Stop the presses! NHL commissioner Gary Bettman and Arizona Coyotes principal owner Andrew Barroway have threatened that if a new Arizona arena isn’t built, the team will move … sorta. Here’s Bettman, in his letter to the state senate:
The simple truth? The Arizona Coyotes must have a new arena location to succeed. The Coyotes cannot and will not remain in Glendale.
And Barroway:
As Commissioner Bettman made clear in his letter to legislators, the Arizona Coyotes Hockey Club cannot survive in Glendale. … The bottom line remains the same: the team’s owners continue to lose tens of millions of dollars annually. Consistent losses of such magnitude are not sustainable — not for an NHL franchise, or any other business.
Yeah, that’s not exactly a threat, guys: For starters, it’s missing the “And if you don’t get it, then what?” piece. “Things cannot continue as they are” is a classic example of the non-threat threat, and having Bettman deliver it is a classic use of a league commissioner. But ultimately, despite the resulting headlines — “NHL and Coyotes tell Arizona: Give us a new arena or we will leave” in the Arizona Republic — there isn’t much more solid behind this than the last time the league did it, except that this time Bettman actually signed his name to it.
Those headlines, of course, are precisely the goal, or rather the idea of them throwing a threat into the arena-subsidy-reticent Arizona legislature is. This is the “Don’t make me come in there” of sports subsidy negotiations — better to let Arizona elected officials imagine what will happen if they don’t meet the Coyotes owners’ demands that to actually say it out loud and risk people getting mad at you for conducting extortion. Hey, it’s almost like these guys have a playbook!
Regarding:
“The simple truth? The Arizona Coyotes must have a new arena location to succeed. The Coyotes cannot and will not remain in Glendale.”
The simple answer? Feel free to build a new arena 100% paid for by the Coyotes/NHL. Now leave us alone!
I hate threats like these. I still can’t get over how MLB fleeced the DC tax payer for the total amount of stadium construction for the Nationals.
@Luis
And watch the moronic ownership of the Nationals sign Bryce Harper to a $400 millionm contract in the next year or two.
At his age, a non pitcher, 15 years/400 mill might be a good deal.
Maybe, but he has really only had that one exemplary year (2015) + last April.
The rest of last year he was just a good player, not one of the leagues best or really that close even. He is no Mike Trout.
He is still young, but a year ago people thought he had a good chance to be a top 5 player, now that looks more uncertain.
Imagine if the teams were forced to build their own stadiums Harper’s lifetime earnings might be only $400 million instead of say $600 million. It is a good thing we are using scarce tax money on that!
Stadiums are a sunk cost, not a marginal one, so I don’t know that players would actually be paid a lot less if team owners had to fund them themselves.
If cable TV went away tomorrow, on the other hand, that would have a huge effect. But cable TV will be with us forev — wait, what’s that you say?
If owners have to pay more for their stadiums, they then have less money to spend stupidly on player contracts, unless they are willing to take less profit.
I really disagree Neil. I think if the teams had to spend more on stadiums, they would absolutely cut player pay somewhat. It of course wouldn’t just effect that, I am sure tickets would be more expensive, and profits lowers, and pay for other luxuries and staff brought down marginally. But it would totally impact the whole economic picture.
I mean sure if I run a small business whether I am paying $500 a month in rent or $1000 a month in rent probably doesn’t impact my choice of laptop if my cash-flow situation is fine. But that is because the rent is not a size-able portion of the business expenses.
With stadiums we are talking what dozens of millions of dollars a year per team per year on average? Something like that. You can bet dozens of millions of dollars a year absolutely has impacts on how much the teams spend on other things. The whole picture is different because it is a size-able part of their overall business processes.
“I think if the teams had to spend more on stadiums, they would absolutely cut player pay somewhat. It of course wouldn’t just effect that, I am sure tickets would be more expensive, and profits lowers, and pay for other luxuries and staff brought down marginally.”
If you believe that, then you also believe that owners also spend more on players, and charge less for tickets, just because they have money burning a hole in their pockets and feel the need to share it with someone. I’m not saying sports team owners aren’t stupid, but they’re not generally that kind of stupid.
Well they absolutely spend less on the players than they could, that is the whole point of much of the CBA. It is mainly a way for there owners to prevent bidding wars. As for ticket prices, no they don’t artificially lower them, it is all interrelated. You are striking a balance between short term and long term concerns, gross ticket revenues and fan base size/other revenues, and fan perception of cost. If all teams were pay for stadiums and needed to raise prices fans would generally be willing to pay more.
Look I work as a well paid consultant, but I am positive I could have more gross revenue with a higher rate per hour. I make the subjective judgement that the extra contacts and relationships built up by doing more work for less, and professional networking and esteem et cetera are worth not maximizing current revenues. Maybe I am wrong, and it is easy to be that way when things are working. You can deny though that if my costs went up (as they have particularly for healthcare) I would increase my rates and tell the clients “tough”. And they take it because there is a perception of value.
Now if just l was doing that maybe it wouldn’t work, but my competitors are mostly under the same pressures.
I think the ticket side is where your argument is the strongest, on the expenses side you are just totally mistaken, particularly if you are looking at the case where it isn’t just one team who is forced to pay their own way but all/most of them.
at least in DC’s case people there actually like baseball and go to games. That’s not the case with hockey in AZ. I view sports as an amenity like a park. beach, or art museum. Its worth it if its something people enjoy and partake in. Hockey isn’t a draw in Arizona.
An Amenity that otherwise has immense revenues from ticket sales and TV contracts? That doesn’t make sense at all. If it wasn’t there people would go to the damn zoo or hunting or whatever.
I get the original allure of the Phoenix area since it’s a big market and the NHL wanted to have a presence in southern regions. But how many ways do the Coyotes need to fail to finally decide it’s not going to work there? They’d be far better off relocating the team to Quebec, Seattle, etc.
If there is ever going to be a successful NHL franchise in Arizona it WILL NOT be the Coyotes. Even if being there is a must for them they’d be better moving this franchise and then coming back in a decade or so and starting from scratch.
Phoenix is like Atlanta – not a bastion for hockey. The Atlanta experiment failed twice, highly unlikely Phoenix gets a 2nd shot.
That would be a third shot (remember the Roadrunners?).
In fairness, the Roadrunners were WHA and IHL teams. But that’s the $5 table, the NHL the $500 million dollar table.
WHL, 1967 to 1974, then WHA. If the $5 table cannot make a go of it as the only (hockey) game in town, then the $500M table cannot either (especially with other sports choices available — there is only so much disposable income around here). BTW, the Roadrunners played in the Madhouse on McDowell sharing it with the Phoenix Suns (the horror!).
Given they’ve switched owners (twice if you count the period where the NHL owned the team) this is already the Coyote’s 2nd or 3rd chance.
They’ve actually had five distinct owners/ownership groups since they relocated from Winnipeg, if you count Burke/Gluckstern (who bought and moved them).
Then Ellman. Then Ellman/Moyes, sort of. Then Moyes… then NHL, now Barroway/Leblanc.
Am I missing anyone in there? Maybe… could be more than 5….
Wow, I had no clue it was that long a list. But, again, how many tries does a sane person give them before it becomes clear they’re not going to take off there? How can there STILL be people who think it’s as simple as moving the arena to some better location?
Good question. I don’t know… I suppose at some point everyone gives up on a dishonest and faithless spouse, but Coyotes arena supporters seem more committed than most sane persons would be.
Too bad all the arena supporters weren’t ticket buying fans… then the team would actually be viable.
With how the Coyotes are getting paid to play and still aren’t happy, I don’t see Hansen building a Seattle arena with them as partners.
Hansen’s got his own problems even getting ground broken in Seattle, where the City owns KeyArena and has two groups (including AEG) saying they could renovate and operate it. The result is that the Seattle City Council is stonewalling Hansen on the vacation of a street where his arena would go while trying to get their ducks in a row for the Keynovation. Right now, it is not the place to move an NHL team and may not be for years to come. Nothing is done in Seattle until after it’s been talked to death…and then you wait.
And a question for Gary Bettman: Where was your concern about Glendale’s viability when leaders there approved a $150 million bond in 2003 to build the arena there; or when taxpayers were stuck for $25 million subsidies two years in a row after the bankruptcy (a move which had serious non-hockey repercussions in that community)?
Don’t bury the lede with all these “hockey in the desert lol” comments.
Pull up a map. The arena is next to the football stadium in the far western reaches of the Valley. 75% of the population live on the other side of downtown.
On a Sunday, no problem.
On a weekday for a 7pm puck drop? Why would anyone fight 20 miles of rush hour traffic????
Put another way, the Bruins would never play in Foxboro…
Lol. I love this argument. Mainly because I’m attracted to poorly thought-out, cliched rhetoric.
Counterpoint #1. The Coyotes also play weekend games, when there is no rush hour, and the attendance for those is only marginally better than the weekday games. If the fans would go were it not for the rush hour traffic, why don’t they go when there is no rush hour traffic.
Counterpoint #2. If 75% of the population lives on the other side of town, wouldn’t the rush hour traffic be worse over there? Like, three times worse? Phoenix is a very spread out town, with an overwhelming majority of people living in the suburbs. No matter where you put it, it would be a hassle for the majority of people to get there.
Counterpoint #3. You seen the weather during hockey season in places that routinely sell out their rinks compared to Phoenix weather? Blizzards don’t stop fans from going in Winnipeg, Calgary and Minnesota. Why does traffic stop people from going in Phoenix.
Counterpoint #4. Contrary to popular belief, the Coyotes did not do well downtown. Sure, there were a lot of obstructed seats, but if you have a rabid fan base, that wouldn’t matter. The attendance in their final full season in the downtown arena averaged a whopping 96 people more than they are averaging now. And they averaged more fans per game in their first five seasons in Glendale than they did in their last five in Phoenix.
Now, sure, those numbers are going to be skewed a bit because of the difference in capacity for the rare sell outs, but if the only thing between success and failure was the location of the arena, those numbers wouldn’t be close.
Counterpoint #5. The (now-dead) proposal for a joint partnership with ASU hockey would have put the arena right across the street from a football stadium. Their current arena is right across the street from a football stadium. One of those stadiums sells out all the time, the other rarely does. Your rush hour traffic argument is irrelevant here as both play the majority of their games on the weekends.
And, it’s the stadium on the west side that always sells out, despite the fact that the stadium on the east side has 80,000 pre-sold tickets thanks to ASU’s athletic fee included in every student’s tuition. (I realize that they have a cap on the number of students that can use those tickets per game, but they still have a large amount of people that can effectively go to the game for free.)
So ASU has the advantage of a smaller capacity to begin with, lower ticket prices, better public transportation, a large amount of people that have already paid, and the magical East Valley where “75 per cent of the population” lives and they can’t sell out. The Cardinals have none of that, and they do it all the time.
Perhaps the problem isn’t that the Coyotes are too far from downtown Phoenix, rather, that they are too close.
One more thing: does the drive to Glendale make it inconvenient to watch the games on TV? Because this incredibly large fan base seems to think so. A 1.6 rating is considered very bad. The Coyotes would have to quadruple their audience to achieve that.
Thank you. Fundamental issue is that no-one cares enough to spend anything like NHL prices on the product the Coyotes provide.
That is unlikely to change dramatically no matter where they move them in the Phoenix CMA. It might improve a bit elsewhere, but the “slightly above test pattern” TV ratings are a solid indication it won’t move a lot.
Ben Jones makes an irrefutable point that has applied to every daily/semi-daily professional sport since the beginning of time: the arena location must be right.
I do appreciate the emotional demagoguery from CraigC. It fits right in with most comments.
The problem with your statement that the “arena location must be right” is that there is no corollary, real or imagined, that putting the arena in a more convenient location (for some, perhaps less for others) will make the franchise viable.
All evidence over the 20+ seasons the Coyotes have been in existence in the Phoenix area suggests there is nowhere near enough support to allow them to break even on operations, let alone thrive like a franchise in a 5M+ CMA should.
As Craig said, the arena location has no effect on the franchise’s truly disgraceful local market TV ratings. If anything, if the location is the main cause of low attendance, this should cause a spike in tv viewing as all those long suffering fans turn on instead of showing up.
Nothing like that happens. Nothing like that has ever happened for this franchise. Their TV ratings are lower than semi professional bowling and infomercials.
As John points out, my argument is that the arena location is just an excuse, but the fact remains that there is not one shred of evidence that the Coyotes would succeed anywhere in the Phoenix metro area.
You say rush hour is a problem, but the fans don’t make the trek when there is no rush hour.
You say that there’s a huge amount of fans that can’t go to the games, but these fans don’t watch the games on TV, evidently.
You say that a Phoenix based team needs to be downtown or in the East Valley to sell out, yet the only team that consistently sells out plays in the West Valley and, ironically, did poorly when they were in the East Valley.
My point is that there are a lot more factors to success than simply arena location.
Craig, chill.
I didn’t realize we were headed to an all encompassing dissertation, my point was that to non-locals it’s easy to miss the nuance.
The arena is in a bad spot, full stop. That’s not trafficking in “cliche.” Nothing you said actually disproves that. I also did nothing to assert:
— that another arena in an venue-saturated market SHOULD be built.
–anything to do with ASU football which is a weird non-sequitur
–the franchise’s performance downtown
–weather as a factor
The other correction is your implication that I think the Coyotes can reverse course, esp if they build a new arena now. They had a chance to build a stadium in a proper location–the old mall in Scottsdale. They blew it, and I’m not at all certain they will ever be viable here using the current welfare model of franchise profitability. The only sucker left is the Salt River tribe, but maybe they have the casino cash to burn.
And YES, the Coyotes also suck at hockey, and worse they do so in an uninteresting way.
Dude, I read (and comment on) a blog about what a crappy idea public stadium financing is…maybe be a more respectful in your arguments next time. Or post your own comment, since so much of your reply had literally nothing to do with what I said.
p.s. during afternoon/evening rush hour, downtown is actually a reverse commute for a substantial portion of the Valley. Baseball games are fairly easy to get to. The Glendale arena is not.
Everyone, please, chill.
I let all these comments stand because technically they don’t violate the personal attacks rule – they’re all “that’s a dumb comment” and not “you’re a dumb commenter” – but they certainly violate the spirit of the rule, and show why the rule is needed because that way flamewars lie.
These are all interesting and important issues, let’s all discuss them without resorting to insults or hostility. Or I’m gonna have to bust out the deletion stick.
Ben Jones (the two Bens are confusing) –
The entire point of my reply was actually to point out the issues of the over-simplified arena-is-too-far argument. Perhaps you didn’t make those assertions and I was responding to that argument in general and not yours. For that I apologize
The crux of my argument is this: there’s no evidence based on the history of the team and the Phoenix market that things would be different if they moved or if they had originally built the arena in Scottsdale or if they had stayed downtown. My argument was to show that there is so much more to this than “the arena is too far.”
The weather angle is to show that in great hockey markets, people are willing to sacrifice some convenience in exchange for going to the game.
The ASU football angle is to show that being on the east side, in the heart of the fan base is not an automatic cure all to attendance woes. NCAA football is basically a fifth major sport, just because the players don’t get paid doesn’t mean fans will treat the sport any different.
The downtown attendance point was to show that they didn’t do so well when they were downtown. Pretty straightforward.
Also, baseball games are easy to get to. And nobody goes to them. Kind of backs up my point a bit.
The location may be subpar but people still tend to make it to places where they want to go. I’d argue just as big an issue is that the team has never actually been very good. They had 6-year stretch where they missed the playoffs and are currently in the midst of another 4 year run of no postseason. The 2010 season is the only time they’ve ever won a playoff series since they’ve been in Arizona. Even when their regular seasons have been good they’ve been one-and-done in the playoffs. That’s not how you break into a new market and get people excited about your team.
The Pistons play in Auburn Hills, the Ottawa Senators play way out in the sticks, and the Cavaliers spent years in an arena so in the middle of nowhere that it’s land is now part of a national park.
If a team is popular, people will come. The Coyotes just aren’t popular.
The Pistons draw dick, the Sens draw dick (relative to all other Canadian NHL teams and the Cavs drew dick back when they used to play at the Richmond Coli.
So, Walter, you’re right. The Dogs need to get out of Glendale.
How about some attendance stats from the old centralized downtown location vs the out-in-the-boonies suburb? Looks like they drew better in Glendale until the bankruptcy debacle. They’re slowly gaining but have yet to recover.
http://www.hockeydb.com/nhl-attendance/att_graph.php?tmi=7450
@Neil
I generally get the idea of sunk cost. But if owners had to fund stadiums themselves, my assumption would be that they would have to carry (significant) debt. In that case, they would have to put more revenue towards debt and less toward salaries so they could be ensured the desired profit.
If I didn’t have a mortgage, I would have a lot more money to spend on everything else.
I am of the mind that one of the reasons that athletes salaries are so out of whack is that pro sports owners are not paying a dime for the facilities they play in and are also allowed to control all the revenue sources.
Yeah, no, you do not get the idea of sunk cost. Or maybe not the idea of how salaries should work in an open market.
If team owners are being smart about how much they spend on players, they bid up salaries until they’ll no longer raise the team’s revenues by as much as they’d have to spend on the player. So, Bryce Harper is worth $400m to the Nationals if the Nats owners think he’ll help put another $400m worth of fannies in Nats seats and Nats jerseys and Nats concession stands. How much debt an owner is carrying should be irrelevant to that calculus — it’d be like saying, “If I didn’t have a mortgage, I could afford to get a better job and earn more money.”
Now, it’s entirely possible — I’d say likely — that lots of owners don’t approach it like this, but rather as “How much money do we have in the bank? Let’s buy us some new toys for our outfield!” But from a business perspective, that makes zero sense.
Team owners are not smart about how much they spend on players. If they were they would not do long term contracts for a sport where the average number of games played by everyday $100 million contract players is 123 and the average number of innings pitched by $100 million contract pitchers is 168.
As to whether stadium subsidies lead to higher payrolls, I’m wondering if the idea of sunk costs is of limited use because there is a limit on the total revenue side. Revenue is capped by cultural limits on the total number of fans and fan resistance to high prices. These limits exist regardless of how much more a team spends on payroll. Increasing payroll past a certain point will not bring in more revenue, and even before that point the additional payroll investment will fall below the owner’s desired rate of return.
Assuming owners want annual profits, if the first $50m of team revenue is eaten up by paying for stadium debt, that reduces the amount that teams can spend on other expenses, like salary, and still stay within the limits of available revenue. Therefore, it seems like a league where all teams pay for stadiums should have lower total payroll than the same league with all teams getting free stadiums.
Or, I think to put this another way, if the owner is already committed to $50m of stadium expense each year that does not produce any revenue by itself, that means the other expenses for the year must be calculated to produce enough revenue to recover both those additional expenses and the stadium costs, if the owner is going to reach the desired return on total investment within the available revenue.
There are an endless number of angles to explore on this concept.
If stadia were not taxpayer subsidized, for example, only those amenities which would generate more revenue than they actually cost the owner (amortized over the expected life of the stadium) would be built. No reason not to ask for solid gold toilets if someone else is paying, whether you are a sports franchise owner or Saddam Hussein (though, in fairness, I don’t believe he asked…)
Ditto the Bryce Harper angle. If logic played into this, no-one would sign him for more than the quantifiable value of a) his play and general influence on his team and b) his marketing/merchandising value.
In fact, in sports management logic rarely enters the equation. The Nats are very likely to overpay him just to prevent the possibility of him leaving and their having to deal with the negative PR related to his departure.
We must also consider one of Neil’s favourite topics, the opportunity cost of signing Bryce Harper. Even if you have a very high opinion of his skills (I don’t), one of the questions armchair GMs have to answer is “who else could I have signed with the money it will take to lock up Harper for 7-10 years”. As you will be paying Harper for that term, it is impossible to know the answer to this as at least half of the players who might be available during that window have not hit the major leagues yet… Also, even if you believe you can quantify Harper’s market value today, how will it increase (possibly) or decrease (almost certainly) over the term of the contract offered? But I digress….
If a team pays nothing (or only a token amount completely unrelated to the annual cost of stadium mortgage or construction bond payments etc) in exchange for full control of their stadium and holds no tax liability, I would argue the stadium is not a sunk cost from the owner’s perspective: they have no obligation other than trifling payments made in lieu of mortgage, taxes and capital improvements.
“…not sustainable…”
Huh. They’ve been in Glendale since what, 2003? It’s 2017. Seems like it’s sustainable to me.
After all, wasn’t it Bettman who went on Hockey Night in Canada (and other outlets) to tell us all in the spring of 2009 that the losses were “nothing like” what Jerry Moyes was claiming (some $40m annually) and that the actual losses had been artificially inflated by what he termed ‘dubious’ transactions within Mr. Moyes’ affiliated companies?
I mean, sure, when the NHL took over operation of the team itself (which it had to pay $170m to Coyotes creditors to achieve, as I recall…), they lost $36m and $38m respectively over two seasons… but… like the commissioner says, it was ‘nothing like’ $40m in annual losses.
And we can trust what Mr. Bettman says, because he’s right. The one thing we can say definitively about $36m and $38m is that neither is the same as $40m. “Period”.
We can also trust honest Gary on contracts too. The city of Glendale included a $700m lease break fee on the original arena deal to protect themselves in the event of failure. In fact, stupid as that council was, they at least considered the possibility that the business would not work in their small community and included language to prevent the team from up and splitting.
Honest Gary used Arizona bankruptcy statutes to have that lease break quashed, as he is allowed under law to try to do. But that doesn’t change the fact that he was commissioner when the league agreed to endorse the contract the then-owners had with the City of Glendale, so he was certainly aware of that provision.
Then again, he was probably also aware that he could use the state’s own statutes to do an end around on the clause he had just endorsed and accepted as well.
Maybe Glendale’s real failing was not in the lease deal but in picking scumbag tenants and partners?
Some of Glendale’s representatives have spoken.
http://www.glendalestar.com/news/article_6071ba00-0422-11e7-820a-bfae8524c3f7.html
Your take: Coyotes fans weigh in on NHL’s arena ultimatum
http://www.azcentral.com/story/sports/heat-index/2017/03/08/your-take-coyotes-fans-weigh-nhls-arena-ultimatum/98902480/
Gary Bettman clarifies that he’s not giving up on Phoenix area
http://www.espn.com/nhl/story/_/id/18853872/not-giving-greater-phoenix
Gov Doug Ducey on Commissioner Bettman: “I don’t know if delivering an ultimatum letter is most productive thing that can be done.”
Mike Broomhead show – http://kfyi.iheart.com/media/play/27689577/
The most productive thing Bettman could do is to get a personality transplant.
I would agree to use my tax dollars for that!
If the Coyotes do indeed evaporate or something, then maybe 10,000 people will be sorely disappointed. It’s an important government function to spend at least $20,000 per disappointed fan to assure their future happiness. Why wouldn’t we do this? ‘Cuz we hate people or something?
Future of Coyotes in desert once again uncertain
http://www.sportsnet.ca/590/jeff-blair-show/future-coyotes-desert-uncertain/
A new arena doesn’t solve the coyotes problem. At the end of day they like many other NHL teams need operating subsidies to avoid losses incurred. Its the only reason we no longer discuss Columbus.
Quite so. The Glendale arena worked for them when it came with a massive subsidy. A new arena will work exactly the same way. Without a very large subsidy, the Coyotes’ new home city will be Glendale II – another potentially empty arena after the team declares another bankruptcy.
Glendale: Coyotes, not city, to blame for financial mess
http://www.azcentral.com/story/news/politics/legislature/2017/03/09/glendale-fires-back-arizona-coyotes-glendale-arena/98967020/
Bickley: Gary Bettman’s threats backfiring in the Valley
http://www.azcentral.com/story/sports/nhl/coyotes/2017/03/09/bickley-gary-bettmans-threats-backfiring-valley/98969022/