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In Gary Bettman’s NHL, the ‘league rules’ are a fancy expression for “you ain’t gettin’ nothin’ for the franchise when you leave”. Just look at the cases beyond Jerry Moyes’, and you will find a pattern. Jerry Reinsdorf wasn’t about to buy the turkey in the typical way!
Turkeys for sale…..only 50 cents!
Nashville, Atlanta and Dallas are all experiencing financial problems. Tampa Bay and Columbus are right behind them, all feeling the pinch of heavy debt loads, difficult economic conditions and operating in markets where professional hockey ranks behind figure skating and kennel shows in terms of viewer interest.
If the NHL controls the franchises, like Bettman says, then why would you put one in a location that has neither an appetite for the product nor owners with the financial clout to carry the team through good times and bad?
What does the commenter above know? After all, he’s only a professor of Business and Finance at the University of Toronto, by the name of Richard C. Powers.
I remember having a conversation or two about buying a Tim Horton’s franchise. My friend and I marvelling at ‘the what if’ idea that we could afford to buy a Tim’s . “A licence to print money” they are. If you can get your hands on one of these stores, you had it pretty much made. The underlying company being well managed, was able to determine the demographic viability of the location of choice. I wonder if there was some sort of guarantee on profit? And, I also wonder that if the store didn’t make money, what would the corporation do for the owner as far as buying back the franchise, etc.? In other words, was there a safety net to sustaining unnecessary losses if the location didn’t pan out?
To me, it’s ironic that Tim Hortons and its franchises is what Gary Bettman used in the Ron McLean interview that we keep referring back to. Ironic in the sense that Tim Horton was an NHL hockey player that came up with a winner. A winning franchise idea – not in hockey, but in an unrelated industry. At the root of buying a franchise opportunity is the promise of making money.
But what are the requirements of franchise ownership in Gary Bettman’s NHL?
When Gary Bettman explained in that interview with Ron McLean, that when an owner buys a franchise, he is buying that franchise in the location determined by the league. He is really saying it’s not the league’s problem if the franchise loses money.
Sports Properties Acquisition Corp., owned by Tony Tavares, was not able to negotiate a deal with purchasing the Florida Panthers because, according to Gary Bettman, a corporation is not an individual owner with deep pockets enough to sustain losses:
Meanwhile, Florida Panthers owner Alan Cohen has been attempting to sell the team to a investment firm, but the bid has been rejected by the NHL on the grounds that Sports Properties Acquisitions Corp. would not have a single member with a large equity stake. Sports Properties’ president and CEO is Washington Nationals president Tony Tavares, and the firm’s directors include Hall of Fame baseball player Hank Aaron and former New York Gov. Mario Cuomo.
Tony Tavares as we know, was part of the robust group that John Kaites said would be required to save the Phoenix Coyotes franchise. Tavares owns Sports Properties Acquisition for a reason – to acquire failing franchises and to move them to other places. Ask Montreal Expos fans what they know of Tony Tavares’ moving skills. They will tell ya.
In Kaites’ own blog (which I am surprised has not been removed or altered as so many other sites have been), this is mentioned:
Phoenix attorney John Kaites said that he began putting together a team of investors and approached the city and team six months ago about taking over and keeping the Coyotes in Glendale.
Kaites, who represents the White Sox among other sports teams, declined to say who or how many investors were involved.
“It’s a robust group, and that is what it’s going to take to save the team,” he said.
Well we all now know how robust the group was. It was simply a ‘bust’. Perhaps this is why Tavares is now being shunned by the NHL? Perhaps Bettman realized, as he did in his court deposition, that he doesn’t have as many friends as he thought? Better check that personal agenda, for sure!
Tavares might now know what Jim Balsillie feels. You’re only as good to Gary Bettman as when you play by his rules. Maybe when the Reinsdorf deal fell through to buy the Coyotes, Tavares lost favor with the commissioner. Never know. ‘League rules’ seem to change with mood, as does how the NHL Constitution is ‘interpreted’.
Which brings us to the franchise valuation question. How much is any franchise worth, and what protection is there for the owner by the underlying corporation selling the franchise?
When Reinsdorf wanted to buy the Phoenix Coyotes, he came in with no money down, and an expectation that the City of Glendale would be on the hook for any losses.
So, doing the math, Reinsdorf valued the Phoenix Coyotes at $0. Nothing, nada, zilch.
In fact, if it were not also for a guarantee that the City would cover losses over the years, I am sure Reinsdorf would need to get money from the league to compensate for those future losses.
Reinsdorf could not get that deal from the City of Glendale or the league. But it brings the important point of an owner wanting guarantees that if the league wants to sell a turkey, then there had better be rights and protections in place to protect the investor.
So further in the Washington Post article, referring to the Coyotes, Bettman continued:
“We’re fighting to protect our rules,” Bettman said Saturday during an appearance at the Capitals’ fan convention. “It has nothing to do with Southern Ontario or another team in Canada. This has to with being a league that sticks by its fans, sticks by its markets and enforces its rules. Because without that, you can’t have a sports league.”
Well, that’s all nice in theory. I guess in a perfect ‘Garyworld’, that would be a noble idea. How nice indeed. The only flaw in the logic in this ideal is if the fans don’t come out and actually buy enough tickets at high enough prices, and don’t pay for the concessions they consume, then how will the owners of the teams afford to keep subsidizing those fans that are number one?
Jerry Reinsdorf was a smart man with lots of sports ownership experience under his belt. He was asked by the league to come in to bail them out.
No doubt Reinsdorf must have thought they were joking when he looked at the business model.
In short, an owner must have deep pockets to sustain losses (sorry Sports Properties Acquisition (holding company)), and have no rights except to hand the team back to the league at the end of the run, when there is no money left to sustain further losses. Good deal or what? Where do we sign?
So, when the owners in Florida are looking at each other and saying, ‘do you want this turkey?‘, they are likely both going to come up with the realization that a loser is a loser is a loser.‘ What on earth has the league sold us, but a licence to lose money!’
So the Panthers owners are stopped by ‘ league rules’ to come out with any amount of their losses returned, and in Tampa we have this scenario:
Owners of the Tampa Bay Lightning are involved in a similar buyout feud, with the NHL laying out a set of deadlines for the disagreement to be resolved. Part owner Len Barrie was given a 60-day window to buy out fellow owner Oren Koules, but that deadline passed last week. Koules now has until Nov. 23 to reach a deal to buy out Barrie.
In short, who can afford to keep ‘the turkey’ a while longer? But the bigger question is why?
Which leads us to the final point.
How do they actually determine the franchise value for an NHL team?
- If all you are buying is liablility, and you need deep pockets to fund a loser, what would you pay to lose money?
- The NHL trademark must be worth something, but what if you cannot capitalize on it?
- If not able to sell the franchise off to the highest bidder when disposing of a team, how does this affect the investment value?
It would seem very clear, that in Garyworld, a franchise owner is only good if he has lots of wealth to sustain innevitable losses over prolonged periods of time. Like Jerry Moyes, the owners for the Florida Panthers and Tampa Bay Lightning are seeing the fallout of the value of the turkeys they were sold.
The ‘league rules’ are designed to, in effect, strip owners of any right except to lose money if the team is in a losing market.
So, in the failing markets where Bettman is thinking the market will turn around, as a prospective new owner you are really just buying a “Rent-a-turkey” franchise. Yes, you can play with it for as long as you can afford to, but turn it back over to us (NHL).
Perhaps Tony Tavares saw an opportunity to bi-pass expansion fees too? Now that wouldn’t sit right in the commissioner’s agenda, would it?
No way! If you are buying an NHL Rent-a-turkey franchise, then if the turkey farm gets moved, it will not be you as the “renting owner” that will profit. It’s better to strip any remaining wealth from you, so the NHL can reap rewards in every conceivable way.
It is obvious Gary Bettman will continue to be on a hunt to replace one deep pocket with another.
The problem is Bettman seems to be running short of new friends to want to buy (sorry, “rent”) his turkeys.
When Gary Bettman says that the sale of the Phoenix Coyotes could extend beyond December 31st, he likely will have missed the window of opportunity.
After all, don’t turkeys have the greatest value at Christmas?
You can probably sell them a little easier and a for a higher price when in demand.
Maybe not in Garyworld, but in the real world, things are looked at a little differently.
A turkey is a turkey, is a turkey, is a turkey – no matter how you slice it.
As a postscript, it is long overdue to honour one of our own, great minds on Make it Seven. Jennifer brings it home with this comment:
Excellent articles on the links you guys are sending out. Thanks I really appreciate them. And of course Charles on Makeiteighteh.com! Excellent work. Okay I must say I feel it everyone! Our passion for this bid and Jerry Moyes are making things happen for the good. Our enthusiastic minds are attracting what we want most. A seventh team in Canada! We all should be proud to be apart of this historical occassion. Our voices are being heard! Jim Balsillie you have my deepest respect. I feel frustrated when I read negative press about how you’ve handled this quest. I have yet to clearly hear what you you’ve done wrong, besides make a business deal with a man who’s lost millions and spent 2 years searching for a potential owner. AFTER the NHL turned their backs on Mr Moyes. So what did Jim do wrong? NOTHING. It seems society would rather allow the bully (NHL) to keep on bullying. Do as they say, don’t step on their toes! But you Mr Balsillie are intelligent and assertive. A citizen that should be held to the highest regard for your efforts in this fight. I know you will be a very successful, passionate and respected contribution to the NHL. The Coyotes need you, the NHL needs you and everyone who wants a 7th team in canada THANKS YOU!! Hamilton awaits your team!!
jennifer zarull | hamilton | Sep 29, 11:18pm