Friday, June 29, 2007

The death of a franchise
Breaking up is the hardest part

In the short history of this blog, I don't think there's been a single hockey story I've followed more consistently than Jim Balsillie's attempted purchase of the Nashville Predators.

There's a reason for that, and a large part of it has to do with the fact that I believe this is an issue that gets right to the heart of a lot of what ails the NHL.

And I'm far from alone.

But what's been interesting over the past month or so, as I've attempted to chronicle and weigh in on the various machinations with the Predators sale, is that so many hockey fans in Nashville have joined the conversation, sending me emails, commenting on threads and even writing their own blogs in response to what's written here.

Paul Nicholson's comment on my Balsillie post yesterday is a good example, and a lot of what's there is pretty defensive of Nashville's (and other "non-tradition" hockey markets') relative worth as an NHL market.

I understand where he's coming from, I do, and I even understand why there's some (misdirected) anger aimed my way from time to time given I'm expressing my views on some of this sensitive subject matter.

But Nashville, quite simply, has proven it cannot sustain an NHL hockey team. Even with the lowest ticket prices in the entire league (I know: I've looked into flying there for a game or two) and a ridiculously forgiving arena lease, the team has had attendance issues despite having one of the best records in the league.

It's not a matter of Canadians not wanting teams in the southern U.S.; I've argued time and again in favour of teams like Dallas and Tampa Bay that have supported their teams and really brought something to the table in terms of bringing news fans and new energy to the game. That's a good thing.

The Predators, however, are not that, not in the beginning and certainly not now, and they never will be. Even with an owner as forgiving and deep-pocketed as Craig Leipold, the experiment has failed miserably, and the team will be leaving as soon as it can extricate itself from its lease agreement.

Those are the facts here, but they certainly don't change the feelings involved.

Here's Paul, asking why the outcries over potentially moving an NHL franchise to Kansas City over Hamilton:
Why do you care if the team flounders financially?
The honest truth is that I don't find team bankruptcies and relocations particularly entertaining, or beneficial to the game. I don't find half empty arenas filled with fans who received comped tickets entertaining, either. Ideally, the league would be full of teams that were on par in terms of popularity with the six Canadian teams and let's say the top 10 U.S. markets (New York, Detroit, Dallas, Philadelphia, Boston, Los Angeles, Tampa Bay, Colorado, Buffalo and Minnesota). Ownership would be strong; ticket sales would be stronger.

It'd be a better product, it'd be a more popular one, and it would create an environment where hockey wasn't full of markets resembling some sort of minor-league sideshow where terrific Canadian athletes like Jarome Iginla would play when going on the road.

I think the game, and its players and coaches, deserve better than to be dropped into hockey wastelands and kept there when they fail. I'd eliminate five or six franchises tomorrow if so granted that power.
Please. Really. Answer: Why do you not want hockey in as many places as possible?
Why not have a 50-team league? Doesn't Kentucky need a team?

The bottom line, I believe, is that Canadians simply want hockey to be beloved wherever it's played, and that when teams win the Stanley Cup, it means something to the fans involved. The NHL's unfortunately become entwined with the national identity here, and the league's wild goose chase for improved American television ratings and revenues has failed to the point that it risks irreparably damaging its credibility in both countries.

It's time to admit the NHL is what it is, and that its stronghold is in Canada. The six Canadian franchises generated one-third of the league's revenues in 2006, which means the average American franchise produces roughly half the revenue of a Canadian one.

No one is saying this should be a predominantly Canadian league; the country simply doesn't have the population base to support that many teams. But it's unequivocally clear that this country is integral to the NHL's survival, and it's high time Gary Bettman and company treat Canada as more than an afterthought when it comes to integral issues like the placement of franchises.

Kansas City over Hamilton is so undeniably foolhardy that many fans in this country simply can't fathom why such a move is even being considered.

One team will fail; the other will become a national treasure. It doesn't make any sense.

None of it does.

The really unfortunate thing of it all is that there aren't thousands more fans in Tennessee like Paul, who is obviously passionate about the team and wants it to stay put. If that was the case, the Predators wouldn't be going anywhere.

Labels:

51 Comments:

At 4:51 AM, June 29, 2007, Anonymous Anonymous said...

My question is why can't Balsillie finesse this deal? All he has to do is say, 'sure, I'll keep the team in Nashville', and then a year later, say, 'well, I tried, but its not working'. The NHL would have given him everything he wanted. But he had to turn it into a dick measuring contest and he got his stepped on. I don't have anything against Mr. Balsillie, but he's either getting incredibly bad advice or he's too stuborn to figure this out after TWO trys. I think one of the problems is that some nudges and winks were given to the KC people during the Pittsburgh mess, that they would get the next shot at a team, and they're either reserving S. Ontario for an expansion site or MLSE (or Buffalo) wants the thing kiboshed.i

 
At 5:40 AM, June 29, 2007, Anonymous Anonymous said...

The league can't blackball him and his millions forever. So he didn't get the Pens and he won't get the Preds this year. ATL, Phoenix and Florida are all struggling, and the NHL still has expansion on their minds. He doesn't need to finesse anything. The public already hates Bettman and the owners, Balsillie has nothing to lose by being a dick to them to get what he/Canada wants.

 
At 9:01 AM, June 29, 2007, Anonymous Anonymous said...

Any owner but Balsillie, please. Anybody! Peter Pocklington?

 
At 9:11 AM, June 29, 2007, Blogger Chemmy said...

This is pretty stupid. Instead of taking the Predators, the team taking in the most revenue sharing money, and turning them into a team that would probably pay out revenue sharing money, they'll move them to Kansas City where they can keep taking handouts from other teams.

Who failed out of business school and ended up at the NHL? If you have an opportunity to take a struggling franchise and turn them into a successful franchise overnight, why the fuck wouldn't you?

 
At 9:24 AM, June 29, 2007, Blogger PPP said...

Chemmy has another angle for MLSE to WANT a team in Hamilton. Forget the fact that they would have broadcast Hamilton's games on LeafsTV and probably received a larger catchment area not to mention their deal to manage Copps Coliseum.

The club would have probably seen a reduction in the $13M that they have to pay out to struggling teams like Nashville.

 
At 10:04 AM, June 29, 2007, Blogger saskhab said...

Ugh... here again with the "Canadian" and "national treasure" angles. The Hamilton Predators would not be a "national treasure", they would simply be a way more sound business move than Kansas City, which has short term benefits (arena/lease) but real sustainability issues. A lot of southern Ontario people will become fans, like the Ottawa area embraced the Senators. But a national treasure? Were the Winnipeg Jets a national treasure? No one saw any of their games outside of the region. The Quebec Nordiques weren't a national treasure, either. We all felt for the fans that lost their teams, but that was the first time anyone really cared about them. In fact, no one really cared about how Lindros didn't want to play for Quebec, it was more about where he'd end up.

My fears about Hamilton? That it will really hurt Buffalo. Isn't 1/4 of their season ticket base from southern Ontario? Would the Niagra region continue to support Buffalo, or would Hamilton take away that fan base?

I fear Buffalo will lose more fans in the area than the Leafs would.

Also... it's sad to see that Chicago is not listed in your top 10 US markets. Really, really sad. I'd say San Jose has been a much better market than Tampa in the history of the NHL in both cities, too.

 
At 10:16 AM, June 29, 2007, Blogger PPP said...

I agree that a team in Hamilton would really hurt the Sabres but they'll be in trouble as soon as they have a bad team again.

 
At 10:36 AM, June 29, 2007, Blogger PB said...

It's because of this article is why I make your blog an almost daily stop. You are always thoughtful and rational, especially regarding this issue.

That being said, I don't want a team to leave Nashville, and my reasons are more personal, and emotional, than logical. However, if the team can no longer make a go of it in Nashville (and history/past economic performance would suggest so), I can't understand why it would do better in Kansas City? That's what makes no sense, and that's most likely what causes the nationalistic pride on both sides of the border regarding the future of the NHL and the future of the Predators franchise. I now clearly see what has been happening here.

It's truly difficult for me to offer a complete analysis because I do know the history of the franchise I support here in Phoenix, so I generally take pause in relocation issues. However, if the rules of the lease require X (14,000 average attendance) and doesn't achieve X, then Y (selling the team and/or relocating it) should happen.

But not to Kansas City - it doesn't make sense consider what the economic support would be given in other Canadian locales.

If Balsillie, or any owner that bought the Predators said, "We'll give the citizens a chance here. Nothing will change in terms of payroll. We'll do our best to qualify for the playoffs and see where it goes. If the citizens do not support the team here in terms of the lease, then I will move the team." It's the preemptive strike that does bother me somewhat - both with moving the team to Hamilton and to Kansas City.

Again, it's been difficult to watch, but what it has done is expose what is currently working in promoting the game here in the states in the southern markets and what is not working.

I've been a fan of the NHL for many years, but this is the first year I followed it so closely. It's been very eye opening...

 
At 10:55 AM, June 29, 2007, Anonymous David Johnson said...

Would Kansas City even be considered a potential destination for an NHL team if it weren't for a new arena and free rent?

 
At 11:17 AM, June 29, 2007, Anonymous Matt Gunn said...

Incredible post, James.

Said everything I would have hoped to say. The whole thing is just utterly insane, and I can't even begin to fathom how someone could even remotely consider Kansas City over Hamilton. It's like a bad dream.

The whole thing really bothers me, and why should I even care? I live in BC, and have never even been to Ontario.

But like you said, we Canadians just want hockey to be loved and appreciated, and when a team wins the Cup, the whole city should be going crazy.

As a Vancouver fan, I, as well as many others, would be willing to do anything to bring a Cup here, and the fact that teams that can't even fill their building in the playoffs might win... it's almost criminal.

-Matt
GunnHockey.com

 
At 11:54 AM, June 29, 2007, Blogger Paul Nicholson said...

James,

Thank you for your response. You've been very civil and thoughtful in our discussions and i really appreciate that. It is not always the case in other places.

I also appreciate your response. I'm starting to think we don't disagree as much as i thought we did.

I don't think Kansas City would be a good place for the NHL to go. I think Las Vegas, with the additional media attention and cache that being the first NHL franchise would bring would be a huge lift to the league. I don't think Las Vegas would be a very profitable team immediately as a team in Hamilton would be, but there are considerations other than immediate profit that would benefit the league.

Let me also be clear on this: I do not think the Bettman has been a good commissioner.

I think he has done a horrible job and squandered the NHL's position in the larger sports market for years. But i don't think contraction to instant-profit Canadian cities is the solution either.

The league is profitable as it is, subsidized by the Canadian teams. If i have never thanked Canada as a whole and the fans there for making the Nashville Predators possible (and i don't think i have) let me do so right now. I have no illusions as to what makes it possible for me to go and watch the team.

The one point you make that i disagree with is that attendance is the problem in Nashville. It is not. Could attendance be better? Yes. But lets assume for a moment that the Predators had sold out every single game last year - and for good measure raised ticket prices 15%. The team lost $15mil last year. That extra ticket revenue wouldn't cover $1.5mil of that gap (more like half that).

The problem for the Predators and for much of the league as a whole is one of marketing and sponsorships. That was the point i made in my post yesterday. The NBA has learned how to make money on everything they do. The NHL on the other hand (at least the Predators and many other teams) rely on tickets and t-shirts. They seem to be waiting for the businesses to beat down their door and throw money at them. That may happen in Canada, but that simply doesn't happen in US markets when you are competing against the NFL, NBA, and MLB for revenue.

Contrary to your conclusion (that Hamilton= money and Bettman should follow it) I think Bettman follows the money too much. His biggest failure has been there. Not in trying to spread hockey to new markets, but in expecting those markets to support themselves and be instantly adopted. Bettman expects the fans to come to him, to find the league wherever it is.

Best example of this is the US TV deal. He should have sold the rights to the first post-lockout season to ESPN for $1 (even $1 Canadian). Instead he went for the higher rates that the OLN was willing to pay.

It is all about brand and associating yourself with winners. Bettman has not been able to do that.

 
At 12:19 PM, June 29, 2007, Anonymous Keith said...

I knew the second that KC came to Pittsburgh with that sweetheart deal that the NHL would be all over that market. I pegged the timeframe at about three years though. Didn't think it would be only six months.

The NHL is going to go into KC, and it will have a little short term success, and then the NBA will follow right behind and just crush hockey. It's all so predictable, everyone can see it bug the NHL.

I doubt Hamilton, and possibly Balsillie, is done though. With the league floating the expansion balloon, I would think that that is, and has always been, Hamilton's best hope. Hamilton will support an expansion team enduring the growing pains with much greater faith than Kansas City would.

The question comes down to whether the BoG can set their egos aside long enough to agree that Hamilton would be a good market.

 
At 12:42 PM, June 29, 2007, Blogger The Forechecker said...

James, please don't confuse the desire for another Canadian team with the judgment that Nashville is an unrecoverable failure. Nashville can support NHL hockey, and the momentum is heading in that direction quite quickly.

And Paul, I'd ask you to check your math. I show the scenario you outline (sellouts w/15% ticket increase) boosting the revenue line by roughly $10 million, not $1.5. Toss in a few playoff games at slightly increased rates, and that $15 million gap is closed, if not surpassed.

 
At 1:08 PM, June 29, 2007, Anonymous kwyjibo said...

sellouts w/15% ticket increase

Yes, but neither of those things is going to happen. They didn't happen when you had an explosive, elite team, and I don't see why they will with this new-look quasi-gutted Preds lineup next year.

So what's your point?

 
At 1:15 PM, June 29, 2007, Blogger The Forechecker said...

Actually, if they sold out, average ticket prices would rise because it's the lower bowl that's got the most room for improvement. And given the lack of even the least playoff success so far, you can't call them elite quite yet.

The Preds should be able to put a competitive team on the ice this fall, but my point is that NHL hockey is indeed viable in Nashville, despite the need for most in the Canadian media to declare final judgment. Regardless, it's disappointing to see so much haggling over a team that isn't available for relocation anyway. Let's wait and see how the attendance issue plays out before arguing over where they should go.

 
At 1:39 PM, June 29, 2007, Blogger James Mirtle said...

An addendum to my bit about ticket prices: mc79hockey has the data posted, and Nashville, through the first half of 2005-06, outpriced only Atlanta with an average sold ticket price of $34.74.

 
At 2:18 PM, June 29, 2007, Anonymous justin said...

Where is the rest of the data? It cuts off on Jan. 1. The Preds attendence was great the second half of the season which would drive up the avg. paid ticket price. Also, why do you refer to the avg. ticket price through the first half of 05-06? That's kind of obscure isn't it? The price jumped quite a bit for 06-07 and we have had a season ticket price increase during this off season, which will raise them once again.

 
At 2:22 PM, June 29, 2007, Blogger James Mirtle said...

The data was compiled in February of this year, which is why it is incomplete. I believe this to be the most accurate data available, however, when it comes to gate receipts, comped tickets and ticket prices for paid tickets.

When I'd referred to the team's low ticket prices in my post, I was referencing their price before the latest price hike, although definitely, the team did gain momentum in sales and gate receipts towards the end of last year. If you have that data available, I'd love to see it.

 
At 2:30 PM, June 29, 2007, Anonymous Anonymous said...

NHL hockey is indeed viable in Nashville, despite the need for most in the Canadian media to declare final judgment.

The problem is that it isn't up to the fans to determine the viability of hockey in Nashville, but the team ownership. I can't see any owner keeping the team in Nashville for more than a year or so if he can make larger profits in Kansas City, no matter what the terms of the lease are. A businessman can always find a way to wiggle out of any situation and justify it later.

 
At 2:41 PM, June 29, 2007, Anonymous justin said...

No I don't have that data. I would love to see it. And yes, I realize what you were referencing. My question was why? You had the first half of 06-07 available in the same data set. Also worth mentioning is the 20% increase in gate receipts and a 16% increase in ticket prices through the first half of 06-07. Which, once again, would be even higher if it included the rest of the 06-07 season. Seems like a pretty encouraging trend to me.

 
At 2:43 PM, June 29, 2007, Blogger James Mirtle said...

Leipold certainly didn't think so.

 
At 2:48 PM, June 29, 2007, Anonymous justin said...

He was offered a ridiculous amount of money for it. I'd sell too. That doesn't make it a failure. Quite the opposite, it looks to be a phenominal success for Leipold.

 
At 2:49 PM, June 29, 2007, Blogger James Mirtle said...

The team's been on the block for years; this wasn't an out of the blue offer. Neither was the one from Del Biaggio.

 
At 2:54 PM, June 29, 2007, Anonymous justin said...

On the block for years? Before the Balsillie deal, the only thing Leipold mentioned was that he wanted a local minority partner to give him inroads into the local corporate community.

 
At 3:01 PM, June 29, 2007, Anonymous Keith said...

Despite the increase in gate reciepts, and a ton of revenue sharing money, Leipold lost millions. Hardly a "phenomenal success."

 
At 3:12 PM, June 29, 2007, Anonymous justin said...

I think you missed the point. I was referring to what he was making in the sale. For instance, if I buy a house for $200,000 and put lose $10,000 per year in taxes and repairs, then sell it for $400,000, I've done pretty well. Besides, if you use the money gained or lost in year to year operations as the benchmark for success or failure, many of the teams are failures. The simple truth is that people don't typically buy sports franchises for the income they provide. They do it for fun and prestige. If any money is made, it happens when they sell. And of course, there are exceptions.

 
At 3:30 PM, June 29, 2007, Anonymous David Johnson said...

Doug MacLean, former GM of Columbus, was on Team 1200 in Ottawa this morning. He said that Columbus was in the upper half of the league in terms of fan support and corporate support but near the bottom in local TV and radio revenue which resulted in them being a low revenue team. He said that what Columbus makes in a season in radio and TV revenue, the Maple Leafs make in 3 games. As a TV market Nashville and Kansas City are no bigger so even if KC gets good fan and corporate support, the best case scenario is a team with revenue equivalent to that of Columbus, but I doubt KC can get the fan support of Columbus.

 
At 3:35 PM, June 29, 2007, Blogger J. Michael Neal said...

Several points:

Did Leipold really lose millions of dollars? Maybe, but I sure as hell wouldn't take his word for it.

It's funny how a lot of people are criticizing Balsillie for being honest about what his intentions were. Yeah, everyone would have been much better off if he was a bald faced liar.

When Paul says that the NHL needed to more to subsidize teams like Nashville, I have to ask: Why? His argument is that it is a marketing issue. Clearly, then, Leipold hires terrible people to do his marketing for him. Why in the world would the owners that generate lots of revenue be interested in sending even more money to people who can't do their job in order to let those people compete against them? Remember, you are asking people to give your team money.

 
At 3:36 PM, June 29, 2007, Blogger J. Michael Neal said...

Well, Doug MacLean would certainly be able to recognize failure when he sees it.

 
At 3:52 PM, June 29, 2007, Blogger Noel said...

The real interesting question I find is, why is Leopold now willing to forego FIFTY MILLION DOLLARS by accepting the offer that will move the team to KC.

While some articles have suggested its because he really wants to sell, to sell to an owner that will move it to a market that will be 'acceptable' to Bettman and the BoG, and just to be done with it without further legal hassles...

...the consipracy theorist may suggest Leopold may make that $50 million back ... could a kickback be involved ... perhaps a side deal whereby MLSE (or a division thereof) were to extend a 'goodwill' parting gift of even $30 or $40 million? Maybe AEG (owner of the LA Kings and Sprint Center in KC) might even kick in a bit extra.

Would it not be in the interest of MLSE to make such a payout to avoid the competition from Hamilton, even for the short term?

 
At 3:58 PM, June 29, 2007, Blogger James Mirtle said...

Noel, I think Steve Brunt hit the nail on the head in his piece today when he said Leipold was willing to sell to another buyer because it's unlikely he'll ever see a cent from Balsillie given the legal entanglements and league roadblocks. He just wants out, and soon.

 
At 4:03 PM, June 29, 2007, Anonymous Baroque said...

The simple truth is that people don't typically buy sports franchises for the income they provide. They do it for fun and prestige. If any money is made, it happens when they sell. And of course, there are exceptions.

Is this really the exception today, though, or is it more the norm? Most owners seem to be talking a lot about making a team financially viable, and putting a self-sustaining busines together. You hear a lot less purely about competitiveness in a sports context, but in a business sense. Mark Cuban said there are two types of owners--those who hate to lose, and those who hate to lose money. It seems the second type is by far more prevalent, while the fans would prefer the owner of their favorite team to be the first type.

 
At 4:05 PM, June 29, 2007, Anonymous Anonymous said...

Why in the world would the owners that generate lots of revenue be interested in sending even more money to people who can't do their job in order to let those people compete against them?

Because its called the National Hockey League not the National Hockey Zero Sum Total. There are lots of reasons why rich teams support poor teams and most of them involve the rich teams getting even richer. As popular as hockey is in Toronto, a smaller NHL is going to mean less money eventually. You may not need thirty teams for maximum income, but there is definitely a threshold you don't want to fall below. Yes, the teams compete against each other in the hockey sense, but in the business sense its more like branch offices of a single corporation. That corporation chalks up cross subsidies between locations as the cost of doing (hopefully) a growing business concern.

 
At 4:30 PM, June 29, 2007, Blogger PPP said...

"Would it not be in the interest of MLSE to make such a payout to avoid the competition from Hamilton, even for the short term?"

No, as has been mentioned before, they would benefit from a team in Hamilton more than they would suffer.

 
At 4:34 PM, June 29, 2007, Anonymous Baroque said...

If the NHL actually did function like a league, then they would not act like individual fiefdoms with respect to other issues--such as the schedule. Although it might benefit the league as a whole to have all the teams and all the star players appear in all the markets, a travel-light schedule is to the benefit of some teams' pockets, so that is what happens.

 
At 8:22 PM, June 29, 2007, Anonymous Anonymous said...

Mirtle is the best hockey blogger. But you are wrong on this one. I can't see any reason why the NHL would want to see a team in Hamilton. It would cannibalize the fan bases of two existing franchises, one on the financial ropes just a few years ago. Hamilton would be a dreadful road draw in the US, certainly a legitimate consideration for the US teams. When did it become received wisdom that southern Ontario deserves a new franchise? Just because the NHL made the mistakes of cramming three teams in the NY market and two in LA doesn't mean it should repeat the error on the shores of Lake Ontario.

Kansas City beats Hamilton for sure, from the league perspective. But the sad thing is that Houston or Seattle would be much better than KC.

 
At 8:24 PM, June 29, 2007, Blogger James Mirtle said...

There are more hockey fans in the GTA than New York and LA combined.

 
At 8:26 PM, June 29, 2007, Anonymous Anonymous said...

Ballsy is a useful stalking horse. He "threatens" to buy the Pens and before you can scream "date rape" the Pittsburgh taxpayer is waking up with a tender a-noose next to an empty bottle of GBH and a half-billion-dollar tab for a hockey arena. Months later, when the Nashville owner has unsuccessfully tried to badger the local corporates into supporting his team, Ballsy reappears with a ridiculous offer and an ostentatious plan to move the franchise to Hamilton. That allows Del Baggio to put the "boots" to KC, where the prospect of a brand new taxpayer-funded facility sitting empty will no doubt have the local politicians dropping to their knees and offering to swallow. No concession will be too great a sacrifice. He might even get the team for No Money Down, Do Not Pay Until the First of Never. Then, some time in the near future, the NHL expands and Ballsy gets his team for a relatively cheap $150 million, by which time he'll either have Sheila's Dad's place in Hamiltion all to himself or will have convinced some Ontario mayor with an abbreviated middle leg to build him an arena at the expense of unemployed auto workers. Everybody wins. Especially if by "everybody" we mean "rich white carpet-baggers who own professional sports franchises."

 
At 10:20 PM, June 29, 2007, Anonymous Anonymous said...

Trust me. Hockey is loved in Nashville. If it wasn't, you wouldn't have a picture like you did on this page and you wouldn't have so many people fighting for this team to stay. 70 freaking percent of our season tickets are fan-purchased, not corporate, and no team should deal with that. It's unfortunate we're getting such a bad rep and places like Florida and Atlanta are off the hook.

 
At 11:46 PM, June 29, 2007, Blogger Paul Nicholson said...

You're right, my math was a little off, but not by much.
The Predators averaged 13,8xx seats last year, and ended up $15mil in the hole according to Leipold. I agree with some that those numbers could be exaggerated but that's what we have to go with.

The capacity of the Sommet Center is 17,113 for hockey. That's an extra 3,313 seats per game, times 41 games = 135,833 game seats. Let's say all of those extra seats sold for an average of $100 - which they wouldn't since that's some of the most expensive in the arena. That means $13,583,300 of extra revenue.

My point is that tickets alone don't do the trick.

And yes, to Neal's point - yes. Leipold had a horrible marketing group. I've never said different. The promotions and ads that they ran here (when they ran them, which was rare) made it almost embarrassing to be known as a fan.

The NHL in general and very much the Predators specifically need to improve their brand image in the US fast. I would say they need to improve the image in Canada too, just for different reasons. It almost sounds like everyone up there supports their teams despite the league, just because they want hockey. The NBA on the other hand have done such a good job of marketing the game, that in non-NBA towns there are rabid fans of the league and players, not of teams. (I know because i live in such a town).

And no, i don't think the NBA will go into Kansas City, for the same reason it would be bad for the NHL - it is already stretched beyond capacity. It is not a big enough market. Especially if the NHL goes in, the NBA will avoid it like the plague and go to solo markets like OKC or Las Vegas where they don't have to compete.

For the record: If we were having this conversation 12 years ago, i would question Nashville as a location for an NHL team, but think it was worth a try because at the time we were a no-pro town. But right after the Predators came, the NFL came rumbling in and hurt the team. In Kansas City, the NHL will be walking into that situation with the NFL team already entrenched. They will lose that war. Vegas on the other hand...if they can beat the NBA there, may be a great market and is a large enough city to support a team.

 
At 11:54 PM, June 29, 2007, Anonymous Anonymous said...

Hey James, you may know me from TB's blog. I have checked out (and been impressed with) your blog from time to time, but wanted to weigh in here as well on this issue.

Regarding your statement "There are more hockey fans in the GTA than New York and LA combined", I am curious to know whether that is merely a statement of rhetorical fluorish (which you know I am familiar with, heh) or whether that is a thought-out statement. I know that the Canadian sports media likes to pretend that every man jack of us is a rabid hockey fan, but we both know that is a silly proposition; heck, most people are not sports fans at all, let alone hockey fans. Plus, just for starters there are tons of immigrants in the GTA who have little to no connection with the game at all, although the Canadian sports media (especially the hockey media) pretend they either do not exist or do not count.

Cheers,
Gerald Carpenter

 
At 12:19 AM, June 30, 2007, Anonymous Anonymous said...

"Noel, I think Steve Brunt hit the nail on the head in his piece today when he said Leipold was willing to sell to another buyer because it's unlikely he'll ever see a cent from Balsillie given the legal entanglements and league roadblocks. He just wants out, and soon."

James, to be honest, Steve Brunt has the whole thing completely wrong. He views everything through an anti-Bettman prism and really does not understand what goes on at that level of business in any event.

What he, and even you for that matter, are missing is the big picture that I am not sure anyone else has picked up. The key issue for the NHL has absolutely ZERO to do with whether KC is a better market than Hamilton, or vice versa. Nor does it have anything to do with whether the NHL is stronger with Hamilton in the league. The REAL question is this:

Would the NHL be a stronger league than it is now if it had six or seven teams in the GTA, three teams in Chicago and two or three teams in Detroit?

THIS is the issue that the NHL has to grapple with, not simply whether the league should permit a team into Hamilton. IF the NHL allows a team into Hamilton, then the next struggling NHL franchise (and there are some)will want to move to Mississauga, and the next one into Scarborough, and the next one into North York, and then Markham, etc. Can you possibly envision, for example, Phoenix wanting to bolt for the underserved market of Chicago? I sure as hell can. Frankly, it makes me laugh a bit every time Brunt and McCown babble during Prime Time Sports about this stuff, such as (to pick but one example) how a BOG vote would be 28-2. EVERY team with an interest in its own market will want to protect that market. The only people who would vote for such a notion would be the have-nots, who would like to be able to move into a top market. (Of course, given the number of inaccuracies and outright falsehoods that Brunt and McCown spout on PTS, it is a little like shooting fish in a barrel).

Do you see the point? IF a team goes into Hamilton, there is no legal way (and you can appreciate that I have some insight into this aspect) to prevent further encroachments into the Leafs territory, or indeed into any other territory. This is the point that Balsillie himself has missed, and the point that Al Davis himself only learned the hard way in his most recent lawsuit loss to the NFL resulting from the NFL threatening to drop an expansion franchise into his lap in LA. Of course, few people really understand the Davis angle right to the very end when the NFL showed him who was boss.

For all the gah-gah about how Hamilton would be such a super-awesome-fantastic market for the NHL, you know what would kill a Hamilton franchise deader than a mackeral? A franchise in Mississauga, or even Oakville.

Cheers,
Gerald

 
At 2:29 AM, June 30, 2007, Anonymous Anonymous said...

Now hold on there a minute. One of the league's crappiest teams currently charges $300 a ticket. Can we assume Ballsy is therefore reasonably estimating unmet ticket demand in the GTA? If he got his Hamilton Predators, we'd have two teams in the GTA. And both would likely be money-makers. Maybe not each as profitable as the Laughs alone, but profitable.
It doesn't necessarily follow that Gretzky and Co. would then want to move the Coyotes into Markham. And why would a wannabe owner pay $150 million for a fourth team in, say, Mississauga, if there was no longer excess demand for NHL tickets? The league, after all, doesn't just expand as if creating an unowned team out of thin air. Somebody has to sign the cheques.
That is to say, the business model doesn't necessarily hold up for x iterations. But it can hold up quite well for the Leafs, Sabres and Predators to share fans in the GTA.

 
At 3:34 AM, June 30, 2007, Blogger J. Michael Neal said...

Yes, the teams compete against each other in the hockey sense, but in the business sense its more like branch offices of a single corporation. That corporation chalks up cross subsidies between locations as the cost of doing (hopefully) a growing business concern.

It is in the interest of the other owners to drive incompetent businessmen out of the league. One of the very real problems with every sports league is that incompetents aren't ruthlessly put out of their misery. Unlike James, I don't think that there are nearly enough bankruptcies in the NHL, or any of the other major sports leagues. Without them, it's possible for completely useless fools like Bill Wirtz and William Clay Ford to hang around forever, making money, fielding bad teams, and sucking up cash from people who know what they are doing.

I'm not much of a fan of the Austrian School overall, but Joseph Schumpeter's theory of creative destruction is very sound. There has to be some way of clearing the deadwood out of any industry. Sports leagues, with their idiotic revenue sharing systems, have made that next to impossible. There are a couple of good ways to set up a revenue sharing system, but none of the leagues have come anywhere close. They decided that they preferred to eliminate risk rather than promote health.

 
At 5:41 AM, June 30, 2007, Anonymous Anonymous said...

It is in the interest of the other owners to drive incompetent businessmen out of the league.

Not necessarily. It certainly isn't on the Hockey competitive side. An ideal environment for an owner would be a large league full of incompetent owners, which would make competitive success relatively easier (and cheaper) to achieve. Financially too, it isn't always in an owners' interest to limit competition. Like any frachised business, you get a share in national advertising and a protected catchment area for your business to draw from. To keep your part of pooled expenses low, you want LOTS of franchises to spread out the costs, but you want your PARTICULAR territory to be competition free. Thats why the MLSE and other teams love having a big league, but don't want to share their territories.

 
At 8:08 AM, June 30, 2007, Anonymous Baroque said...

It might be easier to compete against incompetent owners, but is there some point where the cumulative incompetence devalues the entire league? In the same way that hitting a ton of home runs isn't seen as a big deal in the steroid era, or winning a weak division isn't valued as much as winning a strong division, at what point is it worse to win in a pathetic league than just be competitive in a stronger, more competent league. It helps an individual owner (to have really bad owners as poor competition), but makes the league as a whole look worse.

 
At 10:40 AM, June 30, 2007, Anonymous Anonymous said...

"Now hold on there a minute. One of the league's crappiest teams currently charges $300 a ticket. Can we assume Ballsy is therefore reasonably estimating unmet ticket demand in the GTA? If he got his Hamilton Predators, we'd have two teams in the GTA. And both would likely be money-makers. Maybe not each as profitable as the Laughs alone, but profitable."

If you ask some of my fellow Canadians, the GTAA with its "8 million hockey fans" (a dumb notion, frankly) can support many teams, but that is a bit beside the point. What would matter to prospective GTA owners is not whether they could sell tickets at Leaf prices, but whether they could sell tickets, sponsorships, boxes and TV rights at prices higher than their current market appears to be able to bear.
It doesn't necessarily follow that Gretzky and Co. would then want to move the Coyotes into Markham. And why would a wannabe owner pay $150 million for a fourth team in, say, Mississauga, if there was no longer excess demand for NHL tickets? The league, after all, doesn't just expand as if creating an unowned team out of thin air. Somebody has to sign the cheques.
That is to say, the business model doesn't necessarily hold up for x iterations. But it can hold up quite well for the Leafs, Sabres and Predators to share fans in the GTA.

"It doesn't necessarily follow that Gretzky and Co. would then want to move the Coyotes into Markham. And why would a wannabe owner pay $150 million for a fourth team in, say, Mississauga, if there was no longer excess demand for NHL tickets? The league, after all, doesn't just expand as if creating an unowned team out of thin air. Somebody has to sign the cheques.
That is to say, the business model doesn't necessarily hold up for x iterations. But it can hold up quite well for the Leafs, Sabres and Predators to share fans in the GTA."


Well, as I indicated, the city of Mississauga would be the first choice. Secondly, this scenario does not depend on "excess tickets". If markets are wide open, you would actually be just as happy with stealing the other guy's ticket demand. Worried about taking the Leafs demand? Hardly. Let them reduce their ticket prices, another owner would say. Worried about the Hamilton Preds ticket demand? Too bad, a Mississauga owner would say. Let 'em move somewhere else, or better yet get the heck out of the league.

Also, I am not talking about franchises being created out of thin air, or new or expansion owners. In the absence of the current league structure, teams that are at the low end of the revenue spectrum would move of their own accord. They would not need to wait for another owner to buy them and then move.

Needless to say as well, the better markets would fill up with as many teams as can support them - plus one, since in this context metaphorically speaking one does not know how big the glass is until it is overfilled and spills. And even then, it might not be the last guy in. The team that gets spilled would very likely be the worst team.

Of course, all that seems fanciful. I feel a little silly even explaining it, because this is basic stuff. This is why the NHL and every other league runs on a territorial basis (yes, even the NFL, despite the assumptions of what Davis supposedly did to them). The NHL is a joint venture with consortium-style financial arrangements. Without people respecting markets, the entire thing falls apart.

Gerald

 
At 11:08 AM, June 30, 2007, Blogger Doogie said...

Would the NHL be a stronger league than it is now if it had six or seven teams in the GTA, three teams in Chicago and two or three teams in Detroit?

Of course not, that's patently ridiculous, and you know it. The GTA can handle two teams (three if you count Buffalo) because it's so badly underserved, but seven? Come on, you're creating a false exaggeration to make a point, and that's a fallacy. Besides, who's to say in the end that any Hamilton team wouldn't wind up paying a territorial fee? But let me turn this around: is the NHL stronger with Kansas City in its stable, over not only Nashville, but Seattle, Oklahoma City, Houston, or Las Vegas? The answer, I think, is obvious.

 
At 2:08 PM, June 30, 2007, Anonymous Anonymous said...

OK, I see what you're saying with the Full + One theory. Eventually one team too many will move into a heretofore profitable market and will fail (or perhaps all teams, thusly weakened) will fail.
But just for the sake of exercising my brain, I'll ask: Is it better for the owner of the Predators (and Coyotes, Panthers, et al) to endure a guaranteed multi-million-dollar annual loss in their current homes than to pursue a Bombard the GTA strategy that theoretically could result in a similar future loss?
I'd take my chances on moving and worry about possible consequences later. At worst, I might lose $15 million in some future season, at which point I move somewhere else.
So if it makes sense for money-losing franchises to move, why does the NHL oppose it? If we assume it's not sentimental reasons (eg. "Hockey just won't be the same without those mustard uniforms") we have to assume Bettman's Kick in the Ballsillie is a protection racket for the Leafs' and Sabres' territorial monopoly. It's only defensible from the point of view of two franchises. The other 28 owners are left to twist in the wind (or move to KC).

 
At 3:23 PM, June 30, 2007, Blogger J. Michael Neal said...

It is in the interest of the other owners to drive incompetent businessmen out of the league.

Not necessarily. It certainly isn't on the Hockey competitive side. An ideal environment for an owner would be a large league full of incompetent owners, which would make competitive success relatively easier (and cheaper) to achieve.


Note that I said that the other owners are better off if they drive incompetent businessmen out of the industry. Ideally, half or more of the league would be made up of people who know how to make tons of money, before revenue sharing, but have no idea how to put a decent team on the field; we'll call this hypothetical team "the Chicago Cubs," to make up a name on the spot.

Unfortunately, this sort of owner is very rare. Most of them that can figure out how to market their teams can also figure out how to build a winner. In many cases, of course, the cause and effect is the other way around; a team that figures out how to win suddenly finds that its marketing campaign works better. Who da thought?

Now, in a league without significant revenue sharing, it might be in the interest of smart owners to have other owners who couldn't find a profit with a map and a compass. It's no skin off of their nose. It might even be worth doing without a big national TV contract. Once an owner has to cut a large check in order to support Bill Wirtz, that goes out the window. Now, he is interested in making sure that Bill Wirtz can figure out how to generate as much revenue from his market as possible, because that means writing him a smaller check, or, in that specific case, helping you write the checks to other people.

This is why any good revenue sharing system looks utterly unlike the ones in place. To start with, the pay in should be based upon the revenue potential of the market the team is in, and not the actual revenue generated. The Blackhawks should not be considered a small market team; they should have to pay in like the huge potential market that they are, and if that forces Bill Wirtz out of business, so much the better.

The pay out should be tied exclusively to winning percentage. If you want to get a slice of the revenue sharing, win some games. I can be talked into using a moving average of winning percentage in order to smooth out the volatility of using one-year records, but the long-term effect is the same. This has several advantages over the current systems. It eliminates the incentive to run your team as cheaply as possible, screw your fans by not caring whether they win or not, and making all your money off of revenue checks; we'll call this hypothetical team "the Pittsburgh Pirates." (Any similarity between these fictional names and the NL Central is purely a coincidence, I assure you.) Guess what, Nuttings, you need to build a good team. It also serves as an additional way to drive bad owners out.

Under this system, the owner that gets hurt the most are Bill Wirtz, which is as it should be. The owners that make out the best are those who run small market teams (real small markets, not Anaheim) and can figure out how to win a lot without spending a lot of money. Again, that's as it should be.

Note that, under this system, you will pay money out of the revenue sharing pool to the Red Wings, because they win a lot. That's a feature, not a bug. It's good to give the big market owners incentives to win, too. You deal with it by adjusting the amount big market teams have to pay in to the pool to account for the fact that they get money back out.

Of course, in the real world, the only owners who would go for this is the small number of owners who successfully run teams in large markets. Everyone else has incentives to avoid it like the plague. Even the others who would benefit from it right now see their risk levels go up. For most of them, it's far better to have a low risk money maker than to worry that things might go bad for them.

 
At 3:44 PM, June 30, 2007, Blogger Stan the Caddy said...

My point is that tickets alone don't do the trick.

No, but if the arena is full, and the people of Nashville were abuzz over the team, then the corporate and advertising dollars would follow. If there's no demand to advertise with a popular franchise, then the advertising dollars do not exist there and the team shouldn't be there to begin with. Ticket sales IS the answer to Nashville's problems because ticket sales = public interest.

 

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