One of the critical problems facing the NHL today is the instability of certain franchises, the vast majority of which are teams that were part of the late-90s expansion or relocated during that era. The biggest issue facing the NHL right now in this area is the Phoenix Coyotes.
The Coyotes were born as the Winnipeg Jets, a team in the old World Hockey Association, a rival league that existed in the 1970s. The WHA folded, but four of their teams--the Jets, Quebec Nordiques (now the Colorado Avalanche), Hartford Whalers (now the Carolina Hurricanes), and Edmonton Oilers--merged with the NHL in 1979. Despite star players such as Dale Hawerchuk, Teemu Selanne, Alexei Zhamnov, and Keith Tkachuk, the team began to run into severe money problems in the 1990s with the sudden escalation of player salaries. Winnipeg Arena, home of the Jets, was one of the smallest in the league (matching Winnipeg's status as one of the smallest markets in the league), and several attempts to replace it with a new arena fell through. Combined with the disastrous effects of the Gary Bettman-driven lockout, which wiped out half of the 1994-95 season, the team could not survive in Winnipeg. It was sold to a group from Phoenix in early 1996, and the team moved to Phoenix that fall, renaming itself the Coyotes.
The Coyotes made the playoffs in 5 of their first 6 seasons in Phoenix, but were always eliminated in the first round. The team has struggled ever since, causing a drop in attendance. The arena problems that forced them to leave Winnipeg followed them to Phoenix, where they spent their first 8 years in America West Arena, which was not suited for hockey. The team has since moved to Jobing.com Arena in Glendale, which is a much better arena for hockey, but which saddled them with a virtually unbreakable buyout agreement.
Despite bringing in Wayne Gretzky as a part-owner and head of hockey operations in 2001, the team has struggled. Since 2003, their average attendance has been 14,827, ranking them 25th in the 30-team NHL in that time (although they have been ranked 29th and 28th the past 2 years). These struggles led current Coyotes owner Jerry Moyes to seek financial assistance from the league in 2008. Moyes then declared bankruptcy on May 5th of this year, with Moyes intending to sell the team to Jim Balsillie, Bettman's apparent blood enemy who is the CEO of the company that makes BlackBerry smartphones. Balsillie plans to move the team to Hamilton, Ontario.
The NHL responded to this by stripping control of the Coyotes from Moyes, and saying that the team could not declare bankruptcy due to an agreement that Moyes signed with the NHL when they gave him financial assistance. The issue is currently in court, and will be decided in the next few weeks.
Unfortunately for the Coyotes, they appear to be stuck in Phoenix. Their lease with the city of Glendale calls for a $750 million buyout if the team breaks it. That puts the buyout amount at over 5 TIMES the $142 million that Forbes magazine valued the team at in their rankings this season. Combine the buyout with the value of the team, and you're talking almost $900 million, which is twice the value of one of the league's cornerstone franchises, the Toronto Maple Leafs (Forbes' #1 ranked franchise at $448 million). The only way that the team can get out of the lease is by being allowed to declare bankruptcy, which Moyes apparently gave up the right to do.
But the Coyotes are just the poster child for problem franchises in the NHL. There are several other franchises in trouble.
The once-proud New York Islanders have been struggling with attendance for the past decade, finishing near or at the bottom of attendance during that time. They have also been in a struggle to replace Nassau Colisseum with a new arena. Several plans have been proposed, but nothing has happened as of this point. The Atlanta Thrashers, one of the late-90s expansion teams, has, with the exception of a few years in the middle of this decade, struggled to produce a winner. They have also been plagued with ownership problems, to the point where the owners are in court to see who has the right to buy out who. The troubles of another of the late 90s expansion teams, the Nashville Predators, began before the team even took the ice. Founding owner Craig Leopold had to deny rumors that the team would be relocated before ever playing a game when they only sold 6000 of the 12,000 season tickets the NHL required. They even got Nashville to pay over 30% of the $80 million expansion fee to the NHL, as well as cover any operating losses from their arena. In May 2007, Leopold agreed to sell the team to Balsillie. This deal fell through when Balsillie, who had told Leopold that he'd keep the team in Nashville, started selling season tickets for the Hamilton Predators. The team instead was sold to Boots Del Biaggio, a venture capitalist who has since filed for bankruptcy, and a group of buyers based in Nashville. The team also has a buyout clause in place with Nashville, which allows them to pay a modest (compared to Phoenix's lease) $20 million buyout to Nashville if the team loses at least $20 million and fails to average 14,000 per game attendance by the end of the 2009/10 season. Del Biaggio's financial problems has led to a federal investigation into his business dealings involving the Predators. Other teams reportedly losing money are St. Louis, Carolina, Buffalo, Florida, Washington, and Columbus.
What are the causes behind these problems? The economy, to a degree, although that won't be really felt until the 2009-10 season. I blame it more on NHL leadership: Poorly executed expansion and relocation plans. Lack of television revenue and exposure. The NHL apparently spending less time doing background checks on potential owners than diners do on the high school kids they hire as busboys. The fact that the salary cap which was supposed to provide "cost-certainty" to teams (and which caused the league to lose an entire season of play) has failed. I know that some people have suggested contracting these teams, not only due to their financial problems, but also due to a watered-down talent pool. I don't think that's necessary, and I don't buy the talent pool argument. Up until the past 25 years or so, when the league was mainly Canadian players, I could see that argument; however, with the huge improvement in the quality of American players in that time, as well as the influx of European and Russian players, I think the talent pool has grown with the league.
I also think that every effort should be taken to keep these teams from relocating. Franchise relocation a sign of instability for a league. Also, I agree with the reasoning behind the NHL's "Southern Strategy", as I call it (but I disagree with the way they've executed it--which I'll get to in a future post). Moving a struggling team like the Coyotes to Canada might be good for that team short-term, but bad for the NHL long-term. I have to admit though, that personally, I'm torn on the issue. I'm an American, but I sympathise with the Canadian fans who feel that the NHL under Bettman has spit in their faces. I would like to see more teams in Canada (although I'd be worried about the effect on the Maple Leafs and Sabres if a team was placed in Hamilton), but I really don't want to see teams taken out of cities and away from their fans.
So what can be done to fix these teams? I suggest the following solutions:
1. Fire Bettman (the root cause of SO many problems in the league);
2. Institute a system where potential owners go through a thorough background check involving their finances and any criminal past;
3. Start an "NHL Bank" so that teams that are in financial trouble can borrow money from a league-maintained pool (which they would pay back with interest when they are out of trouble). This is different from the league's existing revenue-sharing program;
4. In cases where a new arena is the issue, the league and team must work together to provide financing for it (again, this is another area where the NHL Bank would work);
5. If a team needs an influx of cash that exceeds what a loan or line of credit provides them, or is in search of a buyer, sell stock in the team to the fans. This will provide cash for the team, allow fans to have some say in how the team is run (which should generate more interest in the team since the fans would have more than just an emotional stake), and help provide stability for the league by removing the fear that teams will leave if they're struggling or are trying to extort money from taxpayers through a new arena or other means. This will most likely require changes in the rules governing NHL ownership, but it should be done.
In any case, this is an issue that needs to be addressed ASAP, or these teams could act as an anchor and drag the rest of the league down with them.