• If you build it, they will use it as leverage to get a better deal elsewhere

    by Tyler Dellow • September 13, 2010 • Uncategorized • 83 Comments

    Gary Bettman has been quoted as saying that Quebec City needs to build a new arena before he can ever consider the possibility of a team going there. This is a curious statement, given that it’s utterly inconsistent with past relocations and expansions. The NHL has seen three relocations during Gary Bettman’s stint as NHL commissioner. Hartford moved to Carolina in 1998. The Hurricanes played in Greensboro for their first two seasons while an arena was built in Raleigh. The Jets moved to the America West Arena in Phoenix, which was completely unsuitable for hockey and stayed there, hemorrhaging money, until an agreement was reached to provide them with a new arena in Glendale, where they have since hemorrhaged money. The Nordiques moved to Colorado and played in an old arena with a small capacity until 1998-99, when the Pepsi Centre was opened.

    Expansion teams have been similar – Columbus built a rink after they were awarded a team, Atlanta did the same (although plans may have existed and, in any event, the arena is privately owned by the owners of the team) and Minnesota didn’t have rinks at the time that they were awarded their teams.

    Nashville is a bit of a different story – they built their arena before they had a team and then cast about looking for one. They took a real run at getting the Devils and only failed in their hunt because New Jersey was able to use the threat of relocation to leverage a better deal out of the New Jersey Sports and Exposition Authority. They got a list of things including a $12MM renovation of the rink, the right to sell more advertising in the rink, guarantees of minimum revenue streams from suites, club seats and advertising, an annual incremental increase in the percentages the Devils get from concessions, parking and luxury suites, rising from 34.2 percent of gross revenues to somewhere between 40 and 50 percent by the end of the lease and a share in the value of naming rights for an arena.

    So that’s seven expansion or relocated teams during the course of Bettman’s reign, with only one of them having a newish facility in place at the time that the team was awarded or permitted to relocate. The other teams were granted or permitted to relocate on the basis of promises or expectations of appropriate arenas to come.

    Building an NHL facility is, of course, no guarantee that a team will come. Just ask Hamilton, where the Copps Coliseum, built for the purpose of attracting an NHL team, is now derided as being out of date and unsuitable for NHL hockey. It is, however, in the NHL’s interest for NHL calibre arenas to be built without any commitment from the NHL because it provides them with a bogeyman to use in negotiations with current landlords. The threat of Hamilton was used in Edmonton to help extract government money for renovations to Northlands Coliseum. The threat of Nashville was used in New Jersey. In effect, when one government builds an arena without a tenant, what it’s really building is a weapon that leagues can then turn around and use against current landlords.

    The NHL’s options in terms of NHL calibre arenas that don’t have tenants and aren’t located in the territory of other NHL teams are a little thin at the moment. With all due respect to the 15,015 seat MTS Centre in Winnipeg, the Sprint Center in Kansas City might be the only one and it suffers from being in a market in which NHL hockey would probably be about sixth on the radar in a small town that already has two professional sports teams.

    If Canadian politicians should have learned anything from the loss of the Nordiques and the Jets, as well as the destruction of taxpayer money that is taking place in Phoenix right now, it’s that the NHL and its owners play hardball. The minute $450MM of public money is poured into a building in Quebec City without a commitment from the NHL to play there (with a lease that locks the team in, strucutured in such a fashion as to essentially render the team immovable), they’ve handed a pile of leverage in negotiations to get a team over to the NHL. With every season, the arena becomes more dated. When it comes to negotiating terms for the lease, politicians likely won’t look at the arena investment as a sunk cost but, rather, something that needs to be completed by installing an NHL team. It’s a recipe for a lease in which the authority that owns the arena ends up getting absolutely hammered.

    The NHL’s history tells us that teams can be moved or granted on simply the promise of a new arena. Building an arena, in and of itself, guarantees a city nothing. It does however, wreck one’s leverage when it comes to negotiations to get a team. There’s good reason for the NHL to want an NHL calibre arena in Quebec City and to make whatever noises it can that don’t amount to a commitment in order to get one built. The temptation to do so should be resisted, if one is actually interested in getting an NHL team on terms that aren’t punitive.

    To be clear, I don’t blame the NHL for using every ounce of leverage that they can to extract money from government. Free money is free money, after all. I think it borders on immoral for governments to spend a dime on professional sports though. If I was made benevolent dictator of the federal governments of North America tomorrow, the second thing I’d do (after nationalizing the Oilers, firing everyone and building a Red Army type empire), is tax all government subsidies to professional sport at 100%, removing the incentive for states, provinces and communities to pour money into professional sport. I’d also get rid of laws permitting people to write off tickets.

    The net effect, I think, would be a world in which the athletes still made good money, albeit a lot less of it, but tickets would be a lot cheaper, as the guys who built cars in Oshawa would no longer be subsidizing the tickets of downtown lawyers in Toronto. The owners of sports franchises would be incentivized to locate in communities where they could convince the most people to spend the most money on their team, rather than the community with the stupidest combination of state/provincial and local government. By pouring so much government money into professional sport and providing so many tax breaks for those who pay money to consume it, we have, in effect, created an industry that has far more money in it than it otherwise would, which comes out of the pockets of taxpayers.

    As you might expect, I think a publicly funded arena for Quebec City is almost certainly insane. The government’s own report says that it will be a money loser, unless you ignore the capital costs. It’s not surprising that the premier of the most debt ridden province in the country thinks that that means it will be profitable. If you’re going to justify building it, as Jean Charest proposes, on the basis that a city like Quebec City should have an 18,000 seat arena and you acknowledge that it will be a money loser, it seems to me that there needs to be some explanation of what Quebec City will get with an 18,000 seat rink that it doesn’t get from Le Colisee.

    I’m genuinely unsure as to the answer to that question. I wouldn’t think Quebec City gets a lot of big English bands on tour – the only one I see on Ticketmaster for Le Colisee is Muse – but it’s located out in the middle of nowhere with a French speaking population, so I can’t see that the facility is really the problem or the reason for any shortfall in that area. If you leave the NHL and the Olympics aside – you can get the Olympics with the promise of a facilities too although, as Graeme Hamilton notes, a Quebec City Olympic bid has more significant problems – what’s the marginal gain that Quebec City residents will get in terms of entertainment? I would suspect that it’s vanishingly small.

    About Tyler Dellow

    83 Responses to If you build it, they will use it as leverage to get a better deal elsewhere

    1. DSF
      September 13, 2010 at

      Jet lagged perhaps but thought provoking nonetheless.

      The problem is, you are retroactively applying common sense to an industry that has subsisted on taxpayer largesse for many decades.

      The bottom line in your treatise is that professional sports in North America don’t make economic sense since the facilities needed to house them are money losers no matter how they are funded unless the revenue can be generated from multiple sports franchises playing in the same building (MSG, ACC, Staples) augmented by concert and ancillary revenue on a high level.

      So, what you are, in effect, proposing is a downsizing of most professional sports leagues to major centres that can support that kind of activity.

      In your world, the Canucks, Oilers, Flames, Senators, Penguins, Blue Jackets, Predators, Coyotes, Devils, Lightning, Panthers, Islanders, Hurricanes, (have Im missed any?) would vanish because their arenas could not be profitable based on ROI.

      Increasingly, you would see major sports teams concentrated in major markets that can leverage franchises in more than one league to pay for their buildings.

      Is that what you want or do have any ideas that might make it possible for sports fans in many areas to have a home team to root for?

    2. Tyler Dellow
      September 13, 2010 at

      I don’t think I’m proposing a downsizing of professional sports leagues to major centres that will support that sort of activity. What would happen in my world is that the pie would get cut up a lot differently.

      An arena or ballpark doesn’t have to be a money loser. As has been repeated ad nauseum, Rexall is currently one of the busiest arenas in North America – top ten or something like that. Generations of stadia and rinks were built privately. Government money permits them to be a lot fancier but I’m not sure why they are doomed to be money losers if they are built privately. I think you’d still have sport in non-major centres, but the stadiums might not be as opulent as they are now.

      Teams in places like Phoenix, Tampa, Atlanta and Carolina might be a no go but I can’t imagine that the Oilers couldn’t pay for and operate an arena in that environment.

    3. DSF
      September 13, 2010 at

      Let’s focus on the Oilers’ situation.

      Under what circumstances can you see an arena, and an NHL team, that plays in it, being profitable?

      It’s likely the Oilers are losing a marginal amount of money playing in an arena which was built with 100% public funds and in which they pay a $1/year lease.

      How can you see an NHL owner building an arena, at what cost, and making a reasonable ROI?

      Ball is in your court.

    4. Tyler Dellow
      September 13, 2010 at

      DSF –

      First thing would be to run the team better. If you accept that they lost money – and I’m not sure that they did – spending $16MM more than they had to on players to finish 30th probably didn’t help. Spending what I suspect is in the range of $2MM on Kevin Lowe and Pat Quinn this year to do god knows what doesn’t help. They are a spectacularly poorly run organization, protected from the marketplace in part because of the government teat that they suckle at now.

      It’s tough to suss out what Rexall Place does from the Northlands financial reports. I note, however, that private facilities were the norm for a long time in North America. In any event, there are supposedly 240 events a year there. It’s also tough to draw comparisons between how the world would look in my league versus how it looks now. The way in which the pie is distributed would probably be altered significantly. Instead of spending $55MM on hockey players, hockey teams might spend $30MM, as debt service eats up a chunk of their resources. We know though, that most NHL teams are an $80MM to $100MM a year business. Add to that the revenue generated from the other 190 nights a year in which Rexall would be used and I’ve got a hard time seeing how you couldn’t build a $250MM facility and service the debt on it. The pie is going to be cut up differently than it is now. The question to be asked is this: how much revenue can a facility generate? To suggest that you can’t generate enough to run a professional hockey team if you have to build your own rink (there’s no reason that the NHL has to pay $5MM a year to guys) seems absurd to me. I’m cognizant that it would be grossly unfair to Edmonton if the rules started now, so I’d have a committee of leading economists and tax guys set up to figure out the best way to tax all of the benefit that teams like Nashville get from their publicly funded arena at 100%.

      As far as the ROI goes, my suggestion would probably result in a big drop in franchise values across the board. Katz spent too much money on the Oilers. He’d lose a bundle in asset value. C’est la vie. Raw, unbridled capitalism.

    5. Martin
      September 13, 2010 at

      DSF, you’re talking as though costs were fixed, which they’re not. To begin with, a systemic change that took this much money out of the system would result in much lower player salaries.

    6. Passive Voice
      September 13, 2010 at

      While DSF has us on the subject, does anyone happen to know if the cost of stadia has increased in real terms over the years?

    7. mclea
      September 13, 2010 at

      I don’t think your benevolent dictatorship solves the inherent problem of local monopolies. Smaller markets would continue to find their labour costs driven up to unsustainable levels because they are forced to compete with New York and Toronto for players.

      DCF is right in stating that your system would inevitably disadvantage smaller markets to the point where they would no longer be viable. I don’t think it’s a coincidence that profitable, privately built buildings are almost always in large markets. Teams with privately built buildings don’t charge higher prices because they need to cover their costs; they do it because they can.

    8. Tyler Dellow
      September 13, 2010 at

      mclea – I’m not sure that this would be the case, for a number of reasons. First, I think my proposal would disproportionately hit the franchises in large centres, although I can’t be certain of that. If people can no longer write off tickets, it’s going to affect the teams that depend more on that more than the others. That’d be the teams in Toronto.

      Second, who’s to say we wouldn’t have the same CBA in the NHL, or one that’s similar?

    9. Matt M-S
      September 14, 2010 at

      mclea–isn’t the issue whether small centres want to spend their money on subsidising pro athletes and owners, or public services? I tend to agree with Tyler that most teams could survive in his model, though I take your point that they might have more trouble competing.

      The question is whether voters want to pay for a better second line, or better schools. If they prefer the former, more power to them. But it’s usually presented as what I see as a false choice: subsidize us, or no hockey. In the few places where that’s actually true, I doubt hockey belongs there in the first place.

    10. DSF
      September 14, 2010 at

      If you’re working from the premise that an arena cannot be profitable when built with public money, how do you then make the leap of logic to an arena can be profitable if built with private funds?

      I would suggest, if every NHL franchise had to build and operate it’s own facility, there would likely be NHL teams in NY (one) Chicago, LA, Toronto, Montreal (maybe) and Boston. What all of them have in common is an NBA franchise also playing in the same facility.

      Cutting NHL payrolls by 25 million wouldn’t really be enough to change those economics absent the huge TV contracts that enable the NFL and NBA to survive.

    11. Tyler Dellow
      September 14, 2010 at

      If you’re working from the premise that an arena cannot be profitable when built with public money, how do you then make the leap of logic to an arena can be profitable if built with private funds?

      Because if all arenas were built with private funds, they wouldn’t cost $450MM and the division of funds generated by events in the arena would be different. The market would allocate less money to the players/entertainers and more to the debt service on the buildings (although I suspect you’d find that the cost of the buildings would drop and teams would decide they didn’t need utter luxury once they had to pay for it).

      Cutting NHL payrolls by 25 million wouldn’t really be enough to change those economics absent the huge TV contracts that enable the NFL and NBA to survive.

      Really? You can service an awful lot of debt with $25MM annually. And again, it won’t just be the hockey players paying for it. All of the entertainers who use the facility will be taking a hit.

    12. Slasher98
      September 14, 2010 at

      I live in Quebec City and your comments about the city are ludicrous. Have you ever been to Quebec City at least? We’re only 2 hours from Montreal and 100,000 people attended concerts by Rammstein and The Black Eyed Peas this summer on the Abraham Plains during the summer festival. We have international bands like Iron Maiden and Metallica coming almost every year… Our junior hockey team, the Remparts, attracts more than 10,000 fans per game… Finally, it’s not because we speak French that we don’t speak English either… Do you speak French?

    13. Tyler Dellow
      September 14, 2010 at

      Matt and mclea:

      We might see something more akin to the European soccer model in the absence of a CBA like we have now. I’m learning more about the structure over ther but it seems like in a lot of leagues, you tend to get a few long term powerhouse teams. The EPL has the Big 4 who have dominated since it came into being in the early 90′s. Italy, Spain and Portugal seem similar. The Turkish Super Lig has been dominated by a couple of teams.

      It doesn’t seem to me though that this is a consequence of lack of government spending but, rather, a consequence of a lack of mechanisms within the league to promote equality, which are different things. We have a rough sense of the distribution of NHL revenues in the current system. In my system, I would guess that some teams would drop through the floor but that you’d still be left with a pretty stable group.

    14. September 14, 2010 at

      Thank goodness all these commenters are here to explain why the NFL franchise in Green Bay, Wisconsin, has been so disastrously unprofitable.

    15. Tyler Dellow
      September 14, 2010 at

      Slasher98 – I’ve not yet been to Quebec City, although it’s on my list. Accepting what you’ve said at face value, I find it even harder to understand why we should be pouring money into a rink in Quebec then. What benefit is there going to be for the local residents in terms of improved entertainment options?

    16. Slasher98
      September 14, 2010 at

      The current Colisee is a dump, there’s no air conditioning; therefore, we can’t have concerts during summer (for about six months). We need a new building to attract bands like U2, Madonna and Celine Dion. I’m totally for the fact that the arena should be funded privately (Pierre-Karl Peladeau owner of Quebecor), but since the mayor Regis Labeaume and the provincial Prime Minister Jean Charest already said they will part of the construction, people expect Harper to pay his part of the bill. With the looming federal election, Harper will have a tough decision to make as Quebec City is a Conservative Party stronghold.

    17. mclea
      September 14, 2010 at

      Thank goodness all these commenters are here to explain why the NFL franchise in Green Bay, Wisconsin, has been so disastrously unprofitable.

      You’re right Cosh. All the NHL has to is sign a multi-billion dollar TV deal and all these problems would disappear. Why hasn’t Bettman though of this yet?

    18. mclea
      September 14, 2010 at

      Thank goodness all these commenters are here to explain why the NFL franchise in Green Bay, Wisconsin, has been so disastrously unprofitable.

      You’re right Cosh. All the NHL has to do is sign a multi-billion dollar TV deal and all these problems would disappear. Why hasn’t Bettman thought of this yet?

    19. DSF
      September 14, 2010 at

      Thank goodness the Green Bay Packers benefit from hundreds of millions of dollars in television revenue.

      Thank goodness the City of Green Bay, responding to a threat from the NFL to move the team to Milwaukee, ponied up public money to build a new stadium.

      “In 1955, the other NFL owners had threatened to force the franchise to move to Milwaukee if the stadium conditions in Green Bay were not improved. In 1956, Green Bay voters responded by approving (70.3%) a bond issue to finance the new stadium. The original cost in 1957 was $960,000 (paid off in 1978) and its seating capacity was 32,500.
      The new stadium would be the first modern stadium built specifically for an NFL franchise. At that time, all the other NFL teams were playing either in facilities shared with Major League Baseball teams, or in other pre-existing shared facilities.”

      By the end of the 1990s, the Packers believed that they needed to update the facility to remain financially competitive in the NFL. Rather than build a new stadium, Chairman/CEO Bob Harlan and President/COO John Jones unveiled a $295 million plan to renovate Lambeau Field in January 2000. It was to be paid for partly by the team via the 1997-98 stock sale, which netted more than $20 million. Most of the proceeds were to be paid through a 0.5% sales tax in Brown County and personal seat license fees on season ticket holders. After their plan won approval by the Wisconsin State Legislature, it was ratified by Brown County voters on September 12, 2000 by a 53%-47% margin. ”

      Thank goodness for Brown County taxpayers.

    20. DSF
      September 14, 2010 at

      @ Tyler

      Just how would you envision “entertainers” being coerced into performing for less in NHL arenas?

      Wouldn’t it be more likely they would find more profitable venues for their performances and pass NHL arenas by altogether?

    21. Tyler Dellow
      September 14, 2010 at

      In my better world, all public subsidy of sports facilities is taxed at 100%. They will presumably do whatever makes the most economic sense for them. Paying an actual fair market rent for a night in a 20K seat stadium still probably makes more sense than playing in a bar. I’m not sure what you think their options are.

    22. DSF
      September 14, 2010 at

      Their options are playing at the venues that make them the most money. Eventually, the only large venues that exist would be a large privately financed arenas and stadiums that would only be profitable in large centres and that have multiple tenants.

      I’m old enough to remember that, before the construction of Rexall Place and Commonwealth Stadium, that Edmontonians had to travel to Vancouver to see NHL hockey or any of the large musical acts.

      All your perfect world does is return that scenario.

    23. Tyler Dellow
      September 14, 2010 at

      Their options are playing at the venues that make them the most money. Eventually, the only large venues that exist would be a large privately financed arenas and stadiums that would only be profitable in large centres and that have multiple tenants.

      Well, given that you seem to have decided that markets don’t work and that the market’s reaction to the disappearance of public money would be the complete disappearance of teams outside of large markets, this is sort of tenable. I think you need to explain why a hockey team like the Oilers, which can generate $100MM in revenue or so, couldn’t survive with a different portion of that money allocated to the payment of players and a larger portion allocated to servicing arena debt.

      For the reasons I express above, I don’t accept that premise, which is why I think your argument that I’m effectively calling for a return to the days when Edmontonians had to travel to Vancouver to see shows or NHL hockey is wrong.

    24. Deano
      September 14, 2010 at

      mc – I agree with your position, but you want to ‘tax a public subsidy’?

      As the public subsidy is the taxpayer’s money in one level of gov’t, who collects the tax on the subsidy?

      Government taxing government. How about less gov’t involvement in the first place?

      I understand the disincentive you want to create, but this is just wrong for so many reasons.

    25. Quain
      September 14, 2010 at

      So, we’re working under the assumption that Tyler’s plan is implemented on a wide-scale. Obviously, this is blue-skying and we’re never going to see a complete removal of public money being thrown at private entities, no matter the benefits, but this is what crazy people with blogs do.

      Given that, what exactly do you folks think is going to happen here? It’s not as if the supply of arenas is going to skyrocket should public funding dry up, so if you hold that steady (or ratchet it down), where are these musical acts going to play? Currently there’s a supply of bands/events/etc. that can fill up all of these publically funded arenas. Maybe the removal of public funds reallocates the supply mix, but it’s not like dozens of pop acts are going to fold rather than take a few less dollars to play Edmonton. In fact, what Tyler is suggesting is essentially a tax cut… if people really want Britney Spears badly enough to offer her the current gate in our new, more expensive world, they’ll have the money to do so.

      Additionally: since when is Limp Bizkit a public good that anyone should care about? Is Edmonton seriously devalued because you can’t get high end pop acts?

    26. DSF
      September 14, 2010 at

      @tyler.

      Sure, if the league decided it was necessary and imposed a salary cap of, say $30 million and all else remained equal, teams could devote more of their revenue to their facilities.

      How would you address the imbalance between teams that already have modern arenas and can easily service them because they have much higher revenue streams?

    27. JoeNerfHerder
      September 14, 2010 at

      Why the cheap shot at the size of the MTS arena? Winnipeg will sell-out every game at its 15,015 state-of-the-art facility, which is a lot more tickets than they will sell in (take your pick): Florida, Phoenix, Atlanta, Nashville, Columbus…

      It’s a little tiresome to see people perpetuate the myth that the MTS arena is too small, when its actually perfect for the NHL market in Winnipeg (which is better than at least 10 current NHL markets in the southern US).

      Care to explain?

    28. September 14, 2010 at

      DSF et al.,

      There’s a lot of revenue available from selling tickets to hockey games in Edmonton. As long as the dollar trades evenly, Edmonton is well above average in potential revenue so moving the Oilers only makes sense if you want to follow a policy of moving teams to worse than average revenue markets. (The NHL did want this for a while because they wanted TV revenue and wanted to move to weak NHL markets to have a national presence for a national TV deal.)

      If we cut off the various public subsidies, all teams would have to pay for their own arenas which means paying interest on loans to build them. Moreover, cutting off tax subsidies might decrease gate revenues. So teams would earn less revenue.

      Most teams would have to adapt by cutting costs. The easiest cost to cut is player salaries. In fact, if Tyler’s ideal were made real, the current CBA would immediately react by lowering player salaries, leaving some teams profitable. If further changes needed to be made the league could get a better cap during the next round of bargaining.

      What Tyler is saying has happened is that NHL teams have effectively leveraged local governments to compete against each other by threatening to move or by promising magical benefits (outweighing the cost of building the arena) to the city if a new arena is built.

      It’s a given -by logic alone- that some of the threats to move teams are empty. There just aren’t that many good markets to move teams to. Most of the good markets have teams and so the teams will stay there.

      The promises of new arenas are also largely empty, and this has been learned empirically over the last 2 decades. If arenas were such ggod investments, private investors would find ways to make these investments and collect revenue from people who benefits. In other words, if building a new arena in Edmonton is such a financial winner, why hasn’t someone come along and offered millions to do it in exchange for the power to collect revenue from businesses that directly benefit?

      I think over the next few decades, as the realities of what teams and new arenas do and don’t bring become clearer, local governments will realize soon that some of these threats and promises are empty and they’ll begin to act accordingly. Ultimately, this means Tyler’s ideal will be brought about slowly.

      The primary impact of this will be to bend the growth curve of player salary and the value of teams. Teams might also have to cut travel costs by playing more local games, travelling less extravagantly, hiring fewer management and paying none of them exorbinantly, etc.

      The issue that larger teams like TO and NYC can outcompete smaller markets for paying more for players is a separate issue. In most leagues there are more small market teams than big market teams. The small market teams have realized that parity is in their interest and they can collectively leverage their interests to create a salary cap that creates parity. (Baseball is different because fans of baseball seem to be willing to watch teams that have only a snowball’s chance in hell of winning big. I think this is part of the culture of baseball fans.) The wealthy teams are willing to go along as long as the insuing parity doesn’t take away every competitive advantage they might have as a result of their ability to pay a higher salary.

      In conclusion, there’s lots of revenue in Edmonton. (An above average amount as long as the dollar remains solid.) And the league has an interest in keeping a level of cap-parity amongst all teams. Therefore the Oilers will remain here and will have the opportunity to compete with the few wealthier teams.

    29. Rich
      September 14, 2010 at

      Let me quote yourself a little:
      “I wouldn’t think Quebec City gets a lot of big English bands on tour – the only one I see on Ticketmaster for Le Colisee is Muse – but it’s located out in the middle of nowhere with a French speaking population, so I can’t see that the facility is really the problem or the reason for any shortfall in that area. ”

      Wow. Quebec bashing at its best. Looks like you know the city very well, you stupid racist.

    30. The Other John
      September 14, 2010 at

      We got it DSF

      You want the City of Edmonton to pay for a new arena. Its the only way, yet Montreal, Vancouver, Toronto and Ottawa were all built with private money. And are today 100 % owned by private businesses. 100%

      In the heart of conservative private enterprise canada— Alberta…lets subsidise a private business to the tune of $350 m dollars. Nowhere else– ok in Quebec but when have they ever beeen in favour of public subsidies? what…always you say

      The alternative — Katz will move the Oilers. In which case 4-5-6 NHL teams will fight to move to Edmonton. Why, private enterprise! They can make more money with this City’s hockey revenue stream than where they are. Even with the shoddy, rat infested unbelievably subpar Rexall Place.

      Worse part of this PR campaign: if the ancillary development touted around the downtown arena does not materialize (which is supposedly how the City does not get totally hosed on this subsidy), arena supporters will be heard to say “Geez, Who knew”?………. actually, the people opposed to the project

    31. September 14, 2010 at

      Although it’s possible a Winnipeg team would sell out every game, they weren’t able to do so before the team moved. The old Winnipeg Arena had a seating capacity of over 15,000, but the Jets never averaged more than 13,550 fans in a season during the 90s, and in fact, had several seasons below 13,000. The economics may have changed, but I don’t think it’s a sure-thing that Winnipeg would be selling 15,000 tickets for years to come.

      As for comparisons to some of the newer expansion teams, I’m not convinced Winnipeg would easily outsell them over the long haul. Since the 2005-06 season, these are the clubs to average less than 15,015 fans per game:

      2005-06: Blackhawks, Blues, Capitals, Predators, Devils, and Islanders.
      2006-07: Bruins, Blackhawks, Devils, Islanders, Coyotes, Blues, and Capitals.
      2007-08: Blue Jackets, Predators, Islanders, and Coyotes.
      2008-09: Thrashers, Predators, Islanders, and Coyotes,
      2009-10: Thrashers, Avalanche, Predators, Islanders, and Coyotes.

      All of the other teams they’d need to outprice to make more money, and I’m not sure if Winnipeg is a market where that can really happen. As for those on the list above, that’s a lot of bad teams. Clubs like the Capitals and Hawks seem to draw fine now that they’re winning. Even Phoenix drew much better toward the end of the year and into the playoffs. It’s easy to pick on a team like Atlanta or Nashville because they’re new/Southern, and the reality is they’re not charging big money for a lot of the tickets they do sell, but I think we need to be mindful of the fact that neither club has ever won a playoff series. Atlanta has never even won a playoff game. I very much doubt that Winnipeg would be selling out their arena at top dollar ten years in if they’d made only one playoff appearance (where they got swept).

    32. JoeNerfHerder
      September 14, 2010 at

      Scott,

      A few things to watch when you list those average attendances;
      1) As we learned from the Coyotes Bankruptcy, the reported attendance is often far above actuall ticket sales. If you read the bankruptcy records, you will find that the Coyotes actual average attendance (that’s butts in seats, whether paid or not) has never been above 12,900 (that’s never). Attendance is often inflated in order to make and exceed the NHL’s revenue sharing.

      2)You mention it, but I want to be clear, the comparable ticket prices in Atlanta, Phoenix, Florida, Nashville ect, is a lot less than “hockey towns” like Toronto, Montreal, Edmonton and dare I say Winnipeg (when they have a team).

      3)To add to the above (inflated attendance figures and lower revenue from ticket sales), a lot of the tickets “sold” are tremendously discounted. For example, Coyotes tickets were given away free if you test drove a Toyota (try that in Toronto – or Winnipeg when they have a team).

      After you adjust all those attendance figures you listed, and you come up with revenue from ticket sales, you are going to find that Winnipeg is likely to be somewhere right in the middle of the pack, far better than many southern teams and expansion teams.

      I really dislike the arguement that teams like Phoenix have poor attendance because they have a poor team. No team is going to win the Stanley Cup every year. Phoenix had poor attendance and money troubles in 1999, 2000 and 2001. The team had already been around for 3 to 5 years by that point and had made the play-offs. Still they failed to maintane a following over those “good” years. If a team has to rely on winning every season to attract fans, its open to huge market risks. I dare say, those market risks are diminished in Winnipeg because of its huge hockey following, and the Monopoly on sports entertainment the NHL will have.

      Winnipeg will do just fine with a 15,015 seat arena. And 15 years from now, they will still be doing just fine (at least its more likely than in places like Phoenix, Atlanta, Florida…)

    33. September 14, 2010 at

      My problem with Winnipeg is that they weren’t doing just fine in terms of attendance when they did have a team. If the figures are pumped in these other places, there’s no reason to think that they weren’t pumped there too. I don’t know a tonne about Winnipeg, so maybe you could explain to me why you think a team in Winnipeg would be more viable now than it was then. I get that the dollar is improved, and that the arena is nicer (even if it is slightly smaller), but I don’t think those two factors alone are enough to make a go of it. What else has changed there? And just out of curiosity, how much do you think the average ticket would go for in Winnipeg over, say, a five-year period with average team success (two or three playoffs, one or two series wins).

      As for the other markets, I’m not the one setting a Stanley Cup as the threshold, nor do I think it should be. The Jackets have been around for nine seasons, and have made the playoffs once. Atlanta has been around ten seasons and has made the playoffs once. Phoenix has made the playoffs almost half the time, but had missed six straight seasons before last year, and they’ve yet to win a playoff round. Nashville has never won a playoff round. I’m not asking for Stanley Cups here. We’ve seen legitimate hockey markets (like Chicago) struggle when the team is struggling like that. We’re not talking needing to win the Cup here. I don’t think it’s outlandish to say that these teams would be much healthier with a bit more on-ice success.

    34. September 14, 2010 at

      Hey Scott,

      Edmonton’s attendance was shit in the mid 1990′s too.

      I think you’re right that Winnipeg isn’t a great hockey market. Maybe it’s even a bad one. But the fact they had trouble drawing fans in the 90′s when they were losing, is not convincing evidence that they couldn’t do much better now.

      The Oilers did really, really badly back then, too, but the Oilers do much better now. It’s plausible Winnipeg would be doing nearly as well as Edmonton now in terms of attendance.

    35. JoeNerfHerder
      September 14, 2010 at

      Scott, if you compare Winnipeg’s average attendance in the 80′s and early 90′s (but ignore the final year 95/96 because the team was known to be moving and people stayed away), you will find that attendance for the Jets was around 13,200, that’s now considered small. However, the league’s average attendances from the same years 1979 to 1995 was 10,710 to 14,797.

      So really, Winnipeg was in the thick of things with attendance around 89% of league average with larger arenas. If you compare that to today, the NHL average attendance is around 17,072, if Winnipeg was to attract 89% of that, then we are looking at a sell out every night!

      To further the arguement, the old Winnipeg arena was built in the 1950′s and expanded when the Jets and the WHA came to town. In reality, it only had about 9,000 good seats. Infact, you couldn’t see the scoreboard from many of the seats in the upper lower bowl, and upper uppper bowl. A real crappy arena, yet they still average 13,200 a night.

      I’m guessing that average ticket prices would be in the mid $80 range, while some much higher, and likely some in the $60 range. That’s at season ticket rates. Walk up rates will be higher. I promise, they will easily have 13,000 season ticket holder for the for-seeable future (if not more). Compare that to Phoenix, where season tickets holders averaged 5,400 until 2009 when they dropped to 1,400.

      Like I said, Winnipeg will be around and strong 15 years from now. They won’t be the biggest money maker in the league, but they will never be a drain on revenue sharing.

    36. September 14, 2010 at

      I mean to say you “might be right” about Winnipeg. I have no idea.

      But the fall in mid 1990′s attendance in Edmonton and Winnipeg was driven by a lot of things. 1. Fan apathy caused by the widespread feeling that small market teams couldn’t win under the CBA. 2. Bad management and marketing in selling seat packages, season tickets, etc. 3. A relatively poor economy in Canada compared to the U.S. The Canadian economy has been improving relative to the U.S. starting around 1994. That’s helped Edmonton be more competitive and may be partially responsible for more fans in seats. (More fans can afford higher, more competitive ticket prices as the employment and average wages improve.)

    37. Quain
      September 14, 2010 at

      kris: I don’t know much about the history of the Jets, but the Oilers tanked because they were shipping people out of town / rebuilding. Attendance went from 17,000 to 13,000 for four years and right back to 17,000 as soon as they started posting .500 records again. That’s what you expect to see when a team commits to suck, and doesn’t really show a change in fan habits.

      The Jets never eclipsed 14,000 average attendance (excluding a couple of playoff games) in their entire existence. Were the Jets that bad for their duration or was the fanbase just not quite big enough?

    38. Quain
      September 14, 2010 at

      Also, I’ll say this: It’s certainly possible, if you wipe everyone’s memory of the dynasty days, that Edmonton wouldn’t be able to support a hockey team. However, given the history, it seems like the Oilers are firmly entrenched in the hearts and minds of Edmontonians, so you can overcome the slightly smaller market and fill an arena for a mediocre hockey team. For normal expansion teams though, I think you can count on a couple years of suck and mediocrity, rather than Wayne Gretzky and Mark Messier leading them to the promised land over and over.

    39. September 14, 2010 at

      Kris: I agree with you that the Oilers struggled at the gate for a lot of the early to mid 90s, but they did outdraw Winnipeg every single year in that decade.

      JNH: Do you really think Winnipeg can support an average ticket of $80? I’d be very surprised if that’s the case. Winnipeg is, what, 70% the size of Edmonton? Forbes had the average ticket in Edmonton at $55 in 2009, and I don’t see demand for 15,000 tickets in Winnipeg outstripping demand for about 17,000 tickets in Edmonton. I think they’d be fine at first, but would find it difficult to average $50 per ticket over the long term (speaking in today’s dollars).

      As for how they did in attendance, I’m not sure how you figure the Jets were close to average. They were brutal in the 90s:

      1989-90 – 13,106 per game 19th of 21
      1990-91 – 12,931 per game 18th of 21
      1991-92 – 12,931 per game 18th of 22
      1992-93 – 13,550 per game 19th of 24
      1993-94 – 13,297 per game 23rd of 26
      1994-95 – 13,013 per game 23rd of 26
      1995-96 – 11,316 per game 26th of 26

      That’s a terrible attendance record. The teams they beat in attendance more than once are the North Stars (moved),the Whalers (moved), the Sharks (expansion years), the Senators (expansion years), and the Islanders. I’m sure some of that was the building, but that record doesn’t exactly scream demand for NHL hockey. The North Stars were awful as well, and the Wild have done well, so who knows, but I don’t understand how you can be so confident that a team in Winnipeg would never be on the receiving end of revenue sharing given the size and history of the market.

    40. Kris
      September 14, 2010 at

      I don’t think attendance in the 90′s tells youu anything about Edmonton, Winnipeg, or Minnesota. I think we can assume middle class and upper middle class Winnipegers(?) are as hockey mad and willing to buy tickets as their Edmontonian counterparts.

      The only real question about Winnipeg is whether there are enough people in the city who have enough disposable income to buy season tickets and ticket packages regularly. That is if Winnipeg has the wealth it can support a team.

      I suspect Winnipeg doesn’t have the wealth, but that’s the evidence we need, not attendance data from the 90′s, which could have a variety of explanations, as in Edmonton’s and Minnesota’s cases.

    41. September 14, 2010 at

      The poor attendance could have a variety of explanations, but I don’t see how “the past performance of NHL hockey in the market” is irrelevant to the potential future of NHL hockey in the same place. It should at least serve as a warning, and point us in the direction of some significant challenges that need to be overcome.

      As for the comparison between Edmonton and Winnipeg, I don’t know that it’s safe to say both markets will support NHL hockey with the same fervency. From 1989-90 to 1995-96, Edmonton had three seasons with under 14,000 fans per game, and they haven’t had another one since. The Jets didn’t draw 14,000 per game in a single season. They may have both struggled, but the degree was quite a bit different.

    42. DSF
      September 14, 2010 at

      The Other John says:

      We got it DSF

      You want the City of Edmonton to pay for a new arena. Its the only way, yet Montreal, Vancouver, Toronto and Ottawa were all built with private money. And are today 100 % owned by private businesses. 100%

      In the heart of conservative private enterprise canada— Alberta…lets subsidise a private business to the tune of $350 m dollars. Nowhere else– ok in Quebec but when have they ever beeen in favour of public subsidies? what…always you say

      The alternative — Katz will move the Oilers. In which case 4-5-6 NHL teams will fight to move to Edmonton. Why, private enterprise! They can make more money with this City’s hockey revenue stream than where they are. Even with the shoddy, rat infested unbelievably subpar Rexall Place.

      Worse part of this PR campaign: if the ancillary development touted around the downtown arena does not materialize (which is supposedly how the City does not get totally hosed on this subsidy), arena supporters will be heard to say “Geez, Who knew”?………. actually, the people opposed to the project

      Just so you know…I have no dog in the fight as I don’t live in Edmonton.

      You should also know the arenas in Ottawa, Montreal, Vancouver and Ottawa were later sold for much less than their cap cost.

      Where you are right is that, if arenas were profitable ventures, there would be a lineup of people willing to build them but since that’s not the case, there isn’t.

      Now what?

      Are you suggesting Rexall Place which is certifiably a dump in located in one of the worst areas of Edmonton will be a viable venue for the indefinite future?

      Interesting that the owner, Northlands, The City of Edmonton and the building’s prime tenant all disagree with you.

      Perhaps you didn’t hear very clearly what the Katz Group said when appearing in front of City Council.

      They will not renew their lease on Rexall Place.

      You seem just smart enough to figure out what happens next.

    43. Tyler Dellow
      September 14, 2010 at

      For what it’s worth, I’m not really sold on Winnipeg as an NHL market either. I did some looking around after Mark Spector wrote something stupid saying that Edmonton should bend over for Katz or we’d be Winnipeg a while back and it looked to me like Edmonton’s GDP is something like 170% of Winnipeg’s. I suspect that there’s a lot more hockey money here than there.

    44. DSF
      September 14, 2010 at

      @Tyler.

      Those opposed to any public funding of a new arena seem to have no other solution than play in the old barn until it falls down around their ears or make Katz pay for it.

      Since neither are likely to happen, I wonder what you would hold out as a reasonable course of action.

    45. Tyler Dellow
      September 14, 2010 at

      I don’t see why you think that Katz is unlikely to pay for it. He might not want to but I’m not exactly sure where he’s going to find a better option than building a rink on his own in Edmonton.

    46. DSF
      September 14, 2010 at

      He’d be into the enterprise for $650 million Tyler.

      Virtually impossible to make that pay unless he was able to generate a lot more revenue.

      I doubt Edmonton is ready for an NBA franchise and local TV money just won’t compete with the big boys in NY and Toronto given the small market size.

      If faced with that scenario, I think he would be more likely to sell the team.

      I wonder if there is another EIG ready to pick up the pieces?

      Doubt it.

    47. Mike W
      September 14, 2010 at

      The rink can last up past 60 years, plenty of time to pay off his loan that purchased the team. Renovations also could be made for far cheaper. As of 1998, it was “state of the art” according to the Oilers.

      Why again, is this Joe Public’s problem? Edmonton is a hockey market, plain and simple.

    48. DSF
      September 14, 2010 at

      Mike W.

      60 years? Who says? You?

      You realize the economics of the game have changed tremendously since 1978, right?

      The Oilers, other than massively hiking ticket prices, have maximized revenue in Rexall.

      Renovations could be made for how much? Since you say “far cheaper” you must have some information. Please provide it.

      Also please let us know who would pay for those renovations.
      Would that be the buildings’ owner (Edmonton taxpayers) or the tenant that uses the building less than 50 nights a year?

      And it isn’t Joe Publics problem if they don’t care if they have an NHL team.

      If they do care, then it’s an issue that warrants examination.

    49. mclea
      September 14, 2010 at

      He’d be into the enterprise for $650 million Tyler.

      I’m going to have to agree that Katz would have a lot of trouble making a go of this with that much money in.

      Edmonton, despite being a great hockey market, just isn’t big enough to drive the kind of revenue to make the numbers work. Vancouver is 2.5 times the size of Edmonton and their building isn’t exactly spitting out free cash flow.

      Loading up with the much debt – in a province that historically runs through boom and bust cycles – just isn’t going to happen. It wouldn’t be worth the risk for Katz. There’s probably a thousand better places to put your money than an arena in a small market. Not to mention his cost of capital would be through the roof compared to what the government could finance the building at.

    50. Tyler Dellow
      September 14, 2010 at

      DSF –

      Before I’d be willing to take anything that the Oilers say on this at face value, I’d want to see the business case that they can’t build a facility without public dollars. In order to do that, there would have to be some sort of valuation of what sort of revenue an arena can generate, something that I genuinely don’t know the answer to.

      I’m open to being convinced that building a new arena is economically unfeasible in Edmonton. I don’t understand why you’re willing to just believe everything that the Oilers say on the point though, with absolutely no evidence or a hard business case.

    51. Mike W
      September 14, 2010 at

      60 years? Who says? You?

      DSF, you big disingenuous dink, don’t pretend we haven’t gone over this at HF boards before. It’s a cement pill box with good sight lines, luxury boxes (the Oilers only plan to build a few more) and and an ice plant, not the original Crystal Palace.

      Northlands financial documents point to physical plant equipment being deficient, not the arena itself (which makes sense: although Albertans may be surprised to learn that cement buildings last more than 30 years). Physical plant equipment? Things like ice plants, which come a lot cheaper, at $250,000 from my limited research. I don’t claim to have all the answers, but it’s worth looking into. Meanwhile you have city councillors suggesting 30 years from now as a minimum expiry date, so it’s not just me.

      And it isn’t Joe Publics problem if they don’t care if they have an NHL team.

      More fear-mongering. The fact that Edmontonian Katz has wrapped himself with the “community” banner so much makes his threats seem even less plausible.

    52. Tyler Dellow
      September 14, 2010 at

      Do you have any sources or links on the GM Place thing mclea? Also, what’s the cost of capital for something like this going to be to Katz, out of curiousity? Say he puts up $100MM of a $400MM rink and finances the rest?

      I also think Mike’s point, that there’s nothing preventing the Oilers from continuing to play in Rexall, is pretty well taken. I haven’t seen anything to suggest it requires more than physical plant improvements. It might be old and cramped compared to something like Air Canada Centre but, then, it’s not like the Oilers are competing with the Leafs for ticket buyers.

    53. Danny from mtl
      September 14, 2010 at

      @Slasher98

      the show on the Abraham Plains were free, ticket for junior hockey are 13$, come to montreal and pay the cost of a hockey game 2-ticket 300$+parking 25$+ hot dog 5$+ beer 10$
      x 41 games. Réveillez-vous les amis de Québec !!!

    54. DSF
      September 14, 2010 at

      Tyler. You’re mistaking my questioning of the “nay” side for unquestioning support of the other side.

      People like Mike W. have lost any kind of objectivity on the issue…thinking it’s perfectly acceptable for an NHL team to play in a 60 year old concrete bunker located in an urban war zone. (Imagine what 118th Avenue will look like in another 30 years)

      It’s arguable the Oilers are losing money and I too would like to see the books but I can guarantee you if they aren’t now they will be in 10 years.

      Mike W. is convinced that all that needs to change is a new ice plant but he, and others of his ilk, ignore that the economics of the game have changed tremendously and so have the expectations of fans who now pay exponentially higher dollars to attend games and demand a better “fan experience”.

      Rexall is cramped, dirty, dowdy, has very poor public facilities and dreadful concessions and anyone who has attended an NHL game in any modern arena couldn’t deny that,

      Replacing the ice plant won’t change any of that but, at some point, fans, like any other consumers, will balk at paying premium prices for a woefully substandard product.

      See the Nassau County Coliseum for reference.

    55. Mike W
      September 14, 2010 at

      People like Mike W. have lost any kind of objectivity on the issue

      I have a point of view, but “urban war zone,” “cramped, dirty, dowdy, has very poor public facilities” kind of speaks to DSF’s hyperbolic sense of objectivity, especially since this Rexall-trashing neatly coincides with the Oilers 2006 campaign to get a new arena (try finding “tired dump” before this date in media clippings).

      the economics of the game have changed tremendously

      I agree, but have arrived at a different conclusion. Edmonton has almost doubled in size since the 1980s, has a reasonably fit arena, and is an undeniably top third market in NHL.

    56. September 14, 2010 at

      I’m with JoeNerfHerder, the MTS Centre is the perfect size rink for our market. Even Bettman has stated that the MTS Centre is an NHL ready rink. Read the article posted on TSN.ca:

      http://www.tsn.ca/nhl/story/?id=326714

      Enough with “the MTS Centre is too small” nonsense. All of our strategically placed puzzle pieces have fallen into place. We have a state of the art building that’s supported by the NHL Commish, we have a deep pocketed owner (Thomson) as well as a bright-minded business owner in Mark Chipman. The only thing Winnipeg needs to wait for now is the dust to, once and for all, settle in Phoenix so we can get our Jets back.

      http://www.winnipegjetsonline.com
      http://www.twitter.com/WpgJetsOnline

    57. September 15, 2010 at

      I’m with JoeNerfHerder, the MTS Centre is the perfect size rink for our market. Even Bettman has stated that the MTS Centre is an NHL ready rink.

      …wasn’t the part of the point of the post that the NHL/BoG/Bettman/powers that be will do a whole lot of saying and presenting of other cities and their facilities as being viable NHL franchise destinations, regardless of the reality of such claims, in order to gain concessions from the areas in which teams already reside?

      Maybe that part went over your head.

    58. DSF
      September 15, 2010 at

      Yeah, well Mike, the population of Edmonton may have doubled but the seating capacity of Rexall has decreased over the same time period so that’s irrelevant.

      You keep referring to the size of the market but completely ignore the actual issue which is the building.

      You earlier stated it could be renovated for much less than $250 million. Still waiting to see your number and your source and still waiting to hear who, exactly, would be paying for that.

      With your fixation on it being incumbent on Katz to construct a new building so you can watch Oilers hockey without the inconvenience of it costing you anything, you keep ignoring alternatives because that just isn’t going to happen.

      Do you really believe Rexall will be “reasonably fit” 30 years from now?

    59. Mike W
      September 15, 2010 at

      Do you really believe Rexall will be “reasonably fit” 30 years from now?

      Yes. Enough cash has been poured into making it “state of the art” at the beginning on the 2000s.

      “You earlier stated it could be renovated for much less than $250 million.”

      Councillors are already talking less than $200 for the deluxe, doughnut renovation everyone keeps referring to. No other option has been seriously explored, although it’s logical that physical plant equipment doesn’t need to cost as much.

      Meanwhile, you know what? Katz can build his own arena with his own money! No one will stop him!

      seating capacity of Rexall has decreased over the same time period so that’s irrelevant.

      514 seats, eh? I suppose those 52 luxury boxes were irrelevant, too. You’re grasping for straws, DSF.

    60. James.P
      September 15, 2010 at

      Danny from mtl-

      Your facts are wrong. Tickets for the Quebec Summer Fest were 50$ on pre-sale and 65$ afterwards. There were no single day tickets this year. So if you were coming from out of town and only wanted to see Rammstein, you still had to pay 65$ (like I did). Same goes for Iron Maiden, Billy Talent, Black Eyed Peas and the rest that were there this summer. There is definitely interest for high-end pop/rock concerts in Quebec City, and money’s available for it too.

      The rest of your point doesn’t make a whole lot of sense in regards to this discussion. In fact, considering that it’s nearly impossible to attend a live hockey game in Montreal unless you have 300+ dollars to sink into your evening, it’s not inconceivable to think that people would chose to go to Quebec as an alternative – I know I would, as I live about 1.5 hours from both cities.

    61. Schitzo
      September 15, 2010 at

      Yeah, well Mike, the population of Edmonton may have doubled but the seating capacity of Rexall has decreased over the same time period so that’s irrelevant.

      You keep referring to the size of the market but completely ignore the actual issue which is the building.

      It’s been a long time since Economics 101, but I seem to remember hearing that increasing demand while supply remains static does… something. Probably related to ticket prices.

    62. September 15, 2010 at

      Wow. Quebec bashing at its best. Looks like you know the city very well, you stupid racist.

      I didn’t know that. Which race?

      The problem is, you are retroactively applying common sense to an industry that has subsisted on taxpayer largesse for many decades.

      We could’ve stopped right there – sums up the whole conversation

      That is if Winnipeg has the wealth it can support a team. I suspect Winnipeg doesn’t have the wealth, but that’s the evidence we need, not attendance data from the 90’s

      A few years back [2003ish], one of the American business mags [Forbes] calculated that a community needed a “Total Personal Income” of $35.5 Billion to support an NHL team.

      At the time, the Top 5 non-NHL US Metros [with their NFL, MLB & NBA teams accounted for] were:
      Hartford CT $77.8
      Orlando FL $66.3
      Harrisburg PA $59.8
      Providence RI $59.6
      Las Vegas NV $56.2

      I suspect Las Vegas has dropped way down the list. The Providence Rhode Islanders anyone?

      In all there were 29 cities who were within 95% of that $35.5 or better.

      I can’t find a Canadian equivalent to Total Personal Income.
      However, using the 2006 Canadian census, multiplying the number of employed in a Metro by the average income of workers in that Metro:

      TOR 158,405,518,080
      MON 96,358,856,640
      VAN 59,947,382,805
      CGY 40,858,586,540
      OTT 36,400,703,400
      EDM 32,436,971,305
      HAM/NIA 30,712,794,835
      QUE 19,368,812,050
      WPG 18,231,745,210

      Its not the same number, but similar.
      You can add at least $8,000,000,000 to Hamilton for South Toronto, Kitchener etc.
      I suspect Quebec is higher when everything within 90 minutes is added in.

    63. The Other John
      September 15, 2010 at

      DSF

      Rexall Place is really really REALLY horrible. So why is it one of the top concert venues in North America? ….. because the Oilers say it is. They also sell out Rexall for hockey with the single worse managed team in the NHL. Sufficiently badly managed that….absolutely no joke… they are paying someone $5.4 million (cap hit) not to play hockey. DSF let me know which Oiler got fired for signing that contract?

      They also say: a) they are losing money; and b) they can’t afford to compete in the NHL without a new publicly funded new arena; and c) please confiscate and give to us Northlands lucrative concert business

      Oh yeah… and we cannot show you our books because this is free enterprise Alberta and we are a private business. You know—the sanctity of a private business not being obliged to share its financial books with anyone

      Rexall Sports: “Oh and by the way, COE borrow $350 million and when our contractor builds the arena that our designer designs and sends us a progress draw…pay them and keep paying them until your $350 million dollars is exhausted. and FYI if there are any construction extras….you should know that we may need some more money”

      So DSF quit parroting the Oilers PR line and ask some really basic questions: when you want $350 million dollars from us: why can’t we see your books? What are you paying by way of financing costs for your acquisition of the team? what are you paying by way of intercorporate transfers? what are you paying your management group? And if you are in the top 10 in NHL revenue, how can you POSSIBLY be losing money?

      And DSF…… I have not even touched on potential problems connected to the surrounding “possible” commercial development…. which is supposedly how the COE gets its money back for its $350 m debt

    64. NewAlgier
      September 15, 2010 at

      “In effect, when one government builds an arena without a tenant, what it’s really building is a weapon that leagues can then turn around and use against current landlords.”

      Which is why Los Angeles will never have an NFL team. It’s too valuable as a credible threat. Monopolies and cartels do this all the time: they build excess capacity that remains unused in order to cow competitors (cf. Saudi Arabian oil).

      “Also, what’s the cost of capital for something like this going to be to Katz, out of curiousity? Say he puts up $100MM of a $400MM rink and finances the rest?”

      Tyler, I quite agree with you on the arena issue, but financing decisions are independent of investing decisions. Regardless of how Katz finances his arena, he needs to obtain a return on the asset (ie, total incremental capital invested) that supports the needs of all investors (debt and equity). So the right way to think about return is the minimum requirement for all capital invested in the project, probably something around 8%. Additional debt will tend to increase the required return on the equity tranche.

      Katz’s sunk investment on actually purchasing the Oilers is a different story. The trading gods look forward, not back, and Katz bought his team in a different world. If he were building his own arena, with his own money, it would probably be the hockey equivalent of the BC Lions’ temporary $15 million stadium. That’s an asset with a phenomenal return, I suspect. It’s tougher to be efficient with capital when it’s someone else’s money, is my point.

    65. DSF
      September 15, 2010 at

      Okay TOJ.

      Let’s accept the conventional wisdom here that Rexall is good for another 30 years just the way it is.

      Katz should just shut his mouth and have his team play in Rexall until it falls down.

      By that time, Rexall will easily be the oldest, smallest rink in the NHL (it’s already in second last place) and the cost of replacing it is several billion dollars.

      The Oilers left 20 years ago because the ice plant failed and nacncies like you are still wanting the Oilers to open their books to you..

      I might point out that the Calgary Flames, the nearest direct competitor, have an arena with a capacity of 19,289 while the Oilers capacity is about 16,380 or 3000 less per game.

      3000 seats X AVG Ticket price $100.00 X 42 games = $12.6M per year.

      I would also point out the Flames and virtually every other hockey team in the NHL receives a cut of revenue from other arena events.

      Pink Nancies like you might not like it, but that is reality.

      How would you deal with that inequity?

      More bluster?

    66. mclea
      September 15, 2010 at

      Here is one of the problems with financing an arena: relatively speaking, an arena is shit collateral on a loan. First of all, it depreciates like crazy. Second of all, there isn’t a liquid market to sell into. If Katz defaults on the loan and I take possession, what the hell I’m going do with it? With the possible exception of the land, the value of an arena is derived almost entirely from the lease payments it can extract from its tenants. And if my tenants have just defaulted on my loan, I’m in a pretty bad spot. I don’t even know who a potential buyer would be outside of the next sucker who buys the Oilers. Maybe a concert promoter. In any case, I’d have no negotiation leverage and would almost certainly end up with 3 cents on the dollar. Look at the Rogers Centre. 20 years after it was built it was worth nothing and the only potential buyer was the main tenant. Any loan I give would give would require the principal to be paid down pretty quickly so I’m not stuck with a $20MM asset and $200MM in principal outstanding.

      So that means, outside of Katz mortgaging assets from his other companies, that I’m looking at this loan from a strictly cash flow basis. I found an interesting presentation for Arsenal’s Emirates stadium. On page 6 it flaunts what looks like a debt service coverage ratio (DSCR) of 3.8:

      http://www.redaction.org.uk/downloads/accounts/AFC%20-%20investor%20presentation.pdf

      DSCR is essentially operating cash flow/(interest payments + principal payments). It measures how much money you generate from your operations that can go towards serving your debt. There are different benchmarks for this depending on all kinds of factors, but to keep things simple you probably want it over 2 and an operating cash flow/interest payments of at least 3.

      Now the city of Edmonton can get 25+ year bond financing at 5%. They can do this because they have AA debt rating and because the Alberta Government guarantees their debt. Finding good comps for privately financed arenas or stadiums is hard because none of these team owners are publicly traded. I can’t even think of any very many good comps from other industries with huge up front costs followed by 30 years of cash flow generation. Utility companies can borrow long term for a little over 5%, but power generation facilities are way better assets than arenas. Oil sands companies borrow long term at 7%. But again, much better assets, much better credit risks. REITs loans are shorter term, but they’re in the 6-8%. I did some quick google research, and stadiums like Wembley, the Emirates ect, they’re in the 6.5-8% (the Emirates later ended up issuing bonds at 5%, which sort of blew my mind). But these are stadiums in huge cities with internationally known teams. I wish I could find a worse credit risk so I could have a ceiling, but I’m guessing that, best case scenario, Katz gets in at 8%, and that’s with some sort of backing from his other companies.

      So back of the napkin calculations: With $100MM in revenue and a $56MM payroll, assuming no other costs, you have $44MM in operating cash flow. Let’s say its $50MM. And that a new arena will add $50MM more (I don’t know how much the non-HRR is worth, but let’s use these crude, optimistic numbers). Then let’s see what the DSCR under different debt levels with interest only payments and then with interest payments plus the principal being amortized over 25 years:

      Oper CF Debt Int 8% DSCR
      100 100 8 12.50
      100 200 16 6.25
      100 300 24 4.17
      100 400 32 3.13

      Oper CF Debt Int 8% DSCR
      50 100 8 6.25
      50 200 16 3.13
      50 300 24 2.08
      50 400 32 1.56

      Oper CF Debt Int 8%+ Prin DSCR
      100 100 12 8.33
      100 200 24 4.17
      100 300 36 2.78
      100 400 48 2.08

      Oper CF Debt Int 8%+ Prin DSCR
      50 100 12 4.17
      50 200 24 2.08
      50 300 36 1.39
      50 400 48 1.04

      Oper CF Debt Int 8% + Prin DSCR
      25 100 12 2.08
      25 200 24 1.04
      25 300 36 0.69
      25 400 48 0.52

      It should be obvious why Katz is trying to get into the public purse. I don’t think he can carry more than $200MM in total debt – arena debt plus the debt he took on to purchase the team. Probably less than that because $50MM in operating cash flow is probably generous. Of course, he would throw some cash in to de-leverage the Company and appease his borrowers, but I can’t be bothered to figure out his return if he contributed more equity capital.

      This is really crude. Debt financing can be incredibly flexible, and if you start getting guarantees from other companies, or other mortgaged assets, that could change things significantly. The fact that I don’t have access to Katz’ financials, or any other hockey teams not named the Coyotes, makes this hard. So take this for what’s its worth, which is not much.

    67. The Other John
      September 15, 2010 at

      DSF

      Not once have I called you anything. Notwithstanding strong that I strongly suspect you are either a tool of or paid contractor of the Oilers. But if you seriously want an argument you are sadly and woefully Ill-equipped for the argument. Not once have your ever addressed any of my arguments why….. because to use your phrase (referring to you I think douche) nannies…. You have no answer.

      I want a new arena. Not if it cannot pay for itself. It cannot …….the commercial case I did not raise is one that you do not understand but………when you cannot touch the factual argument why complicate matters. You want to borrow a GIGANTIC sum of money would want to see your books……..not in your douche bag world if at a press conference you said you were good for it. You wouldn’t check to see if the Oilers were running every Rexall salary known to mankind through the Oilers because Daryl told you they were running a loss. You would not track intercorporate transfers either because you do not know what they are or they cripple the narrative you are trying to sell. You would not track what outlandish salaries were paid to the senior management group. Nope Daryl says “I am losing money” and you immediately go onto the web and repeat that story OVER and OVER again. Why….because it is easy ……not smart just really really easy.

      What else …….you would refer to others who understand that the game is not checkers as Nancies because while you have a rudimentary knowledge of that rathe basic game. Everyone else is playing chess or Go.

      DSF…….Now…. I have insulted you

    68. DSF
      September 15, 2010 at

      TOJ.

      I really have no idea what you’re talking about. I don’t live in Edmonton, (although I did for 40 years) I don’t have a dog in this fight but I really have a difficult time responding to an emotional spew like yours.

      You keep missing the point.

      You want to see Katz’s books to see if he’s losing money? Okay, fine.

      What does that get you?

      It’s irrelevant unless Katz is making enough profit to also service the debt on on a $400 million arena and I can can guarantee he isn’t.

      He has pledged $100 million of his own money to kick start the project and I expect, unless there is a very good return on that investment from ancillary development, that money is gone.

      Do you begrudge him a return on his investment in the team and his pledge to kick start an arena?

      Let’s assume for a moment that your dim view of the world is correct and Katz is making a small profit from the Oilers.

      You would also demand he invest another $450 million in an arena with virtually no chance of a decent ROI on his investment.

      Why would he do that? To make you happy?

      If he won’t, what would you advance as an alternative?

      See, that’s the problem I have with you contrarians.

      You will not even discuss what the alternatives might be.

      You take the view that “make the rich pay” so I can benefit without any inconvenience or cost to me.

      The only alternative, if you agree that the Oilers will eventually need a new arena is “user pay”.

      I don’t know if, or how many, Oiler games you attend, but would you be willing to spend an extra $50-$100 per game to watch the Oilers?

      That’s the alternative.

    69. R O
      September 15, 2010 at

      So basically what Fake Craig MacTavish (FCM) is saying is that building a new arena is really costly and not worth it.

      Got it. Let the City do that instead. I mean if one asks the government to invest a significant amount on an endeavor with shitty ROI, as FCM so clearly elucidates, might as well save it for the really essential services like giving multi-millionaires the ability to earn multi-millions.

      Alternatively, the Oilers should just tell the City to fuck off and go play in the nearest existing arena (since that option is not prohibitively costly). Where is that again?

    70. DSF
      September 16, 2010 at

      So, RO, those are the only alternatives?

      You’re behaving like a petulant child.

      If one works from the premise that Edmonton (and other cities) find having an NHL franchise is desirable, which I assume you do, or you would be posting on a macrame forum, what would you propose as a workable solution?

      Or are you only here to hate rich people because you’re not?

    71. R O
      September 16, 2010 at

      Yeah Fake MacT, those are the only options. If an arena is untenable to a billionaire because of unreasonable upfront cost and shitty ROI, then one should seriously lean towards it being untenable to the fucking taxpayers.

      PS – I love that DSF responded to a post addressing FCM. That’s hialrious and sad. IIRC he’s also that “Corsi” guy that constantly pollutes Lowetide’s blog.

    72. Passive Voice
      September 16, 2010 at

      $400 million arena
      This sorta ties in to my earlier question, but is $400 million actually the going rate for an arena? That seems (and I’ll freely admit utter ignorance here) to me like an outrageous sum for a mound of concrete (to the extent that it makes me think HOK Sports, or whatever they’ve rebranded as, has basically got the market for arena-/stadium-architecture functionally monopolized, and, with the acquiescence of local governments everywhere, is more or less openly masturbating all over NA’s taxpayers). I’m not saying, btw, that you’re wrong on that price; just that it seems unnecessarily high.

      The only alternative, if you agree that the Oilers will eventually need a new arena is “user pay”.

      I’m curious as to whom you would label the “user” of any NHL arena.

    73. September 16, 2010 at

      Are you suggesting Rexall Place which is certifiably a dump in located in one of the worst areas of Edmonton will be a viable venue for the indefinite future?

      Irony check time: if the area around Rexall is such a shithole, why the fuck does anyone think an arena will liven up downtown? Shouldn’t the Coliseum have “revitalized” that part of town sometime in the last 36 years?

      As for whether Rexall’s a dump, well, everyone here’s started magically bitching about the Saddledome now that the Oilers are trying to get a new arena. Funny how the idea of a new shiny suddenly causes people to notice all the flaws in what they’ve got. Outside the limited capacity, there’s nothing wrong with Rexall that couldn’t be fixed for a small fraction of the cost of a new arena. The Saddledome is constantly getting small upgrades for a million or two here and there; why can’t Rexall?

      Also, how is it that arenas built in the ’20s and ’30s managed to last sixty or seventy years, get upgraded and expanded repeatedly, and not be sinkholes or shitboxes, yet arenas built in the ’70s and ’80s are old and creaky at thirty?

      By that time, Rexall will easily be the oldest, smallest rink in the NHL (it’s already in second last place) and the cost of replacing it is several billion dollars.

      I feel like this needs a picture of Dr. Evil or something.

      The Oilers left 20 years ago because the ice plant failed and nacncies like you are still wanting the Oilers to open their books to you..

      Maybe they should’ve bought a new ice plant 20 years earlier using the change in Katz’s couch cushions instead of being a bunch of stubborn turds. If they leave town because they can’t be arsed to maintain their facilities, they’re so busy trying and failing to bilk hundreds of millions from the public purse, then fuck ‘em sideways, let ‘em rot in Kansas City.

      Honestly, do you even read what you write?

    74. September 16, 2010 at

      Oh, by the way Tyler, there’s another example for you here in Calgary. The Flames spent their first three years here playing out of expansive Stampede Corral while waiting for the Saddledome to be built.

    75. DSF
      September 16, 2010 at

      24 hours later…no one has responded to the real issue.

      If Katz will not build a new arena by himself (he won’t) what are the alternatives and who will pay for them?

      Sorry Tyler, but any discussion of the economics of the NHL will inevitably morph into an Oiler’s arena since your audience is overwhelmingly Oiler fans.

      I can see your point about teams paying less for players and more on servicing arena debt but is there really a a scenario under which you could see that playing out?

      I don’t think so.

    76. The Other John
      September 16, 2010 at

      Sorry Douche

      I did not realize that there was a time line for peoples response.

      I have had a reasonably busy day, work etc and did not realize that when YOU fail to address the questions asked of you, in effect, you are free to argue “but we really need a new arena”, and somehow you think that means you win the argument!!

      Seriously dude there are better games than checkers. When counting over 10, simply slip your shoes off, seriously it works!!

      The real issue is that Katz says, absent HUGE public subsidy (think $ 350 million dollars) , my private business will fail. Somehow, and this is where you got your nickname(Psst its DOUCHE): Katz: “don’t tell me you are losing money, show me!!” That is actually what LENDERS do. Test your statement as to your assets and revenue.

      Somehow you take that to mean that I want to look at the Oilers books. I could not be less interested.

      Bleep, Douche, I know their books are all $#@@&&^ up. Not because I am a cynic, or even a psychic but because I have seen how they run their primary business. This will astonish you….. they run their primary business REALLY REALLY BAD!!!

      I can think of a hundred ways to make the building of a new arena work. I just can’t think of more than 2 or 3 ways that make this work that does not entail the COE getting literally bent over a tabletop and getting screwed.

      Idea one: the Oilers get a $10 million dollar profit from the new arena’s operations. Pst Douche: that is a 10% return on what you refer to as Mr Katz’s personal contribution ($100 m) of my personal seat license money to the new arena but in calculating the Oiler profit they do not get to charge every salary they have in related, interrelated and non related corporations to the Oilers financial statements. Nor inter corporate financing charges.

      What this means Douche is that the Oilers do not get to subsidize the other Rexall businesses. Why……. because the Oilers are getting a HUGE public subsidy for the new arena

      In the event of windfall profits…the COE gets huge payoffs…..but it is clearly not a good deal if the Oilers think the idea is BLEEP the COE and ALL PROFIT off a city paid for arena lies with the Oilers

      Oh and Douche, I attend 25 games a year and, gasp, I pay for my own season tickets in the lower bowl. MY MONEY. Which will ultimately be most of the funding for Mr Katz’s $100 million dollar contribution towards the new arena

      As a season ticket holder I sure wish we had a new management group, a la Stevie Y as our new GM shaking things up for an grossly under performing roster. Fortunately the Oilers have not reached that level of ineptitude…………. what you say we have….in 07

      No wonder we are not making real $$$$$$

      PS I am in Europe and the Middle East over the next 3 1/2 weeks so feel feel to declare victory if I do not reply to your Oiler sponsored pressers posted under your name within 24 hours

    77. Passive Voice
      September 16, 2010 at

      If Katz will not build a new arena by himself (he won’t) what are the alternatives and who will pay for them?

      The Oilers will continue to play in Rexall until the ceiling caves in? Honestly, why is this not tenable?

    78. The Other John
      September 17, 2010 at

      Douche

      Walk down the hall and suggest to Katz the suggested 10 % return on his $ 100 million dollar contribution of my personal seat money towards the new arena”". With a 50/50 profit split with the COE thereafter. Great deal for all concerned!!

      Love to hear what your boss says

      I am sure he has LOTS of businesses returning more than 10% it is just without letting anybody see his books, it is really just conjecture

      Good night my friend.

      Eagerly await the Oiler response: Edm Art Gallery, Winspear Centre, Quebec City arena…..anything other than the facts

    79. The Other John
      September 17, 2010 at

      Douche

      Do not leave until tomorrow. Sincerely sorry for you!!

      Not sure just how stupid you are or if you are simply given talking points and are not given any leeway to deviate from that script. Guess I am giving you the benefit of the doubt

      “He has pledged $100 million of his own money to kick start the project and I expect, unless there is a very good return on that investment from ancillary development, that money is gone”

      Intelligence test Douche: if Katz pledges my personal seat license money and the luxury suite pre sales, he is out little or NO money for his contribution and has COMPLETE CONTROL of a new 18,000 seat arena and has confiscated Northlands highly successful concert business.

      Put simply he he has invested little and has the goose that keeps laying golden eggs.

      His $100 million dollar commitment to the ancillary development may or may not see the light of day

      He already controls the asset that spins off the cash and the COE is holding the debt

      Should I slow down?

    80. R O
      September 17, 2010 at

      Passive Voice:

      As I understand it, 30 years from now, that arena will REALLY suck bad.

      The obvious, OBVIOUS I say, corrollary is that it’s useless now.

      Or something.

      In other news, I’m off to buy a new car and house because those things will cost a ton to repair 30 years down the road.

    81. R O
      September 17, 2010 at

      I honestly thought that the “Fuck off” message to Fake Craig MacT couldn’t be clearer but I guess we need to write in block letters or something.

      In any case, remind me never to piss off The Other John.

    82. DSF
      September 18, 2010 at

      No John…you’re already slow enough..trust me.

      You still can’t quite grasp that Katz will NOT build you a new arena and that behaving like a petulant child won’t change that.

      Katz has all the cards here and playing bullshit poker with him makes you a loser.

      Not a reach.

    83. chartleys
      September 29, 2010 at

      Reach.

      No sense trying to add to an old debate, but that last one is a huge reach.

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