News & Notes XLII: Consolidation Season

[tarheelhockey]

good points....his comeback would be despite revenue shortfalls versus big market teams, I'm spending to the cap (+ more LY) and need that near arena monopoly to survive/get a return on my investment. Not saying that is totally right but it's probably his story.

Unfortunately, it will squeeze out the fan that was loyal during the downturn (but also took advantage of very low prices to attend though)

It’s not so much a concern about squeezing out the loyal downturn-era fan, it’s about squeezing out the entire middle class from being able to attend on anything resembling a regular basis.

Look at what’s going on in Winnipeg, where the team has been pretty good their entire existence in that city. They’re facing empty seats because people flat out cannot afford the relentless squeeze from the Jets front office. When those tickets came available, nobody was waiting in the wings to buy them. The Canes front office’s bet is that Raleigh has enough wealthy/corporate buyers to pick up that slack, but who knows? It’s a hell of a gamble on economic conditions staying the same indefinitely, and the team remaining popular indefinitely.

Maybe there’s a future where the basic-economy experience at a Canes game runs $150/person, and there are actually 760,000 tickets’ worth of people willing to buy into that price scale, and this is all going to end well for the general fanbase. That rings false to me, but I’m not the genius billionaire here.

 

[VaCaps Fan]

I miss rolling to cheap games at PNC to avoid the Washington squeeze.

 

[Boom Boom Apathy]

While making money year over year is obviously an objective of an owner, where these team owners really rake it in is in the appreciation of the asset. Look at Mark Cuban. He sold a majority portion of the Mavs for $4B recently (he still owns 27%) so it means the team's value us approximately $5.4B. He bought the team for $285M in 2000. A 19.2X gain in 23 years.

By contrast, the Dow averaged $10,729 in 2000 and closed at $37,689 in Dec 2023. so a 3.5X gain over the same span.

I'm sure Dundon looks at it the same way. Not to mention the expansion franchise fees, taxpayer funded arenas/upgrades, etc...

 

[tarheelhockey]

While making money year over year is obviously an objective of an owner, where these team owners really rake it in is in the appreciation of the asset. Look at Mark Cuban. He sold a majority portion of the Mavs for $4B recently (he still owns 27%) so it means the team's value us approximately $5.4B. He bought the team for $285M in 2000. A 19.2X gain in 23 years.

By contrast, the Dow averaged $10,729 in 2000 and closed at $37,689 in Dec 2023. so a 3.5X gain over the same span.

I'm sure Dundon looks at it the same way. Not to mention the expansion franchise fees, taxpayer funded arenas/upgrades, etc...

For sure, that’s the long game for profits. I have little doubt that both Dundon and Cuban walk away from pro sports laughing maniacally. Both of them have figured out that the real real money is in appreciation of the real estate attached to the franchise, and they’re already moving on to being developer-barons. For Dundon it’s the new arena district, for Cuban it’s a hotel-casino resort attached to a new Mavs arena. Both of them know that gambling money and “entertainment premiums” will juice annual revenues enough to keep pace with whatever operating expenses inflate to by the time they get out of this game. They’ll make billions off the franchise and ten-billions off the real estate.

Still, I have an unsettling feeling about any industry that is coming off anything like 20x value increases in a 3x market, and especially when it’s still rapidly ramping up prices for its product as though they’re expecting to keep inflating exponentially. Prices are rising into a stratosphere where there’s no real analogue in other forms of middle class entertainment. When going to a single game is like paying a monthly cable bill, or booking a night at a resort, or taking a flight somewhere, we’re talking about something that almost nobody will do in bulk. It has looked like a bubble for a long time now, but there has always been a new TV contract or a new round of expansion around the corner.

The presumption has always been that broadcast deals would keep the average fan engaged after they’re priced out of the arena, but we just saw a casino-backed network go bankrupt and the Rogers deal isn’t going to happen again. We’re seeing plans laid for 36 teams, and 40 is foreseeable, and at some point there just aren’t enough major league cities to keep going at that pace. We know that demographics alone are going to shrink the actual audience for this sport very quickly within the next generation. Where does the money come from? What happens when that next generation of owners takes on all this capital and debt only to see the growth flatline? How many people are still engaging in this 20, 30 years from now?

Dundon and Cuban aren’t worried about that last question. Most of us have some skin in that game, though.

 

[AD Skinner]

I always assumed Dundon’s plan was to flip the team after building the value up. I kinda think he got hooked on the high of chasing a Stanley cup when they got so much closer so much faster than he probably anticipated but I don’t know if he considers it like a necessary part of the plan

 

[tarheelhockey]

I always assumed Dundon’s plan was to flip the team after building the value up. I kinda think he got hooked on the high of chasing a Stanley cup when they got so much closer so much faster than he probably anticipated but I don’t know if he considers it like a necessary part of the plan

I suspect he does exactly what Cuban is doing — pump the value of the team till it hits a peak, then find a partner to buy the majority of it while he stays engaged with the real estate side. That arena district plan is the sort of thing that carries 20, 30 year timelines for the investors. Dundon’s maybe 5 years into that, and a few years away from cutting ribbons on new buildings. By that time he’ll be into his late 50s, which leaves him a nicely timed decade-or-two to soak in the riches of owning a shiny new district before he’s old enough to want to start cashing out of the venture.

So I suspect the sale of shares in the team happens in maybe 3 years or so, which will be right around the time this version of the roster is closing its window but not yet talking explicitly about a rebuild. Dundon walks away having capitalized on massive appreciation on the franchise itself, having gained even more valuable assets for the next decade, and probably with some minority-share so he still gets a Cup ring and his name in the rafters someday.

 

[LakeLivin]

You guys are all off base. Dundon's plan is, and has always been, to move the Canes to Houston. All this real estate stuff is just a ruse to keep us distracted while he lines up the U-Hauls to move the team out in the middle of the night like Irsay did with the Baltimore Colts.

 

[Boom Boom Apathy]

I suspect he does exactly what Cuban is doing — pump the value of the team till it hits a peak, then find a partner to buy the majority of it while he stays engaged with the real estate side. That arena district plan is the sort of thing that carries 20, 30 year timelines for the investors. Dundon’s maybe 5 years into that, and a few years away from cutting ribbons on new buildings. By that time he’ll be into his late 50s, which leaves him a nicely timed decade-or-two to soak in the riches of owning a shiny new district before he’s old enough to want to start cashing out of the venture.

So I suspect the sale of shares in the team happens in maybe 3 years or so, which will be right around the time this version of the roster is closing its window but not yet talking explicitly about a rebuild. Dundon walks away having capitalized on massive appreciation on the franchise itself, having gained even more valuable assets for the next decade, and probably with some minority-share so he still gets a Cup ring and his name in the rafters someday.

Yep. Cuban was able to win an NBA championship to satisfy the "ego" aspect of it.

It's interesting how Cuban set up this deal with LV Sands (new majority owners). He basically handed all that real estate stuff off to them, but gets to keep managing the basketball operations and a portion of the franchise. If they can successfully pull off legalizing the gambling in TX (which they've been lobbying for the past 4 years), which will eventually happen, the value of the franchise, arena, casino etc.. will explode.

 

[tarheelhockey]

Yep. Cuban was able to win an NBA championship to satisfy the "ego" aspect of it.

It's interesting how Cuban set up this deal with LV Sands (new majority owners). He basically handed all that real estate stuff off to them, but gets to keep managing the basketball operations and a portion of the franchise. If they can successfully pull off legalizing the gambling in TX (which they've been lobbying for the past 4 years), which will eventually happen, the value of the franchise, arena, casino etc.. will explode.

There’s so much potential money in that operation, it’s just insane. An NBA team run by casino money, as the anchor for a resort complex. Just wild. The Mavs are going to end up having Laker-like financial resources to pull from (not that rich owners = success… seems to be almost the opposite in most leagues).

I wouldn’t be surprised if Cuban doubles his net worth on that project alone. Sands has DEEP pockets.

 

[Svechhammer]

It’s not so much a concern about squeezing out the loyal downturn-era fan, it’s about squeezing out the entire middle class from being able to attend on anything resembling a regular basis.

Look at what’s going on in Winnipeg, where the team has been pretty good their entire existence in that city. They’re facing empty seats because people flat out cannot afford the relentless squeeze from the Jets front office. When those tickets came available, nobody was waiting in the wings to buy them. The Canes front office’s bet is that Raleigh has enough wealthy/corporate buyers to pick up that slack, but who knows? It’s a hell of a gamble on economic conditions staying the same indefinitely, and the team remaining popular indefinitely.

Maybe there’s a future where the basic-economy experience at a Canes game runs $150/person, and there are actually 760,000 tickets’ worth of people willing to buy into that price scale, and this is all going to end well for the general fanbase. That rings false to me, but I’m not the genius billionaire here.

Oh I remember when they asked me to be included in the studies about what they wanted to do with the arena renovations a few years back they made it very clear in the documents they are planning on squeezing everyone out of the lower bowl and marketing every ticket from goal line to goal line to corporations.

 

[AhosDatsyukian]

I don’t see why Dundon would ever sell. He’s trying to bring a baseball team to the area too. Sports franchises don’t really hit a peak, all of them just keep growing. That has been historically true for all 4 major sports

 

[Boom Boom Apathy]

There’s so much potential money in that operation, it’s just insane. An NBA team run by casino money, as the anchor for a resort complex. Just wild. The Mavs are going to end up having Laker-like financial resources to pull from (not that rich owners = success… seems to be almost the opposite in most leagues).

I wouldn’t be surprised if Cuban doubles his net worth on that project alone. Sands has DEEP pockets.

And I, for one, can't think of one single drawback of having gambling, professional sports, and gobs of money all together under one roof.

 

[chaz4hockey]

Oh I remember when they asked me to be included in the studies about what they wanted to do with the arena renovations a few years back they made it very clear in the documents they are planning on squeezing everyone out of the lower bowl and marketing every ticket from goal line to goal line to corporations.

If what you surmise comes true, then the "loudest arena in the League" will become like attending a game at Church.

The Yankees took that approach and their stadium is much quieter versus old Yankee Stadium and there are always plenty of empty seats in TV view because the fat cats don't always attend.

 

[tarheelhockey]

I don’t see why Dundon would ever sell. He’s trying to bring a baseball team to the area too.

Because at heart, Dundon is a guy who buys things so he can sell them.

Maybe he’s more human than he lets on, but every aspect of his persona suggests he already knows the exact value of this franchise which will cause him to walk away, and he’s probably already had a golf course conversation with the future buyer. It’s just who he is.

Sports franchises don’t really hit a peak, all of them just keep growing. That has been historically true for all 4 major sports

Same can be said for real estate and stock markets, right? Historically they just keep going up. No peaks.

But bubbles are real, and when a “correction” happens it’s traumatic. Happened to pro hockey in the 1930s, 1970s, and 2000s. Some aspects are under the teams’ control (don’t overexpand) some are not (don’t have an owner whose business can’t survive a stock market crash).

 

[Svechhammer]

I don’t see why Dundon would ever sell. He’s trying to bring a baseball team to the area too. Sports franchises don’t really hit a peak, all of them just keep growing. That has been historically true for all 4 major sports

I mean if hes able to get a MLB team to the area and put a stadium in the arena complex (there is room) he'll set himself up to cash out in the long run by making hundreds of billions. Especially in this area, which should see exponential growth over the next few decades.

 

[chaz4hockey]

And I, for one, can't think of one single drawback of having gambling, professional sports, and gobs of money all together under one roof.

Many years ago, I attended a "soccer" game at Manchester United. It was quite an adjustment to see gambling everywhere with bets on first goal, when, second goal, when, player, final score, etc. It was in its own way very distracting and off-putting.

The NA Professional Leagues will need also need to be very vigilant re: gambling and the potential for "the fix".

 

[Anton Dubinchuk]

And I, for one, can't think of one single drawback of having gambling, professional sports, and gobs of money all together under one roof.

They’ll have to call it something really awful, like “Sin City” or something.

 

[tarheelhockey]

And I, for one, can't think of one single drawback of having gambling, professional sports, and gobs of money all together under one roof.

Say it ain’t so, Luka!

 

[tarheelhockey]

They’ll have to call it something really awful, like “Sin City” or something.

They’ve already released preliminary renderings of the first phase of the project.

Supposedly there’s a small museum included.

 

[Svechhammer]

Remember when everyone thought Dundon was the meddling owner who would tank the franchise and Tepper was the one who would bring the Panthers finally to consistent respectability?

 

[Boom Boom Apathy]

Remember when everyone thought Dundon was the meddling owner who would tank the franchise and Tepper was the one who would bring the Panthers finally to consistent respectability?

In fairness, Tepper bought a football team located in a hockey market.

 

[tarheelhockey]

Remember when everyone thought Dundon was the meddling owner who would tank the franchise and Tepper was the one who would bring the Panthers finally to consistent respectability?

Not to turn this thread OT, but the craziest part of this IMO is how much talent the Panthers have just refused to keep or acquire during that timeframe. By all rights they should have been at least decent these few years. A lot of the problem is self-inflicted.

 

[TheReelChuckFletcher]

We know that demographics alone are going to shrink the actual audience for this sport very quickly within the next generation. Where does the money come from? What happens when that next generation of owners takes on all this capital and debt only to see the growth flatline? How many people are still engaging in this 20, 30 years from now?

Is it going to shrink, though? The children of minority demographics, like Asians, Blacks, and Latinos, are more receptive audiences than given credit for as they get wealthier and converge with Whites. If we keep our streak as a winning organization, the Canes shouldn't have a hard time with finding replacement demographics to go to games.

 

[Daeavorn]

It’s really, really important to take that kind of chart in context of local economy. Raleigh having higher priced anything than New York, LA, SF is ****ing bonkers. Relative to the economy, that Canes ticket costs A LOT more than that Kings ticket.

I look at that chart and see us being priced over 50% higher than Dallas, which is a similar-priced market with a similar arena, a similar-sized fanbase, and a team with similar recent success. Dallas also has $40 parking, but that’s in the context of a downtown arena with tons of cheap parking decks and public transit nearby. And the concessions are A LOT cheaper there. You can have bottomless popcorn for $7 and a bottomless soda for $10. Hot dogs are like $5-6. You can make it expensive if you want with prepared meals and alcohol, but you’re not hostage because there are options both inside and outside the arena.

In the bigger view, Dundon’s doing is systematically monopolizing the few existing food/parking options outside PNC, and becoming the developer for all future options. He’s eliminating any chance of downward pressure on prices, and the prices are already rising to reflect that. It’s all fair game in the bloodless capitalist sense, but it’s pretty clear the Canes will no longer be the sort of thing the average person can do instead of going to the movies. It’s going to get very exclusive very quickly, and it’s going to look awful when the team isn’t contending anymore.

I think you are 100% correct here and it reflects how the state of NC has changed over time as well. I was born here in Raleigh and its basically unrecognizable anyways. I did not think about him buying the Bistro would ensure that prices never fall but if thats the case Im just gonna have to stop going to games period. Its already priced me out. I dont wanna spend more than $100 going to a game.

 

[tarheelhockey]

Is it going to shrink, though? The children of minority demographics, like Asians, Blacks, and Latinos, are more receptive audiences than given credit for as they get wealthier and converge with Whites. If we keep our streak as a winning organization, the Canes shouldn't have a hard time with finding replacement demographics to go to games.

I don’t think it’s a racial issue per se, it’s an immigration issue. People coming from a completely different culture (not just Buffalo vs Nashville different, but USA vs India different) are far less likely become hockey fans than are people whose families have deep roots with the game.

Look at where the future population growth is coming from, geographically speaking. It’s a tall order to convert a mass audience of Latin Americans or Bangladeshis or Nigerians to become hockey fans.

Beyond that, there’s also the matter of younger people being demographically less interested in sports than their parents, and gravitating toward other forms of entertainment.

There’s a real issue here and it’s not going to be talked about openly because that’s not how companies operate. But keep an eye on what their actions say as opposed to their words. Everything that’s being built right now is indicative of an expected drop in demand for actual tickets within the next generation. They’re setting up a model where the revenue comes from selling “luxury experiences” to companies and high-rollers, and raking in gambling revenue from the middle class. Actually attending a hockey game for the sake of a hockey game is becoming antiquated.