Devils in Trouble

August 8, 2013

The New Jersey Devils of the National Hockey League (NHL) are reported to be in severe enough financial trouble that the league is considering taking over the team.  Current owner Jeff Vanderbeek, a former Lehman Brothers executive, was not able to meet payments on his newly restructured loan which was suppose to help ease payments.  Forbes reported earlier this year that the Devils have are more than $230 million in debt, which is around the amount that the Atlanta Thrashers were in debt before they were purchased and moved to Canada.  Curiously, Forbes is also reporting that the NHL does not want the Devils to declare bankruptcy as the Phoenix Coyotes did.  Rather, they are going to try and take control of the team and then help find a new ownership group to takeover the Devils.

The takeover seems to have some logic to it, as we have seen teams like the Los Angeles Dodgers get taken over by Major League Baseball to get rid of incompetent ownership and management.  The Dodgers were bought out at a major profit, and the team somewhat rejuvenated.  While I do not think there will be any “mega” offers for the Devils, the franchise has won Stanley Cups in recent memory, and was once one of the dominant clubs in the NHL.  With the league taking over the team, they may be losing out on the $25 million they are currently owed from Vanderbeek, as well as the $55 million in salaries that are due to players this season.

While it does not surprise me that another team has had such financial troubles in the NHL, to see one in one of the larger markets in the league may be a sign of several things.  It could be poor management from a financial perspective, an owner trying to bite off more than he can chew, or it could be that the metro area cannot support that many professional hockey teams.  In any case, this will probably be another point in the argument by the owners to get an even larger split of the revenue the next time they negotiate a collective bargaining agreement.


Los Angeles will get a football stadium, but will they get a team?

September 29, 2012

Los Angeles City Council has given approval for Anschutz Entertainment Group (AEG) to build a $1.2 billion football stadium in downtown LA, next to the Staples Center which is also owned by AEG.  What is interesting in this whole process is that I just discussed about a week or two ago that AEG was selling off all of its Los Angeles based business, and this would surely include the football stadium which will be called “Farmer’s Field”.  This may mean that the price for AEG’s Los Angeles operations just went up by several hundred million (or maybe even more than a billion).  As noted in the article listed above, there were many interested parties at the City Council vote, including individuals from Staples Center with “Farmer’s Field” t-shirts, some fans wearing the colors of the old Los Angeles Rams, and other potential interested parties.

Deadspin notes that the San Diego Chargers could have been the ones to move to LA, if the deal had been done sooner, but that is no longer a possibility.  Likewise, the Oakland Raiders are said to not be favored, as the state would not want to fund such a big project just to move a team from one part of the state to another.  That would indicate that the new stadium will be looking for an NFL team from outside of the state.  The Vikings and Jaguars look to be stuck in their current cities for quite a while, so the next choice falls down to the St. Louis Rams and Buffalo Bills.  Both teams have had troubles drawing fans to games in recent years, and Stanley Kronke (owner of the Rams and Arsenal) would certainly have to consider the possibility of moving the Rams to one of the major markets in the U.S. if St. Louis doesn’t start to helps the Rams out some more.  I’d say Kronke is in a good position to hold St. Louis hostage for some tax money, as he’ll simply just say he will pack the bags and move off to LA if they don’t.

He would not be the first owner to make this threat, and he certainly will not be the last.

I’ve started to get the questions about the economic impact the new stadium will have on Los Angeles.  The answer is a complicated one.  Research shows that facilities don’t necessarily bring big gains to the economies of local regions.  That said, stadiums do bring fans and business to local restaurants, bars, and hotels that are located near a sport facility.  A good discussion of this can be found in the San Jose Mercury News, were professors Roger Noll and Dan Rascher (both very prominent sports economists) discuss the economic impact of the NHL lockout.  Dr. Noll notes that this local business will probably suffer, but not the economy as a whole.  Dr. Rascher adds on that there is some impact for the San Jose with the Sharks not playing, because only 28 percent of those who come to Sharks games live in San Jose.  Considering the size and scope of the Los Angeles area, it is quite possible that you would see similar percentages of out-of-town visitors for Los Angeles NFL games.

So for now, the answer is: we shall see.


Lockouts and Scabs

September 26, 2012

The NHL lockout claimed more victims today, with “just under 20” employees of the St. Louis Blues being laid off by the organization.  Additionally, other employees have taken pay cuts or switching to a four day work week.  Layoffs are spreading around the league, the Florida Panthers even have laid off their mascot.  Some are comforted that Bettman is not taking pay while the league is locked out, but it is important to note that he is the lowest paid commissioner in the major North American sports.  Still he took home close to $8 million in salary last year.

There has been some other news in the NHL, and much of it seems to be coming out of Alberta.  First, the Edmonton Oilers are said to be considering Seattle as a potential site for relocation.  While Bettman and the Edmonton mayor have been telling fans to note worry, it is worth noting that the Oilers owner was in Seattle to talk relocation.  Also coming out of Edmonton is the news that the Oilers and the Calgary Flames are trying to have the lockout ruled as being illegal in the province.  The NHL and NHLPA lawyers have congregated in Alberta, where they are currently arguing in front of the Alberta Labour Board as to whether a lockout is legal by the laws of the province.  It would be curious to see how this turns out.  If the lockout were found to be illegal in Alberta, though a similar motion has already been struck down in Quebec courts.

In other lockout news, the NFL referee lockout is still continuing, and the fans are angry.  Last night in a key final play, the replacement referees seem to have made a mistake which changed the outcome of the game away from the Green Bay Packers to the fortune of the Seattle Seahawks.  Individuals across the country now bemoan the “horrid” refereeing in the NFL, yet they continue to watch the game.  Former 49ers QB Steve Young came out and said that if people are really so angry that they don’t like the product with replacement referees, they should stop watching.  That doesn’t seem to be the case, as ESPN’s Sportscenter scored ratings around a 5.0 for their midnight broadcast.  This is about four to five times higher than the normal viewership during this time period.  It seems that the bad refereeing is almost drawing more attention to the league.

New Jersey state senator Stephen Sweeney isn’t amused by the referees.  He has proposed that New Jersey consider banning replacement referees from working games in the state.  Senator Sweeney is naturally a Packers fan.

Yet here we see government now trying to get more involved in sport, should they not be working on more important things than whether your favorite team had proper officials for their game?


More movement in the LA sports scene

September 19, 2012

Today the Los Angeles Times published an article noting that Anschutz Entertainment Group (AEG), my former employer, headed by billionaire Phil Anschutz, was looking for someone to buy out the rights to their Los Angeles based sport properties.  Included in this are the Los Angeles Kings of the currently locked out National Hockey League (NHL), the Stapes Center where the Los Angeles Lakers and Clippers play (NBA), as well as the Los Angeles Galaxy of Major League Soccer (MLB).  This move came as a surprise to me, as AEG had long been working towards building a football stadium in Los Angeles in order to attract a National Football League (NFL) team.  As the plans have stalled several times and have moved forward and backward several times, it could be that AEG has finally decided to give up on the project, and abandon all their other Los Angeles projects as well.

At the same time, this is not the first time that AEG has sold off sport properties.  The company was one of the main investors along with Lamar Hunt to help get the MLS started in the 1990’s.  AEG once held the three major market teams in the MLS, the Chicago Fire, Los Angeles Galaxy and New York/New Jersey Metrostars.  Since then they sold of the Chicago Fire, as well as the Metrostars.  The Metrostars were purchased by Red Bull for a price reported around $100 million, which many thought was a great deal for AEG to sell off an MLS franchise at such a high price.  Now it seems that AEG is moving away from the MLS and is selling off a lot of their sport properties.  Additionally, it could be a combination of getting out of soccer while they can, selling off a franchise from a locked out league, and the LA football stadium problems that has pushed them in this direction.

In either case, if AEG does sell of the properties it will be a major change in the LA sports landscape.


Quick Update: NHL Lockout Official

September 17, 2012

Greetings, last night the National Hockey League (NHL) officially locked out players, making this the third lockout of Gary Bettman’s tenure as league boss.  I find it absurd that someone would be allowed to be the commissioner of a league after two lockouts, but now his leadership has presented us with a third one.  Of course, he really works for the owners, so as long as he is keeping the thirty or so super rich individuals across North America happy, he will stay in his job.

On Saturday, Bettman continued in doing his work for the owners when the league told the head of the players’ association (Donald Fehr) to not even bother trying to get a last minute face-to-face meeting to try and bring the sides to a compromise.  Granted, this may have been a waste of time as the sides are still too far apart on any deal happening.  The players had already taken a 24 percent cut in salaries to end the previous lockout in 2005, now the owners want the players to drop the percentage of revenues they share by around 8 to 10 percent.  The players weren’t going to agree to this, the Collective Bargaining Agreement was thus allowed to expire, and thus we are now in a lockout.

In my opinion the league has continued to slash costs, the previous time the league had some good arguments to reduce costs, but this time around it seems as if they just want to slash costs because they can.  The NHL is scheduled to begin play in October, but that seems to be in doubt as there is no way a deal will get done in time to get players to training camp and ready for the season by then… unless those players bolt to Europe.  The exodus has already begun, Evgeni Malkin has already left to play in the KHL in Russia.  The KHL was well prepared and set out rules about the number of players from the NHL a team can sign during a lockout, and that the salaries can’t exceed 75% of what the player makes in the NHL.

Already several players are headed over to play in Europe which makes me think that with other revenue sources for many players readily available, this lockout could last a long time. One wonders if this could be the end of the NHL as we know it.


Is the NFL in trouble for Collusion?

September 11, 2012

Thursday in a Minneapolis court room, the trial will begin in the case of Reggie White et al., vs NFL which alleges that the NFL owners were colluding to keep salary caps at a certain level, including that the owners had a secret agreement to keep the cap at $123 million a year during 2010 when the league had no salary cap.  The lawsuit alleges that such behavior has existed since the early 1990’s, and argues that owners have been working together to keep salaries low in the league.  The lawsuit indicates that this collusion has cost the players billions of dollars in potential lost revenue over this frame.  People have been discussing that the bounty gate and concussion problems would be the things that really hurt the NFL, but this new lawsuit brings a major issue for the league from a financial standpoint.

MLB owners were found guilty of collusion during parts of the free agency era, and were thus forced to pay back players, so this is not the first time this has potentially happened in North American professional sport.

Sport site Deadspin notes:

The only way to challenge the salary cap punishments now, after they’ve gone through the collectively bargained appeals process, is to “re-interpret” the entire 1993 settlement that allowed for a salary cap in the NFL and punish the owners’ collusion to the tune of $4 billion in damages.

This could mean big problems. NFL owners are probably cringing as the Judge presiding over the trial will be David Doty, a judge who is known for having ruled in favor of the union several times in the past.

You can also read (and download) the lawsuit on another deadspin article here: http://deadspin.com/5912702/


Kansas City teams using taxpayer money to pay for pretty much everything…

August 1, 2012

It is not unusual for professional sport teams to use taxpayer money for upkeep and maintenance of their sport teams.  Well trouble may be brewing in the state I am based in (Missouri) as WHB 810 Sports Radio in Kansas City broke new yesterday that the Kansas City Royals, the cities Major League Baseball Team, is using only a small portion of the tax money they requested for maintenance and repairs.  This isn’t exactly illegal, but the Royals apparently are using only 9% of the $17 million in taxpayer money earmarked for maintenance and upkeep for stadium repairs.  What are they using the money for?  Well, in 2006 an amendment was added to the lease agreement to both the Kansas City Royals and Chiefs (the National Football League team for the city) which allowed them to use this fund to help pay for “game day operations”.  Well the Royals asked for money from the fund to pay salaries of employees ($4 million) and another $700,000 to pay for their taxes.  Both requests were approved, officially making it so that the Royals were paying their taxes with taxpayer money.  The best part?  The reporter from WHB 810 has actually provided with a list of what the Royals asked for and received from this special fund:

Security $287,377
Telephone $83,698
Supplies $657,838
Uniforms $86,301
Salary, Full-Time Associates $975,309
Payroll, Taxes and Benefits-Full Time $365,176
Salary, Full-Time Associates $321,355
Payroll, Taxes and Benefits-Full Time $133,617
Salary, Part-Time Employees $2,618,568
Payroll Taxes-Part Time Employees $200,320
Security    $236,113
Telephone $515,696
Stadium Services $691,322
Professional Services-First Aid $241,931
Utilities, Telephone, Cable TV $2,291,385
Day of Game Security   $247,528

And the Royals aren’t the only game in town, and it is now being noted from a source that the Kansas City Chiefs are doing similar things with the fund.  The Chiefs asked for $27 million, and used only a third of that amount on stadium repairs and upkeep.  It is noted that none of this tax money is allowed to pay for player salaries, but they are being used to cover other salaries of employees, and pretty much everything else.  The Jackson County Sport Complex Authority which approved these funds just sent re-nomination of their current head to Missouri governor Jay Nixon for approval.  Governor Nixon will need to think twice about this as citizens will clearly not be thrilled by this use of tax money.  This will also not improve Royals owner Dan Glass’ standing with the fans of his team.  They already are unhappy with the way the team is run and will not pay for players, now they find operations are being paid with their tax money, this can not go well.