Coyote Ugly: Bankruptcy in the Desert

Scott WeldonCorrespondent IMay 22, 2009

ST. LOUIS - JANUARY 26: Mike Ricci #40 of the Phoenix Coyotes complains after a call was made against the Coyotes on January 26, 2006 at the Savvis Center in St. Louis, Missouri. The Phoenix Coyotes defeated the St. Louis Blues 5-3. (Photo by Elsa/Getty Images).

The NHL is in huge financial distress and the Coyotes of Phoenix are the tip of the iceberg.

After months of obfuscation the NHL has finally admitted there are problems in Phoenix. They had to lie for months and had to say the team won’t move to have any chance of retaining some sort of ticket base.

I wonder how many season ticket renewals they have right now. A hundred?  The Montreal Expos had their ticket base eroded by, well, always letting their players leave, and because of the constant rumours that the franchise was on the move.

The Montreal fans can be loyal but they expect loyalty in return which isn’t really a staple in professional sports. Teams in the major sports push for that loyalty to flow one way, always to them.  

Al Davis to my mind settled the question of whether or not leagues can decide where owners put or move their franchises. His 1980 antitrust suit came after all the NFL teams voted (with five abstentions) against his moving from Oakland to LA.

The NFL lost it’s legal right to control where team owners put their franchises in the subsequent lawsuit.

The Boys and Girls in the various professional sports leagues like to get together and agree on where franchises should and should not go but that agreement is not legally enforceable.

Really, if the NHL wants to keep Phoenix from being moved they need to keep Balsillie out of the club. Once he gets in it’s over. It cost the NFL $20 million in damages and $40 million in legal costs in 1981. I’m thinking lawyers rates for billable hours have gone up since then.

The league’s attempt to block the Raider’s move was found to have violated Federal Anti-Trust law. The Supreme Court refused to hear the NFL’s appeal. The NFL paid their money and have left Mr Davis alone to make his own rules and franchise moves ever since.

His eventual plan to move back to Oakland didn’t raise even a murmur from the commissioners office.

The Al Davis lesson wasn’t lost on the NFL.  Moving,or threatening to move your franchise is a lucrative business. He got into a bigger stadium in LA and had 150 luxury boxes built for him. Whenever things didn’t go his way he’d threaten to move the team again and politicians, local and state, would cave and offer concessions.

Eventually they stopped negotiating and in 1995 Al moved back to Oakland. He got a 16 year lease agreement, a $32 million loan and $10 million for the construction of a practice facility for what the price of some moving vans? A $70 million bond issue was approved by Oakland City Council to build Al 9,000 more club seats and 175 luxury suites.

The city Al Davis abandoned in 1982 was paying to get him back in 1995. The NFL meekly watched as he moved back. There was no lawsuit this time. They watched and they learned. The threat to move provides a lever in negotiations that sports franchises didn’t used to have.

On Mar. 28, 1984, in the middle of the night, the Baltimore Colts packed up and moved to Indianapolis. Irsay accepted a deal with them and rushed his team out of town from fear that the state of Maryland was going to expropriate the Colts after failed, bitter negotiations. 

In 1995, Art Modell attempted to extort money from the City of Cleveland for his pro-football franchise. The city had built a stadium for the Indians and an arena for the Cavaliers so apparently he was being cheated out of what was rightfully his, a free stadium at public expense.

He moved his team to the abandoned and chastened Baltimore market. His team became the popular Ravens and they were treated as Modell was sure he deserved. He got a 30 year rent free lease on a $200 million stadium.

In 1995, the league approved a move by the Houston Oilers to Nashville. Was this because Houston is a horrible football market? Oh no, it’s because of $292 million worth of concessions Nashville was ready to give up.

Now when the NFL wanted to expand, they had proven football markets in Cleveland and Houston that were devoid of teams. Anxious fans and state and civic governments that have learned their precious NFL franchise can be stolen away without a moments notice in the dead of night tripped over themselves to allow new owners in.

New owners were pleased to pay top dollar for expansion franchises in proven football markets with locals who had been properly tenderized by the loss of their franchises. It’s win-win for the NFL.

Any money the teams need approved by referendum to build something nice and big and expensive for the multi-millionaire owner that the poor average tax payer won’t be able to afford to sit in ,is approved immediately. 

The NHL learned as well. The threat to move the former Stanley Cup winning Pittsburgh franchise is what they used to finally get a new arena funded and started. Jim Balsillie was in some ways used as the paper tiger there. Here comes the evil billionaire Canadian to steal your team.

Do something about it. Egos became engaged and ground broke in August of 2008. The Consol Energy Center is supposed to be ready for the 2010-11 hockey season.

Charles Wang has been trying to use the threat of a move to Kansas City to get a new arena built on the Island. You can’t blame him because the old arena is horrible. He is losing money. It’s not the NFL where the owner of the Oilers felt that Houston didn’t earn ”enough” money.

The NHL often isn’t earning any money at all in it’s markets. Like the NFL it tries to use the threat to move franchises to get what it wants. Unlike the NFL, a lot of Americans don’t feel they need an NHL franchise like they need an NFL franchise so the leverage isn’t as great. Still it’s the leverage they have and NHL works with it.

They seem to have appropriated the right to threaten and to move that Al Davis won in his anti-trust suit. But of course every professional sports owner has the right to move his franchise wherever he wants. It’s a free enterprise thing.

If your team is going to fail in it’s market there’s a much more legitimate argument to be made for moving it. Football was not going to fail in Baltimore or Cleveland or Houston, even if your team owner is a complete moron.

They just weren’t going to make quite as much money as the owners would have liked, but hockey could fail in a lot of those southern US markets. There are still a few, a very few markets, mostly in Canada where hockey can survive if not prosper.

There are sound fiscal reasons for moving some hockey franchises around. The question is who gets to move the franchises and where.

A smarter Jim Balsillie would have told the NHL whatever it wanted to hear, gotten ownership of a franchise, say the Nashville Predators, and then moved it. The only restrictions on that movement would be as a result of whatever lease a particular team has and what contractual obligations a team or owner have made themselves subject to.

New owners may be obliged to sign a contract to join the NHL in which case they might be due to incur whatever penalties were spelled out in the contract for non-compliance with various NHL bylaws. The NHL though can’t,  in law, control where an owner of a franchise wants to move his team.

The NHL wants to complain that Balsillie can’t move into the southern Ontario market because they had it slotted for some problematical, theoretical future fantasy expansion franchise. They’ve ignored this region since the 20’s. The Quebec Bulldogs went under and were sold by the NHL to Hamilton interests 1920.

They kept a team there from 1920-25 until the players revolted over the increased NHL schedule. The team was sold to boot-legger Bill Dwyer and became the New York Americans.

Since then, this theoretically fertile field has lain fallow. The southern Ontario market has been ignored or abused by the Toronto Maple Leafs and the NHL has never shown any inclination to do anything about it.

Until, of course, a billionaire comes along and says, you know, I can make money on hockey in Southern Ontario. Duh! Suddenly the NHL had a secret plan all along to expand there that this damn upstart is messing up.

I’m sorry it’s a little late for the dog in the manger to start barking. I’m thinking 84 years was plenty of time, even for the NHL, to put a franchise in Hamilton.

Since the second six in 1967, they went to: Ottawa, Atlanta—twice, Tampa Bay, San Jose, Dallas, Cleveland, Washington, the island, Kansas City, Colorado twice, Raleigh, Miami, Columbus, St. Paul, Hartford, Anaheim, Winnipeg, Quebec City, Edmonton, Calgary, Vancouver, Buffalo, New Jersey, and Phoenix.

That’s 42 years and 24 cities. None of those franchises, the successful and the less so, had access to as big a hockey fan market as Hamilton would. Yet expansion after expansion, team move after move, always the southern Ontario market was ignored.

It’s a little late now to claim it as your own. We don’t want to use it but we certainly don’t want anyone else to service this market.

The NHL has serious problems. The problems are financial. They’re losing the propaganda war and the fiscal war. The hockey market in the Southern US that they’ve pinned their hopes on has mostly failed to appear.

San Jose, Anaheim, Colorado, Raleigh, and Dallas seemed to currently be succeeding as hockey markets though Hicks’ attempt to sell the Stars and Colorado’s first experience with a bad team may tell a different story soon.

Tampa Bay and Florida have had moments of success. I’d like to think there was a possibility, with good management of success down there, but Florida seems to be a bargain market.

That’s not a good spot to try to sell top end sports entertainment that’s not football. Carolina’s three big playoff runs and their Stanley Cup have given them a fan base. One bad season seems to deflate that tire.

They were having trouble getting 8,000 a game last year, but they look good now. I always thought there was some good will left in Atlanta from the Flames first, not entirely unsuccessful run, but the Thrashers made some horrible short term talent decisions that have left them among the worst teams in the league.

They are in jeopardy of losing their “star” and once they do there’s no reason to watch that team. Columbus is looking good. Yankee markets seem to do better then confederate ones with hockey and after a long climb they’ve put together a young talented roster. I wish them all good things.

Nashville never made any sense. No snow birds, no ice, just country music and NASCAR. It’s a disaster. Phoenix at least had snow birds and still there’s no one at those games except Calgary and Vancouver fans and that’s too long a commute to work.

The national TV contract that this cross US coverage was supposed to generate has not appeared.

What can be done?

The NHL needs to realize there are very few untapped successful hockey markets out there. Southern Ontario is one. Winnipeg or Quebec City may be two others. Toronto could—but won’t—carry another team. If you had an arena, you might sneak a team in Seattle. Kansas City doesn’t have a market but it has an arena.

Gangsters who aren’t worrying about losing money could put an arena and a team in Las Vegas. That’s it. Winnipeg, Vegas, Kansas City, and Quebec City probably would lose money, Vegas would lose boatloads. The real problem is despite how few hockey markets are left there are even fewer people or corporations out there who want to buy a hockey team.

Jim Balsillie is the only guy in the past five years who actually has money who wants to buy a team. The NHL trots out a paper tiger every year or so, but this guy is the only one who’s turned out to be real. Unfortunately for the NHL, he’s a smart billionaire. He wants to buy a team in a market that will make money.

The Hamilton Bulldogs or Tigers or Steelheads or Burghers will make money. All the stupid billionaires are now apparently stupid multi-millionaires and have learned that buying a hockey team in the southern US is like building their bank vault on a sink hole.

Multi-millionaires can’t afford to lose $20-40 million a year. You can lose a billion dollars doing that in 50 years.

Hell, Phoenix will do it in 25. Are you going to sell your franchise for $2 billion in 2050? Maybe, but I don’t think so and with credit contraction a lot of these guys need to sell their franchise now. They won’t be around in 2050 or 2020 for that matter. The time has come to stop the bleeding.

The really stupid billionaires have already bought their southern US NHL hockey team. There’s no one left with a billion dollars who can read a newspaper who will buy a team.                  

The NHL needs to stabilize things. They’ve tried to do it with a positive attitude and wishful thinking. That’s played out. Balsillie and the Hamilton market lets them start to do something concrete.

NHL expansion is an illusion that they need to stop chasing. Until they get this league stabilized the last thing they need is two more money losing franchises. Bankruptcy lets the Phoenix Coyotes out of their lease.

The NHL needs to vote to allow Balsillie to move the team to Hamilton. This lets them maintain the illusion of control on franchise movement. No one wants to see a mad scramble that ends up with 23 NHL teams in Ontario’s golden triangle, well except for a couple guys in Waterloo.

The NHL needs to be able control where franchises are and where they go. Once Balsillie is in the market he wants to be in he’ll go along and play puck with the other owners. They need to reassert league and franchise stability and clinging to this loser in Phoenix won’t do it.

Balsillie then pays Moyes his $212 million for his valueless franchise. Suddenly owners around the league can say, thank goodness, my franchise is worth something. Billionaires on the outside can see that the worst NHL franchise realized $212 million dollars, maybe $150 million or so for an existing NHL team isn’t insane.

The move to Hamilton makes southern Ontario hockey fans happy and ticks off the 112 Coyote season ticket holders. I call that a win. This franchise stops draining $40 million a year from the NHL coffers (hmm  those NHL franchise fees don’t look so great now) and probably within a year or two is contributing $20-30 million dollars to the NHL as a whole.

That’s an extra $70 million a year to the league as a whole. That’s good right? They need to accept the inevitable and get on board and try to steer it. Fighting it gets you an antitrust lawsuit that they can’t win. As I said before, lawyers' billable hour rates have ballooned since the '80s.

The NBA, MLB, and NFL are all behind you but I don’t see them picking up your court costs. They chase Balsillie away and he leaves them with a bleeding wound in phoenix and no one else to patch it.  

The NHL then can use their now more credible threat of a team move to hopefully get the Islanders a new building. Once Wang gets his Lighthouse project moving he should be happy.

A better building and hopefully better team management let the Islanders finally put a decent home grown team on the ice. If they don’t become a money making venture at least they stop losing $23 million a year.

Pittsburgh when they move in to their new building should start contributing a lot more to the NHL bottom line. Tampa Bay is another horror spot. The new owners tried to finance this team purchase in the middle of the worst credit crisis in 90 years.

They have little money, little income and a team that is constantly rumoured to be shopping their best players. They have a good building, a cup, some history, and a core of a team.

Maybe after Balsillie, Wang, and Lemieux and company have added value to their franchises someone with real money will come in and break even in Tampa Bay. Hicks in Dallas is another big problem. His personal financial crisis has left him wanting to sell and there’s no one left to buy an NHL franchise.

Theoretically Dallas was making some money though perhaps next year not so much. Playoff dates saved the teams bottom line the year before and lack thereof crucified them this year.

Nashville also is in a bind so maybe they can be shuffled off to the rink in Kansas City. Florida and Atlanta are in trouble too and once the owners in Atlanta stop fighting each other they’re likely going to sell the team.

It would be nice if by the time that happens there’s a smart billionaire out there who can see an NHL team as a reasonable investment. Before that happens Bettman needs to get Balsillie in the tent and some money flowing in from Hamilton and the Island. Phoenix needs to be let go.

If this doesn’t happen I see a scenario dotted with contraction and bankruptcy. Not all of Florida, Nashville, Atlanta, Phoenix, Tampa Bay, The New York Islanders, and Dallas will survive. There were empty seats in Boston at the start of the year and Detroit has had trouble filling their building.

Some future illusory expansion to Hamilton is a pipe dream at best. Fix what you can NHL and hope you can build some momentum that brings a buyer or two back for an NHL franchise.

Maybe there is a US national TV contract for and NHL full of relatively solvent teams all trying to put a watchable exciting product on the ice. They let Balsillie go and it’s just going to get uglier then it already is.        


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