Thursday, March 08, 2007

Leveraging your future (arena/stadium games), playing with a cities affections


In the coming days, as early as today, likely no later than Friday future of the Pittsburgh Penguins is going to play itself out in Pittsburgh. In South Florida, Miami specifically in the coming months, certainly no later than a year from now a similar drama will wrap up involving the Florida Marlins. Similar stadium/arena games are either well underway or on the horizon in New Orleans, San Diego, Seattle and Sacramento. What ownership has clearly missed, the rules of the game have shifted dramatically in the last decade. And why are sports teams owners making the mistakes they are, the years of using other cites as leverage appears to be coming to an end. It’s one thing to suggest you want to move your sports franchise; it’s an entirely different matter when you don’t have a city to move your team too.

After building towards the framework of an agreement to build a new arena for the NHL Pittsburgh Penguins, Penguins owners Mario Lemieux and Ron Burkle sent a letter to anyone who was interested (the State of Pennsylvania, the City of Pittsburgh and “others”) saying the Penguins believe they had reached an impasse in their negotiations to replace the 46-year old Melon Arena. Alarm bells went off everywhere, but the Pittsburgh Tribune Review asked their readers if they had had enough of the Penguins and the “games” the Penguins are playing, the demands the team is making. They’ve billed it as “the never-ending story”, when last checked Pittsburgh residents have filled six pages of comments, many suggesting the Penguins should take a hike.

Just where does Mario believe he’s going to be able to take his Penguins and more importantly NHL commissioner Gary Bettman should be very afraid the silence that has been coming from the so-called interested parties who have said they’d be interested in an NHL franchise. Let’s remember this, the Penguins aren’t just any NHL franchise, they’re a team that includes four or five potential franchise players led by Sidney Crosby. You buy the Penguins and you’re bringing an instant Stanley Cup contender to your town. Wednesday Burkle visited Las Vegas Mayor Oscar Goodman. Let’s hope Burkle’s rationale for visiting Sin City had more to do with the show girls (eye candy) Goodman traveled with throughout the recent NBA All-Star Weekend than gauging if they’re any real interest in Las Vegas and a National Hockey League franchise.

The NHL and Las Vegas are a terrible fit. David Stern made it clear the Thomas & Mack Center wasn’t fit for an NBA franchise and would have to be replaced (after NBA betting was removed from the sports books) before an NBA team moved or place an expansion franchise in Sin City. If the Thomas & Mack Center isn’t good enough for the NBA what makes it acceptable to the NHL. The NHL may no longer be considered a Tier I major sports league by many, but the optics of moving an NHL franchise from one bad facility to another bad facility is embarrassing. In fact, by taking the time to visit Las Vegas, Burkle and the Penguins embarrassed themselves and the NHL.

Burkle’s next visit may be to Houston. Les Alexander the owner of the NBA’s Houston Rockets visited NHL commissioner Gary Bettman 21 months ago (May 2005) with the expressed purpose of making clear to the National Hockey League he was very interested in bringing an NHL franchise to America’s fourth biggest market. Alexander told The Houston Chronicle on November 3, 2005 he was ready to move forward with his plans to bring an NHL franchise to Houston’s Toyota Center.

"I am trying to get a team. I am trying," Alexander said. "I went to see the commissioner. I told him about my interest. I can't disclose teams, but I've been talking to people (in the NHL) and to investment bankers.

"I had conversations a month ago with an investment banking firm. I'm looking to buy a team. So people know my interest. You hear from time to time that teams might be for sale, then it changes or something else happens. But my interest is out there."

Alexander is a lot like the balloon you might see flying over the state fair – he’s full of hot air and little else. Since Alexander’s “so-called” visit to see Bettman he hasn’t once discussed any efforts to bring an NHL team to Houston. Houston would be the perfect city for the Penguins to move too, but Alexander’s complete silence relating to his efforts (non efforts are more descriptive) to bring an NHL franchise to Houston should send Burkle a message in no uncertain terms, fine if you want to move your team to Houston but I’m not interested. Lemieux and Burkle are looking to sell the Penguins once they’ve either secured the necessary financing for a new arena or sold the team to new owners in another city.

A report in Wednesday’s Houston Chronicle made it clear not only has Alexander lost whatever interest he once had in an NHL franchise, but reminded the Penguins Alexander is the one who controls the Toyota Center where the new state-of-the-art arena the NBA Houston Rockets call home. It would make no sense whatsoever for the Penguins (or any NHL team) to move to Houston unless Alexander wants to buy the team. He’s the “master of his own domain”, he’s the man in control in Houston and he doesn’t appear interested.

However if you’re playing the “leverage” game that Lemieux and Burkle are, you welcome the kind words Mayor Bill White's chief of staff, Michael Moore and other civic leaders offered Lemieux and Burkle in the pages of Wednesday’s Houston Chronicle.

"We're interested in them if they're interested in taking the next step," Moore said. "We've left it in their court."

Added influential Houston Sports Authority board member Billy Burge: "We'd love to sharpen our pencil and put something together for them if Houston is on their radar screen."

Again they’re shooting blanks – Lemieux and Burkle can talk about Houston, but Houston doesn’t deserve to be taken seriously at this time if ever. If Les Alexander was really interested in bringing an NHL team to Houston, the Penguins represent a once in a lifetime opportunity. Cross him off any list once and forever.

What about Jim Balsillie, the Canadian businessman who signed a letter of agreement to buy the Penguins? Balsillie stepped away from the opportunity on December 15, 2006. Balsillie may still be interested but these days he’s up to his neck in “challenges” with his decision last week to resign as co-CEO of Research In Motion on March 5, 2007. Balsillie is reportedly worth billions; in the near future he’ll be focusing his life on his company (RIM) and ensuring the future of Blackberry, the very popular product RIM produces. Forget about Jim Balsillie and any real chance he’ll buy the Pittsburgh Penguins. Nonetheless Balsillie offers a little more leverage for Lemieux and Burkle, but not a great deal more.

The only real option Lemieux and Burkle has remains William “Boots” Del Biaggio and the Kansas City market.

Del Biaggio made a serious bid to buy the Penguins in 2005. Penguins’ owner Mario Lemieux took the team off the market soon after the franchise drafted Crosby. Del Biaggio, a minority-partner in the San Jose Sharks, has signed an agreement with AEG to own and operate an NHL franchise when one becomes available. AEG have built The Sprint Center, a new arena without a major tenant set to open in time for the start of the 2007-08 season.

The National Hockey League expanded to Kansas City before the start of the 1974-75 season. Two years later the franchise moved to Denver, where the team became the Colorado Rockies. The Rockies moved to New Jersey before the start of the 1982-83 season. The NHL has failed once in Kansas City, where an NBA franchise also failed. With a new arena and Sid the Kid, and if William “Boots” Del Biaggio is ready to write a check for at least $175 million, the Penguins could be on their way to Kansas City.

Before anyone in Kansas City starts to get too excited, the first order of business is for the Penguins to make sure the offer that was made by the Anschutz Entertainment Group, which will manage the new Kansas City, for the $276 million Sprint Center that’s scheduled to open in October still stands. The framework of that agreement suggested the Penguins would play rent-free in the new building and would share in all arena revenues with no up-front costs.

Burkle according to a report in The Pittsburgh Tribune Review Wednesday evening were traveling to Los Angeles to meet with Tim Leiweke the President of the Anschutz Entertainment Group, the owners of the Los Angeles Kings and the management company for Kansas City’s Sprint Center. What’s strange, why hasn’t “Boots” said anything (has he caught the same bug Les Alexander has when it comes to the NHL)? It would be prudent for “Boots” to at least suggest he’s still interested in Penguins. That said, the Sprint Center opens in October and needs a tenant. If the deal Leiweke offered to Lemieux and Burkle on January 4 still stands, well they may have to own the team but at least they’ll have a new building to play in.

In South Florida Marlins owner Jeffrey Loria continues to play his version of build it or I’ll leave. Let’s be very clear about one issue, Major League Baseball does not have a long-term future playing in Dolphins Stadium. MLB should have never expanded to South Florida without a plan in place to build a baseball stadium. If it costs more than $300 million to build an arena, it will costs more than $550 million to build a new baseball stadium in the Miami area.

If Mario’s options where he might be able to move the Penguins to (or offer as leverage) Loria’s options regarding the Marlins are even more limited. In 2006 Loria dispatched Marlins president David Samson (his son-in-law) to San Antonio, Las Vegas, Portland and Charlotte in hopes of finding a city ready to build and then give him the keys to a new $250 million taxpayer built baseball stadium. The only seriously interested city has been Las Vegas and Major League Baseball made it clear several months ago they have no intention of allowing Loria to move the Marlins to Sin City. Loria who wants to keep the team (unlike Lemieux and Burkle who intend to sell the Penguins) has nowhere he can move his team to.

They’re getting close to the short straws in Miami. Several suggested stadiums concepts have come and gone and the latest appears set to die as well. Earlier this week the University of Miami Hurricanes football program suggested they would consider moving their home games from the Orange Bowl to Dolphins Stadium. The ‘Canes are the Orange Bowl’s last major tenant. If the Canes leave the Orange Bowl the City of Miami will have to decide what to do with one of football’s more cherished but aging facilities.

The Orange Bowl in located in Miami’s “Little Havana” will be added to the list of potential Marlins stadium sites in the coming days. The Marlins looked at building a baseball stadium in the area around the Orange Bowl in 2004 and 2005 but gave up those plans when the costs of purchasing the needed land around the Orange Bowl as factored into the cost of building the stadium.

"Let's hope and pray the Hurricanes do move to Dolphin Stadium and put the Marlins at the Orange Bowl," County Commissioner Joe Martinez told The South Florida Sun Sentinel.

The City of Miami has in place a $170 million plan to renovate the Orange Bowl. Thus far the city has raised $84 million, including $50 million from the 2004 sale of the Miami Arena. The projected cost to build the Marlins stadium has been pegged at $490 million. The good news, if the Canes move to Dolphins Stadium the Marlins will have the land they need to build their stadium and potentially a fair percentage of the needed financing in place. The bad news, while $84 million may be a step in the right direction to a sports team owner it’s nothing more than a step forward.

But if you’re looking at whether or not the Penguins and Marlins are going to move, where exactly will they be able to move too? In the last five years, maybe even the last decade the stadium/arena game has changed ‘somewhat’. If a professional sports franchise wanted to build a new arena or stadium before the turn of the century professional sports teams held cities and taxpayers hostage demanding taxpayers build sports facilities or they would move their team to a city that would meet their needs. Walter O’Malley used that logic to move the Dodgers from Brooklyn to Los Angeles, the infamous Midnight Mayflower move of the Colts from Baltimore to Cleveland, and Art Modell ripping the heart of Cleveland when he moved the original Browns to Baltimore.

Between 1958 and 1997 (the year the Dodgers and Giants left New York for California) 35 sports franchises (Major League Baseball, National Football League, National Basketball Association and National Hockey League) moved at least once. In the last ten years three teams have moved. Sports have grown into a half trillion dollar industry but by all appearances teams are not moving much if at all anymore. And the reason -- the rules of how the stadium/arena game is played have dramatically changed. That’s not to suggest owners aren’t trying to keep the rules in their favor, just that taxpayers have had enough.

The days of holding a city hostage of being able to leverage the ‘reported’ interest of another city wanting to steal a team by offering what a teams current home won’t offer just doesn’t exist anymore. When Mario Lemieux sits down later today to meet with Pittsburgh civic leaders he had better consider what his real options are. Lemieux and Burkle can suggest they’ll ‘aggressively’ pursue their options, but those options are limited at best, and for Jeffrey Loria they don’t exist. It’s fine to play ‘blind man’s bluff; but you had better understand the guys you’re playing the game with know you’re bluffing. And you had better be careful you don’t alienate your most important stakeholders – the ticket buying public, your fans.

For SportsBusinessNews.com this is Howard Bloom. Sources cited and used in this Insider Report: The Pittsburgh Tribune Review and The Houston Chronicle

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