January 26, 2010

Lightning...Bolt? (to Canada?)

Another post, another financially-stricken Florida sports franchise.

According to several news sources, the NHL's Tampa Bay Lightning (Forbes' 18th most valuable NHL franchise) had to ask for an advance on the revenue sharing guaranteed to every team at the end of NHL season in order to pay their players on time.  They weren’t just a few pennies short, either, borrowing approximately $2 million. That happened in April of 2009.

I know what you're thinking...these guys own an NHL franchise?

Now, reports are surfacing that there is still more economic uncertainty lingering after the 2008 sale of the team from Palace Sports - owner of the NBA's Pistons - to OK Hockey.  And by economic uncertainty I mean, of course, OK Hockey potential defaulting on their $100 million loan payments to Palace Sports.

Since the team was sold for $208 million and Palace Sports loaned the new group approximately half the money for the purchase, the contract was written with the stipulation that if OK Hockey defaulted on its loan, the team ownership would return to Palace Sports.  The issue has come to the fore since the Pistons and Palace Sports are up for sale and...well, no one wants to buy a property with a defaulting loan hanging around.  That means OK Hockey - and now, the NHL - is scrambling for new investors or new ownership to rescue the hockey franchise.

The Lightning are getting crunched...financially, too

It seems the problem is twofold. First, the NHL’s minimum salary requirement has strained the team's bottom line.  When the Lightning won the Stanley Cup with a small group of stars and relative unknowns in 2004, the squad payroll was in the neighborhood of $32-$34 million.  With this relatively small number, as well as the increased revenue from sold-out home games (including 13 home playoff games), the team easily turned a profit.  In subsequent years, however, NHL requirements have pushed the Lightning’s salary numbers north to a floor of $40 million.

After just 16 games with team to start the 2008 season, 
this man and his mullet are still being paid not to coach the Lightning

Second, combine those financial requirements with a 10% attendance drop this season to an average of just over 15,000 fans.  That number is down 20% from similar figures two years ago and, as a result, things aren't looking too hot for the Lightning.  If the current situation continues, the team could be returned to Palace Sports by as early as February 15th.

Inside the St. Pete Times Forum...plenty of good seats still available

How are the financial issues effecting the team on the ice? While they sit just 3 points out of a playoff spot, the team is in 13th place (out of 15 in their conference) with a rather pedestrian .500 record (21-20-10; W-L-OTL).

If you don’t follow the NHL very closely, this is the second time in the past year that an NHL team has been beset by financial issues.  In May of 2009, the Phoenix Coyotes declared bankruptcy and were purchased by the NHL (interestingly, the Coyotes also required an advance from the NHL revenue sharing deal in 2009).

When Canadian entrepreneur Jim Balsillie stepped up to buy the team, his plans included relocating to Canada.  Quickly, the NHL moved in to stop the sale and the team was eventually sold to a group of investors willing to keep the team in suburban Phoenix.

Currently, the Coyotes face the same attendance issues as the Lightning, drawing a scant 10,000 per game, but at least their marketing team has put in some creative efforts to bring fans into the JOBing.com Arena, including:
  • Free shuttle service to the game in Glendale on the "Coyotes Express" from a variety of Phoenix locations
  • Selling tickets in the lower bowl for just $25 (the same seat in other arenas cost over $200)
  • "We Win, You Win" Promotion nights where, if you buy a ticket and the team wins the game, you get a free ticket to another game
  • "Recession Buster" Promotion where, if you buy tickets for three games, you get the fourth game free
  • All-you-can-eat ticket packages
Still, the only tonic for poor attendance is winning and unlike the Lightning, the Coyotes are doing that. Currently, the team - a mix of grizzled veterans and exuberant youth - is defying pre-season expectations and holds the fifth-best record in the Western Conference, good for a playoff spot. Furthermore, even with just 10,000 fans on average in the stands, the team has the 7th best home record in the entire league.

He can't fill JOBing.com Arena, 
but he can get you a discount on any Acme purchases

Overall, are the financial difficulties for these teams a referendum on southern hockey franchises? I’m not sure why there are teams in Phoenix, Tampa Bay, Fort Lauderdale, or Atlanta, but I’m not NHL Commissioner Gary Bettman. Or am I putting too much blame on hockey since it is merely a fact that teams in areas of the country hit hardest by the recession will, by default, struggle with attendance issues?

I think it remains to be seen whether the Lightning and Coyotes can financially rebound over time. Still, given the passionate fans of hockey north of the border, it seems strange that there are only six Canadian teams (Calgary, Vancouver, Edmonton, Toronto, Montreal, Ottawa), when cities like Hamilton, Winnipeg, and Quebec City seem desperate for NHL franchises.  This is not to say that there are no hockey fans in Phoenix or Tampa Bay, but these teams had better find them and soon.

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