The NHL to Hamilton situation continues to get stranger by the day. Yesterday, a new group came forward with their own plan for a team in Toronto [The Canadian Press via The Globe and Mail], which involves a 30,000-seat arena at Downsview Park (with Olympic-sized swimming pool!), a percentage of the profits going to charity and possibly the stupidest name ever proposed for an NHL franchise, the Toronto Legacy. MLS and WNBA clubs laugh at that name. Even the Oklahoma Thunder snicker at that name. Anyway, add them to the list of prospective owners for a GTA franchise. Of course, that list also includes Balsillie and his Hamilton plans as well as the group led by former Leaf Kevin Maguire, who are trying to bring a team to Vaughan.
Even more interesting, though, was today's revelation that Toronto Argonauts owners Howard Sokolowski and David Cynamon are apparently interested in buying the Coyotes and leaving them in Phoenix [Paul Waldie, The Globe and Mail]. Here's the information from Waldie's story, which comes from court filings by NHL commissioner Gary Bettman:
"Bettman said the league has received a “preliminary background application” from four potential buyers for the Coyotes including Howard Sokolowski and David Cynamon, co-owners of the Argonauts. The others applications have come from Jerry Reinsdorf, owner of the Chicago White Sox and Chicago Bulls, as well as current Coyotes co-owner John Breslow and another unidentified Phoenix businessman.
Bettman said each group has “indicated an interest in operating the franchise in Phoenix.”
Bettman did not provide details of the proposals, citing confidentiality issues, and said the league is reviewing each application."
Now, of course, it isn't particularly hard to "indicate an interest in operating the franchise in Phoenix". Clay Bennett indicated an interest in keeping the Sonics in Seattle, and we all know how that worked out. To see if this interest could be at all genuine, we return to some of the material from this week's conference call (earlier posts on the matter are here, here and here), particularly the information dealing with the financial situation of the club in Phoenix.
The application (available via fadoo.ca) to relocate the team that was the subject of said conference call was written by CFL commissioner Tom Wright, but he was retained to do so by both PSE (Balsillie's group) and current Coyotes owner Jerry Moyes. Thus, by working for the franchise, Wright was able to gather complete information about its financial health.
"We had access to all the finances of Mr. Moyes," Wright said. "In its 13 seasons, the club has never approached a profit." Wright added that Moyes had injected $380 million into the team since 2001 without any discernible impact. "The club is not financially viable, and the prospect for it to become financially viable is not there either," he said.
How bad is the financial situation in Phoenix? Wright said the club's studies showed that even if they doubled ticket prices AND increased their attendance by 20 per cent, they would still lose $40 million dollars annually. Clearly, that's not a desirable prospect for any investor focused on the bottom line. Now, NHL franchise values have been increasing, so if that trend continues, the team could still be a worthwhile investment despite operating losses. However, it's doubtful that those values would go up by $40 million a year given the NHL's current struggles, and if losing $40 million a year is the best-case scenario, it's tough to imagine that any smart businessman would want to keep the team in Phoenix for the long haul.
Two of the four prospective ownership groups listed have local connections, though (current co-owner John Breslow and another unidentified Phoenix businessman), so the team could potentially be a loss-leader for them. The PR benefits of being "the guys who saved the Coyotes" might counterbalance the amounts of money they'd have to pour into the team, and they might be able to get a sweetheart deal from the city of Glendale and the other creditors to keep the franchise around. However, it's difficult to see any benefits in owning a team in Phoenix in the long run for either the Cynamon/Sokolowski group or White Sox owner Jerry Reinsdorf, the other prospective owner listed by the league.
Past history may prove instructive here, though. The NHL takes care of those who play by its rules. One example is Craig Leipold, who famously took less money from a mostly-local (except for noted crook Boots DelBiaggio) ownership group in Nashville to keep Balsillie out of the club. Shortly thereafter, Leipold wound up as the owner of the Minnesota Wild. Would anyone really be surprised if Sokolowski and Cynamon take over the Coyotes, keep them going in Phoenix for a year or two, and then either move them to Southern Ontario with the approval of the league or sell them to local interests at a discount and receive an expansion franchise in Southern Ontario as their reward? From this corner, that's the most plausible explanation for their sudden interest.
However, it's also possible that all of this is an elaborate series of smokescreens. A new ownership group in Toronto with massive amounts of funds that wants to play by the league's rules and promises to donate profits to charity? Hmm; that sounds like an attempt to cultivate an even more glossy PR image in Canada than Balsillie's pulled off to date. One of the big things in Balsillie's favour so far is how he's managed to get large amounts of Canadians onside and play on anti-Bettman sentiment. He's seen as the good Canadian willing to stand up to the evil American commissioner, and Bettman's attempts to paint him as a dangerous rogue threatening the entire structure of the league have failed so far. Those attempts look a lot better if there's suddenly a more palatable group on the scene claiming to want to play by the rules and only stating interest in an expansion team, which would certainly be a long and complicated process and probably wouldn't happen for years given the league's current economic state. Bettman and co. can now shoot down Balsillie but fend off some of the backlash in Canada by claiming to work with a new group for an expansion franchise down the road.
Similarly, Cynamon and Sokolowski don't actually have to be serious about purchasing the Coyotes and keeping them in Phoenix. A big part of Balsillie's case to the bankruptcy court so far has been the idea that his bid is the only reasonable one, the only legitimate offer that would satisfy creditors. In the conference call, Wright said that none of these supposed other bids had ever been received by Moyes and that they weren't offering enough money to keep creditors happy.
It's unclear what the terms of any of these offers are at the moment, but consider this scenario: perhaps the NHL has one somewhat legitimate offer (probably Reinsdorf's, as it's been mentioned before), but it's nowhere nearly as attractive as Balsillie's. To make it look better, they recruit other businessmen and have them submit slightly lower offers. Thus, Reinsdorf's offer goes from being a low-ball bid to keep the team local to a reasonable deal slightly above "market value". Of course, there's no indication that this has happened, but it would help to explain why these bids came in so late in the game. If all of these other groups are just to confuse the central issue of Balsillie v. Bettman, they're doing a pretty good job of it so far.
Showing posts with label expansion. Show all posts
Showing posts with label expansion. Show all posts
Saturday, June 06, 2009
Thursday, June 04, 2009
New group enters the second NHL team in Toronto fray
Very interesting stuff here from The Globe and Mail. Apparently, a group led by Paul Pellegrini and Andrew Lopez has lined up $1 billion in financing and scheduled a news conference for Friday to discuss application for an expansion franchise, a potential arena site and a name. I wonder if this group is at all related to the one that provoked the earlier Vaughan rumours I covered back in April?
If Vaughan is indeed the plan, that would make a lot of sense. Vaughan is a better site than Hamilton in my mind; it wouldn't affect the Sabres as much, and there are more people within close range of the arena. Plus, an expansion franchise (especially one with this amount of cash) would allow Gary Bettman and co. to cut Jim Balsillie off at the knees and maintain their control of where franchises are placed. Furthermore, a generous payment could stifle any potential objections from the Leafs and Sabres and prevent what could be a nasty antitrust fight in court. If these guys are serious about coming in through the front door, the NHL may be tempted to go with them to keep Balsillie out. In any case, it will be interesting to watch. In my mind, we will see another NHL team in Southern Ontario relatively soon, as the market's just too desirable to neglect. The questions are where it will play, when it will arrive, and who will be involved. I'll have more on this one as details come out.
If Vaughan is indeed the plan, that would make a lot of sense. Vaughan is a better site than Hamilton in my mind; it wouldn't affect the Sabres as much, and there are more people within close range of the arena. Plus, an expansion franchise (especially one with this amount of cash) would allow Gary Bettman and co. to cut Jim Balsillie off at the knees and maintain their control of where franchises are placed. Furthermore, a generous payment could stifle any potential objections from the Leafs and Sabres and prevent what could be a nasty antitrust fight in court. If these guys are serious about coming in through the front door, the NHL may be tempted to go with them to keep Balsillie out. In any case, it will be interesting to watch. In my mind, we will see another NHL team in Southern Ontario relatively soon, as the market's just too desirable to neglect. The questions are where it will play, when it will arrive, and who will be involved. I'll have more on this one as details come out.
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.
Tuesday, October 21, 2008
A new NHL team for Toronto?
David Shoalts has a very interesting piece in today's Globe and Mail that certainly opens with a bang. As he writes:
"NHL governors are talking informally about placing a second hockey team in Toronto alongside the Maple Leafs, The Globe and Mail has learned.
'Why shouldn't we put another team in the best and biggest market in the world?' one of several NHL governors who spoke with The Globe anonymously said of the Greater Toronto Area.
According to this governor, one idea floated is for prospective owner Jim Balsillie to be rewarded with an expansion team in Toronto after helping to restore financial ballast to the Nashville Predators.
'I've heard this exact scenario,' a second governor said."
This is a very interesting idea, and one that certainly hasn't been floated very much relative to the idea of putting another team in either Hamilton or Kitchener-Waterloo. Toronto could sustain two teams in my mind, given the hockey-mad population, the size of the city and the massive suburbs surrounding it.
However, I'm not sure the Leafs would be overly eager to go along with this plan. Here's the part of Shoalts' piece that deals with their reaction:
"Richard Peddie, president of Maple Leaf Sports and Entertainment, said the organization would not automatically reject the idea of a second team in Toronto.
'When and if the league brings expansion to the table, we'll listen and decide what is best [for hockey],' he said."
This isn't as positive as it sounds. First, Peddie is absolutely non-committal there, which makes sense: this is pretty speculative at the moment, so you don't want to irrevocably commit your organization to a certain course in the media just based on what's come out so far. All he said is they wouldn't reject a proposal before looking at it, which seems reasonable.
I'd also be rather interested to find what Peddie said that Shoalts (or his editors) replaced with the [for hockey], as that seems like a curious comment. It isn't Peddie's primary job to make decisions that are best "for hockey" or even best for the NHL: his job is to run the Leafs and MLSE's other franchises and venues. Thus, anything he and the franchise owners decide upon will be best for their franchise first and the league second. This is logical: these franchises are commercial enterprises with shareholders, so it's up to their management to do what's best for those shareholders. At times, league interests come into it: a healthy league means higher TV revenues and lower revenue-sharing, so it's in the Leafs' interests to go along with the NHL when doing so will undoubtedly and dramatically improve the league. Keep in mind that their motivation and mindset is likely always to help their franchise first and the league second, though: the same is true of almost every professional sports franchise.
A further illuminating passage of the article discusses the economic ramifications.
"As to the potential economic impact on the Maple Leafs, the first governor dismissively waved his hand. 'The Maple Leafs would not be hurt one bit. In fact, it would help them. They could make all kinds of money renting the Air Canada Centre to the other team.'"
Now, I'm not so sure if this governor is thinking straight. First, if the Leafs allow another team into their city, they lose market share. This may not be huge at first given their market dominance and history, but they're no longer the only game in town. They'll likely still sell out every game, but the supply of NHL tickets has just doubled and it's hard to imagine the demand rising at a similar rate. Therefore, the premiums they can charge for their tickets will drop. Of further importance is the impact on merchandising, advertising and television revenues. Yes, there will still be a huge demand for the rights to Leafs' games, but television networks now have another viable alternative source for hockey if MLSE demands too much money: thus, the Leafs will earn less from their television contracts.
Yes, people will still buy Leafs' gear, but some will choose to buy merchandise from the new team instead. The same holds true for corporate sponsors, who gain leverage from the doubling of the supply of boxes and advertising opportunities. If the teams both play at the ACC, they could package their corporate and advertising sales together. That would have to involve some sort of discount for a bulk rate, as no one will pay double the current fees for the Leafs and a new team. You can bet that the new team would take a large share of any profits as well. If they don't package them, all of a sudden that supply of corporate boxes and advertising opportunities doubles, reducing the value of those items if the demand doesn't double as well.
Also, keep in mind that any ACC rental deal wouldn't just be filling "blank slate" days. The facility currently offers big-ticket concerts on most days when the Leafs are out of town. A new team would mean that the amount of concert dates would be drastically reduced, further reducing MLSE's revenue streams from their facility.
A better situation would involve a new arena, but that doesn't seem too likely. Public funding would likely be almost out of the question, given the current state of both the Toronto and Ontario economies. Plus, both governments (and the federal government) just finished building an expensive stadium in Toronto, for MLSE no less. Think they want to get involved with another one in the middle of a recession? With the current high costs of both land and construction, it's tough to see a 100-per-cent private solution working in Toronto either.
None of that is to say that this couldn't work. Most of the concerns mentioned above that MLSE would likely express could be solved by Balsillie (or whoever the new owner is) paying a very hefty fee for entering their territory, similar to the New Jersey Devils. The question is if a second franchise in Toronto is worth that kind of expenditure.
The Ottawa and Buffalo franchises might have concerns with this plan as well. The Senators are finally starting to make some progress at positioning themselves as Ontario's alternative to the Leafs. If this goes down, it affects their market share as well, especially in the area of television rights but also in advertising, corporate support and merchandising. Ticket sales might come into it too: those of us around the midway point between the two cities might opt to travel into Toronto and see the new team instead of going to Ottawa for a Sens game.
For Buffalo, the tickets are probably the biggest concern, as Shoalts points out further on in the article. They have a massive Canadian fan base, particularly in Southern Ontario. Shoalts' sources argue that one of the main reasons the league won't let Balsillie put a team in Hamilton (and by extension, probably not Kitchener-Waterloo either) for fear that those fans might decide to avoid the border and stay in Canada to watch hockey, hurting the Sabres' revenue streams.
As he writes, "Mr. Balsillie, the co-CEO of Research in Motion Ltd., angered league executives by attempting to buy the Nashville Predators with the intent of moving the franchise to Hamilton.
The league will never allow Mr. Balsillie to put a team in Hamilton for two reasons, according to one governor. One is that the city would be a tough sell for U.S.-based teams, and the other, more significant reason, is the belief it would ruin the Buffalo Sabres.
'It's a minor-league town,' the governor said of Hamilton. 'How could we sell a team from Hamilton? Do you think the New York Rangers want to put the Hamilton Steelers on their marquee at Madison Square Garden? Do you think anyone in Manhattan would buy tickets to see them?'
He also said a team in Hamilton would mean thousands of fans in the Niagara Peninsula who attend Sabres games would simply drive to Hamilton to avoid border lineups.
'We do not want to kill the Sabres,” the governor said. “But if there was a second team in Toronto, that would not hurt Buffalo.'"
Both points are valid, and the second one is particularly interesting. However, contrary to this governor's opinion, there's a good chance that the migrating fan base would also be a concern with a second Toronto franchise. Hamilton to Toronto is not a long trip. One of the main reasons for the support for the Sabres in Southern Ontario is the accessibility of tickets, not the driving distances involved, which are often similar to the distances these fans would face if they went to a Leafs' game. A new franchise means many more tickets, and given the hassles involved with crossing the border these days, it probably would be an easy decision to stay at home if tickets are available. That may be the case regardless of if the team is based in Toronto or Hamilton.
Again, this isn't to shoot the idea down out of hand. The league could desperately use another team in Southern Ontario, especially given how much of a subsidy they get from the current one. Relocation of a struggling team would make more sense than a straight expansion, but that's also a far more complicated process. In either case, the NHL could also benefit from letting Balsillie in before they face an antitrust case, and he'd be very good for the league. If he's willing to pay large amounts to compensate the Leafs, Sabres and Senators for moving into their territory and if an arena solution is found (renting the ACC or building a new rink), this could work. One governor suggests $700 million as an expansion fee, which seems outrageous given that Forbes.com ranked the Leafs as the top NHL team last season with a valuation of $413 million. It's hard to think an expansion team would be worth twice as much as that.
In any case, though, the sum would likely be astronomical. The question is how deep Balsillie's pockets are, and if he's willing to pay that much of a premium to bring another hockey team into Southern Ontario.
"NHL governors are talking informally about placing a second hockey team in Toronto alongside the Maple Leafs, The Globe and Mail has learned.
'Why shouldn't we put another team in the best and biggest market in the world?' one of several NHL governors who spoke with The Globe anonymously said of the Greater Toronto Area.
According to this governor, one idea floated is for prospective owner Jim Balsillie to be rewarded with an expansion team in Toronto after helping to restore financial ballast to the Nashville Predators.
'I've heard this exact scenario,' a second governor said."
This is a very interesting idea, and one that certainly hasn't been floated very much relative to the idea of putting another team in either Hamilton or Kitchener-Waterloo. Toronto could sustain two teams in my mind, given the hockey-mad population, the size of the city and the massive suburbs surrounding it.
However, I'm not sure the Leafs would be overly eager to go along with this plan. Here's the part of Shoalts' piece that deals with their reaction:
"Richard Peddie, president of Maple Leaf Sports and Entertainment, said the organization would not automatically reject the idea of a second team in Toronto.
'When and if the league brings expansion to the table, we'll listen and decide what is best [for hockey],' he said."
This isn't as positive as it sounds. First, Peddie is absolutely non-committal there, which makes sense: this is pretty speculative at the moment, so you don't want to irrevocably commit your organization to a certain course in the media just based on what's come out so far. All he said is they wouldn't reject a proposal before looking at it, which seems reasonable.
I'd also be rather interested to find what Peddie said that Shoalts (or his editors) replaced with the [for hockey], as that seems like a curious comment. It isn't Peddie's primary job to make decisions that are best "for hockey" or even best for the NHL: his job is to run the Leafs and MLSE's other franchises and venues. Thus, anything he and the franchise owners decide upon will be best for their franchise first and the league second. This is logical: these franchises are commercial enterprises with shareholders, so it's up to their management to do what's best for those shareholders. At times, league interests come into it: a healthy league means higher TV revenues and lower revenue-sharing, so it's in the Leafs' interests to go along with the NHL when doing so will undoubtedly and dramatically improve the league. Keep in mind that their motivation and mindset is likely always to help their franchise first and the league second, though: the same is true of almost every professional sports franchise.
A further illuminating passage of the article discusses the economic ramifications.
"As to the potential economic impact on the Maple Leafs, the first governor dismissively waved his hand. 'The Maple Leafs would not be hurt one bit. In fact, it would help them. They could make all kinds of money renting the Air Canada Centre to the other team.'"
Now, I'm not so sure if this governor is thinking straight. First, if the Leafs allow another team into their city, they lose market share. This may not be huge at first given their market dominance and history, but they're no longer the only game in town. They'll likely still sell out every game, but the supply of NHL tickets has just doubled and it's hard to imagine the demand rising at a similar rate. Therefore, the premiums they can charge for their tickets will drop. Of further importance is the impact on merchandising, advertising and television revenues. Yes, there will still be a huge demand for the rights to Leafs' games, but television networks now have another viable alternative source for hockey if MLSE demands too much money: thus, the Leafs will earn less from their television contracts.
Yes, people will still buy Leafs' gear, but some will choose to buy merchandise from the new team instead. The same holds true for corporate sponsors, who gain leverage from the doubling of the supply of boxes and advertising opportunities. If the teams both play at the ACC, they could package their corporate and advertising sales together. That would have to involve some sort of discount for a bulk rate, as no one will pay double the current fees for the Leafs and a new team. You can bet that the new team would take a large share of any profits as well. If they don't package them, all of a sudden that supply of corporate boxes and advertising opportunities doubles, reducing the value of those items if the demand doesn't double as well.
Also, keep in mind that any ACC rental deal wouldn't just be filling "blank slate" days. The facility currently offers big-ticket concerts on most days when the Leafs are out of town. A new team would mean that the amount of concert dates would be drastically reduced, further reducing MLSE's revenue streams from their facility.
A better situation would involve a new arena, but that doesn't seem too likely. Public funding would likely be almost out of the question, given the current state of both the Toronto and Ontario economies. Plus, both governments (and the federal government) just finished building an expensive stadium in Toronto, for MLSE no less. Think they want to get involved with another one in the middle of a recession? With the current high costs of both land and construction, it's tough to see a 100-per-cent private solution working in Toronto either.
None of that is to say that this couldn't work. Most of the concerns mentioned above that MLSE would likely express could be solved by Balsillie (or whoever the new owner is) paying a very hefty fee for entering their territory, similar to the New Jersey Devils. The question is if a second franchise in Toronto is worth that kind of expenditure.
The Ottawa and Buffalo franchises might have concerns with this plan as well. The Senators are finally starting to make some progress at positioning themselves as Ontario's alternative to the Leafs. If this goes down, it affects their market share as well, especially in the area of television rights but also in advertising, corporate support and merchandising. Ticket sales might come into it too: those of us around the midway point between the two cities might opt to travel into Toronto and see the new team instead of going to Ottawa for a Sens game.
For Buffalo, the tickets are probably the biggest concern, as Shoalts points out further on in the article. They have a massive Canadian fan base, particularly in Southern Ontario. Shoalts' sources argue that one of the main reasons the league won't let Balsillie put a team in Hamilton (and by extension, probably not Kitchener-Waterloo either) for fear that those fans might decide to avoid the border and stay in Canada to watch hockey, hurting the Sabres' revenue streams.
As he writes, "Mr. Balsillie, the co-CEO of Research in Motion Ltd., angered league executives by attempting to buy the Nashville Predators with the intent of moving the franchise to Hamilton.
The league will never allow Mr. Balsillie to put a team in Hamilton for two reasons, according to one governor. One is that the city would be a tough sell for U.S.-based teams, and the other, more significant reason, is the belief it would ruin the Buffalo Sabres.
'It's a minor-league town,' the governor said of Hamilton. 'How could we sell a team from Hamilton? Do you think the New York Rangers want to put the Hamilton Steelers on their marquee at Madison Square Garden? Do you think anyone in Manhattan would buy tickets to see them?'
He also said a team in Hamilton would mean thousands of fans in the Niagara Peninsula who attend Sabres games would simply drive to Hamilton to avoid border lineups.
'We do not want to kill the Sabres,” the governor said. “But if there was a second team in Toronto, that would not hurt Buffalo.'"
Both points are valid, and the second one is particularly interesting. However, contrary to this governor's opinion, there's a good chance that the migrating fan base would also be a concern with a second Toronto franchise. Hamilton to Toronto is not a long trip. One of the main reasons for the support for the Sabres in Southern Ontario is the accessibility of tickets, not the driving distances involved, which are often similar to the distances these fans would face if they went to a Leafs' game. A new franchise means many more tickets, and given the hassles involved with crossing the border these days, it probably would be an easy decision to stay at home if tickets are available. That may be the case regardless of if the team is based in Toronto or Hamilton.
Again, this isn't to shoot the idea down out of hand. The league could desperately use another team in Southern Ontario, especially given how much of a subsidy they get from the current one. Relocation of a struggling team would make more sense than a straight expansion, but that's also a far more complicated process. In either case, the NHL could also benefit from letting Balsillie in before they face an antitrust case, and he'd be very good for the league. If he's willing to pay large amounts to compensate the Leafs, Sabres and Senators for moving into their territory and if an arena solution is found (renting the ACC or building a new rink), this could work. One governor suggests $700 million as an expansion fee, which seems outrageous given that Forbes.com ranked the Leafs as the top NHL team last season with a valuation of $413 million. It's hard to think an expansion team would be worth twice as much as that.
In any case, though, the sum would likely be astronomical. The question is how deep Balsillie's pockets are, and if he's willing to pay that much of a premium to bring another hockey team into Southern Ontario.
Saturday, May 17, 2008
Vancouver's recipe for MLS
To make a Major League Soccer franchise, you will need:
- One (1) large metropolitan area with a long soccer tradition
- One (1) billionaire owner committed to building a soccer-specific stadium at his own expense
- At least three (3) natural rivals either in the league, entering the league, or pushing for an expansion slot.
- 48, 172 fans who come out for a mere exhibition game against an MLS side (granted, one with a noted superstar)
- One (1) prominent and highly recognizable Canadian soccer player, national coach, Hall of Fame member, club coach, star executive, team president, spokesperson, TV commentator and newspaper columnist to helm the franchise bid.
- One (1) soccer-specific waterfront stadium
(NOTE: Highly desirable, but can be replaced temporarily by the following concoction: one (1) aging stadium that's shown it can handle high-level soccer matches, one (1) provincial premier willing to step into the breach left by local authorities and spend money on sports facilities even after the 2010 Olympics and one (1) league willing to consider the stadium as a temporary home with renovations. This replacement will substantially increase baking time, however.)
Directions: Place in oven and bake on low heat for several years. MLS entertainment should be ready to serve by 2011, but full soccer-specific quality may not be achieved until 2016.
So, yesterday's conference about the B.C. Place retractable roof went down pretty much as anticipated. Some interesting details came out of it, though, and it looks as if the Whitecaps may now be on the path to an MLS franchise. As mentioned above, it's not a perfect path, but at least it's a path, and Vancouver's MLS chances look much better than they did before, which is great news for soccer in this country.
Related:
- Jim Jamieson's story in the Vancouver Province.
- Province columnist Ed Willes has a great piece on how this isn't the ideal solution, but it's the best one currently available (complete with Iron Man analogies)!
- Ben Knight has an excellent take over at the Globe on Soccer blog.
- One (1) large metropolitan area with a long soccer tradition
- One (1) billionaire owner committed to building a soccer-specific stadium at his own expense
- At least three (3) natural rivals either in the league, entering the league, or pushing for an expansion slot.
- 48, 172 fans who come out for a mere exhibition game against an MLS side (granted, one with a noted superstar)
- One (1) prominent and highly recognizable Canadian soccer player, national coach, Hall of Fame member, club coach, star executive, team president, spokesperson, TV commentator and newspaper columnist to helm the franchise bid.
- One (1) soccer-specific waterfront stadium
(NOTE: Highly desirable, but can be replaced temporarily by the following concoction: one (1) aging stadium that's shown it can handle high-level soccer matches, one (1) provincial premier willing to step into the breach left by local authorities and spend money on sports facilities even after the 2010 Olympics and one (1) league willing to consider the stadium as a temporary home with renovations. This replacement will substantially increase baking time, however.)
Directions: Place in oven and bake on low heat for several years. MLS entertainment should be ready to serve by 2011, but full soccer-specific quality may not be achieved until 2016.
So, yesterday's conference about the B.C. Place retractable roof went down pretty much as anticipated. Some interesting details came out of it, though, and it looks as if the Whitecaps may now be on the path to an MLS franchise. As mentioned above, it's not a perfect path, but at least it's a path, and Vancouver's MLS chances look much better than they did before, which is great news for soccer in this country.
Related:
- Jim Jamieson's story in the Vancouver Province.
- Province columnist Ed Willes has a great piece on how this isn't the ideal solution, but it's the best one currently available (complete with Iron Man analogies)!
- Ben Knight has an excellent take over at the Globe on Soccer blog.
Thursday, May 15, 2008
Whitecaps to push for MLS status?
Some interesting news came out today. The Vancouver Whitecaps, who have been trying for ages to give the city a privately-funded new showcase stadium (supposed to be paid for entirely by Vancouver multi-millionare Greg Kerfoot, the team's owner who has been a key financial backer of the growth of soccer in Canada) with little success, may have finally made the breakthrough needed on a stadium of suitable size to support their Major League Soccer ambitions. However, the potential breakthrough has come from an unexpected direction that may cause as many problems as it creates. According to local radio station CKNW, both the Whitecaps and Lions will be represented tomorrow morning at a news conference called by B.C. Premier Gordon Campbell, which is believed to be on the subject of a new retractable roof for B.C. Place. The Whitecaps told CKNW last week that they'd consider playing in B.C. Place with the new roof if it helped their chances of landing an MLS franchise.
On the face of it, this seems like it may be a problematic proposition for the Whitecaps. B.C. Place was opened in 1983, and it's appeared to show its age recently, most notably when the roof collapsed in January 2007. It also goes against the soccer-specific stadium model so desired by MLS. However, the idea makes a lot more sense once you consider comments from Whitecaps president Bob Lenarduzzi in a April 30 Vancouver Province article by Jim Jamieson.
"The club is still 100 per cent committed to building a soccer-specific, natural grass stadium on the Vancouver waterfront, but would consider B.C. Place as a temporary venue if major renos are announced shortly as expected," Jamieson writes. 'Our priority is still the waterfront stadium, but given that it's taking as long as it has, we need to have alternatives if the opportunity to move to a higher level is available,' said Lenarduzzi. 'It would be a short-term solution, as we're looking at the waterfront stadium being our permanent solution but of course we're mired in that process right now.'
Now, that makes a lot of sense. The key goal here is for Vancouver to get into MLS, and the window is rapidly closing. MLS has said it will cap expansion at 18 teams. There are currently 14 teams, and two more franchises have already been approved (Seattle next year and Philadelphia in 2010). The Montreal Impact already have a bid on the table, backed by their brand-new natural-grass Saputo Stadium, and St. Louis is apparently applying as well. Given the rapidly expanding popularity of MLS, it's hard to believe that these are the only other cities interested. If both those clubs make it in and the league sticks to its previous comments, Vancouver would be on the outside looking in. Time is clearly of the essence, so a move to a newly-reinvigorated B.C. Place (which MLS has deemed acceptable as long as there's a long-term plan for a soccer-specific stadium) would dramatically boost the team's
chances of cracking the exclusive MLS club.
B.C. Place also can handle soccer. It played host to the old NASL Whitecaps for several years, and staged the last Soccer Bowl before the league folded. More recently, 48,172 soccer fans packed the joint for last November's clash between the Whitecaps and David Beckham's L.A. Galaxy. It isn't the ideal outdoor stadium the Whitecaps have been dreaming of, but with a new roof, it would make a great interim venue until the new stadium gets finished. The capacity's also a tremendous advantage: far better than the 6,868 seats in Swangard Stadium (the Caps' current home) or even the 20,500 at TFC's BMO Field. If the Whitecaps make it into MLS, there will be likely be tremendous ticket demand similar to what happened with TFC. The Vancouver area has long been very supportive of top-quality soccer, and the old NASL team used to regularly sell out Empire Stadium (32,000 capacity). With B.C. Place, fans wouldn't have to sell their soul for a ticket the way you have to for a TFC game at BMO Field.
There are other alternatives coming out of the woodwork as well for the long-term stadium solution, which should put some pressure on the Vancouver bureaucrats who have dithered for five years over accepting a free stadium (ironic that this is happening just up I-5 from where a team is about to be stolen due to the lack of a publicly-funded stadium). One compelling one is the idea of building a new stadium in the suburbs out in Surrey, just off the SkyTrain rapid-transit line, floated by my esteemed father a while ago and promptly followed up on by the Vancouver Province with a story by Kent Spencer (which included Surrey Mayor Dianne Watts offering support for the proposal) and an editorial backing the idea. A downtown stadium would be more desirable, but Surrey is a viable alternative (especially due to the easy access provided by transit to the western part of Surrey, where the stadium would likely be located), and its inclusion in the mix should give Vancouver council a little pressure to hurry up on the downtown proposal for fear of losing out. Suburban stadiums have worked out well in other MLS locations, notably Gillette Stadium in Foxborough, Massachusetts (home of the New England Revolution and the NFL's New England Patriots) and Giants Stadium in East Rutherford, New Jersey (home of the New York Red Bulls, and the NFL's New York Giants and New York Jets).
As the Globe's Matthew Sekeres wrote in his excellent article last month, the team is quite happy to look at different stadium solutions.
"Maybe I underplay it, but I don't think it would make a difference," Lenarduzzi said. "What we're saying is, 'We can build it anywhere, just tell us where.'"
Five years later, that question awaits an answer.
In other communities, with a smidgen of political will and dollop of pressure from the local millionaire, an answer would've come in five minutes.
Perhaps the presence of political backing in Surrey (where landing a pro sports franchise would be a huge coup for the city) will be enough to get things done, or perhaps the idea of competition will produce new will in Vancouver to keep the team downtown (even though they currently play in another suburb, Burnaby). Either way, at least the team looks to have some options now.
Regardless of where the new soccer-specific stadium is located, one (and a preferably natural-grass one) is still desperately needed. However, this announcement on B.C. Place is very promising: it should give the Whitecaps a good jump on their bid for MLS by providing a suitable high-capacity venue for them to play in. In turn, the team gaining MLS status would put more pressure on local officials to get things done on a new stadium. It's rather a reverse of the normal model of stadium, then team, but a similar manuever worked for the Blue Jays many years ago: they got into Major League Baseball with the terrible confines of Exhibition Place on the promise that a new stadium would be built down the road, and then they were able to use that leverage to forge the political and financial support needed for the SkyDome. Let's hope stadium history can repeat itself in Vancouver.
Update: 7:42 P.M.: Jim Jamieson has a new story up on the expected deal.
On the face of it, this seems like it may be a problematic proposition for the Whitecaps. B.C. Place was opened in 1983, and it's appeared to show its age recently, most notably when the roof collapsed in January 2007. It also goes against the soccer-specific stadium model so desired by MLS. However, the idea makes a lot more sense once you consider comments from Whitecaps president Bob Lenarduzzi in a April 30 Vancouver Province article by Jim Jamieson.
"The club is still 100 per cent committed to building a soccer-specific, natural grass stadium on the Vancouver waterfront, but would consider B.C. Place as a temporary venue if major renos are announced shortly as expected," Jamieson writes. 'Our priority is still the waterfront stadium, but given that it's taking as long as it has, we need to have alternatives if the opportunity to move to a higher level is available,' said Lenarduzzi. 'It would be a short-term solution, as we're looking at the waterfront stadium being our permanent solution but of course we're mired in that process right now.'
Now, that makes a lot of sense. The key goal here is for Vancouver to get into MLS, and the window is rapidly closing. MLS has said it will cap expansion at 18 teams. There are currently 14 teams, and two more franchises have already been approved (Seattle next year and Philadelphia in 2010). The Montreal Impact already have a bid on the table, backed by their brand-new natural-grass Saputo Stadium, and St. Louis is apparently applying as well. Given the rapidly expanding popularity of MLS, it's hard to believe that these are the only other cities interested. If both those clubs make it in and the league sticks to its previous comments, Vancouver would be on the outside looking in. Time is clearly of the essence, so a move to a newly-reinvigorated B.C. Place (which MLS has deemed acceptable as long as there's a long-term plan for a soccer-specific stadium) would dramatically boost the team's
chances of cracking the exclusive MLS club.
B.C. Place also can handle soccer. It played host to the old NASL Whitecaps for several years, and staged the last Soccer Bowl before the league folded. More recently, 48,172 soccer fans packed the joint for last November's clash between the Whitecaps and David Beckham's L.A. Galaxy. It isn't the ideal outdoor stadium the Whitecaps have been dreaming of, but with a new roof, it would make a great interim venue until the new stadium gets finished. The capacity's also a tremendous advantage: far better than the 6,868 seats in Swangard Stadium (the Caps' current home) or even the 20,500 at TFC's BMO Field. If the Whitecaps make it into MLS, there will be likely be tremendous ticket demand similar to what happened with TFC. The Vancouver area has long been very supportive of top-quality soccer, and the old NASL team used to regularly sell out Empire Stadium (32,000 capacity). With B.C. Place, fans wouldn't have to sell their soul for a ticket the way you have to for a TFC game at BMO Field.
There are other alternatives coming out of the woodwork as well for the long-term stadium solution, which should put some pressure on the Vancouver bureaucrats who have dithered for five years over accepting a free stadium (ironic that this is happening just up I-5 from where a team is about to be stolen due to the lack of a publicly-funded stadium). One compelling one is the idea of building a new stadium in the suburbs out in Surrey, just off the SkyTrain rapid-transit line, floated by my esteemed father a while ago and promptly followed up on by the Vancouver Province with a story by Kent Spencer (which included Surrey Mayor Dianne Watts offering support for the proposal) and an editorial backing the idea. A downtown stadium would be more desirable, but Surrey is a viable alternative (especially due to the easy access provided by transit to the western part of Surrey, where the stadium would likely be located), and its inclusion in the mix should give Vancouver council a little pressure to hurry up on the downtown proposal for fear of losing out. Suburban stadiums have worked out well in other MLS locations, notably Gillette Stadium in Foxborough, Massachusetts (home of the New England Revolution and the NFL's New England Patriots) and Giants Stadium in East Rutherford, New Jersey (home of the New York Red Bulls, and the NFL's New York Giants and New York Jets).
As the Globe's Matthew Sekeres wrote in his excellent article last month, the team is quite happy to look at different stadium solutions.
"Maybe I underplay it, but I don't think it would make a difference," Lenarduzzi said. "What we're saying is, 'We can build it anywhere, just tell us where.'"
Five years later, that question awaits an answer.
In other communities, with a smidgen of political will and dollop of pressure from the local millionaire, an answer would've come in five minutes.
Perhaps the presence of political backing in Surrey (where landing a pro sports franchise would be a huge coup for the city) will be enough to get things done, or perhaps the idea of competition will produce new will in Vancouver to keep the team downtown (even though they currently play in another suburb, Burnaby). Either way, at least the team looks to have some options now.
Regardless of where the new soccer-specific stadium is located, one (and a preferably natural-grass one) is still desperately needed. However, this announcement on B.C. Place is very promising: it should give the Whitecaps a good jump on their bid for MLS by providing a suitable high-capacity venue for them to play in. In turn, the team gaining MLS status would put more pressure on local officials to get things done on a new stadium. It's rather a reverse of the normal model of stadium, then team, but a similar manuever worked for the Blue Jays many years ago: they got into Major League Baseball with the terrible confines of Exhibition Place on the promise that a new stadium would be built down the road, and then they were able to use that leverage to forge the political and financial support needed for the SkyDome. Let's hope stadium history can repeat itself in Vancouver.
Update: 7:42 P.M.: Jim Jamieson has a new story up on the expected deal.
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