Wednesday, July 30th, 2014

Business News

17

It’s not all bad news. League revenues continue to inch forward last year because the league has a solid core of hockey markets than are showing healthy increases every year. Gary Bettman can take credit for a CBA that is driving the best talent to the big media markets. Boston and Chicago have been reborn and Los Angeles is a team that is clearly on the rise. The Rangers are making the playoffs and even the Leafs are starting to make some noise.

Also, one zombie franchise has been put out of business as the Atlanta Thrashers became the Winnipeg Jets. Ticket sales immediately put a tiny Canadian market near the top of the NHL middle class, a fact that probably turned a few more heads toward Quebec City.

If life in the NHL penthouse (and the rest of Canada) is very sunny, the basement is flooded, leaving several franchises underwater:

1) The Dallas Stars are nearly sold to Tom Gaglardi but the team is still headed to bankruptcy court because the purchase price won’t cover the team and arena debt. Lenders are going to take a haircut. I wonder if the Hicks experience teaches a lesson to those who have lent to sports teams. I wonder if money to invest in hockey teams becomes even scarcer.

2) Will the league ever be able to get rid of the Phoenix franchise? It is fairly obvious that a) nobody is prepared to buy the team for $170 MM without heavy subsidies from the city of Glendale, and b) the city of Glendale is finished with heavy subsidies. It is only going to write one more cheque for $25 MM to help cover losses this year. The gravy train is staggering into the station.

Is the league cutting the price for insider Greg Jamison? Does he have the money to sustain losses for a few years? What kind of a haircut is the NHL going to take? How much worse will it get if the team falters?

Does anyone care any more?

3) Dave Checketts in St. Louis pretty much has to sell because his principle investor wants out. They want $180 MM for the team they bought for $150 MM five years ago. According to reports they have received multiple offers but none that were close.

4) The Columbus Blue Jackets are threatening to leave the Ohio city if they don’t get a better deal on their arena lease. The solution? Get the city to buy the arena and rework the lease to deliver up $9.5 MM a year to the Blue Jackets.

(I sure get tired of the sportswriter response to this sort of thing. In this piece Bob Hunter knows the Jackets will end up with $9.5 MM a year and knows that the money comes from the taxpayer. But hey, it guarantees the Jackets will stay in town! Cheap, I guess.)

5) Nobody wants to build Charles Wang an arena, so the Islanders will continue to limp along losing money and credibility with every passing season.

6) The New Jersey Devils missed a $100 MM payment due September first. No problem here though – they are merely restructuring the financing while looking for a minority owner who wants to buy into a business that probably owes more than it is worth.

7) The Nashville Predators are not in financial trouble as far as I know, but they have been embroiled in a scandal surrounding the awarding of the concession contract. Apparently team executives lied to the city so that a company owned by Jeremy Jacobs (yes, that Jeremy Jacobs) wouldn’t have to compete for the contract, a contract they have held since the birth of the franchise.

I doubt if the scandal will have any legs – it’s too complicated – but it looks really sleazy. Crony capitalism at it’s best (or worst.)

8 ) In Florida, Dale Tallon signs several bad contracts just to get to the salary floor. Meanwhile, the Kings say they won’t pay Drew Doughty more than $6.8 MM and they wouldn’t accept a contract that is less than seven years. What kind of CBA produces that result? Unless Doughty gives up his right to UFA status at 25, Los Angeles will apparently let him sit.

9) The shape of a (temporary) solution to all these problems is emerging with the new NFL contract and the ongoing NBA lockout. Football players got 47% of revenues and the NBA is looking for a number a lot closer to that than the 57% NHL players get.

Knocking NHL players salaries back to the NFL percentage would cut salary costs by 17.5% and increase the owner’s share by $300 MM. The rich teams would get richer and the zombie franchises would be able to continue to lurch from crisis to crisis for another few years.

The players, I’m sure, won’t think much of the idea, but what can they do? Sigh.

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Comments

17 Responses to “Business News”
  1. Rajeev says:

    The players, I’m sure, won’t think much of the idea, but what can they do? Sigh.

    They’ll cave, in part from pressure from the various league organs in the MSM, and virtually all non-elite Eastern Europeans will move to the KHL for better money (and worse conditions and arenas). Most fans wont’ care, but a few like me will and will watch less and less of the NHL. The Salavat Ufa – AK Bars Kazan game today was absolutely fantastic and featured two teams who could play with any of the top NHL teams. In terms of take home compensation, Alexander Radulov will probably make about as much as Drew Doughty will, but he’ll play alot closer to his hometown, will play far fewer games, and probably doesn’t have to worry as much about having to donate his brain to science when his playing days are over. Of course, there are some unique concerns with playing in Russia, as we all know too well.

    To answer your question, the league will get worse, the players will make less, but the owners will make more. We’ve already seen this happen, haven’t we? I actually don’t think the players will cave too hard and I don’t think the league has much leverage at all. But I would expect that 57% to do down, unfortunately.

  2. Magicpie says:

    Also, one zombie franchise has been put out of business as the Atlanta Thrashers became the Winnipeg Jets. Ticket sales immediately put a tiny Canadian market near the top of the NHL middle class, a fact that probably turned a few more heads toward Quebec City.

    Middle class for how long? Winnipeg only has a population of only 700,000, making it the smallest city in the NHL, and the second smallest North American city to have a big-4 sports franchise (next to Green Bay). Their arena only has 15 000 seats.

    I know Canada loves hockey and everything, but when your team’s population base and arena size are both 20-30% smaller the 29th place team in each of those categories, it seems to me like it’s gonna be an uphill climb. Ottawa’s a Canadian team too, and they have a far bigger population base, a normal-size arena and (for a while there) a winning team, yet they still had trouble making payroll a few years ago.

    • Tom says:

      I’ve made no bones about my view on the Winnipeg market. The team can do okay but in every other way it is bad for the NHL. Quebec City isn’t any better. Neitrher place helps the league increase the interest in the game in the US.

      But both will deliver up significantly stronger revenues than about a dozen US markets and will do so for the forseeable future.

    • granzeir says:

      In Winnipeg’s case it’s the only game in town and they’re enjoying a homecoming honeymoon right now. Time will tell what the future brings (i.e. a weaker Canadian $ possibly?).
      The Ottawa situation occurred a number of years ago and had more to do with the organization carrying too much debt along with an owner that simply didn’t have the means to own and operate an NHL franchise. A stronger currency and new owner with seemingly deeper pockets has corrected the situation, at least for now.

      • Well, Let’s see:
        Winnipeg: Football( CHL Blue Bombers) and Jets. It’s not seemingly deeper pockets. TNSE’s owner Mark Chipman, is one of the Canada’s most richest person and Winnipeg Jets, already sold their waiting period of at least 5 years, will continue their strong sales in NHL. In fact, all Canadian markets but Ottawa( still followed with close 94.5%) were sold out and have at least a year of waiting list. For example, Leafs and Habs, you have to wait for 3 years.
        Quebec City: Pierre Karl Peladeau’s Quebecor is no less of TNSE’s Mark Chipman, as Quebecor Inc’s the second-strongest media corporation of Canada. As the recent moves of Quebecers protesting return of Nordiques De Quebec or the widespread selling of their merchandise 15 years after they relocated.
        Quebec have none of Top-4 Sports team, apart from Quebec Kebs which participate in NBL Canada which would gives us theory that when Nordiques are back in town, it’s popularity will be stronger than Jets.

        • Tom says:

          One of the problems with this discussion is that fans and the league see different objectives and problems. I don’t doubt – and I don’t think Gary Bettman doubts – that Winnipeg and Quebec City can be profitable franchises. They can succeed in their market. There is a gain for the individual owner and team by moving Atlanta to Winnipeg, but there is no gain for the league, for the collective.

          One of the league problems is that 90% of revenues are local. That’s a key reason there is such a huge gap between the haves and have nots. That’s something the league wants to change. To change that, the sport has to become much more popular in the States.

          Winnipeg and Quebec City don’t do anything for that problem. They probably make it worse. Will the Jets sell in Florida? In California? Will obscure Canadian cities affect local TV ratings in the US?

          Most fans are quite content with hockey as a regional niche sport. We don’t have to be bigger than basketball to be happy. But the league doesn’t think like fans. The league wants to be a truly national sport in the US because that’s where the new money, the potential, the growth is. It is a pipedream but it is the only pipedream in town.

          The league moved back to Winnipeg – and likely will return to Quebec City – only because they had very little choice. It delights fans in Winnipeg and stabilises a franchise, but it does so at the expense of the pipedream. Canadians see the move as hockey returning to its roots. Gary sees it as a setback.

          • beingbobbyorr says:

            Winnipeg and Quebec City don’t do anything for that problem. They probably make it worse. Will the Jets sell in Florida? In California? Will obscure Canadian cities affect local TV ratings in the US?

            I’ve played and/or watched hockey since 1965, and when I moved to Los Angeles (from NYC / Phila.) in 1983, even I, a die-hard hockey geek, found myslef avoiding the Forum when the Jets, Flames, or Canucks rolled into town. ( I went ONCE to see Gretzky’s Oiler dynasty, and of course I kick myself now for not having seen more of them in person . . . but I digress )

            Americans have absolutely no image of Winnipeg, Calgary, Edmonton, or (back then) Vancouver (now, we’re more comfortable w/ BC because we see it in 80% of our TV shows thanks to Hollywood-North tax breaks), and for some psychological reason beyond my ken, cities that have no ‘brand’ down here are like Kryptonite to the casual sports fan . . . . and in Hockey, that means most Western Canadian cities.

            Odd side note: one of the prominent sponsors at Anaheim Ducks home games during the last few years has been some Alberta Tourism/Commerce organization. Not sure why they think Orange County is a wellspring of untapped snowbirds, but good luck to them. I’ll be curious to see if their adverts continue this season.

          • Tom says:

            Americans have absolutely no image of Winnipeg, Calgary, Edmonton, or (back then) Vancouver (now, we’re more comfortable w/ BC because we see it in 80% of our TV shows thanks to Hollywood-North tax breaks), and for some psychological reason beyond my ken, cities that have no ‘brand’ down here are like Kryptonite to the casual sports fan.

            I don’t really understand it, either, but I think it also leaks into the larger NHL brand. Do Americans think of Winnipeg as a major league city? How can a major league have teams in cities that are not major league? It reinforces the idea that hockey is a Canadian sport, and a niche attraction in the US. It reinforces an idea that the NHL is trying very hard to change.

  3. Doogie2K says:

    Nobody wants to build Charles Wang an arena, so the Islanders will continue to limp along losing money and credibility with every passing season.

    To be fair, no one wanted Wang to build himself an arena, either. It’s like Nassau County simply doesn’t want the Islanders anymore.

  4. It’s just me but if Coyotes,Islanders and Blue Jackets are only teams that are most likely to relocate and that’ll be to Quebec City, Hamilton and Hartford.
    Nashville, Tampa Bay and Dallas will stay because for the first two, the strong ticket sale increases in this year and Dallas, owner: Gilgardi.

    • Magicpie says:

      How about Seattle?

      -they’ve got four million people and are the only Top-15 US media market aside from Houston and now Atlanta without a team,
      -there’s a big void left there by the Sonics,
      -they’ve already got an existing arena that I’m assuming can be retrofitted for hockey without massive expenses,
      -there’s a rabid hockey fan base 2 hours up the highway in Vancouver that can help out with ticket sales the way Toronto does for Buffalo
      -last but not least you’ve got a laid back, west coast-y population full of Canadian transplants that’s at least somewhat amenable to being brought around to hockey than the Canadian teams (it worked in San Jose).

      I’m really surprised that they don’t get mentioned in the franchise relocation discussions more often.

      • Tom says:

        I think you are wrong on the rink. When it was remodelled in 1994, it became state of the art for basketball, seating 17,000, but it left only 10,000 or so unrestricted seats for hockey. Some people think this was a deliberate plan by the basketball team to prevent having to compete with the NHL.

        The rink is the big issue in Seattle.

        That aside, I agree with you. It might be the best untapped market in the United States. Hockey goes back a long way in Seattle.

        Finally, though, I don’t think there are 30 good markets for hockey in North America. Until that changes – unlikely in the short or medium term, IMO – we’ll have a problem that makes labour peace a pipedream.

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