Two of our favourite parts of the new Arena debate is when people scoff at Daryl Katz offering to put 100 million dollars towards a City owned arena and when they later roll their eyes when it is suggested that owning a Pro Sports franchise isn’t a very lucrative business.
It’s no secret that we support the new arena project, think that the City should be involved in a way that provides an appropriate return on their money and that also encourages development in North Downtown Edmonton, depicted below:
We remain of the mind that in these unsteady times owning a Pro Sports franchise is a fragile business at best, testing the financial resolve of the uber rich who may already be feeling the pinch economically in other parts of their business empire.
Having an owner ready to contribute $100 million dollars on top of having purchased the team for an inflated value and having subsidized the team through what must have been a non-profitable last few seasons is a rarity in this economy and shouldn’t be dismissed so easily.
The trouble that the NHL is having with the sale of the Phoenix Coyotes is a prime example. According to a recent TSN article "The franchise never has turned a profit since moving to Arizona and is expected to lose at least $20 million this year."
Now we didn’t major in businessology when we attended the Laurielle Beauty Academy and Community College, but even we know that a company that loses $20 million a year when it’s salaries are hilariously low and even somehow made the playoffs ain’t the greatest company since the days of Adam Smith. One can hardly blame Ice Edge Holdings from having a good long think about the Pros and the Cons of keeping a team in the Desert regardless of what Gary Bettman says.
AND IT AIN’T JUST PHX
The problem of increasingly stretched pro sports owners isn’t just contained to Phoenix. The largest investor in the St. Louis Blues has just notified majority owner Dave Checketts that they intend on selling their interest in the team citing a bunch of fluff about "building a strong foundation for success" and "being tired of subsidizing losses that include the employment of Louie, the most stereotypically dressed ‘Blues’ related mascot ever created."*
*Actual mascot, not actual statement
AND ALSO THESE GUYS
Another example comes from Dallas where the Mavericks have come under the spotlight of scrutiny as Ross Perot sues Mark Cuban over how the team is run. If you were amazed to learn that Ross Perot – the delightfully hilarious business tycoon that was oft parodied by Dana Carvey back in the day when he ran for President of the US – owned part of the Mavs, you are not alone on this one.
Nonetheless, Perot has basically accused Cuban of losing a mind bogglingly large sum of money over the past few years in an attempt to win an NBA title:
"Mark Cuban’s financial management of the Dallas Mavericks was described as “reckless” in a lawsuit filed Monday in Texas by a minority investor in the team who accused the flamboyant owner of amassing net losses of $273 million and debt of more than $200 million.
The lawsuit partly opens the Mavericks’ books, showing some results and projections. Perot said the team generated a net loss of more than $50 million in the year ended June 2009 and a net cash flow deficit of $176 million since 2001. Looking ahead, Perot said that internal projections show additional losses of $92 million through 2013 and debt rising to $281 million."
Great Gods almighty! That is some considerable sum of money isn’t it? Losses of $273 million and debt of $200 million on a team? A team that was purchased at an incredibly inflated value of $285 million back in 1999-2000? Can someone please remind us again why the NHL prevented Cuban from blowing all of this money on the Pittsburgh Penguins?
It’s interesting to note that Cuban doesn’t bother refuting that the team has lost a boat load of dough in the time he has owned the team and instead prefers to talk like this:
"In an e-mail message to The Dallas Morning News, Cuban said: “There is no risk of insolvency. Everyone always has been and will be paid on time.” He added that “being in business with Ross Perot is one of the worst experiences of my business life.” “He could care less about Mavs fans,” Cuban continued. “He could care less about winning.”
Now we aren’t going to sit here and tell you that Cuban needs the money he lost or that Perot is headed into the poor house. Cuban sold broadcast.com to yahoo at the absolute height of the dot com boom for an eye popping $6 Billion dollars and then proceeded to pump the real proceeds into a little company called HDnet.
Zounds. He can afford to pay the Dallas Mavericks to lose this kind of money for a looooong time before it would cause him real concern. What’s 500 million to a billionaire? That is like one of us normal people going to Subway and asking for double the meat right?
It is interesting to note that this Perot v Cuban lawsuit is also shedding some unwanted publicity on the sports empire of Tom Hicks, who owns both the Texas Rangers and the Dallas Stars:
"The accusation that the Mavericks have too much debt and are insolvent is resonant in the Dallas area. Stung by the global credit crisis, Thomas O. Hicks’s sports company, which owns the Texas Rangers and the Dallas Stars, stopped paying interest on $525 million in debt in March 2009, and Hicks has put the Rangers and the Stars up for sale. A group led by Chuck Greenberg and Nolan Ryan has agreed to pay $575 million for the Rangers, but the sale is embroiled in a dispute among Hicks, his lenders and Major League Baseball."
AND NOW RELATING IT BACK TO US
Voicing your opinion that the City needs to be very careful how it handles the proposed arena development is fine. Loudly screaming that the arena should be built by Daryl Katz himself using only a steamshovel and a borrowed bag of cement is fine too.
But all parties involved should count their lucky stars that there is a super rich Edmontonian fronting the losses our local squadron and looking to develop an arena at all, as opposed to hastily putting the team on the open market or ceasing all debt payments on the loans supporting the team.
After all, things could be much worse: