Bettman, Moyes and Balsillie Tug-o-war Continues

Part 2 of 2: The Winnipeg Contingency Plan

Now onto what this means for Manitoba NHL fans. Winnipeg is outside territorial rights of all existing teams, so this becomes a non-issue. Based on the past relocation of Atlanta to Calgary in 1980, and all the past history listed above, there will be no relocation fee to move clubs anywhere including Winnipeg. So the last remaining question is “Is there a lost expansion opportunity cost to the NHL owners, should a team relocate to Winnipeg first?” If not, then an owner for the purchase price alone can set up shop in the Golden Boy’s city. If so, then how much extra would this cost?

Certainly a case for extra fees can be made for any city that has been rumoured for expansion in the past. However, the leading contenders for expansion for the past 3 years have been Hamilton (mainly due to Balsillie’s ever present push), a second Toronto team, Waterloo (also mainly due to Balsillie’s ever present push), Las Vegas and Kansas City. Winnipeg, Houston, Portland and Seattle all seem to be listed as potentials, but they are simply not mentioned as often by both the NHL and the media as most probable for expansion. Hartford, Oklahoma City and Quebec City all seem to be C list at best.

Winnipeg doesn’t score the same as all these potential US destinations in terms of locations that are “glamourous” or that will enhance prospects for the cash cow also known as a US TV network deal. Coupled with the fact that those Southwestern Ontario destinations are also at the media centre of Canada and it gets harder to believe that the NHL would be expanding to Winnipeg before most of these markets.

Now that was perception, so what is the reality? The revenues of the 6 existing Canadian teams are outperforming the US clubs by a wide margin and for several years. The Manitoba economy is one of very few in North America that is even-keeled during a bad recession, with no real estate value correction nor meltdown. Unemployment is actually dropping while the rest of the continent is heading the other direction and can only hope for such good news. History shows that the fanbase and corporate community has demonstrated support of the now-departed Jets, the current Moose and many international hockey events. So it seems in practical terms that placing a team in Manitoba is on sound business principles offering the NHL a soothing confidence lacking in many existing markets.

Although relocation also has an opportunity cost similar to expansion, relocation is held for markets where the largest expansion fees can’t or won’t occur. This is why the NHL is so against relocating troubled teams into Ontario, whether by Balsillie or anyone else. Needing to vacant a once-promising market turned sour for another promising market does in fact reduce the potential for the NHL. But in losing an A list opportunity the effect is even larger.

So while an expansion team value won’t be less than the going rate of NHL teams, the opportunity cost may be the same amount or less. Edmonton Oilers sold for $200 million gross with debt inclusive. Nashville sold for $193 million gross with debt inclusive. Minnesota Wild, one of the NHL’s model teams at least off the ice, sold for $250 million gross, debt inclusive. What this means is that an expansion team will go for near the $190 to $200 million mark. Should a team wish to relocate to Winnipeg, the NHL might demand that as compensation to the other 29 owners. However, when you consider that the purchase price would be in excess of that compensatory fee, it makes a lot less sense to relocate a club than buying an expansion team. This is the worst case scenario for Manitoba if the NHL plays Broadstreet Bully style. Now you know why Mark Chipman has stayed quiet and followed the NHL’s instructions since at least 2004 when the MTS Centre opened.

Here’s where it gets really interesting.

If the NHL has exhausted all effort to find suitable owners for the existing city and presuming the club hasn’t went to court or bankrupt in the mean time, then the NHL is not in a strong position to demand lost expansion opportunity fees. And again past history shows this to be true with Winnipeg moving to Phoenix as well as Quebec City to Denver. Each team had to move and move quickly. Any port in a financial storm causes the NHL to alleviate its’ demands for relocation and lost opportunity fees, especially for those cities where expansion prospects aren’t highest. Notwithstanding the show of strength in Judge Baum’s court; this is to get Balsillie to blink first. By taking a very troubled team and turning it into a successful and marginally profitable club, Winnipeg stands to help the NHL out of a mess, while still not costing future premium expansion opportunities. This is the best of both worlds for the NHL nowadays.

Bettman’s now-public-but-then-confidential email to his second-in-command Bill Daly, saying in effect if the Phoenix club has to move, it should be first offered to Winnipeg may reveal that the NHL feels exactly the same way about Winnipeg and its’ place in the overall relocation and expansion plan. Glad we hockey nuts of the north could be of service to the NHL! So long as a team becomes ours, past NHL misgivings will be forgotten.

Winnipeg remains as a financially-responsible contingency for the NHL and offers a way out of trouble for Atlanta, Nashville, Miami and Tampa Bay. Also, remember that recent ownership changes to Nashville, Miami and Tampa Bay mean little as the club’s business outlook is just as dire. Look for the new owners to keep the entertainment centers but shed their main tenant hockey teams in the not-too-distant future. It is notable that only Len Barrie part of the Tampa Bay ownership has any real ties to hockey in all of these cities. Also consider the cost of the package that includes adjacent open real estate, the rink and the team for $240 and $206 million respectively The teams in Miami and Tampa Bay could sell for as low as say $120 million; meaning that those entertainment palaces cost the new owners less than 50% of replacement value. And freeing up more than 40 nights allows those centers to be even more profitable without a money-losing hockey tenant. Watching these clubs now is like waiting for the other NHL shoe to drop.

So if Manitoba misses the bus in Phoenix, there will be plenty more opportunities for us to catch the next one shortly! Beggars can’t be choosers, but I get the strong feeling that Mark Chipman hasn’t begged and never will. It may be that some teams are already looking at Winnipeg, giving our ownership group choice between several teams.

If you have an opinion, we'd love to hear from you. Click over to the forum and let us and the members know what you think! www.mbmbforum.com

Chris
Chair, Manitoba Mythbusters
www.ManitobaMythbusters.com
www.myNHLincludesWinnipeg.com

~ The Reality May Surprise You! Excite You! ~

End of Part 2 of 2