The Value Of The Hometeam
Sports are a fickle thing, they bring out the best and the worst of people. Professional sports franchises often come, in a way, to define their cities. Pittsburgh, home of the Steelers. Boston, home of the Red Sox. Detroit, home of the Red Wings. But what is their intrinsic value? What does it mean when they leave? The City of Phoenix may be about to find out:
Less than an hour before the National Hockey League commissioner planned to broker a deal to sell the Phoenix Coyotes and strip team owner Jerry Moyes of his duties Tuesday, Moyes filed for bankruptcy to sell to his own buyer.
Moyes, as part of a Chapter 11 reorganization filing, agreed to sell the team for $212.5 million to a BlackBerry wireless magnate who plans to move the team to a yet-to-be determined location in southern Ontario, Canada.
The move is not a certainty. Already, the NHL and Glendale, which leases Jobing.com Arena to the Coyotes, have objected to Moyes’ tactics. And other investors could outbid BlackBerry executive Jim Balsillie’s PSE Sports & Entertainment LP.
But the Coyotes, who have played in metro Phoenix since 1996, habitually have lost money in the desert, first when they shared an arena with the Phoenix Suns in downtown Phoenix and most recently in Glendale.
Moyes, who since 2001 has invested more than $310 million in the team, declined to be interviewed. Earl Scudder, his financial and legal adviser, said Moyes had no option but to file for bankruptcy because that was the only way to void the team’s lease with Glendale.
There are so many threads here it is hard to know where to start. The arrogance of an owner. The bankrupt state of a national sports franchise. And not just any hockey franchise either, one run by the Great One, the greatest hockey player ever, Wayne Gretzky and playing in one of the newest most state of the art single sport dedicated stadium in the league. Oh, and hey, does the line "no option but to file for bankruptcy because that was the only way to void the team’s lease with Glendale" not sound an awful lot like the mantra of the Obama Administration and the auto manufacturers trying to shed those pesky dealership agreements?
So, apparently the market value of the Phoenix Coyotes is 212.5 million – if the team is shipped off to somewhere in southern Ontario, Canada. I don’t know the value if they stay in Phoenix, we may find that out soon. What is the value of the team to the city above and beyond that and how should it play into consideration in BK Court? Now, with the Coyotes and Phoenix, this is somewhat of a theoretical exercise compared to big time franchises like the Steelers, Red Sox etc., but there is some value there. Should that be considered?
What do you do about the stadium lease? The presumption is that can be blithely voided. This stadium is a huge issue:
The move shocked Glendale, which contributed $180 million for the $220 million arena that opened in 2003. For the city’s hefty investment, the team signed a 30-year agreement with an early-termination penalty of more than $700 million.
There are only so many ice capades shows and big enough concert acts to fill a joint the size of Jobbing.com Arena. What becomes of the city’s investment and the property that resulted? What about the fans that have been loyal to the Coyotes, are they owed anything. In all honesty, Phoenix is a Suns, D’Backs, Sun Devils and, for the time being anyway, Cardinals town. The Coyotes were always an afterthought, but still, there are more than a few. This has happened to more established franchises to a degree before, to wit the Seattle SuperSonics most recently.
I fully understand that I have asked more questions than I have answered, but there are some perplexing ones in play here. I am interested in the thoughts of people from different regions and perspectives. Oh, and hey, to our Canadian friends, do you really want the Coyotes back? After all, Phoenix stole them from Winnipeg to start with. What comes around goes around, eh?
who plans to move the team to a yet-to-be determined location in southern Ontario, Canada.
Guess Deep River doesn’t really fit the description; more’s the pity.
single sport dedicated stadium
Ouch!!
Presumably the NHL would have some interest in common with the various Phoenix-area stakeholders, as having an NHL team in that city was in order to exploit that particular market. (Unlike the NBA, in the excrable Supersonics matter, who iirc seemed to want the move out of a city that could support the existing francise.) Could the francise owner just sell to any location, as it were, without having to satisfy the NHL? Especially considering that they were hot on his tail with a plan that would’ve tried to keep the francise where it is.
This also reminds me of those bk cases starting in the 80s, I guess, where corporations that probably were going concerns were allowed to get out of union contracts that they didn’t like. Didn’t like it then, don’t like it now.
Addendum 1: Talk about your cramdowns. (Wow, must be getting late for the ol’ brain.)
Addendum 2: I’m trying to think of a situation where public interest stakeholders have been allowed to prevail in court over private disposition of a quasi-public good; there’s been some limited success with historic landmarks I guess. But even that route doesn’t always work.
It looks like the NHL is making early noises about objecting and trying to have the league, through its owners, block any sale/transfer. Not sure a BK judge would care; but that is a great question.
Chuck @2 – Yeah, the support has always been lukewarm here at best. It might be different if they ever won anything; haven’t even made the playoffs in a long time. The Sun Devils and Suns are the only ones that pull here no matter what. The Cards used to have as many fans from opposing teams half the time until last year. Still, once the City has invested in the stadium, I kind of have issues with them just up and disappearing. There really isn’t anybody to pick up the slack there.
Could the franc[h]ise owner just sell to any location, as it were, without having to satisfy the NHL?
No. The NHL Board of Governors would have to approve any move. And the league would prefer, for marketing and geographic balance reasons, to have the franchise stay in the SW rather than move (back) to Canada. (For example, it’s important to them that there be enough teams in the west to make a ’swing’ for eastern teams playing out-of-conference games, and to keep a reasonable number of teams within easy traveling distance of each other.)
But if Arizona flat-out can’t support a team…
The Coyotes aren’t the only struggling franchise, though. The league could be looking seriously at “consolidation” — exec-speak for dropping two or four teams.
Gretzky’s involvement is also a big problem. He’s just nowhere near as good an exec or coach as he was a player, but you won’t find many people in hockey willing to say that in public or even willing to make decisions that make it obvious that that’s what’s going on.
Disclosure: I’m the sister-in-law of an NHL GM whose team hasn’t done much better than the Coyotes over the last five years.
Some of us up here where, in the days before global warming, we could occasionally see our piss freeze before it hit the ground if we were young and dumb enough to take our leaks outside in January or February, never could figure out what pro hockey was doing in places like Dallas, Miami and Phoenix.
There is that, too, speaking as a 40th-parallel-and-up type myself.
But now that the teams are there and the civic resources engaged, I guess the point is moot, the cost is sunk, etc. Given the present, what’s now the best course?
Thirded. I understand that hockey is trying to be a national sport with big TV revenues but if there is no snow and ice, things have to grow organically as happened with Alabama-Huntsville.
I find it amusing that I’ve got a surfer ad showing up right now along side this post. The caption below the surfer reads “the best beach weather in the nation.”
My sympathies go out to the Coyotes fans. I am still pissed the Irsay’s stole the Colts from Baltimore. They left in the night without telling their employees.
I do think over time the franchises on some level do belong to a city. They belong to a city’s collective consciousness. The Colts should not have been allowed to leave. But the courts did not believe we owned them. We owned them in our hearts and souls.
When Model brought the Cleveland franchise to Baltimore, I felt sorry for the fans in Cleveland. They supported Model’s crappy teams for years. Sold out for years, he took their money and stole their hearts. At least Cleveland got to keep the Browns name and records. The NFL treated Cleveland far better than Baltimore.
Chef, that is one of the thoughts that got me going on this – what is the relative value in those teams. Baltimore got robbed; Cleveland too, but at least left with their essence of the team intact. The Colts and the Browns really meant something, it is easy to see why citizens of those cities felt like their hearts were being ripped off. That should be worth something. But what about the Coyotes in Phoenix? they were carpetbaggers from somewhere else to start with and were far from an iconic fixture in the town and state. Few will really cry if they leave (other than the taxpayers on the hook for the stadium). But say you are a BK judge, how do you differentiate between the two cases? One situation is really worth far less to a city than the other situation, how do you determine the relative worth? Damned if I know…..
Allison at 21 beat me to it
The Final Jeopardy is … What is Winnipeg?
I’m proud San Francisco Giant’s new stadium was built with private money.
There’s risk when a city/county builds a franchise a new stadium. They are bad ideas unless designed to be general purpose.
Da Bears ownership wanted a new stadium and threatened to leave Chicago for Memphis. Da Mayor said “Let ‘em. Chicago’s the 2nd largest sorts market in the USA. We’ll get a new franchise.”
is it legal to declare bankruptcy to void a specific contract ???
seems to me that this is a cheap and dishonest way to void a contract, and it smells of obstruction of justice
Heck, I didn’t even know that Phx had a hockey team. To hear it has one, and that the value is $212 Large, is surprising.
$212M for an NHL franchise not located in Toronto/Montreal/Boston/Pitts/Calgary/Detroit/Buffalo? Shocking. I would have pegged it at $100M tops.
Still, I hope that a-hole owner gets his, and the taxpayers don’t get screwed.
Trust me, it’s easy to forget, even here.
Value in Pittsburgh? The Penguins have been skating around Chapter 11 for 10 years. Didn’t they have to give a large chunk of the team to Lemieux just to pay his deferred? The NHL has nothing like the legitimate revenue base it needs & has played these stadium subsidy games to the point where the whole league is ready to retrench.
At least Da Broonz (a hockey team) are having a good year.
Here in France, home teams stay put. Everything stays put in France; this can give rise to problems, but not for sports fans.
OT, but similarly a thought teaser:
You, Bank of America, better buy Merrill Lynch, or …
… what?
Same old song and Dance my friends.
NBA:
Rochester Royals —>Cincinnati Royals —> Omaha/KC Kings —> KC Kings —>Sacramento Kings
NFL:
Chicago Cardinals —>St Louis Cardinals —>Arizona Cardinals
MLB:
Boston Braves —>Milwaukee Braves —>Atlanta Braves
Philadelphia Athletics —>Kansas City Athletics —>Oakland Athletics
etc etc etc
Your graphic does not include a hockey puck, stick, glove, mask or skate.
Relocation to Canada makes sense in terms of existing fan support, but I suspect the economics don’t work anywhere except perhaps Quebec City and Toronto. Balsillie doesn’t have a legal leg to stand on, he’d be encroaching on the Leafs market, and Buffalo. Maybe even Detroit.
I also think the season is too long, and the league has too many teams, but I’m a fan, not an owner.
Does Canada want the Coyotes back? Well, not if it means that the new owners will go to a Canadian city and extort public money for a sweetheart stadium construction/lease etc., which is what happened with the Ottawa Senators (which were not dissimilar to the Coyotes – placed in an out of the way part of the city as a front for a real estate development/rezoning) and then went bankrupt because of underfinanced ownership and were bought out for a song. The Montreal Canadiens stadium was built with private money, and along with the profitable team, is one of the busiest, most profitable concert venues in the world. If Jim Balsillie is permitted to bring the Coyotes to Canada (which really means southern Ontario, where it will undoubtedly be popular and successful) I would support it, as he will be putting his own money up for the team and play in an existing, underused arena in Hamilton. He is putting up his own money because a successful NHL team in southern Ontario is a given – if LA can support TWO hockey teams, Toronto can support 3 – the reason he is having difficulty is that the Maple Leafs don’t want to share the best hockey market in the world – imagine if the Yankees wanted NY all to itself, except that they haven’t won the World Series since 1967!
I feel sorry for the taxpayers of Glendale – their civic government should never have gotten involved with public money invested in such a white elephant. Stadiums and arenas as engines of urban development have a very poor track record, especially football stadiums that are only used about 15 or 20 times a year. And I say this as a huge sports fan, just one who is dubious about the need for public financial support.
Sounds to me like Jerry Moyes is trying to out-Bidwell Bidwell. He’s going to need a lot of luck to pull that off, because Bidwell is a legend.
There are also elements of Al Davis in play here — Oakland/LA/Oakland/??? “I want a new stadium, and a new lease that gives my team more city money.”
Since this is a theoretical exercise anyway, you might want to project into the future and see what the team’s value would be if they actually won.
Hi bmaz. You wrote:
Working just from memory here, but as a Browns fan (thanks for the sympathy) I seem to remember Modell & the NFL getting tripped up by a clause in their lease with the old municipal stadium that gave the stadium the right to keep the Browns there for the length of the contract. At the time there was about 3 years left on it, and therefore the prospect of dozens of public effigies at games, miserable attendance, no corporate support and an overall multiyear money losing PR nightmare. That more than anything forced the league’s hand in guaranteeing a new franchise for the city before Art could take his sorry ass out of town. I don’t know if Phoenix has anything similar in the fine print, but I think including provisions like that may help cities protect their infrastructure investments. And would also require fairly precise timing of owners who want to load up the Mayflower vans.
Moving the Coyotes to Hamilton, ON is fair turnabout for moving the Quebec Nordiques to Colorado.
And Winnipeg is still awaiting the return of the Jets like it’s Passover and Elijah is coming to dinner.
Wait till the Buffalo Bills move to Toronto.
this is another cautionary tale for using public money to build a stadium for a team the public doesn’t own. this time brought to you by the city of phoenix.
Yes, I guess Phoenix is about to find out. Another way to put it is that Winnipeg found out in 1996, because the Canadians didn’t think it appropriate to subsidize sports teams the way American towns would.
>The NHL has nothing like the legitimate revenue base it needs
Isn’t that just a way of saying they’re paying players too much. I mean, what revenue base does it “need”?
I know! I know! Call on me! Call on me! We can use the stimulus money to bail out the ultra rich sports franchise owners like we have the banksters! I mean after all, who wants to live in a ghost town of empty commercial stalagmites surrounded by tent cities without a professional sports franchise./s
A little perspective might be apropos here.
Story of the Night
Tom Izzo brings Broadway to Michigan.
I realize this may sound sacrilegious, but I think if a community puts up a big chunk of funding for a local sports franchise, the taxpayers should get an ownership stake. That way the community can keep their team if they want to (or least have a say in the matter in proportion to the $ they put up).
The Green Bay Packers do not have an owner that can sell the team and move it willy nilly, unlike every other major sports franchise in the country. Green Bay would never have been able to keep its team with its small TV market and population if it hadn’t been for the ownership structure (and revenue sharing has kept the team competitive within the NFL). I think this model needs to be more widely emulated. Does a team belong to a single owner or the community that supports it?
You mean as opposed to letting your team go to the New York Jets and, now, apparently, the dreaded Vikings??
LOL! Ya know… various people felt compelled to tell me when Brett retired again and my reply to each and every one of them was… wait until May. Guess what, it’s May and Brett’s feeling his oats once again… I hope he goes to the Vikings, more power to ‘im. I’m gonna die laughing though ; )
Lots of community owned baseball farm teams out there.
Really??? That’s cool. I always figured the farm teams were owned by the principal owner of the major league team — that isn’t the case?
Home towns matter.
Unfortunately, the Arizona Coyotes are just a line on a balance sheet.
Fans and Phoenix suffer.
Ruh roh. Ramirez a no no.
Manny being Manny – on roids!
Scott Boras is in spin mode…
Theo’s trade not so good for both teams?
who suggested that PHX locate a sports team in Glendale? I mean that is an hour away from downtown with traffic. Too many games too far away. At least the football team only has to play 8 games per year in its overpirced stadium across the street.