Thursday brought yet more twists and turns to the saga that is the bankruptcy and sales auction of the Phoenix Coyotes. Friday will complete the two days of hearings and will pull the sales process closer to its end, but most likely, not to conclusion.
The hearing Thursday in Phoenix, AZ with Judge Redfield T. Baum, presiding started by asking if there were any other bids beyond the NHL’s and Jim Balsillie, the co-CEO of Research in Motion, the creators of the Blackberry mobile device line. As reported earlier in the week, Ice Edge LLC dropped out of the bidding leaving just the league and it’s antagonist in Balsillie left to battle over the club’s rights. By the end of the hearing at 9pm ET, several issues stood out that could keep the Coyotes playing at Glendale’s Jobing.com Arena, or be forcibly relocated by Balsillie to Hamilton, Ontario, Canada, against the NHL’s current wishes. As you’ll see at the end of this list, “nothing” might be a precedent setting “something”.
1) Is Moyes a Creditor, or an Owner that has Lost Equity?
One of the main issues in that separates the bids of the NHL and Balsillie is monies that would be directed to Coyotes owner Jerry Moyes. Moyes, who slowly moved into a majority ownership position as the club slid further and further into red ink, was the one that filed for Chapter 11 bankruptcy protection, and Balsillie’s bid was submitted as a way to satisfy the creditors, including Moyes.
Balsillie’s bid includes up to $104 million that would go to Moyes as a creditor. The $104 million represents the amount that Moyes has reportedly loaned the Coyotes. The NHL’s bid has no monies outlined for Moyes, as the league is contending that the $104 million is lost equity, and therefore, would not need to be repaid. Judge Baum challenged the league’s contention in Thursday’s hearing.
2) Can the League Block Balsillie Based Upon Character?
An issue that could stop Ballsilie’s bid dead in its tracks, would be if Baum were to uphold the league’s Board of Governor’s 26-0 vote, with abstentions from the Buffalo Sabres, Pittsburgh Penguins and Toronto Maple Leafs, rejecting Balsillie as a potential owner in the NHL saying he lacks “good character and integrity".
Lawyers for Balsillie have argued that owners don’t need to “love each other”, and cite that the BOG’s vote was in reaction to any possible lawsuit that the Maple Leafs might file over relocation to Hamilton, which the Leafs see as their territory.
3) Relocation and Exiting the Jobing.com Arena Lease Agreement
Jim Balsillie raised his offer for the Coyotes by $30 million on Tuesday to $242.5 million, with $50 million set aside for the City of Glendale to offset losses incurred by the Coyotes leaving Arizona and relocating to Hamilton. Lawyers for Glendale reject the $50 million saying Thursday that damages would be between $565 million and $685 million – a massive gap. The issue of the lease would seem very difficult to exit without compensation. As one of the lawyers characterized it in Thurs. hearing, “It’s ironclad.”
4) What Should the Relocation Fee Be?
Both Balsillie and the NHL commissioned reports to determine how much indemnification should be paid to offset losses to the Toronto Maple Leafs, and to a lesser extent, the Buffalo Sabres should Balsillie place the Coyotes in the Hamilton market, which is in proximity to both franchises. The placement of a third club will dilute the sponsorship base, television and radio territories, and available fan base, but then based upon ticket prices and current attendance figures for the Maple Leafs (both, the highest in the league), a case can be made that the market could bear another franchise. Both the Coyotes and then Balsillie commissioned sports economist and author Andrew Zimbalist (see the Business of Sports Network interviews with Zimbalist from 2004 and 2006 on The Biz of Baseball) to analyze the possible relocation of a club to Hamilton, and render a relocation figure. Zimbalist initially reported that the NHL would be entitled to between $11 million and $13 million (figures are blacked out of associated document), but testified on Thursday that the fee could be as high as $18 million. He based his figures on past relocations within the NHL to make the determination, most notably the Quebec Nordiques to Denver and the Hartford Whalers to Raleigh. Zimbalist also said on cross examination on Thurs. that his methodology had not gone through a peer review process.
The NHL countered by having two separate independent studies done that did not consult with each other having Dr. Franklin Fisher and Barrett Sports Group, LLC and Sports Value Consulting, LLC project a relocation fee. In a separate court filing, the NHL responded to Zimbalist’s initial figures by saying, “[T]he notion that a team in Hamilton would be worth only $11.2 million to $12.9 million more than a team in Phoenix is patently absurd.”
The NHL filing then goes on to challenge Zimbalist’s methodology in bullet point fashion. It begins by looking at a core issue: What are the Coyotes worth in Glendale and in Hamilton:
Prof. Zimbalist understates the value of the Hamilton franchise option taken from the League by basing his estimate of that option on simple historical averages for NHL franchise expansions. This approach is inconsistent with his own view that Hamilton is an above-average site in terms of local interest in NHL Hockey.
Prof. Zimbalist overstates the value of the Phoenix franchise option returned to the League by overlooking the fact that relocation by the Club would substantially impair the value of that option on a going-forward basis.
The filing also adds this bullet point:
In particular, Prof. Zimbalist considers only one factor (namely, Hamilton's economic viability to support an NHL franchise) among the numerous economically relevant factors that NHL rules require the Board of Governors to consider when evaluating proposed franchise relocations. Prof. Zimbalist fails to analyze whether or how relocation of the Coyotes (absent NHL approval) would impair the League and consumers by, inter alia, (a) eroding the value of the option to locate a new NHL Club in Phoenix at some future date; (b) reducing the League's geographic diversity; (c) damaging the NHL's ability to foster community commitment to its Clubs on a League-wide basis; and (d) imposing significant operational costs on the League and its other Member Clubs.
Needless to say, the NHL’s relocation figures are in stark difference to Zimbalist’s. BSG calculated that an appropriate relocation fee would be approximately $101 million. SVC calculated that an appropriate relocation fee would approximately $195 million.
During the hearing on Thursday, the NHL lawyer Shepard Goldfein said, the relocation fee should be 60 percent of Balsillie's initial offer of $212.5 million which comes to a $127 million fee.
All of the relocation fee issues from either side may be moot in the eyes of the bankruptcy court, however.
"A big number," Baum said in reference to Goldfein’s figure. "But the relocation fee is not the most important legal issue that is going to be submitted to the court."
5) What Are the Coyotes Worth in Hamilton?
As a continued part of the NHL’s response to Zimbalist’s relocation fee amounts for indemnification to the Leafs and Sabres, the consulting firms used valuations of the Coyotes in both markets to make their determinations. This key element points to the value of the Hamilton market, as compared to Phoenix. It also outlines the league’s contention that due to the value of the market, it becomes a loss to both the Maple Leafs and Sabres, should that market be cannibalized by a Coyotes relocation to Hamilton:
BSG estimated the value of a team in Hamilton as between $261.8 million and $279.8 million. SVC estimated the value of a team in Hamilton as approximately $315 million. Aided by the actual results that the Coyotes have achieved in Glendale, the experts employed the same methodology to calculate the likely revenues for a team in Glendale and the ultimate value of a team in Glendale. BSG estimated the value of a team in Glendale as between $163.4 million and $176 million. SVC estimated the value of a team in Glendale as approximately $120 million.
It’s important to note that the valuation is a face value rendering. Any ownership that assumes the franchise in Glendale assumes the lease agreement, which, in part, has had a cobbling effect on the Coyotes. The club reported losses of approx. $60 million last season, alone.
6) The Issue of Copps Coliseum
Balsillie has worked out an agreement to have the Coyotes play at Copps Coliseum, should the club be relocated to Hamilton. The agreement between the City of Hamilton and Balsillie has two issues, one being the clock: the city is sticking to an Oct. 31 lease pact with Balsillie, whether the issue of the Coyotes is fully resolved by then. Secondly, the 24-year-old facility is hardly up to NHL standards, and therefore Balsillie has proposed a sweeping renovation to Copps that could total as much as $200 million to complete (see details of the renovation plans along with renderings of the design).
The problem is, Balsillie is not willing to fund the renovations, and there is currently no firm commitment to fund it at the government level.
The Mayor of Hamilton, Fred Eisenberger, wrote in a letter referenced in Thursday’s hearing, “I would like to assure the National Hockey League that the planning process for the renovation of Copps Coliseum is currently in progress and we are confident that a financing commitment for the project will be made by the appropriate levels of government in Canada in partnership with the City of Hamilton,” adding, “We believe the Copps renovation plan is … well within the scope of available government funding programs.”
7) Friday Hearing to Outline Conflict of Interest in NHL Bid
On Friday, NHL Commissioner Bettman will take the stand, and will face Jeffrey Kessler and Tom Salerno, the lawyers for Balsillie and Jerry Moyes of the Coyotes. Jim Balsillie, originally scheduled for Friday, has removed himself from testifying. Bettman will surely feel the heat from Kessler, a powerful and noted anti-trust lawyer. At the heart of the questioning will be the NHL’s rejection of Balsillie by the league’s Board of Governors as a potential owner, while being engaged in the bidding process for the Coyotes. Kessler will no doubt claim that there is a conflict of interest in those two issues.
8) Complexities Could Render “No Sale” Ruling By Judge
The hearings on Thursday and Friday were designed as an auction process that would render who would ultimately gain control of the Coyotes: the NHL or Jim Balsillie. But, on Thursday, another, and more likely result was mentioned.
Judge Baum said at one point, "There is a third possibility here — no sale," which caused a stir amongst the courtroom. "It is more than theoretical. You all ought to keep that in mind."
While Baum did not specify why, as outlined above there are several reasons:
The Balsillie bid is the highest, and therefore would satisfy the majority of the creditors, but his offer does not fully address the damages associated with exiting the Jobing.com Arena lease agreement.
The NHL’s bid lacks details on its payment schedule for creditors, something Judge Baum was critical of at Thursday’s hearing. He informed the league to provide him with a schedule by Friday.
The NHL’s claim that to Hamilton would be damaging seems to be tied only to how much indemnification Balsillie is willing to pay, regardless of how he has attempted to elbow his way into owning a franchise. A sizeable sum would seem address the issue, but at the end of the day, the court is not as concerned about the relocation fees as the issues of satisfying the creditors and dealing with the Glendale lease.
Not rendering a sales ruling prevents setting a precedent that would place league constitutions in the crosshairs. A ruling in favor of the NHL, and Balsillie has said he would file anti-trust charges. A ruling in favor of Balsillie, and the NHL has said they would appeal. By not ruling, based on the weak offers, Baum prevents Balsillie-like actions from occurring in the NBA, NFL, and MLB, all of which have filed briefs in support of the NHL.
Finally, by not ruling, the status quo is retained. The league will continue to look for an owner that wishes to keep the club in Glendale, while the lease agreement is addressed. Moyes and Balsillie will be left to consider other options, depending on the desires of Balsillie.
9) Addressing Other Hypothetical Scenarios
There have been other scenarios mentioned by those watching the proceedings, such as the Coyotes being liquidated under Chapter 7. That action would ostensibly be forced contraction, and in reality, impossible.
The Chapter 11 filing and Balsillie bid are designed to gain access to the Coyotes and relocate them. Selling them off would not satisfy the creditors, nor deal with the Glendale lease. It would force the NHL to hold a dispersal draft, which would mean some players would lose their jobs, and therefore, the NHLPA would look to stop the move citing interest in other markets for a sale, rather than liquidation, so players cannot be "sold" to gain money to pay back the creditors. The Coyotes are leasing Jobing.com Arena, so they can't sell the building... as mentioned, impossible to pay back creditors through liquidation.
10) Predictions
As Baum mentioned, no sale “is more than theoretical”, and therefore, seems a very real outcome of the auction process. It’s possible that with the proceedings completed, Jerry Reinsdorf and Ice Edge could come back into the mix as adjustments to the Glendale lease are explored, and the salary of Wayne Gretsky is addressed (Goldfein, the attorney for the NHL, revealed that in the Ice Edge bid that has now been withdrawn that Gretzky agreed to have his yearly salary from decreased from approx. $8 million to $2 million).
The wild card is Balsillie. He left the courtroom on Thursday without comment, and said he would address the media on Friday. Whether Baum rules then is uncertain, but unlikely. He has said he would inform the parties involved, at the latest, before the puck drops on the 2009-10 season for the Coyotes. Their first preseason game is Sept. 15. The Coyotes open the regular season Oct. 3 at Los Angeles.
Minor League Player That Had Contract Voided For Misrepresenting Name and Age, Now Suspended for PEDs
Janet Marie Smith Rejoins Orioles as VP of Planning and Development
IBAF Announces Additional Baseball World Cup Television Partners
MLB Network Announces Sept. Live Game Schedule
The Curious Case of Troy Ellerman
LWIB: Call for Increased Revenue Sharing, Update on the Potential Sale of the Rangers, Boras on Rookie Compensation
New Protective Helmets to be Mandatory for Arizona Fall League
Weekend Means National Blackouts for MLB Extra Innings, MLB.TV
Upcoming Biz of Baseball Interview: Victor Conte
Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network (select his name in the dropdown provided).
The NHLPA Executive Board, which is composed of one representative from each of the National Hockey League’s (NHL) 30 teams, voted 22 to 5 (three reps abstained from voting) in favor of ousting Kelly, who had only been on the job for 22 months as the union’s fourth Executive Director. The decision to remove Kelly was made during the NHLPA’s annual meeting, which took place on Sunday and Monday in Chicago.
In the wake of Kelly’s dismissal, NHLPA General Counsel Ian Penny was installed as the union’s Interim Executive Director. Penny will serve in this position while the NHLPA attempts to find a new leader. As of now, neither Penny nor interim NHLPA Ombudsman Buzz Hargrove has expressed any interest in becoming Kelly’s successor.
Hargrove, in an interview with the Toronto Globe and Mail, attempted to provide some insight into the Executive Committee’s decision to fire Kelly by stating that, even after being on the job for nearly two years, Kelly had not earned the trust of the players.
“I could only summarize it in that the players felt that given all the issues that they dealt with, not any one in particular, but with all of the concerns combined, they came to the conclusion that they didn’t have the trust and confidence in Paul Kelly to lead the union into the future, especially with the CBA [collective bargaining agreement] coming closer and closer to and end.
Those outside the inner circle of the NHLPA are left to wonder what events led to Kelly’s dismissal. Players reportedly perceived that Kelly was developing too cozy of a relationship with NHL Commissioner Gary Bettman and that Kelly was not developing the necessary relationships with this constituency. Others speculate that Kelly was the victim of a power struggle between rival factions within the NHLPA. Regardless of the reasons that led to the dismissal, it is clear that there is a leadership void within the Union.
With less than two years before the expiration of the current CBA, players seem less concerned with, as the Executive Committee framed, “public relations hits” or maintaining leadership stability and more interested in acting on new information that was important enough to change the direction of union leadership. “The decision [to fire Kelly] was made as the result of the checks and balances we now have in our Constitution,” said Chris Chelios, a member of the player board. Fellow Executive Board member Shawn Horcoff echoed Chelios’ message, saying that the new information that came to the players was “too hard for the membership to ignore.”
Regardless of the true reasons for Kelly’s firing, the dismissal of the former Assistant U.S. Attorney creates a situation where nobody is in place to prepare the players for a potential labor conflict in 2011. Both the union and the NHL are in a tenuous position; professional hockey is fighting to stay relevant within the United States, and another protracted labor dispute will further damage the sport’s popularity. Thus avoiding a lockout or strike is in the best interest of the league and the union. However, striking such a deal is often built on trust, trust that can only be developed through building a relationship with the other side. Kelly had apparently already achieved with both Bettman and other NHL brass.
While Kelly may have not been the ideal Executive Director, he was working off a collective bargaining agreement that he inherited from ex-NHLPA chief Ted Saskin. This upcoming set of negotiations was to be Kelly’s real test. Now players are, for the third time in four years, faced with the task of electing another union head to lead the NHLPA into negotiations with the league at a pivotal crossroads.
OTHER NEWS FROM THE BUSINESS OF SPORTS NETWORK
Business of Sports Network: Focus on Media
(THE BIZ OF BASEBALL)
Dodgers Deal for Veterans Jim Thome and Jon Garland
VIDEO: Dave Howard, Exec. VP of Business Ops for Mets Grills Book Author on Team Sale
Tribune Bankruptcy Judge to Hear Requests in Cubs Sale
Kazmir, Mulder Reconnect With Rick Peterson to Get Pitching Delivery Back in Form
With Fenway Park Renovations Nearly Complete, Everything Coming Up Roses for Janet Marie-Smith
Angels Land Kazmir
Free Agent Minor Leaguer Suspended 50 Games for PEDs
Book Author Speculates That Mets Being Sold "When", Not "If"
Court Ruling Places Name Leakers, BALCO Investigation in the Crosshairs
Hornets Owner Shinn Isn't Concerned About Team's Status
The Biz of Basketball Adds Complete Summary of Current NBA CBA
Jeff Levine is a staff member of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is a sports attorney, and the Executive Director of One Sports and Entertainment, International.
While much of the NHL offseason spotlight has focused on the events taking place in Glendale and Phoenix, Arizona, the Chicago Blackhawks have experienced quite an offseason of their own. Initially, the Hawks had much to celebrate; but as of late, the franchise has shown up in the news for all the wrong reasons.
The offseason started with a bang. Chicago landed Marian Hossa shortly after the July 1st free agency period began, signing the highflying sniper to a twelve-year contract worth 62.8 million dollars. Shortly after signing the most coveted free agent of 2009, the Blackhawks’ offseason fortunes took a turn for the worse.
The weeks following Hossa’s arrival into Chicago were extremely turbulent. During this time, the franchise was the focus of two National Hockey League investigations for not following League rules. Team General Manager Dale Tallon was the subject of one investigation, as he failed to make qualifying offers to his team’s restricted free agents by the NHL imposed deadline.
This failure to tender qualifying offers within the appropriate time frame forced the team to sign these players to larger contracts. Now the team has less cap space to attempt to resign next year’s crop of free agents, which includes Patrick Kane, Duncan Keith and Jonathan Toews. The Blackhawks will most likely be unable to resign all of these elite players due to the team being so close to the salary cap ceiling. Tallon was fired as a result of the blunder.
A few weeks after Tallons’s firing, the team revealed that Hossa would require shoulder surgery. The other adverse Hossa-related news was the initiation of an NHL investigating scrutinizing the circumstances and understanding between the parties regarding Hossa’s contract. Blackhawks management vehemently deny any wrongdoing:
“The Marian Hossa contract is a legitimate contract that was approved by the NHL. We are not at all concerned by the investigation and are confident the NHL will conclude that there is absolutely no evidence that the Blackhawks intended to circumvent the salary cap.”
The investigation is examining whether the parties attempted to circumvent the NHL CBA by intentionally signing a contract that would conclude after he is retired. Intentionally agreeing to such terms, in effect, stretches out Hossa’s annual cap hit (his average salary during the length of the contract, basically dividing 62.8 million dollar by 12). A longer period to divide the contract means that Hossa’s salary will not eat up as much cap space, leaving the team free to allocate more money to other players. Signing a contract that was created in this manner violates the CBA, and the penalties are stiff.
However, proving the parties’ intent may be difficult. Pursuant to the CBA, inferring the intent of the parties’ actions may be based on both direct and circumstantial evidence, as well as examining the reasonableness of the language within the standard player contract. If the investigation finds that the parties violated the CBA, the Blackhawks could be accessed 5 million dollar fine and/or loss of draft picks while Hossa could be fined 1 million dollars. As a draconian tactic, the League could also void Hossa’s contract with the Blackhawks.
The most recent incident for the Blackhawk faithful is scripted right out of the movie Slapshot, as team superstar Patrick Kane was arrested early Sunday morning for assaulting a Buffalo cabbie at 4:00 in the morning. The police report notes that Kane and his cousin had paid a $13.80 meter taxi ride with $15, and that the cabbie only gave back $1 in change. As a result of not giving an additional 20 cents in change, the Kanes snatched the $15 back and assaulted the cabbie, repeatedly punching him and breaking the driver’s glasses.
On Thursday a grand jury in New York’s Erie County began probing the incident. Ultimately the grand jury can decide whether to grant an indictment of the Kanes and move the lawsuit forward. Kane and his cousin are charged with second-degree robbery, a Class C felony, and fourth-degree criminal mischief and theft of services, both Class A misdemeanors.
If found guilty of any of the charges, Kane will most likely walk away with a light sentence, as he is a well liked native of Buffalo and active within the local community. It is also unlikely that Kane will face any penalty from NHL Commissioner Gary Bettman, who does not have the reputation for player discipline.
Kane is supposed to be featured on the cover of EA Sports’ NHL 10, which is due out in a few months. However, it is unclear whether Kane’s taxicab incident and any additional legal consequences will impact his status with EA Sports.
More important than the EA Sports cover is where do all of these events put the Blackhawks in preparation of the upcoming season. Hossa is expected miss several months while recovering from shoulder surgery. He may be available as early as November. In the meantime, it is unclear whether Kane’s legal troubles will keep him off of the ice. Although he is only 20 years old, Kane was long ago anointed as a team leader; he should not be involved in antics that are normally reserved for National Football League players.
Since Tallon’s firing the organization has promoted Stan Bowman to general manager. This move may have damaged the psyche of the locker room, as many players had a close relationship with Tallon and viewed him as a father figure. Although Stan Bowman is the son of legendary coach (and current Blackhawk Senior Advisor) Scotty Bowman, it is unclear whether the shakeup at GM will have a positive effect on the team. Tallon’s mismanagement of the team’s salary cap may also make it difficult for Bowman to resign his marquee players following the 2009-10 season. For now it is up to Bowman to restore order within the organization and refocus the team toward taking another step toward the reaching the Stanley Cup.
Coveroo Partnership with MLB Means Cellphones Have You Covered
Two Cubs Minor Leaguers Suspended for PEDs, Total Minor League Suspensions Now Stands At 50
2009 MLB Season Will End with Cubs Sale Still Not Completed
NatMobile Comes to the DC Area as Part of Marketing Effort
Baseball Denied Reinstatement for 2016 Olympics
As Playoff Chances Dwindle, Mets Cut Ticket Prices
Rays Purchase Ownership Equity in Florida UFL Franchise
Dodgers Launch Mobile Ticket Truck, Snoop Dogg Takes Spin
Roku Brings MLB.TV to Your Television
Jeff Levine is a staff member of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is a sports attorney, and the Executive Director of One Sports and Entertainment, International.
Bulls and White Sox owner Jerry Reinsdorf is looking to land the Phoenix Coyotes, a club embroiled in financial chaos.
The Phoenix Coyotes are embroiled in a tangled web of power, intrigue, duplicity and litigation that has seemingly gone on forever with no end in sight. And in the eyes of officials with the city of Glendale and the NHL, the white knight in shining armor is Chicago White Sox and Bulls owner Jerry Reinsdorf. Based on their similarities in doing business, they all deserve each other.
The Coyotes have been losing $30-35 million per year since they moved into a new $180 million arena in Glendale six years ago. While current owner Jerry Moyes has been blamed for poor management, given the oppressive terms of the lease between the team and the city, the best operator on the planet couldn’t make the numbers work. Last fall, Moyes approached the city in an effort to renegotiate the lease. When his efforts were rebuffed, he sought bankruptcy protection in an attempt to salvage a portion of his $300 million investment in the team.
Unbeknownst to Moyes, while he was begging Glendale for financial relief, the city, in conjunction with the NHL, was soliciting Jerry Reinsdorf as a potential new owner. The troika had been in secret negotiations whereby the league would seize the team from Moyes, sell it to Reinsdorf, and the city would rewrite the lease to Reinsdorf’s satisfaction.
His Coyotes dealings – which served to undermine the Moyes/Glendale relationship - are standard operating procedure for Reinsdorf. The sports magnate refused to honor his spring training lease with the City of Tucson and moved the White Sox to a new facility in…surprise, surprise…Glendale. Faced with a choice between a long, drawn out lawsuit against Reinsdorf or accepting his settlement offer, Tucson opted for the latter.
Reinsdorf’s actions effectively killed spring training in Tucson. The two remaining teams – the Arizona Diamondbacks and Colorado Rockies – exercised a clause in their leases giving them the right to opt out in the event there were fewer than three teams in the market.
Reinsdorf was reportedly incensed when details of his backroom dealings with Glendale became public and he threatened to withdraw the offer he made to purchase the Coyotes from Bankruptcy Court for $148 million. Not surprisingly, no cash is involved in the offer. Reinsdorf would assume a portion of the existing debt if the city would agree to rewrite the lease to provide an additional $23 million per year in revenue and pay him $15 million per year if the team continues to lose money. And if losses continued, Reinsdorf would be allowed to move the team after five years.
There’s a ready solution to the Coyotes mess. Canadian billionaire Jim Balsillie, co-inventor of the Blackberry, has offered $212.5 million in cash to purchase the team if he can move it to Hamilton, Ontario. The deal is clearly the best option for the creditors, but the league isn’t exactly enamored of Balsillie, who tried to force his way into their gentlemen’s club on two prior occasions when he put in bids for the Pittsburgh Penguins and the Nashville Predators.
In preparation for an auction scheduled for early September, the league voted 26-0 to support Reinsdorf’s bid over Balsillie’s (and one other bid containing few details). In a motion asking the Bankruptcy Court to throw out Balsillie’s bid, the league says it rejected Balsillie as an owner because “he lacks the good character and integrity required of a new owner.” By rejecting Balsillie, the league also preserves its right to a fee for the Hamilton territory should it approve expansion or a relocation of an existing team at a later date.
The Bankruptcy Court’s responsibility is to the creditors, and from that perspective, Balsillie’s bid is clearly the best. But whether the court has the legal authority to circumvent the NHL constitution and bylaws and force the league to accept Balsillie as an owner - and award him the Hamilton territory - remains to be seen. Much to the chagrin of NHL owners and Commissioner Gary Bettman, Bankruptcy Court Judge Redfield Baum has yet to eliminate Balsillie, which is a victory for truth, honesty and decency, however fleeting it might be.
In the meantime, the stench emanating from the Valley of the Sun is the Coyotes’ carcass decomposing in the desert heat.
OTHER NEWS ACROSS THE BUSINESS OF SPORTS NETWORK
(THE BIZ OF BASEBALL)
Authors and Publishers of Clemens Book Being Sued by Gym Owner
Press Release: The Biz of Baseball, Other Business of Sports Network Sites, Upgrades with Twitter Access
Rockford RiverHawks To Join The Northern League in 2010
David Ortiz Addresses Media, Red Sox Issues Statement in Support
MLB Releases Statement Regarding 2003 Drug Test
Prior to Ortiz Press Conference, MLBPA Releases Statement Regarding 2003 Drug Test
Astros Minor Leaguer Einertson Suspended 50 Games for "Drug of Abuse"
The Significance of Michael Weiner at the Ortiz Press Conference
With 10 Days to Go, "Signing Strasburg" Watching Kicks Into High Gear
Jordan Kobritz is a staff member of the Business of Sports Network. He is a former attorney, CPA, and Minor League Baseball team owner. He is an Assistant Professor of Sport Management at Eastern New Mexico University and teaches the Business of Sports at the University of Wyoming.
On Thursday, Jiri Hudler became the first Red Wing to bolt for the Continental Hockey League, signing a two-year tax-free deal with Moscow Dynamo, at an estimated worth anywhere from $3 million to $5 million per year. Hudler’s defection to Russia is significant because it is only the second time Ken Holland has lost a player to another league since he became General Manager in 1997, the first one being defenseman Danny Markov who signed with signed with a KHL team after the 2006-07 season.
Although less than a month old, it has been a difficult off-season for the Winged Wheel. First, Marian Hossa signs a twelve-year pact with the rival Chicago Blackhawks, and then the team loses several free agents in a mini exodus. Although the Hossa experiment seems to have failed, Hudler’s unexpected departure is potentially more troubling for fans because the deal he signed with Dynamo, depending on reports, is not worth substantially more than what he was being offered by Holland. This piece of information, coupled with the fact that Hudler was scheduled for salary arbitration (where he figured to receive a significant raise), elicits a variety of questions regarding Hudler’s motivation to leave Detroit and the state of the proud franchise.
While one should not sound immediately the panic button in Detroit, Holland faces the daunting task of quickly retooling a team that lacks some toughness up front and possesses an aging defensive corps. While the Wings have a tremendous nucleus in tact, as the team has Pavel Datsyuk, Henrick Zetterberg and Johan Franzen signed for the foreseeable future, Holland lacks the salary cap room to maneuver and plug holes with the necessary talent. Hudler is only 25, and has many years of good hockey ahead in his career.
Holland expects Hudler to resume his Red Wing career once the KHL contract concludes, as he was quoted saying that Hudler is “going to have a contract that he's going to have to honor when he comes back.” But even without the talented young Czech, the Wings are not devoid of young talent. Holland, along with Assistant General Manager Jim Nill and hall of famer – turned executive – Steve Yzerman, are known amongst the league as being shrewd talent evaluators and developing young players through its system, so the right players to make sure that Detroit remains competitive may already be in Grand Rapids – Detroit’s AHL affiliate. Detroit just resigned former Swedish Elite League MVP Ville Lieno and speedy grinder Darren Helm to contracts, who will most likely take the ice-time previously delegated to Hudler.
But looking at the National Hockey League as a whole, Hudler’s commitment to Dynamo may be an ominous sign. With the NHL salary cap only going up by a mere $100,000 for the 2009-10 season, and the global financial crisis still gripping much of the world, expect next year’s free agents to follow Hudler’s example. Payers will most likely be evaluating offers from any team that submit the best package. Hudler may be making headlines with his decision to play in Russia this year, but next year this could become a more common occurrence, leaving additional (and less capable) GMs in the same position that Holland currently finds himself.
MORE NEWS ACROSS THE BUSINESS OF SPORTS NETWORK
(THE BIZ OF BASEBALL)
MLB All-Star Game to be Broadcast in 230 Countries and Territories Around the Globe
Poll Shows Vast Majority of MLB Fans Most Concerned About Ticket Prices
Oakland Athletics to Retire Rickey Henderson's No. 24 Jersey
Shane Victorino and Brandon Inge Selected by Fans for Final Two All-Star Game Slots
The Biz of Baseball Enters Content Partnership with 3P Sports
WADA President Urges MLB to Make Changes to Drug Testing Policy
Minor League Attendance Nearly Flat Compared to Last Year
MLBPA Executive Board Makes Preliminary Decision to Name Michael Weiner Executive Director
With Interest, Final Cost of Marlins Stadium Expected to be $2.4 billion
Sizing Up the Final Stages of the Cubs Sale
U.S. Presidents to Make Special Video Appearance Before MLB All-Star Game
(THE BIZ OF BASKETBALL)
NBA Lowers Salary Cap to $57.7 Million
NBA Round Up: The Latest on Marion, McDyess, & Wallace
Lakers Land Artest, Ariza Headed to Houston
Taco Bell Named as NBA's Official Quick Service Restaurant
Round Up: The Latest on Gordon, Randolph, and Kidd
FIA Formula One Teeters on the Edge as FOTA Walks Out of Meeting
A Broad Ranging Conversation on Sports Business with Maury Brown and Tim Lemke
Jeff Levine is a staff member of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is a sports attorney, and the Executive Director of One Sports and Entertainment, International. He can be reached at
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
The 2009 NHL Entry Draft came and went last week. Overall, the event lacked any real drama. However, Friday’s fist round had a good amount of action, as it featured both a blockbuster trade and finally unveiled to the world which can’t miss player the New York Islanders were going to anchor their rebuilding efforts around: John Tavares.
Held at the Bell Centre, home of the Montreal Canadians, the first day’s action included future hall of fame defenseman Chris Pronger and his hefty contract being moved from the Anaheim Ducks to the Philadelphia Flyers in exchange for a package that included top six forward Joffrey Lupul and several first round draft picks.
Flyers fans will love Pronger’s bruising style of play and on ice leadership while the Ducks receive a major player in Lupul as well as several chips the now rebuilding franchise can use to quickly rebound into a contender. FYI, this is the second time Lupul has been traded for Chris Pronger, first time being when Lupul (then a member of the Ducks) was involved in the package that brought Pronger from Edmonton to Anaheim.
Not lost in all of this is the decision by the Islanders to choose flash and scoring over stay at home defensive reliability. In choosing to a draft mega prospect in Tavares, the Islanders will get scoring help that the struggling franchise desperately needs, seeing that a defenseman led the team in points this past season (Mark Streit).
One of the alternatives that GM Garth Snow was considering in drafting number one was Victor Hedman, the towering Swedish defenseman and top rated European prospect coming into the 2009 draft. Going with Tavares brings instant name recognition to New York, a major hockey market, and will instantly pay dividend because more goals will translate into more fans in the seats of the aging Nassau Coliseum. Tavares has been touted as a future first overall pick since 2004, so even if he does not light the lamp right out the gate, fans will still come to games, and Tavares has been groomed to handle the spotlight, which he most certainly will face in New York.
Now the arduous task for Snow and company is to reverse the tremendous LA Clippers-like curse that has befallen the once proud New York franchise. Only time will tell if Tavares is the real deal; however if he lives up to half as much of the hype he should be a serviceable NHL player for a few years.
The larger issue here is whether Tavares and the new crop of Islander players (see Kyle Okposo, Jeff Tambellini and Josh Bailey) can resurrect the franchise and begin the road back toward respectability and profitability. Owner Charles Wang has voiced regret in buying the team and is frustrated that the team’s new arena is nowhere close to breaking ground. He has also dropped subtle hints that he is exploring relocation options.
A new arena (the Coliseum is one of the oldest venues in the game and lacks the hallmarks of most modern staida that enable teams to produce millions [i.e. suites, club seating]) is a necessity if the Islanders are to remain in the Metro New York area and actually make money. Regardless of the fact that the Islanders are far from profitable and are probably paying very close attention to the bankruptcy proceedings playing out in Phoenix, Islanders fans should rejoice because their franchise has made a good choice, although they really could not had messed this one up…or could they? Luckily Mike Millbury was not at the helm for this draft.
MORE NEWS ACROSS THE BUSINESS OF SPORTS NETWORK
(THE BIZ OF BASEBALL)
Record 223.5M Votes From 17.8M Ballots Cast on MLB.com for All-Stars
MLB.com Releases Mobile App for Palm Pre
Rangers May Have Borrowed As Much as $15 Million from MLB to Make Payroll
MLB Round-Up: Latest Trades
Costas to Interview Ripken on 70th Anniversary of Gehrig Speech
Site Prep Work For New Marlins Stadium Expected Today, Despite Bonding Shortfall
Inside MLB Attendance - Interleague 2009
Ken Rosenthal Joins MLB Network, Will Keep FOX Sports Duties
MLBAM, Cox, and the San Diego Padres Announce In-Market Deal to Stream Games Online
An Interview with Dr. Harvey Schiller, President of the International Baseball Federation (IBAF)
(THE BIZ OF BASKETBALL)
Taco Bell Named as NBA's Official Quick Service Restaurant
Round Up: The Latest on Gordon, Randolph, and Kidd
A Broad Ranging Conversation on Sports Business with Maury Brown and TIm Lemke
Jeff Levine is a staff member of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is a sports attorney, and the Executive Director of One Sports and Entertainment, International. He can be reached at
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
The following is the first article by the latest Business of Sports Network staff member,Jeff Levine - Maury Brown
In a move that illustrated independence, insight and intelligence, Federal Bankruptcy Court Judge Redfield T. Baum denied Billionaire and Blackberry co-CEO Jim Balsillie’s offer to buy the Phoenix Coyotes and relocate them to Hamilton Ontario. By denying the June 29th deadline to culminate the sale between Balsillie and current owner and trucking magnate Jerry Moyes, Baum's opinion illustrated his aversion to quickly rule on the issue of relocation. However, a reading of the opinion also illustrated the Judge's skepticism that approving an eventual sale and relocation would turn professional sports on its head.
Judge Baum vacated the proposed June 22nd auction date of the financially troubled Phoenix franchise, striking a blow to Balsillie's efforts to circumvent the National Hockey League protocol and move the team to Hamilton, Ontario without consent. Responding to League allegations that Balsillie should not be allowed to use the bankruptcy process to obtain a franchise only to relocate it, Judge Baum stated that a party "can not assume [via the bankruptcy laws] only the benefits of a contract; rather assumption is the entire agreement, benefits and burdens." Judge Baum also invalidated the antitrust argument made by Moyes' attorney, Thomas Salerno, writing that it is not a per se antitrust violation for professional sports leagues to have terms and conditions on relocation of member teams. Judge Baum went on to say that in this case, he "can not find that antitrust law, as applicable nonbankruptcy law, permits the sale free and clear of the relocation rights of the NHL.”
Some believe that Judge Baum’s rejection of the Balsillie/Moyes proposed timeline of the sale is a victory for the NHL. However, the Judge voiced his skepticism that allowing the franchise to be sold and subsequently moved out of Glendale would “wreak havoc” on professional sports which the NHL, along with the support of the other major sports league, argues. Judge Baum replied to this assertion by opining that, “[f]rom the outside looking in, it appears that each of the leagues has not suffered or been materially damaged when one of its members made a quick and unapproved move…[from one sports market to another].”
League Commissioner Gary Bettman has repeatedly argued that the NHL can be successful in non-traditional hockey markets like Phoenix. He asserts that four ownership groups, including a group led by Jerry Riendsorf intend to bid on the Coyotes and would keep the franchise in Glendale. However, and as Judge Baum astutely pointed out, Balsillie’s bid is the only one that has been filed with the Court. Further, support for hockey in the desert may be dwindling, as NHLPA Executive Director Paul Kelly was recently quoted questioning whether it was time to "pull the plug" on the Coyotes.
Underlying Issues?
One should note that in addition to franchise relocation, another underlying issue central in this litigation is the viability of hockey in non-traditional markets within the United States . This strategy was a central component of Commissioner Bettman’s blueprint for NHL success when he was plucked from the NBA and tabbed as the League’s first commissioner in the early 1990s. This seems to still be a central strategy.
Thus far into his tenure, many of the League’s financially floundering franchises have come from these non-traditional markets, including the Nashville Predators and both Florida franchises (the Tampa Bay Lightning and Florida Panthers). As for the Coyotes, Court filings illustrate current owner Jerry Moyes’ desperate predicament, as documents show that the franchise has lost hundreds of millions of dollars in operation costs and owe substantial sums of money to creditors since moving to Arizona. At the same time, an interesting legal thread for sports law enthusiasts also present here is the issue of whether the legal system will continue to defer to sports leagues as to their internal on-goings, as the majority of these leagues are voluntary, non for profit entities.
Regardless of the Judge Baum’s ultimate ruling in this dispute, expect an immediate appeal. Both parties in this controversy possess significant funds, and therefore can carry this fight until the Supreme Court decides whether to grant certiorari.
MORE NEWS ACROSS THE BUSINESS OF SPORTS NETWORK
(THE BIZ OF BASEBALL)
Sammy Sosa Reportedly Tested Positive for PEDs in 2003
Orioles Create "2110 Eutaw Street" Ticket Promo
Matt Kemp to be Final Dodgers Bobblehead Promotion of Season
LWIB: Whither The Amateur Draft? Don Fehr Comments on "Vets vs. Kids", and Minor Leagues See Good Attendance
Utley Now 1st in Overall NL All-Star Game Voting, Manny Ramirez Drops to 6th for Outfielders
Wheaties Releases Commemorative Package Honoring NBA Champion Los Angeles Lakers
Overnight Ratings for Game 4 of NBA Finals Up 4.8% From ‘08
Jeff Levine is a staff member of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is a sports attorney, and the Executive Director of One Sports and Entertainment, International. He can be reached at
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Alex Ovechkin has the Capitals winning both in the standings and finally, at the bottom line.
Think back just two seasons ago, and the Washington Capitals were abysmal, posting all of 70 points for the season, finishing last in the Southeast Division, and second to last in the Eastern Conference.
My, how times have changed.
With Alex Ovechkin matching Sidney Crosby’s hat trick, the Caps took a 2-0 lead in the Eastern Conference semi-finals, with a 4-3 win over the Penguins at the Verizon Center Monday night.
And while the Capitals continue to climb in the standings, owner Ted Leonsis might finally – finally – see something other than red in the Captials ledgers.
While there are marginal profits to be made by making the Stanley Cup Playoffs in the first place, the real rewards for teams in the playoffs start to appear in the second round, a location that the Capitals now are sitting comfortably in.
Washington Times sports business reporter Tim Lemke covers the financial implications for the Capitals in his Sunday article, Caps' wins earn them respect, profits.
Asked about how reaching the playoffs impacts the Capitals both now, and in the future, I responded:
"Certainly, the Capitals have to be feeling pretty good about this," said Maury Brown, founder of the Business of Sports Network. "It's been a while for them, and it's a great story. It definitely is helpful. Everybody's going to be very interested in the team. You go out in the first round, well, maybe not so much."
In other words, there are marginal revenues to be had in the first round due to the large percentage of revenues that go to the players; approx. 65 percent.
This is backed up by comments within Lemke’s article by Capitals President Dick Patrick.
"Without a doubt, the more success we have here in the playoffs, the better we're going to do," Patrick said. "Absolutely, there's a correlation there."
There is also the fact that the further a team goes into the playoffs, the more a club can charge for tickets. As further reported by Lemke:
Mr. Patrick said there is great potential for additional revenue in later playoff rounds because tickets will be about 20 percent more expensive and fans are more likely to purchase team merchandise. Industry analysts said a $2 million profit from the conference semifinals isn't out of the question.
"The further you go, the more lucrative it becomes," Mr. Patrick said. "You're making it into more games, you're making more money. If you can get into the third round, you can really start feeling good about it."
Regardless of how far into the playoffs the Capitals go, club executives say that they will still take a loss on the season. As to how much extra revenue can be had by winning the Stanley Cup, the “team can net between $13 million and $17 million, depending on the length of each series, according to officials from Park Lane, a Los Angeles-based sports investment bank.”
All things considered, the Capitals seem to be more than headed in the right direction. With a 2-0 advantage over the Penguins, odds are good that the direction involves moving up further still in the playoffs.
OTHER NEWS ACROSS THE BUSINESS OF SPORTS NETWORK
Hostess Offers Chance to Throw Three Strikes at a Royals Game to Win $1M - The Biz of Baseball
MLB Adds Charity Running Events to All-Star Festivities - The Biz of Baseball
Why Twitter May Be the Greatest Thing Ever for Sports Fans - The Biz of Baseball
Youth is King. Let’s Wrap Up Them Up Through Arbitration - The Biz of Baseball
Seibu Lions Use Matsuzaka Posting Fee to Upgrade Bathrooms in Grand Style - The Biz of Baseball
Red Sox Release Statement on Mike Dee's Departure - The Biz of Baseball
Yankees Do the Right Thing the Wrong Way on Ticket Prices - The Biz of Baseball
Buy a Majestic Jersey, Get Two Tickets to an MLB Game - The Biz of Baseball
Tickets.com Reaches Multi-Year Agreement with Red Sox - The Biz of Baseball
Inside the Numbers - Repricing of Yankee Stadium Tickets - The Biz of Baseball
Podcast – Maury Brown on Mike Silva’s Show - Blackout Policy, Forbes Report, More - The Biz of Baseball
Vasgersian: "I certainly didn't mean to trivialize an injury." - The Biz of Baseball
Yankees Cut Prices on Most Expensive Seats - The Biz of Baseball
6pm ET: Maury Brown on Mike Silva's NY Baseball Digest Show - The Biz of Baseball
2009 MLB First-Year Draft to Be Shown on MLB Network. See Draft Selection Order - The Biz of Baseball
