NHL Acting More Spiteful Than Smart in Phoenix Situation

The Phoenix Coyotes ownership situation has turned into more of an ego battle than an effort to fix a problem. It’s become a fight over legalities and control instead of trying to better the sport.

Former owner Jerry Moyes claimed over $100 million in losses when filed for bankruptcy protection. Last season the team lost $30 million, they have never turned a profit, and have continued to move further away from break-even in recent years. The NHL has admittedly loaned money to the franchise to meet payroll and loan payments. Unless Gary Bettman wants to follow the US government down the TARP rode, this is not a business model he should be defending.

Throw in the fact Phoenix had a payroll near the minimum, they have a relatively new arena with a naming rights deal, and have the most iconic figure in hockey working for them in a visible role. At some point, you need to look at the business and admit it makes no sense investing in and pull the plug. Did I mention the local cable ratings and attendance in the bottom 5 of the league?

Given the current economy and the shift in professional sports ownership methods away from just being for fun where its OK to take significant losses and towards developing more sustainable businesses, it makes no sense for anyone to invest in a Phoenix based hockey team. It’s a losing proposition. Even the appreciation argument falls apart, as team value according to Forbes has barely appreciated with inflation since Moyes bought in 2001, not nearly enough to keep up with his losses.

Back to Bettman and the NHL’s stance. It’s easy to understand why they don’t want Balsillie to swoop in and move the team under his own terms. Plus, Balsillie has done everything he can to develop enemies with the way he conducts himself. However, begging Jerry Reinsdorf to buy the team and keep it in Phoenix is not the answer. Phoenix will not suddenly become a hockey town, it will not magically start winning and turning profits, and in the end, the NHL will eventually need to continue to bail it out. Is that acting in the best interest of your shareholders – the other league owners?

Not to continue to beat down on Phoenix, but look at the support the Diamondbacks and Arizona Cardinals receive – or lack thereof. Outside of a few spurts of success, it’s a difficult market to sell tickets. The Suns even played in front of half-empty arenas this season after making the playoffs for a number of years and still putting an entertaining, star-filled group on the floor. Bettman needs to come to grips with the fact his grand plan to bring hockey into the South is failing. He needs to admit that and fix it before it starts to compromise his sport.

The NHL’s argument that it’s too late to move a team before next season has already been proven wrong. Apparently it’s only too late when they are not in favor, but if it’s Quebec to Colorado and they want to see it happen, then its fine – but that’s how true cartels work. It leaves a few options. If they insist on not moving it before the season starts, the league can either run the franchise themselves (a la the Expos) or try to sell to the Reinsdorf group. However, the NHL should put ramifications in place that allow the team to move if business conditions don’t improve. Set season attendance goals and profitability conditions. If Phoenix fails to meet them, and the franchise shows no signs of changing, the league should have no regrets in moving them immediately. And don’t bring the lame-duck franchise argument because the fans have treated this team like a lame-duck the past few years.

Another option is to allow it to auction the team to a group that would move it to Canada. If they prefer the team not move to Hamilton for some reason, then pick an owner that will move it where the league sees fit. However, find a way to control the terms of the move and conduct it in a way that excludes Balsillie from the process, if that’s the sole intent.

Moving the Coyotes back to Canada makes the franchise more valuable, thus the league becomes more valuable and all the owners benefit. It also takes a financial burden off the league front office, and shifts the discussion from negative publicity to stories about sell outs and new rivalries. Bettman is acting spiteful right now by trying to keep this team in Phoenix. It hurts the entire league. He needs to admit the mistake of moving them, realize Phoenix does not support any of its teams, least of which is hockey, and make a sound business decision that will earn long-term applause.

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2 Responses

  1. Had Jerry Colangelo and the Suns ownership group actually shared arena revenue with the Coyotes, this might not be a problem. US Airways Center is in downtown, next door to Chase Field. However, the arena is under Suns control, so they got advertising and suite revenue for Coyotes games, not the Coyotes themselves.

    The new Jobing.com arena (which didn’t get a naming rights deal until after it opened), is in Glendale, not downtown. So is the new Cardinals University of Phoenix Stadium, but that is only an 8 game commitment.

    The NHL should let the Coyotes move to Canada, perhaps even to the new arena in Winnipeg, where the Coyotes franchise (as the Winnipeg Jets) previously was located.

  2. The revenue sharing would certainly help, though I’m not convinced Phoenix has enough of a hockey market for sustainable revenue. No teams should accept that type of stadium deal – hello Islanders and Twins.

    Winnipeg would be a good move, though it almost admits Bettman and ownership made a mistake moving them to Phoenix in the first place.

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