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Phoenix Conspiracy Theory

We have seen enough numbers since the Phoenix Coyotes bankruptcy three years ago to know that hockey in Phoenix (at least in Glendale, Arizona where Jobing.com Arena the Coyotes home) is a money loser.  The only way that one can make money is if somebody else pays for the losses.  In the recent term somebody else has been the city of Glendale itself.  They have put up $25 million a year for the past two years to cover the team’s losses.  Obviously that is unsustainable.  No city can afford that and it isn’t in any city’s best interests.

That makes it surprising that a potential sale to keep the Coyotes in Phoenix exists.  Former San Jose Sharks CEO Greg Jamison leads an unnamed group of buyers who would buy the team in Glendale with the city paying large facilities management fees to the Jamison group.

The right wing Goldwater Institute has been involved in the potential Phoenix Coyote sales in the past and threatens to sue if the deal is a case of the local government subsidizing private investors in a way they see as being illegal. 

The basic problems that killed deals with Jerry Reinsdorf and Matthew Hulsizer all still exist.  The underlying problem is that hockey in Glendale has been a money losing venture and somebody must subsidize the losses.  Nobody would want to do this indefinitely into the future and there seems no way around it.

The Phoenix Coyotes have had the lowest attendance in the NHL.  It is not easy to build a fanbase when the franchise is in jeopardy and might depart from the city at any time.  The Phoenix Coyotes are in the semifinals this year and could have a Stanley Cup finals appearance.  It would be embarrassing to the league to have unsold tickets or really cheap seats in the Stanley Cup finals and the only way to prevent this is to make the fans believe that there is a future to hockey in Phoenix.

Many in the media have openly speculated that the team will be moving this summer.  I predicted they will be in Quebec City in March.  I still believe that is a good bet.  I think it is quite reasonable to believe that this potential Phoenix sale isn’t a serious sale.  It is a construct for public relations to keep fans interested in the Phoenix Coyotes playoff run.  There is no way that the finances work out.  How can a team that loses tens of millions of dollars each year be worth purchasing?

The NHL is motivated to keep this ruse going to maximize the amount of money they can make on the Phoenix playoff run.  The city of Glendale is under strong financial pressure from the money they have spent financing Coyote losses.  They are seeking to have $20 million returned that the NHL is keeping in an escrow account.  Likely a financially successful playoff run will reduce losses this year and give them more money that could be returned. 

It isn’t clear who if anyone is fronting the money to buy the Coyotes.  Greg Jamison is the front man of an unnamed group.  This is similar to the Dave Checketts group that bought the St Louis Blues in 2006 and then bowed out in 2010 leaving Checketts and the Blues in financial turmoil which is only now coming to an end with new ownership.  The ownership group was interested in the investment of the appreciating value of an NHL franchise and it looks like a failed plan in St Louis.  Why would it work better in Phoenix?

It isn’t clear that a real group exists with real money behind Jamison to keep the Coyotes in Phoenix. I think a rudimentary group may exist and this group may be interested in owning a hockey team.  They may get their team in the future as a potential expansion.  This service in a Phoenix ruse earns goodwill and may reduce the price of an expansion franchise. 

Is this scenario crazy?  It seems more believable than the NHL having found some saps willing to pay large sums of money indefinitely into the future to keep a money losing team in Phoenix.  I would be surprised to learn that this deal doesn’t fail and the Coyotes do not stay in Glendale.  That seems like the only financially workable result to this situation.

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Comments

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My conspiracy theory was that the Sharks were buying themselves a farm team..

Posted by Josh from Warren on 05/09/12 at 07:32 PM ET

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Bettman is a fallen sucker that caved in to Mayor Scrugs crying because they don’t want an empty arena but Glendale is a bankrupt city with a 35 mil gap and will have to let go police officers and firemen as well as other civil servants.Bettman is trying to play Superman to save Glendale by keeping the Coyotes there but he fighting a losing battle,bankruptsy will be inevitable.Bettmans business plan is also bizzare as he knows that 7 Canadian teams pulled in over 1 billion dollars in revenue and 23 U.S teams pulled in 2 billion dollars so he must know that expansion into Canada would equal more revenue.I think its been 20 years to long with Bettman,time to fire him.

Posted by john mcmanus from Hamilton Ont on 05/10/12 at 03:27 AM ET

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NOt only is Glendale losing money on this, they are also in danger of being sues by the AZ Cardinals and the Fiesta Bowl for $67 M because they took away parking spaces and gave them to a Tanger Outlet mall.  If they lose that, there is no way they can keep the Coyotes going with $25 M infusions.  The arena is in the far west Phx area, yet the fan base is in the far east Phx area.  There is only one route from the base to the arena and it involves getting there weekdays in rush hour traffic.

Posted by stevejg61 from mesa, az on 05/11/12 at 12:25 PM ET

Bossy_Rules's avatar

Let’s see - they moved from Winnipeg for the 96-97 season.  They made the playoffs that year and lost in the 1st round.  They did the same each of the next 3 seasons.  Then they missed the playoffs in 00-01.  Then they made it again and lost in the 1st round again in 01-02.  Then they missed the playoffs each of the next 6 seasons (04-05 wasn’t played so it was a 7 year span).  They finally made it again in 09-10 but the problem was that by this time talk of their impending departure was already starting and fans were reluctant to make an emotional investment in the team.  So they’ve been good these past 3 years and now they’re in the conference finals but I think its too late.  They needed to be good while they still had a chance to stay.  They needed to be good enough to grow a large and loyal enough fan base to make them profitable.  Apparently they haven’t done that and now even though they are in the conference finals a lot of fans will be reluctant to make any commitment beyond maybe going to see one of these playoff games and watching the rest of this year’s playoffs on tv.  The team’s future in Phoenix is still in jeopardy and this success will not lead to an avalanche of season-ticket purchases for next year.  It is probably too late to save the team in Phoenix except for maybe a White Knight who is willing to keep it there and lose money - but those are hard to find. 

All this raises the question of what exactly is needed to sustain an NHL franchise.  You can’t put a franchise in a city in which it will only generate enough money to be viable if it is winning championships.  Only one team can win the Cup every year.  You need to find cities that will support teams through thick and thin.  I’m not talking about going 15 years without a winning team or anything like that but if you can’t weather a 6 or 7 year stretch of missing the playoffs then your city can’t support a team.  Every franchise will have playoff droughts.  With only 53.3% of the teams making the playoffs every year most franchises will have stretches where they don’t make it for several years in a row.  I don’t know how many cities there really are like that.  There may not be that many cities that can really support a team through thick and thin.  Maybe the NHL needs to lower the salary floor to make it easier for teams to ride out the lean times.

I wonder about Atlanta.  That city may have supported a team perfectly well if they had just made the playoffs a few more times.  They only made it once in 11 seaons (in their 7th) and missed it 4 more times before they ownership group gave up and moved them. 

Maybe there is just this no-man’s land where there isn’t enough revenue generated when losing to afford to improve a team and if they overspend to build a good team and make the playoffs it doesn’t pay for itself (see Charles Wang getting Chris Osgood, Adrian Aucoin, Michael Peca, Alexei Yashin, Roman Hamrlik and finishing 5th in the conference only to blow the whole thing up a few years later).

What do you think PSH?

Posted by Bossy_Rules on 05/14/12 at 06:15 PM ET

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imageThe Puck Stops Here was founded during the 2004/05 lockout as a place to rant about hockey. The original site contains over 1000 posts, some of which were also published on FoxSports.com.

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