Dan Friedkin the man behind NHL to Houston

[aqib]

Yeah, but in Fertitta's mind, it's "how long does it take to make the money BACK?" If you're making $25m a year running a hockey team and it costs $800m to a billion, you're making your money back in 20-25 years and he's 67 years old. (And that's a made-up number, as many on this site would probably love to argue hockey in Houston would not be THAT profitable!)

Most profit is made on selling the team a decade or two later. But he can't JUST sell the NHL team while maintaining ownership of the Rockets/control of the arena, because no one is going to want a tenant asset (hence the Winnipeg Jets 2.0).

So that's why he's always been interested in $200m-$300m "buy them and move them like the 1990s" team, but not a $500m to $800m or more "modern NHL expansion/relocation fee team."

Partnering with Friedkin accomplishes the financial goals of "also owning an NHL team" while not tying the Rockets and an NHL together. Obviously, he wouldn't get AS MUCH directly; but there's also indirect aspects.

They can structure the like three separate deals they need to make (arena management, minority share, and TV) so it's win-win. While Fertitta would be "giving up" revenues from inside the arena by not owning the team, he's gaining revenue on the Space City side of things from selling ads to 80+ more games. The money Feritta is "leaving on the table" is being picked up by Freidkin, who's leaving money on the table that Fertitta picks up.

Throw in that he WANTS to bring a WNBA team to Houston, too, and that'd take arena dates away in the summer, but if he's controlling half of a second arena...

You're right about the "45 of 365" aspect, but not all 365 dates are equal business. WEEKENDS are just more lucrative than weekdays.

Lets be real. None of us know all that goes into the valuation of pro sports teams. Sure the broadcast deals are mostly public information and we can guess the arena revenue. But we don't know all the sponsorship deals, the international broadcast revenues, all the sponsorships, etc. Vinick bought the Lightning for $93 million in 2010 and just got a $1.8 billion valuation in 2015. The Islanders sold for $485 million in 2016 and Hurricanes sold for $420 million in 2018. Now Utah went for $1.2 billion.

When the Thrashers left the going rate for a new arena was $320 million. So someone could have bought them for $120 million and built an arena for $320 million so $440 million total. Now you're talking $3 billion.

I've pointed out 100 times that Fertita lost the Rockets to Alexander because his bid was $80 million and Alexander bid $85 million. He probably could have gotten in for $650 million at the same time that Seattle got in if he told Bettman "I want in at the same price as Seattle" Now the price is at least twice that. So you would think he would have learned his lesson.

There is the joke about the guy who wanted to wait until the price of cars came down before he bought one. He's been walking for 40 years.

As far as the WNBA goes, about half the teams in the WNBA don't play in NBA arenas. The average attendance is about 9800. If you take out Indiana its 9100. So would they even need to play at Toyota Center as opposed to Fertitta Center? Even if they played in Toyota Center its 20 games in the summer which is NBA and NHL off-season.

As far as weekends vs weeknights it depends. Sure its better for a sports team that has 41 games to have as many of them on a weekend as possible but a concert that's a one off can be any day. Also since the leagues limit the back-to-backs you can have a Rockets game Friday and a concert Saturday.

 

[KevFu]

Also, he CAN just sell a minority share of the NHL team when the valuation is right, so being a junior partner in that regard facilitates what we posit he actually wants to get out of this deal.

Right, the whole "make his money back" thing was just about why Fertitta didn't pull the trigger on being the majority owner. If he's the majority owner, he creates a situation where he's the mogul of two teams and an arena and those franchises are essentially linked forever.

But I think his interest in the NHL is less about the hockey than it is about "Houston Sports" or redevelopment of downtown Houston around sports." Two owners working together really gets the best bang for the buck across the board.

 

[KevFu]

Lets be real. None of us know all that goes into the valuation of pro sports teams. Sure the broadcast deals are mostly public information and we can guess the arena revenue. But we don't know all the sponsorship deals, the international broadcast revenues, all the sponsorships, etc. Vinick bought the Lightning for $93 million in 2010 and just got a $1.8 billion valuation in 2015. The Islanders sold for $485 million in 2016 and Hurricanes sold for $420 million in 2018. Now Utah went for $1.2 billion.

When the Thrashers left the going rate for a new arena was $320 million. So someone could have bought them for $120 million and built an arena for $320 million so $440 million total. Now you're talking $3 billion.

I've pointed out 100 times that Fertita lost the Rockets to Alexander because his bid was $80 million and Alexander bid $85 million. He probably could have gotten in for $650 million at the same time that Seattle got in if he told Bettman "I want in at the same price as Seattle" Now the price is at least twice that. So you would think he would have learned his lesson.

There is the joke about the guy who wanted to wait until the price of cars came down before he bought one. He's been walking for 40 years.

As far as the WNBA goes, about half the teams in the WNBA don't play in NBA arenas. The average attendance is about 9800. If you take out Indiana its 9100. So would they even need to play at Toyota Center as opposed to Fertitta Center? Even if they played in Toyota Center its 20 games in the summer which is NBA and NHL off-season.

As far as weekends vs weeknights it depends. Sure its better for a sports team that has 41 games to have as many of them on a weekend as possible but a concert that's a one off can be any day. Also since the leagues limit the back-to-backs you can have a Rockets game Friday and a concert Saturday.

A lot of great points here. The arena and sponsorship deals are just "messy." As sports fans, we want to say "This team brings in X dollars" but it's just not that simple when a company pays X dollars for arena signage and it's there for NHL games, NBA games, WNBA games, and any concert/event in the building. Who gets what?(And that's a large part of why the WNBA doesn't make as much money on paper).

You're absolutely right that the WNBA doesn't need 20,000 seats -- although they DO need room to grow. They STOPPED doing cheap tickets and comps (Same as the Florida Panthers did). They'd rather sell 9000 seats at $40 each than 18,000 seats at $10 each.

But all of this is the "mutually beneficial" stuff. You have this overlapping list of needs, and a Freidkin/Fertitta partnership provides overlapping solutions.

As hockey fans, in the BOH forum, we're trained to be thinking that owners want to make money off hockey. But Fertitta's actions don't line up with that.

Which brings me to another one of your points: The old "New public arena for $320 million" vs new public/private arenas for $1b to $2b or more... It's really just that the old method was "getting as much as you can for free" and they were replacing RELICS that didn't have abundant revenue streams. It was "Seat, Popcorn, Beer."

The 1990s-2000s public-financed places were "entertainment venues" with a ton more points of sale, exotic fare and revenue streams.

Now it's public-private because it's about LUXURY amenities. The public pays for the "entertainment" venue part, and the private pays making the arena have luxury amenities which make obscene amounts of money off the rich fans, but most the public will just never see.

Most the luxury stuff sold by ACCESS and not event. For example, I watched a game from either a $1 million or $2 million suite once... because the rich dude bought it for NFL games, and didn't give a damn about the Chile national soccer team.

That's part of the reason why 10,000 empty seats at a WNBA game in the NBA venue can be better than a sold-out Feritta Center, and why partnering at two arenas is better than owning all of one. Especially when these guys basically HAVE to be partners: definitely for the Toyota Center if the NHL team wants to/needs to play there, and definitely for TV.

So if you partner up, and then address overlapping needs together, everyone comes out a winner.

 

[aqib]

A lot of great points here. The arena and sponsorship deals are just "messy." As sports fans, we want to say "This team brings in X dollars" but it's just not that simple when a company pays X dollars for arena signage and it's there for NHL games, NBA games, WNBA games, and any concert/event in the building. Who gets what?(And that's a large part of why the WNBA doesn't make as much money on paper).

You're absolutely right that the WNBA doesn't need 20,000 seats -- although they DO need room to grow. They STOPPED doing cheap tickets and comps (Same as the Florida Panthers did). They'd rather sell 9000 seats at $40 each than 18,000 seats at $10 each.

But all of this is the "mutually beneficial" stuff. You have this overlapping list of needs, and a Freidkin/Fertitta partnership provides overlapping solutions.

As hockey fans, in the BOH forum, we're trained to be thinking that owners want to make money off hockey. But Fertitta's actions don't line up with that.

Which brings me to another one of your points: The old "New public arena for $320 million" vs new public/private arenas for $1b to $2b or more... It's really just that the old method was "getting as much as you can for free" and they were replacing RELICS that didn't have abundant revenue streams. It was "Seat, Popcorn, Beer."

The 1990s-2000s public-financed places were "entertainment venues" with a ton more points of sale, exotic fare and revenue streams.

Now it's public-private because it's about LUXURY amenities. The public pays for the "entertainment" venue part, and the private pays making the arena have luxury amenities which make obscene amounts of money off the rich fans, but most the public will just never see.

Most the luxury stuff sold by ACCESS and not event. For example, I watched a game from either a $1 million or $2 million suite once... because the rich dude bought it for NFL games, and didn't give a damn about the Chile national soccer team.

That's part of the reason why 10,000 empty seats at a WNBA game in the NBA venue can be better than a sold-out Feritta Center, and why partnering at two arenas is better than owning all of one. Especially when these guys basically HAVE to be partners: definitely for the Toyota Center if the NHL team wants to/needs to play there, and definitely for TV.

So if you partner up, and then address overlapping needs together, everyone comes out a winner.

The arena signage and stuff is I think is accounted for in team valuations. But we've seen valuations soar once sports betting expanded and we don't know how much the teams are getting from there. There has to be other stuff we don't know about. Otherwise we can't rationalize how Utah is worth almost 3 times as much as bigger market teams went for a few years ago.

One thing about the new arenas and all sports venues that I find annoying is that so many of them have fewer seats than the ones they replace. Some parts of the new venues are things that are designed to appeal to people other than me so I sound like an old curmudgeon. I generally don't leave my seat during the game unless I have to go to the bathroom. I usually grab my food before I sit down because I value the improved vantage point of being in the arena. I get that younger generations like to move around and are more social during the games than I am.

When it comes to cheap seats, I get that not having the cheap seats leads to more revenues in the short-term but I think longer term its going to hurt being able to develop new fans. If its too expensive for someone to take their families to games then their kids may not become fans. I used to buy the NFL draft hats every year when they were only $20 now they are $50 so I don't buy them anymore. There was once a time when Shakespeare was a working class interest. Now it only appeals to the wealthy. Sports are trending that way too. A few years ago teams started monetizing training camps, which had been the only free thing. It was a cool way for fans to build a connection but a few thousand extra dollars outweighs that.

Getting back to Houston, I don't think Friedkin needs Fertitta for TV since he has investments in entertainment and production so he's probably better off going it alone.

 

[KevFu]

The arena signage and stuff is I think is accounted for in team valuations. But we've seen valuations soar once sports betting expanded and we don't know how much the teams are getting from there. There has to be other stuff we don't know about. Otherwise we can't rationalize how Utah is worth almost 3 times as much as bigger market teams went for a few years ago.

One thing about the new arenas and all sports venues that I find annoying is that so many of them have fewer seats than the ones they replace. Some parts of the new venues are things that are designed to appeal to people other than me so I sound like an old curmudgeon. I generally don't leave my seat during the game unless I have to go to the bathroom. I usually grab my food before I sit down because I value the improved vantage point of being in the arena. I get that younger generations like to move around and are more social during the games than I am.

When it comes to cheap seats, I get that not having the cheap seats leads to more revenues in the short-term but I think longer term its going to hurt being able to develop new fans. If its too expensive for someone to take their families to games then their kids may not become fans. I used to buy the NFL draft hats every year when they were only $20 now they are $50 so I don't buy them anymore. There was once a time when Shakespeare was a working class interest. Now it only appeals to the wealthy. Sports are trending that way too. A few years ago teams started monetizing training camps, which had been the only free thing. It was a cool way for fans to build a connection but a few thousand extra dollars outweighs that.

Getting back to Houston, I don't think Friedkin needs Fertitta for TV since he has investments in entertainment and production so he's probably better off going it alone.

I'm definitely with you on the "sit down and watch the game" and the "sports are trending toward the wealthy, not the average fan."

But the reason to get into all of that is that there's less money to be made off "the sport" (aka, number of fans who want a ticket) than there used to be compared to the money from all the STUFF the venue has (suites, clubs, luxury amenities, concessions). That's what makes the "Arena Operations" game just as, if not more lucrative than the "Sports owner" game.

As for TV, the production is one thing, it's the distribution that's the challenging part. There's just no real reason to go it alone when Space City has the infrastructure for distribution already. Also, Space City has TWO teams that have been there for 50+ years and you're brand new, you want to compete with Space City in the winter and not offer anything in the summer to compete with the Astros?

And the other factor is that if the NHL plays in the Toyota Center, it's just cheaper to be on Space City and just use the same equipment they already use for Rockets games. Like you're not bringing in your own truck, own cameras, own wiring and adding a second set (well, probably fourth) to the building.

 

[TheGreenTBer]

Yeah, but given the sheer enormousness of Harris County, is picking a suburb a good idea?

Like, if you pick Katy or Sugar Land or Woodlands... how many people from THE OTHER are going to go 50 miles (in some cases across Houston) to attend a game.


Given that Feritta has kicked the tires on an NHL team, but seemingly doesn't think the expansion fee aligns with what he's willing to pay, there's probably not that many hurdles to an agreement between the two billionaires.

Each of them have like 3 to 5 times the wealth that Alexander did, so the whole "fighting over every sports dollar" is far less likely than what we saw with Alexander and Watson.

Alexander threatened to leave Houston. Feritta is just all about Houston sports in a way that isn't very "make as much money possible" compared to "I want to see Houston teams win." Dude is invested in almost every sport in Houston in some way; and massively in U of H.

In fact, what could make the most sense is Friedkin and Feritta co-own an Arena Management Company, build a the next Rockets arena at UH for both the Rockets AND the Cougars (who are SRO in the 7000 seat Feritta Center). That helps the Cougars recruiting; and Fertitta doesn't "Leave" downtown because he's making half the money off the concerts and hockey at the downtown arena (which is like 2 miles away).

Most accurate Houston comment i ever heard was "Houston is 90 minutes away from Houston."

 

[aqib]

I'm definitely with you on the "sit down and watch the game" and the "sports are trending toward the wealthy, not the average fan."

But the reason to get into all of that is that there's less money to be made off "the sport" (aka, number of fans who want a ticket) than there used to be compared to the money from all the STUFF the venue has (suites, clubs, luxury amenities, concessions). That's what makes the "Arena Operations" game just as, if not more lucrative than the "Sports owner" game.

As for TV, the production is one thing, it's the distribution that's the challenging part. There's just no real reason to go it alone when Space City has the infrastructure for distribution already. Also, Space City has TWO teams that have been there for 50+ years and you're brand new, you want to compete with Space City in the winter and not offer anything in the summer to compete with the Astros?

And the other factor is that if the NHL plays in the Toyota Center, it's just cheaper to be on Space City and just use the same equipment they already use for Rockets games. Like you're not bringing in your own truck, own cameras, own wiring and adding a second set (well, probably fourth) to the building.

I get Citi Field having 42K seats as opposed to 57K in Shea. When you have situations like the new Nissan Stadium having about 10K fewer seats than the current stadium and the new Bills Stadium having fewer seats than they currently have season ticket holders.
The Browns are talking about upper deck prices of $210 per game ($2100 for a full season). My comparison when the new stadium opened in 1999 upper deck seats were $30 ($300 for the entire season). I don't know how many people will be making 7x more in 2029 than they did in 1999. With regular inflation $30 in 1999 should be $57 today. I think those tickets are over $100 now.
I think you are overrating the costs for TV. When the Nets had their stay in Newark, the Devils were on MSG while they were on YES.

 

[StreetHawk]

I get Citi Field having 42K seats as opposed to 57K in Shea. When you have situations like the new Nissan Stadium having about 10K fewer seats than the current stadium and the new Bills Stadium having fewer seats than they currently have season ticket holders.
The Browns are talking about upper deck prices of $210 per game ($2100 for a full season). My comparison when the new stadium opened in 1999 upper deck seats were $30 ($300 for the entire season). I don't know how many people will be making 7x more in 2029 than they did in 1999. With regular inflation $30 in 1999 should be $57 today. I think those tickets are over $100 now.

Raiders have the 2nd lowest capacity stadium now (in terms of ones that were built in the 2000's), after AZ, at 65K. But are like top 3 or even tops in Revenue generated from the stadium. Getting to be more about luxury and extras than ticket sale revenue.

Titans are at 69K and dropping for their new one. Same with the Bills at $71.6K going under 70K.

Outside of NFL, big time college football and top line entertainers like Swift, you don't need stadiums that large.

A bunch of teams will be looking at a new stadium by like 2035 in the next decade. Washington is listed at 62K, but that feels low, so not sure if they just blocked some sections out. Most teams to target 60-65K capacity moving forward.

NHL/NBA, I don't think any arena will be larger capacity than MON/CHI NHL wise moving forward.

 

[aqib]

Raiders have the 2nd lowest capacity stadium now (in terms of ones that were built in the 2000's), after AZ, at 65K. But are like top 3 or even tops in Revenue generated from the stadium. Getting to be more about luxury and extras than ticket sale revenue.

Titans are at 69K and dropping for their new one. Same with the Bills at $71.6K going under 70K.

Outside of NFL, big time college football and top line entertainers like Swift, you don't need stadiums that large.

A bunch of teams will be looking at a new stadium by like 2035 in the next decade. Washington is listed at 62K, but that feels low, so not sure if they just blocked some sections out. Most teams to target 60-65K capacity moving forward.

NHL/NBA, I don't think any arena will be larger capacity than MON/CHI NHL wise moving forward.

So that's what I am getting at. They reduce the capacity of the stadium to increase revenue in the short term but that's going to come back to haunt them down the line. When you have 10K fewer seats sure you increase the price per seat and add more bars, etc you can boost some revenue. However, that's 10K fewer fans that you could have in the stadium. Now I can't show the ROI of those 10K fans on a spreadsheet, because I am talking about the longer term on their fandom. When I was a season ticket holder I was definitely more bonded to the team than before and after. But even if you only get to 1-2 games a year that has a bigger impact on your fandom and makes you more likely to buy gear (even if its not at the stadium) frequent the team site etc. It also has a longer-run impact. When you don't get to go to a game through your entire childhood how big a fan are you going to be? Add to that leagues moving more and more games off free TV. Like when the NFL first started broadcasting games on cable it was always available over the air in the local markets so if the Giants-Cowboys was a Sunday Night ESPN game it was also on one of the local channels in NY and Dallas. Now you have playoff games on Peacock. Yes its a short-term boost but its going to hurt in the future. Not current fans turning it off but new fans not being created.

 

[KevFu]

I get Citi Field having 42K seats as opposed to 57K in Shea. When you have situations like the new Nissan Stadium having about 10K fewer seats than the current stadium and the new Bills Stadium having fewer seats than they currently have season ticket holders.
The Browns are talking about upper deck prices of $210 per game ($2100 for a full season). My comparison when the new stadium opened in 1999 upper deck seats were $30 ($300 for the entire season). I don't know how many people will be making 7x more in 2029 than they did in 1999. With regular inflation $30 in 1999 should be $57 today. I think those tickets are over $100 now.
I think you are overrating the costs for TV. When the Nets had their stay in Newark, the Devils were on MSG while they were on YES.

You are totally right about Buffalo. That's the mindset permeating sports now, but a place like Buffalo is going to "cross the line" long before a team in Houston is going to come remotely close to it.

I don't think it's really "overrating" the costs. It's not that expensive relatively speaking to sports where you're talking about hundreds of millions of dollars. Most of sports TV is contract work, and they're renting equipment and production costs are just part of the deal.

But the Nets in Newark with Devils on MSG is that the Nets owner wasn't starting YES from scratch. YES had carriage from the Yankees setting it all up already. The Nets partnered with YES for the exact same reasons an NHL team in Houston should partner with Space City.

 

[aqib]

You are totally right about Buffalo. That's the mindset permeating sports now, but a place like Buffalo is going to "cross the line" long before a team in Houston is going to come remotely close to it.

I don't think it's really "overrating" the costs. It's not that expensive relatively speaking to sports where you're talking about hundreds of millions of dollars. Most of sports TV is contract work, and they're renting equipment and production costs are just part of the deal.

But the Nets in Newark with Devils on MSG is that the Nets owner wasn't starting YES from scratch. YES had carriage from the Yankees setting it all up already. The Nets partnered with YES for the exact same reasons an NHL team in Houston should partner with Space City.

The Nets partnered with Yes because they had common ownership at the time.
Also remember the Yankees started Yes from scratch even though they had been with MSG who was owned by Cablevision and they had to launch a PR campaign to force Cablevision to carry the YES network.

 

[TheLegend]

****Points to thread title****


Why do these threads always morph into NFL, NBA discussions he there's a lack of new info???

 

[aqib]

****Points to thread title****


Why do these threads always morph into NFL, NBA discussions he there's a lack of new info???

Because we are talking about different scenarios in which the two franchises could coexist if they were owned by different owners and financing of a new venue. As a result we bring in examples from other teams and/or other leagues.

 

[KevFu]

Also remember the Yankees started Yes from scratch even though they had been with MSG who was owned by Cablevision and they had to launch a PR campaign to force Cablevision to carry the YES network.

I mean, I'm an "Expansion for everyone / everywhere can be successful" guy, and you're making me point out that "Yankees baseball" is significantly more popular than "NHL Hockey in Houston"?

 

[aqib]

I mean, I'm an "Expansion for everyone / everywhere can be successful" guy, and you're making me point out that "Yankees baseball" is significantly more popular than "NHL Hockey in Houston"?

Talk about getting lost in the sauce. I am just point out that starting a new network for your team isn't that hard. Its been done many times.

 

[KevFu]

Talk about getting lost in the sauce. I am just point out that starting a new network for your team isn't that hard. Its been done many times.

For an existing team, with existing fans, with quantifiable data on viewers to discuss carriage deals with. Has it ever been done for an expansion team?

"Lost in the sauce" you're using the New York Yankees, the biggest global sports brand on the planet, launching their own network as evidence that it would be "easy" for an expansion team with no brand identity or quantified fan base to do the same.

Starting a network is easy... it's getting providers to carry the network that is the hard part.

I'm not sure how you could argue teaming up with Space City isn't the path of least resistance, especially when there's other reasons for these two guys to be partners. Unless you just like to argue to argue, which is fun.

 

[aqib]

For an existing team, with existing fans, with quantifiable data on viewers to discuss carriage deals with. Has it ever been done for an expansion team?

"Lost in the sauce" you're using the New York Yankees, the biggest global sports brand on the planet, launching their own network as evidence that it would be "easy" for an expansion team with no brand identity or quantified fan base to do the same.

Starting a network is easy... it's getting providers to carry the network that is the hard part.

I'm not sure how you could argue teaming up with Space City isn't the path of least resistance, especially when there's other reasons for these two guys to be partners. Unless you just like to argue to argue, which is fun.

The example with the Yankees is that they had to work to get a carriage deal with the company they shafted in starting their own network. Sure its the path of least resistance but its not insurmountable given that Fridkin is in the entertainment business. So if Space City doesn't offer a deal that makes sense it won't be hard for him to pivot.