February 3, 2009
NHL in turmoilHistory says contraction may help
By BILL LANKHOF, SUN MEDIA
The NHL never has seen a time filled with such tumult.
Attendance woes beset not only pauper franchises, but vacant seats are showing up in even its more traditional cities. Owners bemoan the cost of salaries and fret over a depressed economy. Others complain unsuitable arenas make franchises unsustainable.
Unemployment is not only crippling the world economy it is keeping fans on the living room couch rather than in arena seats. Cash constraints make the long-term survival of franchises tenuous. Speculation is rampant of teams folding or moving.
It is pro hockey's harsh new world. And, it is the 1930s. It just sounds a lot like the NHL we know today.
But, this was the NHL of the Montreal Maroons and the original Ottawa Senators, who along with the Americans of New York, the St. Louis Eagles, Philadelphia Quakers and a club in Pittsburgh would disappear -- victims of the financial ruin wrought by the Dirty '30s. What NHL franchises are experiencing today is nothing that hasn't happened before. Most of us just weren't around to see it the first time.
Those hard times shrunk the NHL from a league that had 10 teams into what many still regard as the Golden Age of the "Original Six.''
It's called contraction. And, in today's NHL nobody within memo-distance of Gary Bettman's office is allowed to even think of using the C-word. Even the Montreal Canadiens considered folding in the late 1930s so maybe speculation that George Gillett has considered selling the team now isn't so crazy. Maybe he does have a cash crunch and maybe all those denials are just so much window dressing.
Maybe yesterday's Pittsburgh Pirates are today's Nashville Predators, the Maroons just forerunners of the Florida Panthers.
As stock markets attempt to weather the worst financial storm since the Great Depression, Bettman recently reported blue skies for the gate-driven league. He is a man spitting into a prevailing wind. There is a growing mountain of disquieting evidence:
In Nashville, the Predators are papering the house.
The Islanders and the Phoenix Coyotes are losing tens of millions of dollars annually.
In Columbus, a regular ticket to the lower bowl is $45. But a $50 promotion now gets the same ticket, an all-you-can-eat pre-game buffet and a post-game brew or soda pop. In Hockeytown, there is fear the faltering auto industry will empty corporate boxes.
"We're living in incredibly uncertain times. The implications of the economic fallout are going to be far-reaching," Darwin Semotiuk, a specialist in Canadian sport policy and a professor at the University of Western Ontario's School of Kiniesiology, said recently. "The people in professional sport had better put their heads up ... It's going to be more difficult to attract the corporate dollar and business sponsorship."
In St. Louis, the Blues slashed prices, dropping the cheapest ticket to $9.
The Lightning's new owners reportedly needed a financial life preserver from previous owner, Bill Davidson, to complete their purchase.
The Devils, one of this generation's most succesful franchises on the ice, are one of 17 teams experiencing attendance dips and there's a dispute with the city over who's responsible for keeping the lights burning in the building.
The league did have an audited revenue growth of 12% last year. But that was before the playing fields turned into economic quicksand. Growth this season is expected to flatline. Many teams won't feel the full impact until they try renewing season ticket packages or corporate suites in the off-season.
Corporations are cutting promotional budgets.
"It's going to be interesting to see how this shakes out in markets where the NHL isn't the alpha dog." Dan Mason, an associate professor at the University of Alberta's International Institute for the Study of Sports Management, said recently. "Take Washington. You have the Redskins, the Nationals, the Wizards and, just up the road, the Baltimore Ravens and Orioles, plus college sports.
"Or, take Nashville: They have the Titans and the Predators. You have a corporate base that spends money on suites and sponsorships. If times get tight, chances are those corporations give up affiliation with the Predators or Capitals before they give up ties with the NFL team."
Here then is a list of the NHL1s most vulnerable:
This could be a blueprint of how not to operate an expansion franchise. Don Waddell is by all accounts a lovely man but he has become the Inspector Clouseau of the NHL. Despite having prime draft picks every year the Thrashers rank even below the much-maligned Maple Leafs in player development.
The Hockey News recently ranked the Thrashers 23rd in prospects. And, when they do get a solid player, general manager Don Waddell has lost him. In eight seasons, the team still is looking for its first playoff game victory.
The team's fan base has eroded. Attendance dropped another 7.9% the first half of this season -- second biggest drop in the NHL. It has cash flow problems which hasn't been helped by a collective agreement that forces it to spend at least $41-million.
Nobody really knows if Atlanta would support an NHL team because, in all honesty, it never has had one of NHL calibre.
If the NHL bought out the owners and folded the team it would be considered a mercy killing. Or, if a less desperate solution is more to Bettman's liking: Keep the team; fold Waddell.
A 27 % share of the Predators got tied up in minority owner William Del Biaggio's bankruptcy hearings. Del Baggio has been accused in three lawsuits of providing forged documents to financial institutions to land multimillion dollar loans that he has not repaid. Di Biaggio is just the latest NHL owner being fitted for a pinstripe suit courtesy of the U.S. government. The NHL may lead all of pro sports in the number of owners who could audition for a starring role on Judge Judy.
Meantime, the team can't score on the ice, or with fans. Management revealed it considered buying thousands of unsold tickets so it can qualify for a full share of the NHL's revenue sharing plan. Through 22 home games, the Predators' average paid attendance was 256 tickets short of the 14,000 average required for a full share of the revenue-sharing pool that netted the team $12 million last season.
The plan gives small-market clubs money that the NHL collects from the 10 highest-earning teams. The amount franchises receive falls if certain attendance figures aren't achieved.
Predators lead owner David Freeman made an estimated $50 million selling a medical waste disposal business. So, when it comes to waste you'd think an expert like Freeman would recognize it even if it was disguised as a hockey team. But, he says his reputation as a businessman is at stake, and he wants to make hockey work here. So, as for Balsillie buying and moving the team?
"There is no Plan B," Freeman said.
In attempts to goose attendance, about the only thing the Panthers haven't tried is to pay people to come and watch. But, they're coming close.
The Panthers are one of the biggest offenders in padding attendance. It is possible to buy a ticket for $17. If that's not good enough, for the same $17, you can get a deal including a ticket, a parking pass, a $5 gas card, and a food voucher for a total worth more than $17.
In Toronto, that wouldn't get you in the parking lot.
Or, just bring a driver's licence. It gets any first-time fan a pair of tickets.
TV ratings for the Panthers have dropped 16.7% locally the first half of the season -- second biggest drop in the league. Hamilton Panthers anyone?
Every new day brings new speculation. Most of it bad.
Item: Wayne Gretzky confirms the team requires financial assistance and owner Jerry Moyes is seeking an investor to keep the team in Arizona. Item: TSN reports 80% of the team is expected to be sold in the next two months.
Item: Unidentified management sources say the team could be disbanded or moved before next season.
Item: Moyes could lose $45 million U.S. this season. He is also in dire financial shape in outside business interests, a large trucking firm which was first buffeted by high gasoline costs and now an economic slump.
The good news is attendance is up but with a 14,734 average, it still is fifth worst in the league. It also has a lousy lease agreement as a result of the municipality putting up $180 million to build their arena.
Most NHL teams generate up to $10 million from parking alone. The Coyotes get nothing and instead pay a surcharge of $2.70 per vehicle or about $2 million a year.
Since the dynasty Isles of the 1980s dithering ownership and bad teams have eroded a once strong fan base: an NHL low of 13,462 fans a game.
But a lot of those paid-for seats are empty most game nights. Charles Wang has given the franchise better ownership than many expected but the team's survival hinges on a new arena.
The U.S. credit markets make this less likely and Wang has gone nowhere in negotiations with municipal officials regarding a retrofit of Nassau Coliseum.
His patience may be wearing thin. The Islanders have announced they will play an exhibition game in Kansas City next season. That would be the same city the NHL considers as a coveted market -- a city that already has an NHL calibre rink.
There has been months of speculation that new owners Oren Koules and Len Barrie don't have the money to operate the team successfully -- hence all the talk of Vincent Lecavalier being traded. And wouldn't that move help the gate receipts!
Attendance already is down more than 2,000 a game compared with last season.
Trading your marquee player isn't going to help.
Forbes Magazine noted: "The new owners believe they can increase cash flow by $18 million a year. They better. Their purchase was financed with a $105 million, three-year bullet loan, meaning in 2011 they will either have to pay the loan off or refinance it."
A recent story in the St. Petersburg Times said the new owners met this month with Palace Sports (from whom they bought the team) to restructure a $70-million financing agreement.
The dominos are teetering. TV ratings have dropped 21%, the most of any NHL club this season. The owners are on their third coach and also fired Jay Feaster, a qualified general manager.
Unless your name is Bettman, this situation makes Winnipeg or Quebec City look like hockey heaven.
The league commissioner would seem to be willing to do anything to avoid either moving or folding a team. It explains why Balsillie, who has the money and an eager market in Hamilton, doesn't have a team but Nashville and a guy the feds would like to fit for bracelets does get to have one.
Pressed about the possible sale and relocation of teams from Florida, Tampa Bay, Nashville and Phoenix, Bettman reiterated at the all-star break that nothing is in the works.
The single-minded intransigence smacks of Napoleonic proportion. A second franchise in Southern Ontario, according to one sports economy expert quoted recently, would immediately become the third most valuable in the NHL behind only the Leafs and Rangers. The U.S. northwest is a proven hockey market.
Fans in Quebec City and Winnipeg didn't desert NHL teams -- the NHL deserted them.
The unwillingness to explore options is even more curious because it's not like Bettman has got people lining up to buy his weak-link franchises.
Balsillie is the only one who has shown the slightest interest -- and he has not endeared himself to the NHL chieftains. There are money-losing owners willing to sell to Balsillie but his attempts in 2007 to relocate the Predators didn't sit well with NHL headquarters or the Board of Governors.
He didn't endear himself again when he allegedly leaked the "Canadiens for sale" idea -- and ended up apologizing to Gillett. Plus, there's no upside to letting another team into the area for either the Sabres or Maple Leafs.
Winnipeg and Quebec City would be small market choices but at least there'd be people in the seats, which isn't the case in Florida and Nashville. In the U.S. the best market might be Seattle, which has supported other levels of hockey. It would also become an instant rivalry for Vancouver, even Calgary. Or dare they dream, Winnipeg?
Moving four of the most troubled teams (Seattle, Portland, Quebec City or Ontario all seem to guarantee success) and folding a couple might be the best option because contraction, as history has shown, isn1t a dirty word.
True, it puts a dagger through the heart of Bettman's dream to rival the NBA in the southern U.S. But failure to get a network TV deal has already ensured that anyway. A 26- or 28-team league wouldn't hurt anything this side of Bettman's ego. It would weed out deadwood franchises, not to mention players. Owners wouldn't have to pour millions of revenue sharing into franchises that too few fans cared about. The Original Six was born out of economic necessity but it came to thrive and today is recalled with great fondness.
Who's to say, as it did then, that such sweetness can't follow bitterness once more.