Why NHL relocation is looking to Seattle

Key Arena

Does it seem strange to anyone that Seattle is being touted as the #1 landing spot for the Phoenix Coyotes? There is an arena plan, but no actual arena or plan to build it. There is a potential NBA co-tenant, but likely no plans for further basketball relocation/expansion discussion until David Stern retires. The question doesn’t really center on whether Seattle can support an NHL team or not, but rather, why now?

As we speak, Quebec City is building a hockey arena. You can literally watch them pour every once of concrete on one of the city’s three arena construction webcams. Note: 3 out of 7 of Quebec City’s municipal webcams are pointed on Quebecor Arena’s construction site. Think they miss the NHL? The Canadian winter is dark and full of terrors.

And then there’s Hamilton, Ontario. If Chris Hansen wants an example of why you shouldn’t cross a league’s commissioner, he needs only to look to Canadian businessman Jim Balsillie’s efforts to relocate a team to Hamilton. The former Blackberry CEO tried unsuccessfully to buy the Pittsburgh Penguins in 2006, the Nashville Predators in 2007 and the Phoenix Coyotes in 2009.

In the Phoenix case, Balsillie actually offered then owner Jerry Moyes $212.5 million to purchase the team after it went into bankruptcy. However, the NHL had previously extended Moyes $38 million to stay afloat in return for proxy control of the team by the commissioner Gary Bettman. Just hours after the sale agreement to Balsillie, the NHL stepped in and removed Moyes from any form of team control. The case eventually went to court and the NHL retained ownership of the Coyotes. Balsillie likely sunk any future chance of securing a team in Hamilton, though an anonymous bid was made for the Buffalo Sabres in 2011. That bid was to relocate the team and amounted to $259 million, significantly more than the $189 million price the team was eventually sold for to remain in Buffalo.

So, there is clearly a rabid appetite for new teams in Canada. Why then is Seattle an assumed front runner? The most obvious explanation is that Seattle is being used as leverage to squeeze the city of Glendale for a better deal in much the same way the NBA did with the Sacramento Kings. Indeed, with so much effort already invested in Arizona, it would be surprising to see the team move until all other options have been exhausted. However, there are some key differences between the NBA and NHL landscapes that contribute to Seattle’s inclusion as the top relocation destination for a hockey team.

For the NBA, owners aren’t keen on expansion because it would dilute their share of the upcoming TV deal. Once that deal is in place, expansion becomes much more likely. For the NHL, however, there is little revenue from their national TV deal, so owners are eager to expand while collecting those expansion fees. Would an ownership group from Seattle be willing to pay a hefty expansion fee, probably not. Could the NHL collect higher fees from applicants from Quebec City or Hamilton? Just follow the dollars.

Ultimately, the NHL wants a team in Seattle as much as Seattle wants a team. The Emerald City is a lucrative market with a significant corporate presence (Amazon, Microsoft, Starbucks headquarters). It is also the 12th largest TV market, something to consider if a team is moving out of Phoenix, which is the 13th largest TV market. Neither Quebec City, nor Hamilton can offer similar numbers.

If Phoenix is not viable, then the best strategy for the NHL is to address the situation by landing a team in a place such as Seattle. The goal would be to get a foothold in the region with potential rivals in Vancouver and San Jose. Large expansion fees from Seattle are unlikely and ultimately not that important. Replacing a league-owned, hemorrhaging team in Phoenix with a privately owned, functional team in Seattle would be considered a win.

After Phoenix comes off the NHL books, a new round of expansion to Quebec City and/or Hamilton can proceed. NHL owners will be rewarded with a fresh stream of expansion fees from eager Canadian applicants.

This all makes sense, but the most glaring risk in the plan is the lack of an NHL-caliber arena in Seattle. Teams can play in small venues for a several years, but a suitable arena must eventually be built for a team to be anywhere close to profitable. Right now, new ownership would have to assume a large part of the risk for building a new arena if they bring a team to Seattle. Chris Hansen has an arena plan, but the city isn’t going to move forward without an NBA team to fill it. New owners will have to convince Hansen and the city that they are viable partners that can help fund the development of a new arena. If they succeed, Key Arena can suffice in the meantime.

As I explained in a previous article - “However, many teams have made small venues work on a temporary basis. Before the Shark Tank was built, the San Jose Sharks played in the Cow Palace (1991-1993), an arena that seated just over 11,000. Likewise, the Tampa Bay Lightning played their first year (1992) in the 11,000-seat Expo Hall before moving to the much larger Thunderdome.  The Carolina Hurricanes played two years (1997-1999) at Greensboro Coliseum (23,000 seats), where they averaged just 8,637 fans. So, there does seem to be a precedent for arenas of this size, but the question depends largely on the magnitude of financial loss that the new owners are willing to absorb while a new venue is built.”

Conversely, if a team moves to Seattle and no arena is built, does the team have any better chance of succeeding than in Glendale? Not likely. Would the NHL really relocate a team without an arena, or even an agreement for building one? Well, if the losses in Phoenix are large enough, then selling to new owners might be preferred to holding or folding the team. Having credible owners such as Raymond Bartoszek and Anthony Lanza could bring much needed stability to the franchise in a potentially lucrative market. At worst, the financial losses would be someone else’s problem, and at best the NHL gains a strong foothold in a valuable market.

Read related article: “The NHL in Seattle: Can Key Arena provide a temporary home?”

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