account issues with the border or the novelty value of a new Canadian team, which would likely cause some of those cross-border Buffalo fans to switch allegiances. Moreover, I'd venture that those fans are much more likely to transfer than the died-in-the-wool Leafs' fans; the Sabres are more of a marriage of convienience than a true love for many in Southern Ontario who can't afford the prices of the Air Canada Centre. Still, in all likelihood, a new franchise in Vaughan would hurt Buffalo much less than one in Hamilton or Kitchener, and the market research cited by Shoalts suggests that a Vaughan franchise might not appreciably impact the bottom line of either Buffalo or Toronto. That makes a lot of sense, considering the number of people in the area and the massive love for hockey they display. See the map below for an indication of where all these different cities are.
View Southern Ontario in a larger map
Now we come to the specific problem of where to put an arena. Shoalts enumerates several possibilities in the article, and I've marked them on the map below. The first key one is on land owned by Victor De Zen, a perhaps somewhat-sketchy businessman (Shoalts mentions that he's facing fraud charges) who's interested in an arena deal, but not in owning a team. His land is at the intersection of Highway 427 and Highway 7, northwest of the airport. Other possibilities include the area around Woodbine Racetrack and the area around Downsview Airport. All of these would be somewhat accessible from downtown; the Downsview site is near York University, while there are plenty of ways to get to Woodbine and the new transit expansions around Pearson Airport would help with that site. The De Zen site is slightly more remote, but not incredibly so; it's not too far from downtown and it's close to several of the northern suburbs, plus its location just off the highway would also help. See the map below for these three locations, as well as Pearson Airport and the Air Canada Centre as references.
View NHL in Vaughan in a larger map
This would be a pricey move, and would take quite a while. At the moment, there are no firm plans for a new arena. It takes time to draw up blueprints, arrange financing and figure out construction details. Shoalts suggests that the cost of an arena alone could be up to $400 million, which is a hefty chunk of change. You then still would have to pay territorial rights fees to both the Leafs and the Sabres, and those aren't going to be cheap; the Sabres need all the fan support they can get, and the Leafs won't give up their ridiculously lucrative monopoly in southern Ontario for a mess of pottage.
The last payment for territorial rights that I know of was the Mighty Ducks, who paid $25 million to the L.A. Kings in 1993. That doesn't seem like much now, but it was half of their franchise fee of $50 million. If you go by the most recent Forbes valuations, the Leafs are currently worth $448 million U.S., a good part of which is due to their monopoly status. They'll want a lot of cash to give that up, and the Sabres will likely want a similar amount. Even the lowest-valued team on that list, the Phoenix Coyotes, has an estimated value of $142 million (perhaps less these days given the franchise's losses); going by the 50 per cent standard would suggest that a group trying to move Phoenix to Toronto would owe at least $71 million to each of the Leafs and Sabres. Shoalts figures that these rights could go up to $200 million (presumably $100 million to each club), but my thinking is that they could run even higher given the stature of the Leafs and the prestige and numbers of the southern Ontario market.
The final question is where the team would come from. NHL expansion at the moment isn't all that likely, which would suggest relocation would be the next logical option. There are plenty of interesting candidates in that regard, including the cash-strapped Phoenix Coyotes, the attendance-lacking Atlanta Thrashers and the New York Islanders, plagued by arena woes. Something has to be done about all these teams eventually, and Phoenix first of all; the team is hemorraging cash, has an owner looking to cut his losses and is being propped up by the league. That isn't a tenable situation.
The big problem here is that this is still Gary Bettman's league. Moving an American team north of the border would be a colossal loss of face for the commissioner, who has spent most of his time in power trying to sell hockey in the Sun Belt and vault it into major-sport status in the U.S. A second team in Ontario makes tremendous financial sense for the league, but it would also be seen as a retreat from trying to gain mass acceptance in the States. In many places in the U.S., hockey's still seen as a primarily Canadian sport, an image that Bettman has bent over backwards to try and remove. Other possible areas for relocation, such as Kansas City and perhaps even Las Vegas, would be available more quickly and wouldn't carry the stigma of adding another Canadian franchise. Thus, the league may not do anything more than look at this until they're desperate. It would be a terrible economic opportunity to pass up, but Bettman and company have always been more about saving face than making smart business decisions, so it wouldn't surprise me if nothing happens on this front for a while. We'll see how it turns out.
The primary problem involved in bringing a new team into southern Ontario is getting the Maple Leafs and Buffalo Sabres to go along with it thanks to their territorial rights. This is where location becomes a key issue, and it's more of an issue for the Sabres than it is for the Leafs. The Leafs already have a huge market to draw from with the massive suburban population of Toronto, and they're in incredibly good financial shape. There's an almost inexhaustible demand for their product (despite the downturn in their on-ice fortunes of late), so another team in the region is not going to kill them. Their main concerns are to keep the team from being placed in downtown Toronto (leaving them with a sizeable competitive advantage, as that's where the big money and the highest concentration of people are) and to get a suitably massive territorial rights fee.
In Buffalo, it's a different story. There's substantial cross-border support for the team, particularly from the Hamilton and St. Catherines areas. Tickets for Sabres' games are easier to come by and much cheaper than the equivalents for Leafs' games at the Air Canada Centre. Thus, a team in Hamilton (as previously suggested by one Jim Balsillie) would be a considerable blow to the Sabres' cross-border fanbase, and a team in Kitchener (as also mentioned in the Balsillie discussions) would be a similar, if lesser, blow. That's been the main sticking point in these discussions so far.
The new proposal suggests putting an arena in Vaughan, which is a suburb north of Toronto. This is considerably different from the Hamilton and Kitchener proposals, as the Leafs are now between the new franchise and the Sabres. Thus, in theory, most of the Southern Ontario fans who currently go to Sabres' games from Hamilton and St. Catherines would continue to do so. The new franchise would draw from Toronto proper and the northern suburbs. Of course, that doesn't take into account issues with the border or the novelty value of a new Canadian team, which would likely cause some of those cross-border Buffalo fans to switch allegiances. Moreover, I'd venture that those fans are much more likely to transfer than the died-in-the-wool Leafs' fans; the Sabres are more of a marriage of convienience than a true love for many in Southern Ontario who can't afford the prices of the Air Canada Centre. Still, in all likelihood, a new franchise in Vaughan would hurt Buffalo much less than one in Hamilton or Kitchener, and the market research cited by Shoalts suggests that a Vaughan franchise might not appreciably impact the bottom line of either Buffalo or Toronto. That makes a lot of sense, considering the number of people in the area and the massive love for hockey they display. See the map below for an indication of where all these different cities are.
View Southern Ontario in a larger map
Now we come to the specific problem of where to put an arena. Shoalts enumerates several possibilities in the article, and I've marked them on the map below. The first key one is on land owned by Victor De Zen, a perhaps somewhat-sketchy businessman (Shoalts mentions that he's facing fraud charges) who's interested in an arena deal, but not in owning a team. His land is at the intersection of Highway 427 and Highway 7, northwest of the airport. Other possibilities include the area around Woodbine Racetrack and the area around Downsview Airport. All of these would be somewhat accessible from downtown; the Downsview site is near York University, while there are plenty of ways to get to Woodbine and the new transit expansions around Pearson Airport would help with that site. The De Zen site is slightly more remote, but not incredibly so; it's not too far from downtown and it's close to several of the northern suburbs, plus its location just off the highway would also help. See the map below for these three locations, as well as Pearson Airport and the Air Canada Centre as references.
View NHL in Vaughan in a larger map
This would be a pricey move, and would take quite a while. At the moment, there are no firm plans for a new arena. It takes time to draw up blueprints, arrange financing and figure out construction details. Shoalts suggests that the cost of an arena alone could be up to $400 million, which is a hefty chunk of change. You then still would have to pay territorial rights fees to both the Leafs and the Sabres, and those aren't going to be cheap; the Sabres need all the fan support they can get, and the Leafs won't give up their ridiculously lucrative monopoly in southern Ontario for a mess of pottage.
The last payment for territorial rights that I know of was the Mighty Ducks, who paid $25 million to the L.A. Kings in 1993. That doesn't seem like much now, but it was half of their franchise fee of $50 million. If you go by the most recent Forbes valuations, the Leafs are currently worth $448 million U.S., a good part of which is due to their monopoly status. They'll want a lot of cash to give that up, and the Sabres will likely want a similar amount. Even the lowest-valued team on that list, the Phoenix Coyotes, has an estimated value of $142 million (perhaps less these days given the franchise's losses); going by the 50 per cent standard would suggest that a group trying to move Phoenix to Toronto would owe at least $71 million to each of the Leafs and Sabres. Shoalts figures that these rights could go up to $200 million (presumably $100 million to each club), but my thinking is that they could run even higher given the stature of the Leafs and the prestige and numbers of the southern Ontario market.
The final question is where the team would come from. NHL expansion at the moment isn't all that likely, which would suggest relocation would be the next logical option. There are plenty of interesting candidates in that regard, including the cash-strapped Phoenix Coyotes, the attendance-lacking Atlanta Thrashers and the New York Islanders, plagued by arena woes. Something has to be done about all these teams eventually, and Phoenix first of all; the team is hemorraging cash, has an owner looking to cut his losses and is being propped up by the league. That isn't a tenable situation.
The big problem here is that this is still Gary Bettman's league. Moving an American team north of the border would be a colossal loss of face for the commissioner, who has spent most of his time in power trying to sell hockey in the Sun Belt and vault it into major-sport status in the U.S. A second team in Ontario makes tremendous financial sense for the league, but it would also be seen as a retreat from trying to gain mass acceptance in the States. In many places in the U.S., hockey's still seen as a primarily Canadian sport, an image that Bettman has bent over backwards to try and remove. Other possible areas for relocation, such as Kansas City and perhaps even Las Vegas, would be available more quickly and wouldn't carry the stigma of adding another Canadian franchise. Thus, the league may not do anything more than look at this until they're desperate. It would be a terrible economic opportunity to pass up, but Bettman and company have always been more about saving face than making smart business decisions, so it wouldn't surprise me if nothing happens on this front for a while. We'll see how it turns out.
Subscribe to:
Posts (Atom)
Posts
