Friday, June 15, 2007

Jim Balsillie – life imitating art

There’s a classic Seinfeld episode called "The Bookstore". It aired in Seinfeld’s ninth and final season (the 17th episode). In a classic take on what happens when the cart leaves the barn ahead of the horse, the episode ends with Kramer having lost a contest is forced to pull Newman uphill in a rickshaw. Kramer quickly gives up pulling the rotund Newman uphill, disaster ensues, Newman heading downhill towards his certain demise in an out of control rickshaw. Over the last 48 hours the Jim Balsillie’s purchase of the Nashville Predators is looking a lot like that classic Seinfeld scene – with Balsillie replacing Newman in the runaway rickshaw.

In the last few days one NHL Board of Governor has described Balsillie as a ‘clown’, the NHL has made it clear it doesn’t want to see Jim Balsillie anywhere near next week’s NHL Board of Governors meeting, Craig Leipold the current owner of the Nashville Predators admitted he has no idea what Balsillie is doing and there are enough innuendoes and lawsuits brewing to realize if nothing else as is so often the case lawyers are certainly going to be including Jim Balsillie on their Christmas list.

"We are under the impression that the sale is on the agenda for the June 19 executive committee meeting and the June 20 [governors] meeting and we have not otherwise been informed by the NHL," Balsillie's lawyer, Richard Rodier said in a Globe and Mail report before the sideshow Balsillie created Wednesday. "Since we are not doing anything different than Boots Del Biaggio has done in having a lease agreement with the Sprint Centre in Kansas City, we fail to understand why the NHL would have any problem.

"We are simply making contingency plans since the team would need a place to play in the event that the lease in Nashville were to terminate prior to its expiration date and nothing else."

Not only has the league insisted Balsillie and Rodier be no where near New York next week, but they’ve made it clear they have no idea when (or if) they’ll be ready to talk about Jim Balsillie’s ‘potential’ ownership of the Predators.

Wednesday evening the City of Hamilton’s city council reached an agreement with Balsillie whereby if he buys and moves the Predators he’d move the franchise to Hamilton’s Copps Coliseum. In a related move that is sure to upset NHL officials Thursday morning Balsillie began accepting deposits for season tickets for a team Balsillie doesn’t own and a team still holding a valid lease in Nashville.

"If you join a club or a fraternity, it is a bunch of people who have to work together in a partnership," the governor told The Globe and Mail. "Sometimes you have to give up what you want for the greater good of the league. This is not the way to come in [to the NHL].

"In my travels, I've already had people, unasked, say, 'Who is this clown?' I've had three clubs mention this to me."

But if the NHL was interested in seeing how Hamilton area NHL fans would respond to the opportunity to make deposits for NHL season tickets the response Thursday morning and afternoon was overwhelming. Hamilton’s Copps Coliseum seats just a shade over 17,000. By 6:00 PM Thursday evening according to Canada’s TSN, there have been more than 4700 deposits for lower bowl seats and almost 2500 deposits for upper bowl seats. And interested fans were asked to make $1,000 deposits for lower bowl seats and $500 for upper bowl seats. As well the buildings suites are completely sold out. Deposits of $5,000 each were required to reserve a suite. More than 60 suite deposits were taken before Balsillie’s represents cut off suite sales. All in what amounts to the first eight hours ticket sales in excess of $6.25 million were generated for an NHL team that may never be.

What is becoming increasingly clear Jim Balsillie could care less what anyone thinks of his brazen efforts to buy and possibly move the Nashville Predators. Initial report had Balsillie paying Leipold $200 million for the Predators that soon increased to a reported $220 million, with the figure now being revised to $238 million. The unnamed NHL board of governor member can say whatever he believes about Balsillie’s business acumen but if anyone pays $238 million for the Nashville Predators it will dramatically increase the value of every NHL franchise. If the Predators are worth $238 million then it’s safe to assume the current financial valuation of the Toronto Maple Leafs (pegged by Forbes to be $350 million last year) will increase to more than $600 million.

Ironically the Maples Leafs are at the center of this story. Currently the Leafs are the only NHL franchise within the “Golden Horseshoe” an area around Toronto rich with corporate dollars and hockey fans. All told more than 7 million people live in a region underserved with only one NHL franchise. The NHL has become silent on a few key matters relating to any potential move Balsillie may or may not make. Those questions include if a franchise wants to move and that teams’ relocation puts it near another NHL franchise is there a protected area. And just as important in terms of revenue generation (at least to a team interested in moving close to Toronto what is franchises protected television region?).

It had been widely believed (and still is) that an NHL franchise holds territorial rights of 75 miles. Certainly two cases the NHL can use if and when the matter reaches the court(s) is the move of the Colorado Rockies (the NHL team) from Denver to East Rutherford, New Jersey in 1982 and the NHL’s expansion into Anaheim in 1994. In both cases each team moving into a ‘protected region’, had to pay a relocation fee in excess of $50 million. And in each case those fees were negotiated between the teams’ wanting to move and the teams’ in those regions.

"You get in the club and everyone thinks you'll be okay, but you turn out to be a pain in the ass," the governor said. "This guy is showing he is a pain in the ass before he even gets in the club."

If the Toronto Maple Leafs and Buffalo Sabres territorial rights are an issue (Hamilton falls within the radius of both teams protected areas) an even bigger obstacle that needs to be dealt with the local TV market. Its unlikely the Sabres will have a great deal to say about Balsillie’s interest in selling local TV rights in Southern Ontario but as history has shown, Maple Leaf Sports and Entertainment, the parent company for the Toronto Maple Leafs, are an entirely different matter to consider.

The Ottawa Sun’s Rob Brodie recalled what happened when the Ottawa Senators joined the NHL in 1992 and how the Maple Leafs reacted when it came to local television rights. When the Ottawa Senators arrived in the league, the NHL drew a line from roughly Belleville to Pembroke and declared anything east of there the Senators regional broadcast territory.

The Toronto Maple Leafs kept the rest of Ontario, but anyone in this part of the province knows all about the griping and bitching that's caused over the years among that Original Six franchise's fans who wound up on the wrong side of the line.

Imagine what might happen if that pie was split three ways. They've been fighting that fight in Ottawa for 15 years now, and it's still a hopeless cause for the Senators organization.
But the answer to that TV dilemma might already exist. The Senators' broadcast territory actually stretches east through Quebec and Atlantic Canada, with a good chunk of it shared with the Montreal Canadiens. How amicable the discussions were to make that happen, Bordie wasn’t sure of. But the point is, it's something that could put the brakes on a Hamilton-Toronto battle.

Meanwhile in Nashville, where the team is currently located, the man who currently owns the Predators Craig Leipold must be wondering what next from the man he hopes to sell his team to – Jim Balsillie.

"I did not see the application for ownership that was submitted by Mr. Balsillie to the NHL, nor was I made aware of its contents, prior to its submission," Leipold said in a prepared statement. "So I was surprised to learn that the application contained a conditional request to relocate the franchise.

"Prior to signing the agreement to sell the franchise, I met with Mr. Balsillie and communicated the relevant terms and conditions contained in the Predators lease, and that the subject of relocation was not part of the sale conditions. He indicated he understood."

Leipold reminded The Tennessean that it was important to remember that Balsillie's request is a contingency plan based upon the lease being terminated early.

"As we stated on May 24 when we announced the franchise sale, as long as the lease is in effect and the market is supporting the team, the franchise will remain in Nashville," Leipold said in the statement.

When the National Hockey League awarded the City of Nashville a franchise, the Predators ownership group received a very lucrative deal. The City of Nashville paid 31.25% of the $80-million fee to join the league. The city also absorbs operating losses from the arena, despite the fact that the teams’ facility is operated by a subsidiary of the team.

In Nashville where the next stage of this drama needs to play itself out the “locals” aren’t very happy and are making it clear to anyone who will listen they’re not going to lose the Predators without one hell of a fight.

Nashville Councilor Jamie Isabel told the Toronto Star the city of Nashville has no intention of allowing the Predators to move and if need be are prepared (the city and its taxpayers) to purchase whatever tickets are needed to top off the reported 14,000 ticket threshold.

"The Predators have created a lot of good buzz and they've been good for the city," he says. "They've created a lot of business for the companies and restaurants around the arena. Every year interest in the team has grown. I really don't see this team leaving."

As is often the case when it comes to professional sports and public subsides, Isabel may be only telling part of the story. Charlie Tygard, a Nashville city councilor who's in charge of a committee to help bolster local tourism, told the Toronto Star the Predators have been "fantastic from an economic standpoint." Nevertheless, Tygard says he thinks the team's future is uncertain.

"We're in an election year and we're going to have a new mayor in September," Tygard says. "There's five candidates and some of them have been campaigning on a platform of no higher taxes."

And as The Toronto Star’s Damien Cox reported Thursday, a group of NHL governors he spoke to (not the ones who called Balsillie a clown in The Globe and Mail) believe Balsillie will be approved as the Predators new owner.

"(Balsillie) is an honorable guy and he's got the money. That's it. He passes," said one respected NHL executive, who said his owner wouldn't get in Balsillie's way.

Moreover, once in control of the Preds, it seems evident that Balsillie believes he can relocate the club to the city of his choice.

"Based on my own research, it would be difficult to stop him doing whatever he wants to do," said the governor of a U.S.-based club.

And if Balsillie is looking for additional support Ontario premier Dalton McGuinty getting ready to call an election suggested he’d be ready to help facilitate a move.

"We brought the Senators to Ottawa, and I tell you, the psychological component alone (is great)," McGuinty said. "It doesn't matter what happened at the office – if the Sens have won that night, you're feeling great."

The facts such as they are:

Jim Balsillie has made a blow the cover off the walls offer for the Nashville Predators. At $238 million the financial valuation for every NHL franchise would increase.

As much as Balsillie is offering for the Predators and as great an impact as that purchase would have on the NHL’s bottom line, Balsillie’s operating style has to be scaring NHL team owners. Certainly Jim Balsillie is a nightmare for NHL Commissioner Gary Bettman. Bettman’s powerbase could be challenged by Balsillie’s recent moves. Jim Balsillie isn’t the bull in a china shop, he’s King Kong run amok in a china shop.

The National Hockey League’s expansion and moving of franchises into the American southeast has been a complete disaster. The Predators have lost a reported $70 million since the city was awarded an NHL franchise. There is no future for an NHL team in Nashville.

Despite suggestions by NHL Commissioner Gary Bettman is mildly interested in more Canadian franchises had better accept that if the NHL has a future in 30 let alone 32 markets (last week’s talk of NHL expansion) there had better be at least 10 teams in Canadian markets. And the only way there might be ten teams in Canada would include not one, not two but three teams in the so-called Golden Horseshoe, and teams in Winnipeg and Quebec City.

The Hamilton ticket sales for the first eight hours – 7,200 season tickets sold, 60 suites = $6.25 million.

Along with Nashville, Phoenix, Raleigh, Atlanta and Miami are all home to NHL teams with uncertain future. Despite the Tampa Bay Lightening success in the aftermath of their 2004 Stanley Cup and the Anaheim Ducks success they’ll enjoy from winning this years Coupe Stanley anywhere between five and seven NHL teams are going to be forced to move from their current locations in the next decade.

It has been suggested before ands it will be said again – while Jim Balsillie is right in what he wants to do, he’s gone about the process in all the wrong ways. Instead of being as quiet as a church mouse, his good intentions aside he’s being his own worst enemy with his actions. The greatest irony – someone else may benefit from all of the work Jim Balsillie is doing, with Balsillie based on his actions being forced to sit on the sidelines.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: The National Post, Globe and Mail, The Toronto Star and The Tennessean

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