Thursday, May 14, 2009

NHL Financial Stability

A few years ago I was asked about the stability of the NHL in an article on foxbusinessnews. With the recent announcement that the Phoenix Coyotes owner (Jerry Moyes) is filing for bankruptcy and agreeing to sell the club, the topic of the financial stability of the league comes up again. While the NHL and Moyes set to battle in court over the issue of who now controls the Coyotes and whether the league or the owner determine who the team is sold to, it is not surprising that marginally viable teams face significant losses like the Phoenix Coyotes during this economic downturn. No matter what happens, there are difficult issues to content with.

The first is that the league faces a significant dilemma if they ultimately have control of the franchise, in that there is a viable purchaser in Jim Balsillie who has expressed interest in purchasing the team and moving them to Southern Ontario. The reason why is that the Buffalo Sabres receive a significant amount of revenues from fans in the the area, and most likely many of these fans would choose to patronage the new local team. So do you sell the team to an owner who is interested in investing the amount of money that is needed to build a financially strong franchise and potentially cause another franchise that has had financial problems in the past to lose maybe 10% of their gate revenues?

The other is that if the Coyotes were to move, one of the downsides of local governments subsidizing pro sports teams is that the local government is left with the stadium and the debt but not the sales tax revenues, and local businesses that pay a premium to be near the stadium have reduced traffic and most likely lower sales (and profits).

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