Monday, March 05, 2007

The good, the bad and the ugly – the business of the National Hockey League

It’s been several weeks since HB’s Insider focused on the National Hockey League and today is catch-up day with no less than four different business related issues. The good news the Pittsburgh Penguins are about to get their arena deal done and an NHL team in an NHL market will stay and grow older in that market. The bad – the Edmonton Oilers terrible handling of Mark Messier Night. The ugly, how the New York Rangers treated St. Louis Blues owner Dave Checketts Saturday and even uglier the state of hockey in Arizona. The good, the bad and the ugly – the National Hockey League.

Saturday reports in both The Pittsburgh Post Gazette and Pittsburgh Tribune Review suggested the State of Pennsylvania and the Pittsburgh Penguins are close to an agreement to build a new state-of-the-art arena for the Penguins.

Pennsylvania Gov. Ed Rendell doing what politicians do best offered both positive and at the same time pessimistic vibes (better known as sitting on the fence) relating to the Penguins long-term viability in the Steel city.

Addressing the media Friday before a scheduled appearance said the two sides "keep making progress. We keep narrowing the issues and I think we're very close." But then in the same breath suggested the Penguins could easily be calling Kansas City home next year.

"So it's still somewhat precarious, although I'm very optimistic that we're close. The attitude of the Penguins has convinced me that they want to stay here. We've just got to iron some things out," he said.

There hasn’t been a great deal of news emerging from Kansas City in recent weeks. You don’t have to read a great deal into that to suggest the obvious – this is going nowhere quickly nearly two months after the Penguins visited Kansas City very early in the year. On January 3, 2007, Mario Lemieux and other executives of the Pittsburgh Penguins visited Kansas City to meet with Sprint Center representatives so they could make their pitch on possibly moving the Penguins there.

On January 4, 2007, exploring the possibility of relocating the Pittsburgh Penguins, owner Mario Lemieux received a serious offer from officials in Kansas City. Tim Leiweke, president of Anschutz Entertainment Group, operator of the Sprint Center, had offered the Penguins a chance to play rent free and be equal managing partners in the new arena if Lemieux moved the club to the Missouri city. Pittsburgh Penguin owner Mario Lemieux could move the club to Kansas City next season. How serious are the two sides – a so called ‘soft’ 30 day window has long been past. Bottom line Anschutz will accept the Penguins with open arms but aren’t holding their breath.

Last week the Penguins turned down an opportunity to extend their current agreement with the City of Pittsburgh to keep the team at the Melon Arena for at least one more year. If the Penguins reach an agreement to build a new arena, the Penguins will play at the Melon Arena for at least two more seasons while the new arena is being built. The Penguins refusing to sign that one year extension is a great move on their part. Put as much pressure on the State of Pennsylvania and the City of Pittsburgh, and continue to use Kansas City and the Sprint Center as leverage.

The Penguins remain months away from any real deadline – late in the 1994-95 NHL regular season Quebec Nordiques owner Marcel Aubut demanded a financial bailout from Quebec's provincial government to build a new arena. The Quebec government was never interested and in May 1995, shortly after the Nordiques were eliminated from the playoffs, Aubut sold the team to a group of investors in Denver, Colorado. The franchise was moved to Denver where it was renamed the Colorado Avalanche. The Avalanche would win the Stanley Cup in their first season after the move. At this point in time it doesn’t appear history is about to repeat itself but one can never tell.

"We are making progress. If I sounded a little pessimistic, I didn't mean to be that," he said. "I just want everyone to know that it isn't a done deal. There's a little bit of confidence in the air here that it's over. It isn't over yet."

"[Penguins co-owner] Ron Burkle is one of the most successful businessmen in the country and he didn't get that way by being an easy negotiator," he said.

"In terms of percentage of viewers this is the best market in the country, so they would be walking away from that and walking away from a deal that is a very good deal," he said.

If there is any ‘cause for concern’ at this point the only talking seems to be coming from Gov. Rendell, the city of Pittsburgh who surely will be involved in any serious negotiations relating to the financing of the arena and the Penguins have been silent. While it may indeed be prudent to keep quiet, given that the good Governor is doing a great deal of talking it is somewhat puzzling the other two key parties aren’t saying anything.

However it does appear the two sides are getting close to an agreement which is great news for the National Hockey League. NHL commissioner Gary Bettman is going to have his hands full in the next few years dealing with NHL disasters playing in non-traditional hockey markets. Pittsburgh has evolved into what can be called a traditional (or established) hockey market. Better to keep teams where hockey has proven support as opposed to the markets where the NHL is doomed to fail.

One of those markets where the NHL appears doomed to fail is the Phoenix area. A pair of media reports last week clearly indicated that it isn’t a matter if the Phoenix Coyotes are going to be forced to consider their options but when they’ll be casting their sights on markets like Kansas City.

A report in Friday’s Arizona Republic suggested the Coyotes will lose more than $30 million this year. In the second year of a collective bargaining agreement that delivered cost certainty to NHL franchises an NHL team losing tens of millions of dollars isn’t just bad, isn’t just terrible, it’s a sign that the NHL isn’t working in that market. With the NHL’s salary cap expected to rise next year (as will the salary floor, the minimum a teams payroll must be) the report also suggested the Coyotes will keep their team payroll at the bottom half of NHL’s payroll scale and won’t be signing any major free agents during the off-season.

If nothing else it’s clear the Coyotes aren’t the only ones who seem out to lunch when it comes to understanding if Arizona sports fans are interested in hockey. Arizona may offer a great opportunity to sports entrepreneurs but Arizona is to hockey what Canada has become to professional baseball – sports version of a leper colony. Arizona is home to three professional hockey teams – the Coyotes, Central Hockey League Prescott Sundogs and ECHL Phoenix RoadRunners.

“There is a great love for hockey here and it is deep-rooted,” Coyotes President Douglas Moss told’s Timothy Gassen last week. “Because this is a melting pot community, there are many fans who bring their allegiances here for other teams. It’s our challenge to turn them into Coyote fans.”

However, Moss also told Gassen that love for hockey hasn’t included any real interest in buying hockey tickets. The Coyotes are enjoying the third-largest jump in paid tickets among all NHL teams in the 2006-07 season, though game attendance appears to be down about 1,000 fans per game. The reason for the apparent numbers discrepancy is actually a positive sign for the Coyotes. “We actually have given away far less complimentary tickets this year, while selling close to 12 percent more,” he said. “So while there might be less people in the building, more of them have paid, and that’s the growth that signals a strong future for us.”

“We had to be in our own arena to survive financially,” Moss says. “Between that and the new CBA (the 2005 Collective Bargaining Agreement between NHL teams and players, which brought a salary cap), the future for the franchise is bright. And this is the best place to watch a hockey game in any arena in the NHL, by far.”

However, when you’ve been giving away more than 2,500 tickets per game over an extended period you’re in a very dangerous place. Case study after case study clearly shows when sports franchises giveaway a significant percentage of their tickets over a long period of time they’re devaluing the value of their tickets. The challenge the Coyotes face, the horse has long left the barn.

The Edmonton Oilers Tuesday proved why they’ll never become the Montreal Canadiens. Le Bleu-Blanc-et-Rouge (better known as Les Canadiens) have won 24 Stanley Cups. The Canadiens have retired 11 different numbers (honoring 12 different players). Before retiring Mark Messier’s number 11 Tuesday, the Oilers had retired the numbers for five other Oilers led by the greatest Oiler ever #99 Wayne Gretzky. The others who had their numbers retired prior to last Tuesday’s night honoring Messier: Al Hamilton, Paul Coffey, Jari Kurri and Grant Fuhr. The latter three were teammates on four of the five Stanley Cups the Oilers won with Messier and Gretzky. If Wayne Gretzky will remain the greatest Oiler and at least for argument sake the greatest player in NHL history, Messier is clearly the second greatest Oiler ever.

Tuesday night, the Oilers managed to embarrass themselves, their ‘great’ history and take away from what should have been one of the greatest nights in their organization’s history. It was a clear case of a sports franchise not fully appreciating how forces can combine to create a perfect storm of humiliation.

It’s a given the planning and execution of a night honoring someone of Mark Messier’s stature had to be at least a year in advance. Messier retired just after the NHL and the NHL Players Association reached their new CBA and moved forward with the 2004-05 season. How important a hockey player was Mark Messier in Oilers hockey history? Try imagining how the Miami Dolphins handled the retirement of Dan Marino, the Denver Broncos John Elway, the Baltimore Orioles Cal Ripken – there are very few opportunities to recognize players like Mark Messier, the Oilers were fortunate to have both Gretzky and Messier to honor. With all due respect to the other Oilers who have had their Oilers numbers retired, none represent what Gretzky and Messier have to the Oilers.

The Oilers slipped on more than just a banana when in their advance planning for the night honoring Messier they failed to understand that the ceremony was on the same day as the NHL trade deadline. The Oilers who traded both Messier and Gretzky, Tuesday traded the face of their franchise Ryan Smith to the New York Islanders. Four hours before the Oilers and a grateful city were set to honor the second greatest player in franchise history, the Oilers traded the soul of their team Ryan Smith. Unable to reach a contract extension with Smith and facing the very real probability of losing Smith to free agency at seasons end (and getting nothing in return), the Oilers waved the white flag on their season and traded away Smith. Which brings this back to how badly the Oilers managed to handle the retirement of Mark Messier’s number.

Again a night as special as last Tuesday had to have been planned for more than a year. A plan that called for the Phoenix Coyotes to be in town for that game. Wayne Gretzky is the Coyotes coach, the Oilers needed to ensure Gretzky would be in attendance. Here’s where the Oilers have to be held accountable for their terrible timing. The Coyotes made two trips to Edmonton this year. Who in their right mind would consider scheduling a night honoring a player with Messier’s impact on the same day as the NHL’s trade deadline? This has nothing to do with whether or not the Oilers made the right decision of trading Ryan Smyth and everything to do with how badly they managed to handle what should have been a perfect evening.

The Montreal Canadiens, the New York Yankees, the Chicago Bears, the Boston Celtics would have never considered scheduling a night honoring the second most important player in their teams’ history on the same day other events (a trade deadline) might in anyway impact that evening. It is inexcusable any sports franchise would have made the egregious mistake the Oilers made. That’s what separates greatness from mediocrity.

The New York Daily News Sunday reported on how the New York Rangers handled the ‘homecoming’ of Dave Checketts, and the former Garden general counsel Kenneth Munoz and former MSG Network president Mike McCarthy. Checketts had severed as Madison Square Garden’s President and the President of the Rangers and New York Knicks more than a decade ago. Saturday, the Rangers honored former goaltender and longtime MSG hockey analyst John Davidson before Saturday’s Rangers St. Louis Blues game. Checketts now owns the Blues and Munoz and McCarthy are both part of the Blues management team.

According to the Daily News, the Rangers who made a suite available to Davidson and his family told Checketts, Munoz and McCarthy they weren’t welcome in the Davidson suite and the Rangers wouldn’t sell the trio tickets.

"For some reason, we're not welcome, "McCarthy said, making his way to his seats with his teenage son. The reason, according to sources on both sides, was that the long-strained relationship between Checketts and Garden chairman James Dolan has become downright hostile since last summer. That was when Checketts and the Blues attempted to hire one or more Garden employees, angering Dolan. An unnamed source told The Daily News Dolan told one of Checketts' associates that he would consider escorting him out of the building if he attempted to attend the game.

Remember the Daily News used unnamed sources and a Garden spokesperson did tell the News: "We gave Dave and the Blues owners the same treatment any other owners would receive," Garden VP Barry Watkins said. "We didn't revoke anything. As far as anything above and beyond that, they were able to purchase tickets just like anyone else."

Well Watkins version of the story and how people buy tickets to Rangers game may be very different from how the average hockey fans buys tickets. The Daily News reported that Checketts got his tickets from St. Louis-based Anheuser-Busch - five rows behind the Rangers' bench. Even better -- McCarthy, a partner in the Blues' ownership group, was left to go on and the Rangers' Web site to purchase tickets from season subscribers who were selling them for the sold-out game.

"Yeah," McCarthy said in the Daily News report. "No go. It was a no-go. So, we had to get creative. Dave went through A-B (Anheuser-Busch). And the Rangers have a site ... on their Web site ... season-ticket holders who turn their tickets back in for resale. You can get tickets that way.

"So, I was up on the glass, right next to the penalty box. I felt very welcomed and unwelcomed at the same time."

The good (the Penguins look like they’re staying in Pittsburgh, the bad (the Coyotes and the Oilers mishandling of what should have been an error free night) and the ugly (the Rangers management acting like children in their handling of the teams’ former management team). The good, the bad and the ugly – the National Hockey League.

For this is Howard Bloom.

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