Phoenix LXXX: Is there another way out?

[thegreaterikku]

Winnipeg only got their team because there was no viable USA market available at that time.

Winnipeg only got their team because the NHL couldn't handle two teams in difficulties. It was either Atlanta or Glendale. They will keep Glendale until they are sure to recoup money loss.

Because, let's all remove our hand from the sand here, the NHL aren't keeping Glendale just to pissed off everyone. In some way, it is still lucrative for them (even if the team is doing poorly in sales) to keep it there (so I am pretty sure some offhand profits) and I wouldn't be surprised if the NBC deal would fall through if they lost Glendale and the NHL isn't ready for this since the American market is tough for hockey.

 

[Slashers98]

Winnipeg only got their team because the NHL couldn't handle two teams in difficulties. It was either Atlanta or Glendale. They will keep Glendale until they are sure to recoup money loss.

Because, let's all remove our hand from the sand here, the NHL aren't keeping Glendale just to pissed off everyone. In some way, it is still lucrative for them (even if the team is doing poorly in sales) to keep it there (so I am pretty sure some offhand profits) and I wouldn't be surprised if the NBC deal would fall through if they lost Glendale and the NHL isn't ready for this since the American market is tough for hockey.

What's so lucrative about losing $30M/year? NBC showed the Coyotes one time I believe this season, I just don't buy that everything hinges on the NBC TV deal.

 

[HamiltonFan]

And there still isn't. And if there's no viable U.S. market out there not presently being served, what does that say for Bettman's stewardship of the league? If you're going to say he's not at fault, fine, who is at fault then?

Hey, you're preaching to the choir here. I don't approve of the way the nhl runs their league, but I'm just stating the obvious that their business plan, in a nutshell, is to maintain the USA footprint at all costs to appease NBC. As long as bettman, daly, jacobs, snider etc are still around, nothing is going to change. They're a stubborn, old school bunch who can do whatever they want, and nobody can do a damn thing about it. The Canadian teams are essentially a giant cash register used to fund the American TV contract pipedream.

 

[Ludwig Fell Down]

Anybody else get the idea that the NHL leaked it themselves?

As soon as Daly denies the veracity of the Forbes article, that will be confirmation that the NHL leaked the details.

 

[LouisOlivier]

I think Bettman allowed the sale to Chipman because the 23rd richest person on the planet is co-owner; and probably at way more than 50%.....

I think too that the rich owner of the Winnipeg Jets have something to do in the relocation.

BUT it's because the owner of the Thrasher didn't want the Thrasher anymore in his arena so they got no choice to sell it to the only City that could land the Thrasher.

 

[Slashers98]

As soon as Daly denies the veracity of the Forbes article, that will be confirmation that the NHL leaked the details.

He already denied it.

 

[Nordskull]

As soon as Daly denies the veracity of the Forbes article, that will be confirmation that the NHL leaked the details.

Already done.

He said some details are not totally accurate and said the NHL will not made public comments on the proposed deal.

 

[RandR]

What's so lucrative about losing $30M/year? NBC showed the Coyotes one time I believe this season, I just don't buy that everything hinges on the NBC TV deal.

The NBC deal includes their affiliated stations, particularly NBC Sports. Why a top 15-market like Phoenix matters is not because NBC intends to broadcast Coyote games; it's because Phoenix makes up part of the market for broadcasts of any game.

I've linked to this story at least twice before in the past 2 years of these Phoenix threads, but here goes again... written just before it became known that Atlanta would have to be moved first.

TV market could prevent Coyotes' move to Winnipeg

A survey of several current and former NHL governors - who would not speak on the record because commissioner Gary Bettman frowns on public discussions of league business - highlighted the league's need to keep the Phoenix market (the 12th-largest in the United States, according to Nielsen Media Research) in order to maximize a U.S. TV contract.

The NHL announced Tuesday it had signed a 10-year, $2-billion (U.S.) television contract with NBC and its cable network, Versus. The governors surveyed did not know if the possibility of losing Phoenix as a market played a role in the price of the contract, but all were sure it played a role in the negotiations.

Now that Atlanta has moved, having Phoenix move to QC would be the loss of 2 of the top 12 TV markets in the U.S. Seattle would have been a fine replacement (same size market as Phoenix) but that isn't going to be viable just yet.

Doesn't mean that the league can't move to QC, but I suspect it is part of the calculation.

 

[AtlantaWhaler]

Winnipeg only got their team because the NHL couldn't handle two teams in difficulties. It was either Atlanta or Glendale. They will keep Glendale until they are sure to recoup money loss.

False. Winnipeg got their team because there was an ownership who was dead set on not owning a hockey team dating back to 2005. There was nothing the NHL could do. There were terrible owners who found willing buyers with deep pockets and ASG was finally done suing eachother. Done deal.

Different in Glendale. The NHL are the owners and don't want to be the bad guys who end up moving the team (IMO). Also agree that they are wanting to recoup losses.

 

[cbcwpg]

What's so lucrative about losing $30M/year? NBC showed the Coyotes one time I believe this season, I just don't buy that everything hinges on the NBC TV deal.

From April 19 , 2011

http://www.theglobeandmail.com/spor...event-coyotes-move-to-winnipeg/article624167/


The NHL announced Tuesday it had signed a 10-year, $2-billion (U.S.) television contract with NBC and its cable network, Versus. The governors surveyed did not know if the possibility of losing Phoenix as a market played a role in the price of the contract, but all were sure it played a role in the negotiations.

"All our broadcast partners want to keep that market."

One former governor said the new NBC contract probably calls for "a credit back and forth" depending on what happens in Phoenix.

"To be truthful, we hate to lose a big market like Phoenix. That's it in a nutshell."

I don't know if I buy the whole TV argument either. When one looks at the actual numbers of people in Phoenix that watch NHL hockey, its hard to see why keeping these small numbers are so important to the NHL or NBC. Then again it's all about "potential" all the time.

One other quote in the article not related to TV...

Other governors said a reluctance to move back to Winnipeg on the part of the owners is not a major factor. However, all agreed expansion will not be how Winnipeg or Quebec City get teams.

 

[King_Stannis]

From April 19 , 2011

http://www.theglobeandmail.com/spor...event-coyotes-move-to-winnipeg/article624167/


The NHL announced Tuesday it had signed a 10-year, $2-billion (U.S.) television contract with NBC and its cable network, Versus. The governors surveyed did not know if the possibility of losing Phoenix as a market played a role in the price of the contract, but all were sure it played a role in the negotiations.

"All our broadcast partners want to keep that market."

One former governor said the new NBC contract probably calls for "a credit back and forth" depending on what happens in Phoenix.

"To be truthful, we hate to lose a big market like Phoenix. That's it in a nutshell."

I don't know if I buy the whole TV argument either. When one looks at the actual numbers of people in Phoenix that watch NHL hockey, its hard to see why keeping these small numbers are so important to the NHL or NBC. Then again it's all about "potential" all the time.

One other quote in the article not related to TV...

Other governors said a reluctance to move back to Winnipeg on the part of the owners is not a major factor. However, all agreed expansion will not be how Winnipeg or Quebec City get teams.

That's $200 million a year from one network, which seems right in line with the NBA, which I think gets around $900 million combined from all of its broadcast partners. Given that the NBA, the best league for comparison to the NHL, gets usually 3-5 times the ratings of the NHL, the financial deal seems pretty much in line.

At what point do we and the NHL realize that the current deal IS their big national TV deal? That's not even including what the league gets from Canada. The league is doing just fine with TV money.

 

[nelina]

How about Quebecor to finance undercover someone to throw a lets say 5.8M bid for the Arena management in Glendale?

 

[JimAnchower]

What is the penalty from NBC to the NHL if they leave Phoenix? Is it more or less than what they are losing annually by staying (I would guess less)? Would the new Canadian TV deal make up that difference if the Coyotes are moved to Quebec City?

 

[Undertakerqc]

How about Quebecor to finance undercover someone to throw a lets say 5.8M bid for the Arena management in Glendale?

If NHL finds out, its game over for Québec City forever in the NHL. Althought, the way Bettman and the NHL are acting, sure feels like its already the case.

 

[Wheathead]

You're not even losing a ton of TV viewers on NBC if you lose Phoenix. I would imagine that in a market like Phoenix, you're less likely to watch a game without the Coyotes in it than in other markets. Since the Coyotes may only play once or twice a year... viewer loss is minimal.

 

[CGG]

If Fortress funds everything up front, it looks like this:

Assets
Cash $80M
Investment in Team $170M

Liabilities / Equity
Loan from NHL $85M
Loan from Fortress $120M
RSE Equity $45M

The most "optimistic" scenario is this - Fortress only puts in money as needed, i.e. as the hockey team loses money. So they put up $40M upfront, then pledge $80M more over the next 5 years to absorb the losses, say $16M a year. The $80M will get paid back by the COG AMF, the $40M portion eventually gets converted to equity.

At close:

Assets
Cash $16M (for Year 1 losses)
Investment in Team $170M

Liabilities / Equity
Loan from NHL $85M
Loan from Fortress $16M - to cover Year 1 losses
Loan from Fortress $40M - eventually to be converted to equity
RSE Equity $45M

If Fortress really only "loans" $80M, they don't need $15M a year, maybe $10M a year for 20 years does it, and they count on the other $40M being rolled over into equity at some point.

Still, that would require a $10 million AMF, not a $6 million AMF. Good luck to Councillor Sherwood in his attempts to "close the gap".

The other major hurdle is the $85 million loan from the NHL. Take it at face value, that it doesn't need to be paid back for at least 5 years. I'm also going to assume that the $80 million in working capital funding is gone after 5 years due to continued losses. That's only $16 million a year, and we're assuming the entire AMF just goes through Renaissance to Fortress, so only $16 million a year in cash losses is very optimistic when there's basically no AMF to offset any of it.

Then what - starting in Year 6 Renaissance has no more cash to cover losses. Presumably they don't have to worry about the Fortress loan because that would cotinue to be serviced by the AMF. But they do have to cover losses themselves....and start paying back the $85 million loan from the NHL.

Which leads me to the conclusion that there has to be an out clause after 5 years, with the NHL getting paid off from the proceeds of a sale or relocation. Perhaps that's why Daly claims the article isn't "fully accurate" because it doesn't mention the out clause?

 

[CGG]

You're not even losing a ton of TV viewers on NBC if you lose Phoenix. I would imagine that in a market like Phoenix, you're less likely to watch a game without the Coyotes in it than in other markets. Since the Coyotes may only play once or twice a year... viewer loss is minimal.

The only thing that makes any sense regarding the TV contract is when you get to the semi finals and finals. NBC will show the Stanley Cup finals, regardless of who is in it. They no longer get to pick the teams. So if Phoenix moves to Quebec, that means there's less of a chance of an all-American final, and more of a chance of a Winnipeg-Quebec final.

I'm not sure how many Phoenecians would watch the Coyotes if they ever made it to the Cup finals, but it's probably (slightly) higher than the number of Phoenecians that would watch Quebec in the Cup finals.

 

[Nordskull]

The only thing that makes any sense regarding the TV contract is when you get to the semi finals and finals. NBC will show the Stanley Cup finals, regardless of who is in it. They no longer get to pick the teams. So if Phoenix moves to Quebec, that means there's less of a chance of an all-American final, and more of a chance of a Winnipeg-Quebec final.

I'm not sure how many Phoenecians would watch the Coyotes if they ever made it to the Cup finals, but it's probably (slightly) higher than the number of Phoenecians that would watch Quebec in the Cup finals.

OK but the contrary is true.

I did not watch Stanley cup finals since 1995.

Lots think the entire country is watching this show. Nothing is more false.

 

[RandR]

What is the penalty from NBC to the NHL if they leave Phoenix? Is it more or less than what they are losing annually by staying (I would guess less)? Would the new Canadian TV deal make up that difference if the Coyotes are moved to Quebec City?

I don't think the penalty, if there is one, is known because the details of the TV contract (beyond length and size) were never made public.

If the potential move of 1 large-market team (at the time it was believed to be Phoenix) was part of negotiations, then I doubt NBC could have been so stupid as to not have wanted some sort of clause to cover a situation where multiple large-market U.S. teams either moved or folded over the 10-year life of the contract.

 

[Slashers98]

If Fortress funds everything up front, it looks like this:

Assets
Cash $80M
Investment in Team $170M

Liabilities / Equity
Loan from NHL $85M
Loan from Fortress $120M
RSE Equity $45M

The most "optimistic" scenario is this - Fortress only puts in money as needed, i.e. as the hockey team loses money. So they put up $40M upfront, then pledge $80M more over the next 5 years to absorb the losses, say $16M a year. The $80M will get paid back by the COG AMF, the $40M portion eventually gets converted to equity.

At close:

Assets
Cash $16M (for Year 1 losses)
Investment in Team $170M

Liabilities / Equity
Loan from NHL $85M
Loan from Fortress $16M - to cover Year 1 losses
Loan from Fortress $40M - eventually to be converted to equity
RSE Equity $45M

If Fortress really only "loans" $80M, they don't need $15M a year, maybe $10M a year for 20 years does it, and they count on the other $40M being rolled over into equity at some point.

Still, that would require a $10 million AMF, not a $6 million AMF. Good luck to Councillor Sherwood in his attempts to "close the gap".

The other major hurdle is the $85 million loan from the NHL. Take it at face value, that it doesn't need to be paid back for at least 5 years. I'm also going to assume that the $80 million in working capital funding is gone after 5 years due to continued losses. That's only $16 million a year, and we're assuming the entire AMF just goes through Renaissance to Fortress, so only $16 million a year in cash losses is very optimistic when there's basically no AMF to offset any of it.

Then what - starting in Year 6 Renaissance has no more cash to cover losses. Presumably they don't have to worry about the Fortress loan because that would cotinue to be serviced by the AMF. But they do have to cover losses themselves....and start paying back the $85 million loan from the NHL.

Which leads me to the conclusion that there has to be an out clause after 5 years, with the NHL getting paid off from the proceeds of a sale or relocation. Perhaps that's why Daly claims the article isn't "fully accurate" because it doesn't mention the out clause?

Very good breakdown of the financial numbers!

 

[Nordskull]

In the end, this franchise may be in excess in the USA at this very moment.

If not, why is there no serious buyer?

When the south belt operation began, they knew some cusualties would occur.

Atlanta was no 1.

But overall, the south teams are not doing that bad. I'd say mission accomplished for Bettman, this, Coyotes moving north or not.

If Qc city wasnt ready to take this team, and unless I am missing something, in the event it must go, it don't know what NHL would do.

PS Its obvious this is a 5 years plan, obvious. Very short term plan. 5 years clause = they are already sold to Seattle in their heads. It's a "rent" disguised as a "sale"

 

[Llama19]

I would trust my dog (black lab) in a room with two giant bags of dog food and 5 pounds of cooked bacon more than GB at this point after Forbes report.

And that says something about snowball's chance in hell

In this case, and with possibly GWI's involvement, it may look more like this...

 

[gifted88]

No press conferences scheduled for today eh?

hmm, very uneventful.

 

[Nordskull]

No press conferences scheduled for today eh?

hmm, very uneventful.

That's the great lesson learned: "dont expect anything"

 

[JimAnchower]

I don't think the penalty, if there is one, is known because the details of the TV contract (beyond length and size) were never made public.

If the potential move of 1 large-market team (at the time it was believed to be Phoenix) was part of negotiations, then I doubt NBC could have been so stupid as to not have wanted some sort of clause to cover a situation where multiple large-market U.S. teams either moved or folded over the 10-year life of the contract.

At some point, whatever the penalty is (as long as it isn't a termination to the deal) will be less than the losses incurred by continually owning the team in Phoenix. That point probably hasn't arrived yet, but it could soon, especially if the league owns the team again next year and they don't have a large AMF to help cover the losses. In addition, the NHL could go to the Canadian broadcasters and say "how much will you increase your offer if we send a team to Quebec City?". If the Canadian broadcasters say they would cover the NBC penalty (and perhaps more), then it doesn't matter.