a·cu·men [ak-yuh-muhn] noun: keen insight; shrewdness

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Monday, 24 September 2012

09/24/12 Notes On Franchise Relocation


With Oilers executives visiting Seattle for meetings about relocating the team, some fear this could actually happen. Is it likely? How about a history lesson?



Let me preface this article by saying that I'm personally very much in favor of the arena project, but to suggest that the Oilers will surely relocate unless a deal gets done is not only unnecessary, it's probably unlikely.

Pictured above is the puppet master himself, Mr. Gary Bettman. Since he assumed the post of commissioner in 1993, five teams have relocated from one city to another.

The Minnesota North Stars relocated to Dallas after the 1992-93 season, and a failure to reach an arena deal was part of the reason. However, poor attendance and the fact that the team was losing money were the key problems, as was a sexual harassment lawsuit against the owner of the team.

The Quebec Nordiques moved to Colorado in 1995, primarily because the team was in the smallest market in the NHL and a weak Canadian dollar made it extremely difficult to compete financially. Doing everything in French didn't help their popularity either. Off to Denver!

The Winnipeg Jets were also a victim of the Canadian dollar and a woefully small market. Canadian cities had a very hard time keeping up back then, and the Jets became the Phoenix Coyotes. It's worth noting that the small size of the Winnipeg Arena was a factor in the relocation, but saving the Jets in this financial climate would have been almost impossible regardless.

Financial losses and poor attendance also torpedoed the Hartford Whalers in 1997. A last-ditch fan effort to pool resources and purchase season tickets saved the Whalers for one season, but it was all for naught. Once again an arena deal was part of the problem, as Whalers owner Peter Karamanos was negotiating with the state on a new $147.5 million building (when the Whalers couldn't fill the old one). Karamanos demanded $45 million to cover three years of losses while the arena was built, the deal fell through, the best logo in hockey (aside from the Oilers) was gone, and the team wound up in Carolina.

Finally, there's the Atlanta Thrashers, who reportedly lost $130 million in the final six years of their existence. Is there a better reason to move a franchise?

Arenas were key issues in at least three of these cases, but the biggest problem was always money. And that, friends, is one area where the Oilers have been in good shape. Forbes lists the Oilers as the fifth-most profitable NHL franchise in 2012, with an operating income of $17.3 million. Only twelve teams actually made money this year, so the mighty Oil are one of the healthier clubs around. Future salaries for the Oilers' young stars will cut into that profit pie in a few years, but that $17.3 million came with over $60 million in player salaries on the books.

(Incidentally, the Toronto Maple Leafs made $81.8 million, which is why that market can support a privately funded arena and other markets can't.)

As long as the Canadian dollar remains somewhat on par with the US greenback, the Oilers should be in decent financial shape. The product on the ice can't get much worse, so attendance is unlikely to drop when the team improves and boasts several emerging stars. What's more, the Oilers pay into revenue sharing. To willfully move a team in the Oilers' situation to a less certain part of the hockey world is risky proposition for the league.

In addition, any franchise relocation would require a majority vote from the NHL's league of governors. Sometimes, NHL owners also enter into a seven year non-relocation agreement with the league. Katz bought the team in 2008, and assuming that such an agreement exists he would not be allowed to move the team until 2015 if at all.

A downtown arena is still a good idea for the City of Edmonton, in my opinion, but not because the team will necessarily go bankrupt and relocate without it.

2 comments:

  1. Totally agree, and I think anyone like the idea of go bankrupt and relocate . I think there are things you have to think better before taking any desicion. Visit us http://www.priceperhead.com/

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  2. Franchise relocation is most important issue in business. You have to think about relocation effects on business growth as well as reputation also.

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