KATZ GROUP: BLUFFING WITH 2/7 OFFSUIT

Eight years ago, during the first NHL lockout (how pathetic is it that there is a 1st and 2nd lockout, ugh) poker was on every sports channel. At first fans complained about it, but within month many started watching and playing online. Poker was the new "sport" of choice, but even the most uneducated poker fan realized quickly that you folded 2-7 offsuit, unless you were the big blind and could check to see the flop.

Right now the Katz Group and the City are playing heads up, and the Katz Group lost a big hand yesterday. Their appearance in Seattle followed by a head-scratching press release was akin to going all in with a 2-7 offsuit.

I’m perplexed as to why the Katz Group thought they could use relocating to Seattle as a bargaining chip. The blatant facts are that relocation is NOT an option, even when their current lease expires at the end of the 2014 season.

Here is why relocation won’t happen.

  • Gary Bettman admitted he made a mistake allowing Winnipeg and Quebec to relocate, and since then Bettman has proven he’d rather have the league own a team and have them lose $20 million a year than relocate. He won’t let one of his profitable teams up and leave.
     
  • The Oilers aren’t losing money. They are profitable, despite being the only team in the NHL that doesn’t get non game-night revenue.
     
  • Florida, Columbus, Phoenix, NYI and many other teams have been losing money for years. There is zero chance Bettman allows the Oilers to jump the queue and relocate before those other money-losing franchises. A source within the NHL, who didn’t want to be named for obvious reasons, told me this morning, "There is no way the league would let them move. They will try to help facilitate a deal to get a new arena, but relocation is not an option at this point."
     
  • The rink in Seattle won’t be ready for at least three years, likely four. So the Oilers would play at Key Arena for two years, before becoming a tenant in the new rink in Seattle. The WHL team vacated Key Arena because it’s a terrible hockey venue, but the Oilers will play there for two years? No chance.
     
  • The Oilers are the #1 team in Edmonton, but in Seattle they’d be #5 behind the Seahawks, Mariners, Sounders (soccer) and the new NBA team. Seattle will be a viable option for a team that is losing money, but it would be a backwards move for the Katz Group to relocate there.
     
  • The Oilers are amongst the top-five most expensive ticket prices in the league, but that won’t be the case in Seattle. The San Jose Sharks sell out every game, but they lost money last year because they can’t charge premium prices. Below is the Sharks seating chart.


You can get a ticket in the 2nd deck for $46/game in San Jose. If you want a pair of individual seats in Edmonton in the same section it will cost you $135.50 each (based on LA Kings game on October 16th from Oilers website). It is basic supply and demand. There are more rabid fans in Canada, thus higher ticket prices. Everyone knows that ticket prices in Seattle will not be as expensive as Edmonton.

OTHER OPTIONS

(This is the inside of the Sprint Center in Kansas City. Looks great, but not good enough to attract an NHL team.)

The Katz Group sent out this statement yesterday. It came from Executive Vice President, Bob Black: 

"I can confirm that Daryl Katz, Patrick LaForge, Kevin Lowe and others from the Oilers leadership group are in Seattle for meetings and to attend the Seahawks game. 

We remain committed to working with City Administration to achieve a deal commensurate with what Winnipeg and Pittsburgh have done to sustain the NHL in those small markets. If we can achieve such a deal, the Oilers will remain in Edmonton and we can get on with the important work of developing the new arena and investing in the continued revitalization of Edmonton’s downtown core.

Nonetheless, and as the City of Edmonton is aware, the Katz Group has been listening to proposals from a number of potential NHL markets for some time. After more than four years of trying to secure an arena deal and with less than 24 months remaining on the Oilers’ lease at Rexall Place, this is only prudent and should come as no surprise.

We are extremely grateful to Oilers’ fans for their patience and loyalty as we work through this process towards what we sincerely hope will be a long and successful future for the Oilers in Edmonton. We have no further comment on the status of our discussions with other markets at this time."

Who are these potential NHL markets? Let’s assume they are talking about Kansas City, Seattle and Quebec City.

I’ve already broken down why they won’t go to Seattle, but if Kansas City was such a great market how come Atlanta moved to Winnipeg? Moving the Oilers to KC is as likely as the NHL lockout ending this week.

The 2011 census had Edmonton (metropolitan) population 6th highest in Canada at 1.5 million. Quebec City was ranked 7th with 765,700. Will fans in Quebec who average $22/hour pay the same as fans in Alberta who average $27/hour? I doubt it.

At this point relocation should not even be discussed, because it isn’t going to happen. Any fan, blogger or media person who suggests it is a realistic possibility isn’t paying attention.

The League won’t allow it to happen, and the Oilers don’t want to move.

The major problem I see now is that the Katz Group hasn’t made it clear what they want. Instead of wasting everyone’s time, and creating more disdain from their fans, the Katz Group needs to realize that unsubstantiated threats of a possible move won’t help them at the negotiating table.

We know the league won’t let them move, and we know that deep down the Oilers don’t want to move.

It was a bad bluff and you lost the hand, but the Katz Group still has lots of chips on the table. When you get caught bluffing in poker you take your lumps and move on.

There is nothing wrong with bluffing, it’s part of poker. Unfortunately it has also become a staple in most arena negotiations, and usually it only serves to hinder and delay the process. Remember when Mario Lemieux was flying to Vegas, Kansas City, Houston and Oklahoma City, well months later at the groundbreaking ceremony for their new rink he admitted what most already knew.

"It (relocating) wasn’t an option. We had to do a few things to put pressure on the city and the state, but our goal was to remain here in Pittsburgh all the way. Those trips to Kansas City and Vegas and other cities was just to go and have a nice dinner, and come back."

During those negotiations some fans despised Lemieux, but once a deal was completed Lemieux was labeled the saviour of the franchise.

The Oilers aren’t moving. It is a non-issue, regardless of trips to Seattle, Kansas City or Quebec.

WHAT NOW

Just because relocation isn’t a serious option, doesn’t mean the city should just sit back and do nothing. According to councillor Bryan Anderson, "There has been no forward progress since last October."

This project needs to get done. There has to be an equal amount of motivation from both sides to accomplish this. The city needs a new facility and the Oilers want one, and we all recognize this. Neither wants to pay for all of it, so find a middle ground by looking at the intricacies of deals in Pittsburgh and Winnipeg and find out what worked and what didn’t work.

The Katz Group’s "tell" was easy to spot because we’ve seen it before during previous arena negotiations, but now it’s time to deal a new hand and get back in the game.

  • mikezanier

    I am not sure about your price comparison … in section 202 row 37 and I pay 46.00 per ticket . Seems pretty comparable. The Oilers game day tickets are much higher.

  • DSF

    Is there a FAQ regarding the deal as of october last year? I.e., im looking for a quick breakdown of the deal… what was the agreement. Did Katz put up 100 million or didnt he?

  • DSF

    @woodguy

    It causes me great pain to back up anything dsf posts but the one thing he has been consistent about is comparing Seattle to Edmonton without a new rink.

    • I’m referring to the deal that the city has in front of KG now.

      KG is trying to change the terms of that deal, and will probably succeed to some extent, but the current deal has to trump anything they can offer in Seattle by the sheer number of dates KG can get revenue from the arena, coupled with the almost non-existent lease cost. ($3.5MM/yr for the first 10 years + maintenance costs)

      Listening to a couple of CoE councilors today, that’s one big stumbling block in the negotiations.

      KG says non-HRR will be one number and council, using some numbers based on the new rink getting x% of Northlands revenues, says its much larger.

  • The Soup Fascist

    I think there is a bigger question. How did the “To Catch a Predator” guy get enough scratch to build a spiffy rink in Seattle and buy an NBA team?

    EDIT: Wow. Turns out it isn’t the Predator dude. Actually Chris Hanson was a journeyman NFL punter. I could have looked silly. Sure glad I sidestepped that landmine. Wow, what are they paying punters nowadays?

  • DSF

    I think both Katz and the city have alredy sunk too much coin into this to let it fail. At least that is my hope. A new arena will be built. The best option is to build it while the ciy has a partner and an NHL team.

  • FMS

    This is just another move that shows Katz is out of his element in dealing with the public sector.

    I’m sure this kind of tactic might be very effective in private business: find an element which gives you perceived leverage, bully your competition (particularly if they’re small businesses) into meeting your demands.

    But when you deal with municipalities, secrecy and threats are nothing more than a PR nightmare. I think Katz is in for the harsh realization that this relocation threat has done far more harm than good.

  • Jason Gregor

    I think that fan fatigue has set in. Build it or don’t but make a decision is the view.

    My own opinion is that Rexall fails as a hockey venue because the seating is not steep enough, the ice machine needs replacing and the concourse is brutal. The only benefit being it is easy for me to drive to.

    If I were on council I would be in favour of Edmonton building a new rink to be owned by the city, to be operated by Northlands (or similar) and the Oilers get the same rental deal that they have now in Rexall. Katz would get more hockey revenue because of more boxes, seats and concessions.