Friday, June 19, 2009

Phoenix Fallout

On Monday, Judge Redfield Baum ruled against Jim Balsillie's motion to relocate the Phoenix Coyotes to Hamilton, citing the June 29th deadline imposed by the Balsillie camp as being inadequate to consider the relocation application that they filed. Winners (the NHL) and losers (Balsillie) have been declared, but the legal battle rages on and this issue is far from resolved. Let's take a look at the players in this drama and try to determine where they stand after the Judge's ruling and speculate on what might happen next.

Jim Balsillie

Look up headstrong, stubborn, and a few other more pejorative adjectives in your dictionary, and you will find Balsillie's picture. Immediately after the ruling, his spokesman Bill Walker declared that he (Balsillie) was "unfazed" and vowed to press on with his quest to get control of the Coyotes. Balsillie is shrewd, because he knows without a doubt that this is the most economical manner in which to acquire an NHL franchise for southern Ontario. The expansion fee for a new Canadian franchise is going to be, in my estimate, well north (pardon the pun) of the $100MM figure that was bandied about in the bankruptcy proceedings. Adam Proteau of the Hockey News speculates that it will be around $400MM. Balsillie has cloaked himself in the Canadian flag and fomented an attitude of "Us against Them" between Canadians, NHL management, and U.S. franchises. Balsillie is driven by the fact that he desperately wants to own a franchise, and he wants to obtain one as cheaply as possible, and the Coyotes are his best current shot at doing so. He will continue his attempt to acquire this franchise. Much like mold in your bathroom, the League shouldn't expect to get rid of him easily.


The positive that came out of Judge Baum's courtroom was that owners (and potential owners) have to abide by the policies and procedures established by the league, and that the league has ownership of franchise rights and territories. Examining the financial information that was on display during the trial indicates that the Phoenix franchise is bleeding red ink, and now the NHL is responsible for those losses that were incurred last season and on an on-going basis. The public perception in Canada of Gary Bettman and league management is that they exhibit a tremendous amount of disrespect and even animosity toward those cities that want an NHL franchise. I don't believe this to be true, but it has become the perception, fueled by the rhetoric that has come from Balsillie and the Make It Seven campaign. League management will have some significant work to do to repair the image of the League, if possible, with hockey fans up north. The League also has to make a critical examination of how to best grow the game with fans across North America. I do believe the League will place a team in southern Ontario- an expansion team. The expansion fees will be too great for the League to ignore for much longer.

The City of Glendale

Possibly the most financially vulnerable entity in this affair, the City of Glendale stands to lose the anchor tenant for Arena. The Coyotes have 24 years remaining on their lease for which the city receives $500MM per year. Losing the Coyotes means that the repayment of the bonds issued to contruct the arena will fall on the taxpayers in Glendale. Should the Coyotes remain in Phoenix, look for significant concessions to made to the team on this lease.

Jerry Moyes

Moyes conspired (in my opinion) with Balsillie to put the franchise in bankruptcy and to structure the bid as it was presented. The reason: Balsillie's bid allowed Moyes to recover most of the $103MM that he had loaned to the franchise. Moyes, as the largest unsecured creditor, has a decided pecuniary interest in seeing that Balsillie wins the bid- at that price. Should the NHL persuade the court to agree to allow only bids for the franchise that will keep the Coyotes in Phoenix, Moyes will receive practically nothing for the sale of the franchise since it is estimated that the bids may come in around $140MM. One cannot fault Moyes (or Balsillie for that matter) for operating in their own economic self interest- we all do. It is how they have operated that has presented the problem that the courts are trying to resolve. My guess is that Moyes will turn out to suffer the greatest financial loss when the dust settles.

The Coyotes Hockey Club

As a player watching this affair unfold, I would think that you would have to feel a great sense of unease. Will more talent leave the club? What will be the operating environment? Will there be any fan support? Professional athletes are like most of us, they want stability in their work environment. The Coyotes work environment is anything but stable, and one has to wonder how this will translate to product on the ice.

Coyotes Fans

The loyal fans of the Coyotes have got to feel like they have been speared in their nether regions by Patrick Kane. To watch your team become a pawn in an end run around league rules and with the swift potential of being uprooted and relocated is disheartening and terrifying.Phoenix fans have been trashed as undeserving of an NHL team and hockey in the Valley has been declared dead. It is a given that there are numerous steps that can be taken to improve fan support, but no fan of a hockey team should be treated as have the fans in Phoenix (sound familiar, Pred fans?). One aspect of this is the parochial attitude of some in the Canadian press about hockey and who "deserves" a team. Frankly, growth of the game will continue to be stunted with the prevalence of this type of thinking.


Speaking of pawns, how is this Make it Seven thing working for you? One can debate the merits of the tactics employed by Balsillie and his hired legal guns, but the frustration level of Hamiltonians from the on again off again dance with a potential NHL franchise must be off the charts. Wrapping the possibility of landing a franchise in a nationalistic fervor only serves to widen the gulf between hockey fans in Canada and those in the U.S. At some point, do you feel used by Balsillie in his quest to own an NHL franchise?

Buffalo Sabres

Relatively quiet in this matter has been the Buffalo Sabres, but I am of the opinion that they stand to suffer greatly with the location of another hockey club in southern Ontario. Buffalo draws a number of fans from that area- hockey fans that can't get a ticket or afford one to see the Maple Leafs play. Another team in southern Ontario will draw from their fan base and has the potential to create financial distress for the Sabres, regardless of any indemnity payment.

MLB, The NFL, and The NBA

It is of some significance that the other professional sports leagues have taken great interest in this case, to the point of filing amicus briefs siding with the NHL. Should the outcome of further legal proceedings undermine the right of the each of these professional leagues to control the location of their franchises, the chaos could be the order of the day in professional sports. The anti-trust claim filed by PSE was put on hold by the court since PSE had not made a formal application for ownership of the Coyotes, and was therefore a moot point. At this time. The court also expressed some reservations about meddling in the operations of a professional sports league as to operating their franchises, specifically the ability to determine their particular location. However, the added considerations of a bankruptcy proceeding cloud what appears to be clearly defined guidelines as it regards the rights of a professional sports league in this regard. This is a complex legal question that will have far reaching implications for all of professional sports if those guidelines are set aside.

This matter is far from over. Balsillie has indicated that he will continue to pursue ownership of the Coyotes with an eye toward relocation to Hamilton. The NHL has indicated that the League has several bidders lined up to bid on the franchise and keep it in Phoenix. The bankruptcy court will supervise this process. And until it is resolved, a number of interested parties will be in limbo.

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