Thursday, June 07, 2007

One step up and two steps back

The National Hockey League season ended Wednesday night with the Anaheim Ducks winning their first Stanley Cup in franchise history. What Gary Bettman didn’t need to hear as he presented the Stanley Cup to Ducks captain Scott Niedermayer and the Conn Smyth Trophy to news that Canada's Competition Bureau is investigating the NHL’s franchise relocation policies.

The news follows last weeks confusing media reports regarding the Nashville Predators. NHL commissioner Gary Bettman spoke with the media before game one of the Stanley Cup finals suggesting in no uncertain terms the Predators were staying in Nashville. Late last week Hamilton officials announced they had reached an agreement with Kitchener/Waterloo native Jim Balsillie whereby Balsillie had secured the rights to place an NHL franchise in Hamilton’s Copps Coliseum.

In an era where any sign of a mixed message is the last thing professional sports leagues need in delivering a concise consistent message the NHL (largely because of Balsillie’s actions) is suffering at a time when the league’s communications should be shinning through. Meanwhile the league with struggling teams in the American southeast appears set to expand to both Las Vegas and Kansas City with an announcement coming as early as the next few weeks.

Bettman has done his best to deliver the NHL’s message regarding the Predators future in Nashville throughout the Stanley Cup finals.

“What's going to happen with Nashville? We have an application by the club for Craig Leipold to sell the Nashville Predators to Jim Balsillie. That is a process that requires us to do some more due diligence, even though we did some in Pittsburgh, we have more to do.

“It will require a three-quarter approval by the Board of Governors in terms of whether or not Mr. Balsillie as an owner and this transaction should be approved.

“The Predators have a lease that goes, I think, for another 14 years, give or take. There is a possibility that the lease could terminate in a year if certain things do or don't happen. But as far as we're concerned right now, Mr. Balsillie's request for approval and the transaction related solely to him buying the Nashville Predators subject to whatever lease is in effect, and if, in fact, at some point the lease is terminated and he seeks to relocate the franchise, that is something that would have to be considered under the league's constitution and bylaws at the time.

“There is a lease, and sports leagues aren't in the practice of letting teams violate their leases. I believe Mr. Balsillie understands that and it's conceivable that this team will be in Nashville for as long as its lease, however long that may be.”

Bettman offered Nashville hockey fans similar sentiments Sunday in an interview with The Tennessean – the Predators have a lease and if the terms and conditions of that lease are met NHL hockey is staying in Nashville – end of discussion.

Then in the midst of the Stanley Cup finals during the teams’ travel days between Anaheim and Ottawa last week for some inexplicable reason Balsillie felt the need to renew an understanding the prospective Predators owner has with the city of Hamilton regarding the use of Hamilton’s Copps Coliseum. Thursday a company owned by Balsillie reaffirmed their interest in securing the rights to an NHL franchise playing games in Hamilton.

Terry Whitehead, a Hamilton councilor, told The Globe and Mail that he had met with a representative of Mr. Balsillie last Friday. "We had an original agreement in 2004 for an option and we used that as a benchmark with intent to enter further discussions.

However, Mr. Whitehead added in The Globe and Mail report: "I wouldn't be buying my [hockey] tickets any time soon because a lot of us are skeptical about how the NHL views this. Our fight is not with Mr. Balsillie, but the NHL is always a concern."

Was it prudent for Balsillie to meet with Whitehead and reaffirm his interest, of course it was. Did it make any sense for the meeting and the news that Hamilton’s city council has created a subcommittee to meet with Mr. Balsillie and his representatives? Of course, but where Balsillie has sent warning flags that he is a maverick owner, potentially someone who will do damage and harm to the good of the NHL.

What Balsillie should have done is to reestablish his interest in Copps Coliseum but at the same time making sure his intentions are known to as few people as possible. The news ending up in every Canadian paper and as a result being picked up by the wire services serves only to embarrass the NHL and in particular NHL Commissioner Gary Bettman. How much faith could anyone have in Bettman’s word concerning the Predators future in Nashville when the perspective owner is negotiating an arena deal in another city?

Wednesday the NHL media’s collection service must have done a double take when The National Post’s Theresa Tedesco offered a front page report suggesting Canada’s Competition Bureau is “believed to have launched an inquiry into the franchise relocation practices and policies of the National Hockey League amid speculation that one of its financially-strapped teams in the United States could be relocated to southwestern Ontario.”

If the NHL had serious reservations about Balsillie, the last news a professional sports league wants to read concerns any government department looking into the business practices of that league. Marilyn Nahum, a spokeswoman for the Competition Bureau said in The National Post report the regulator “can't comment on investigations or confirm that an investigation is under way" because the Competition Act requires probes to be conducted in private.

However, sources told the Post the Competition Bureau is reviewing a section of the NHL's constitution that deals with the "territorial rights" of the league and its member clubs. According to Article 4.1 of the league's constitution, "each member shall have exclusive territorial rights in the city in which it is located and within 50 miles of that city's corporate limits," which is known as the club's "home territory."

Section 4.2 of the NHL's rules sets out an absolute prohibition over the proposed relocation of existing franchises by declaring that "No member shall transfer its club and franchise to a different city or borough."

At the same time, section 4.3 also grants each team exclusive control over its "home territory," and each club can prohibit hockey games from being played in its "home territory" without their consent.

More importantly, section 4.3 states that "no franchise shall be granted for a home territory within the home territory of a member, without the written consent of such member." In other words, existing hockey teams have the individual right to veto the relocation of other clubs within an 80-kilometre radius of their own market.

This isn’t the first time Balsillie’s business dealings with the NHL have ended up on the front page(s) of one of Canada’s national newspapers. After Balsillie bid to buy the Pittsburgh Penguins failed, unnamed sources told the National Post Balsillie’s bid to buy Mario Lemieux’s Penguins fell apart after the league put in a set of terms and conditions regarding the proposed sale that hadn’t been considered. NHL deputy commissioner Bill Daly made it clear in responding to the December National Post story the NHL hadn’t added any last minute clauses and that Balsillie knew all of the terms and conditions.

Either The National Post has some of the best sources when it comes to the business of the National Hockey League or it’s at the least curious how two stories relating directly to Jim Balsillie’s proposed purchase of two different NHL franchises ended up on the front page of a national newspaper.

Last week when the Stanley Cup final shifted to Ottawa for games three and four rumors floated throughout the media that the NHL was looking at expanding by two franchises. The two franchises would play in the NHL’s western conference with Detroit and Nashville moving to the eastern conference. Film and television producer Jerry Bruckheimer would own one team in Las Vegas and William "Boots" Del Biaggio III who remains focused on securing a team for Kansas City’s tenant less Sprint Arena (scheduled to open in October) who be awarded a franchise for Kansas City. Each man would pay a $300 million franchise fee.

NHL deputy commissioner Bill Daly in a widely circulated email confirmed the NHL has had ‘discussions’ with interested parties in securing an NHL franchise for Las Vegas and Bruckheimer was one of those parties. While not shooting down the expansion talk Daly admitted the NHL’s Board of Governors have yet to discuss expansion, an issue Bettman reiterated Wednesday night. Another source told The Canadian Press expansion to Las Vegas could be at least four to five years away. Before anyone in Sin City gets too excited and tries to buy NHL season tickets, hopefully the NHL is considering the following.

There are at least five or six current NHL franchises that need to be either operating much more effectively off the ice or it is in the best interest of the owners of those teams to consider relocation. Those teams include: the Nashville Predators, Florida Panthers, Atlanta Thrashers, Carolina Hurricanes and Phoenix Coyotes.

Gary Bettman’s sole focus when it comes to the state of members teams is to ensure the 30 current NHL teams are all doing well both on and off the ice. It’s a pretty safe bet that’s exactly what Bettman is trying to do, but the lure of expansion fees is an elixir few sports owners can turn down.

The current NHL collective bargaining agreement ensures the players receive 54 percent of all hockey related revenues. One exception to that 54 percent is expansion fees. Two teams, $600 million would result in each of the NHL’s current NHL owners receiving $20 million. NFL owners may be wary of expanding afraid to share in the league’s multi-billion national TV agreements.

There is no such fear among the Lords of the Rink. While it may be in the best interest of the NHL to relocate teams to Las Vegas and Kansas City, you can bet the 30 NHL owners are licking their chops in anticipation of a potential $20 million windfall. Clearly in the coming days, weeks and months Gary Bettman is facing what clearly is in the best interest of the league overall (the 30 current teams doing well) and what the owners consider to be in their best interests -- $600 million in expansion fees. And let’s not forget the firestorm quickly developing around Jim Balsillie. The Anaheim Ducks may have ended the 2007 NHL season Wednesday night but the game(s) are only beginning for Gary Bettman.

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

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