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Contraction a necessary evil for survival of NHL says economist

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Old
12-18-2012, 02:56 PM
  #476
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Originally Posted by Mayor Bee View Post
To be blunt, that's a terrible example. You're talking about something that is forbidden, as opposed to simply being new and unusual.

You'd have been better served to talk about opening up sushi restaurants in the United States 20 years ago, or Mexican restaurants in the United States 40 years ago, or Italian restaurants in the United States 100 years ago; all are better examples. But then you'd be forced to admit that people exposed to something new and exotic don't automatically reject it and continue to do so.
I agree. Let's be honest, expansion is always a very long term gamble, especially expansion into midmarkets, or into an entire region that's barely heart of a sport and doesn't follow it that much. It can take decades to even see who's going to succeed and who's going to fail.

Right now the only failing market with any nonstupid definition of "failure" is Phoenix. Other squads might need a good arena situation to survive, but then so does Winnipeg, so there goes that argument. Only in Phoenix is the financial situation so toxic that you can't find an owner to take the losses. Move that market to another sunbelt town, like, say, Houston, and bang, problem solved. And if Phoenix wants to try again when the stink of Jerry Moyes has a chance to blow away and other nearby teams are better established and can create more exciting matchups, who knows.

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12-18-2012, 03:00 PM
  #477
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Originally Posted by Mayor Bee View Post
To be blunt, that's a terrible example. You're talking about something that is forbidden, as opposed to simply being new and unusual.

You'd have been better served to talk about opening up sushi restaurants in the United States 20 years ago, or Mexican restaurants in the United States 40 years ago, or Italian restaurants in the United States 100 years ago; all are better examples. But then you'd be forced to admit that people exposed to something new and exotic don't automatically reject it and continue to do so.
No, no, because it's irrelevant to my point on whether Southern hockey markets could be successful 30-40 years down the road. The example was solely about the present and near future. The reality is that if you opened a Mexican restaurant in Wisconsin 40 years ago, your business either did well and converted loads of people to Mexican food or you went broke and closed the place down. There wasn't a national restaurant league that forbid other restaurants in the area from paying their staff better than you or opening a location near your place and forced them to make their product more mediocre just so you had a better shot at success down the road.

But that is the issue at hand here, because the NHL is severely restricting the freedom to do business of its more successful franchises and the rights of their empoyees for the purpose of assuring that these marketplace losers stick around. That is no small point given that in any legal proceedings ahead, competitive balance will be the league's main argument for why it is justified to have such severe restrictions. But it is obvious that if you want to allow a 350 pound kid compete against nine trim athletes in a 40 yard dash you will have to tinker a *lot* more with the competitive framework and what the athletes are doing than if you just had 10 comparable athletes competing.

In other words, without markets that lose loads of money *now* the NHL would find it easier to have competitive balance and thus it wouldn't have to create a major labor relations crisis every time a CBA is re-negotiated.

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12-18-2012, 03:01 PM
  #478
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Originally Posted by Dojji View Post
I agree. Let's be honest, expansion is always a very long term gamble, especially expansion into midmarkets, or into an entire region that's barely heart of a sport and doesn't follow it that much. It can take decades to even see who's going to succeed and who's going to fail.

Right now the only failing market with any nonstupid definition of "failure" is Phoenix. Other squads might need a good arena situation to survive, but then so does Winnipeg, so there goes that argument. Only in Phoenix is the financial situation so toxic that you can't find an owner to take the losses. Move that market to another sunbelt town, like, say, Houston, and bang, problem solved. And if Phoenix wants to try again when the stink of Jerry Moyes has a chance to blow away and other nearby teams are better established and can create more exciting matchups, who knows.
Phoenix was screwed as soon as ground was broken for America West Arena. The idea of a perfectly-located arena was great, and the idea of building it without a hockey configuration despite being told that Phoenix was a prime expansion/relocation city was unbelievably stupid.

Every issue in Phoenix goes back to that. If it had a hockey configuration:
- The Coyotes play in the perfect place
- The arena is full night in and night out
- An arena with a hockey configuration never becomes necessary
- Glendale never enters the picture

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12-18-2012, 03:42 PM
  #479
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Originally Posted by JuniorNelson View Post
I am thinking that contraction may be something that overtakes the NHL, rather than something they do on their own. If there is no season the legal procedures will tie up the league for at least a second season. That's a long time. Will all thirty franchises remain? If there are teams that do not make any profit, then finance a legal marathon, without any revenue for two years that do not restart would anybody be surprised?
Exactly no need to contract any team as long as there's a buyer, carry on. If there are no buyers, move. If the team can't move and there are no buyers at any price well that's just business. Don't take it personally and foldup.

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12-18-2012, 03:51 PM
  #480
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Originally Posted by Stix and Stones View Post
Exactly no need to contract any team as long as there's a buyer, carry on. If there are no buyers, move. If the team can't move and there are no buyers at any price well that's just business. Don't take it personally and foldup.
As long as you understand that it is a franchise that is folding and not an entire business. The NHL would be buying the franchise back in order to fold it.

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12-18-2012, 03:57 PM
  #481
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As long as you understand that it is a franchise that is folding and not an entire business. The NHL would be buying the franchise back in order to fold it.
No they wouldn't, if it fails it's done. Sheesh what is it with people they want everything, rev sharing, reduce player costs and if the thing is still failing somebody has to buy it. Not likely.

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12-18-2012, 04:05 PM
  #482
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No they wouldn't, if it fails it's done. Sheesh what is it with people they want everything, rev sharing, reduce player costs and if the thing is still failing somebody has to buy it. Not likely.
I'm not 100% sure, but I think the NHL bylaws would say you are wrong.

Owners from other teams don't get to charge hefty expansion fees and then get to keep the money when a franchise goes under. The franchise owners are business partners, not competitors.

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12-18-2012, 04:10 PM
  #483
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Originally Posted by KINGS17 View Post
I'm not 100% sure, but I think the NHL bylaws would say you are wrong.

Owners from other teams don't get to charge hefty expansion fees and then get to keep the money when a franchise goes under. The franchise owners are business partners, not competitors.
The only reason the League bought the Yotes was to keep Balsillie out. If Balsillie wasn't buying, Moyes and the creditors would have got Zero.

If ASG didn't have the Winnipeg offer do you think the league would have bought them?

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12-18-2012, 04:24 PM
  #484
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Originally Posted by KINGS17 View Post
I'm not 100% sure, but I think the NHL bylaws would say you are wrong.

Owners from other teams don't get to charge hefty expansion fees and then get to keep the money when a franchise goes under. The franchise owners are business partners, not competitors.
Im not 100% but im pretty sure the only reason the nhl took over Phoenix was because theyve invested so much money since day one there. There is probably a few rich people who are ready to invest in a team so if they pony up the money in a potentially viable market the nhl will award expansion (hard without 2 teams at a time), or relocation (win for nhl since they get 'expansion fees'). That happened with Atlanta to winnipeg. It should have been phoenix to winnipeg but the nhl was not going to be seen as weak in giving back the same franchise that moved. Instead wpg inherited the shattered remnants of a starless thrashers team. After the nhl took over phoenix they have done a good job of stockpiling and developing young defenders. I personally think an nhl owned team should not be allowed to bid war for player services on july 1st and be forced to scout the scraps, but thats another discussion.

If a market is such a detriment to the league where the 2 options are not doable, then yes simply shutting the doors and leaving the league would happen. The nhl would draft off the players under contract/in the system and ufas would sign elsewhere accordingly. The nhl would have to exhast the 2 options before and a contraction would require absolutely no willing owners

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12-18-2012, 04:44 PM
  #485
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Florida is the third largest state in the United States. You CAN'T ignore that market entirely. The Lightning have been more of a success than a failure in their history and their ownership has made a lot of positive strides.

Similarly, if you're going to bother with Dallas you might as well hit Houston too. Those two markets are stronger with each other to play against than either one is alone and either market can provably stand alone anyway.

And at that point, we're pretty much quibbling over the existence of Carolina, Florida, Nashville and Phoenix. And really, of the three, only Phoenix is demonstrably unsustainable and two of the remaining three (Nashville and Florida) are demonstrably sustainable, even if other revenue streams do have to cover for losses of the actual hockey squad.

A healthy revenue sharing scheme is more than enough to save anyone else except for Phoenix, in other words. Get Phoenix sorted out and get hockey back on the ice and only a handful of bitter enders are even going to care how many teams there are in the NHL.

There is no reasonable point to considering contraction. Only irrational nationism disguised as budget-consciousness (with someone else's money no less).
Few problems with the concept that more and more revenue sharing solve the economic woes.

1. three teams, Toronto, New York R and Montreal make 83% of the earning before tax (EBT) you are suggesting be shared.

2. the league has $250M EBT Net, ~$8M per team, this isn't enough to drastically change the overall profitability.

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12-18-2012, 05:00 PM
  #486
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Im not 100% but im pretty sure the only reason the nhl took over Phoenix was because theyve invested so much money since day one there. There is probably a few rich people who are ready to invest in a team so if they pony up the money in a potentially viable market the nhl will award expansion (hard without 2 teams at a time), or relocation (win for nhl since they get 'expansion fees'). That happened with Atlanta to winnipeg. It should have been phoenix to winnipeg but the nhl was not going to be seen as weak in giving back the same franchise that moved. Instead wpg inherited the shattered remnants of a starless thrashers team. After the nhl took over phoenix they have done a good job of stockpiling and developing young defenders. I personally think an nhl owned team should not be allowed to bid war for player services on july 1st and be forced to scout the scraps, but thats another discussion.

If a market is such a detriment to the league where the 2 options are not doable, then yes simply shutting the doors and leaving the league would happen. The nhl would draft off the players under contract/in the system and ufas would sign elsewhere accordingly. The nhl would have to exhast the 2 options before and a contraction would require absolutely no willing owners
I found the NHL constitution on line. Paragraph 3.7 covers voluntary withdrawal from the NHL (folding).

http://www.bizofhockey.com/docs/NHLConsitution.pdf

Pretty much three choices:

1) The NHL can find a new owner.

2) The NHL can buy the franchise.

3) The NHL can liquidate the assets of the franchise.

In any of those cases the money goes to the entity that owned the franchise prior to folding it.

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12-18-2012, 05:20 PM
  #487
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Originally Posted by KINGS17 View Post
I found the NHL constitution on line. Paragraph 3.7 covers voluntary withdrawal from the NHL (folding).

http://www.bizofhockey.com/docs/NHLConsitution.pdf

Pretty much three choices:

1) The NHL can find a new owner.

2) The NHL can buy the franchise.

3) The NHL can liquidate the assets of the franchise.

In any of those cases the money goes to the entity that owned the franchise prior to folding it.
So if there are no buyers, liquidate baby. The owner gets the proceeds from the sale of the equipment. Good enough!

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12-18-2012, 05:22 PM
  #488
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Originally Posted by KINGS17 View Post
I found the NHL constitution on line. Paragraph 3.7 covers voluntary withdrawal from the NHL (folding).

http://www.bizofhockey.com/docs/NHLConsitution.pdf

Pretty much three choices:

1) The NHL can find a new owner.

2) The NHL can buy the franchise.

3) The NHL can liquidate the assets of the franchise.

In any of those cases the money goes to the entity that owned the franchise prior to folding it.
Or

4) The League does nothing and allows a team to declare bankruptcy. The League is under no obligation to operate or buy the team. If the estate cannot find a buyer (subject to the League's approval of any owner or relocation) or financing to operate the team, the team would simply cease operations and be liquidated. If the team defaults on Players contracts, the League has the right to assume and assign them as it sees fit (dispersal draft, assign to a new expansion team, etc).

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12-18-2012, 05:25 PM
  #489
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Or

4) The League does nothing and allows a team to declare bankruptcy. The League is under no obligation to operate or buy the team. If the estate cannot find a buyer (subject to the League's approval of any owner or relocation) or financing to operate the team, the team would simply cease operations and be liquidated. If the team defaults on Players contracts, the League has the right to assume and assign them as it sees fit (dispersal draft, assign to a new expansion team, etc).
If you read the NHL Constitution that is essentially #3.

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12-18-2012, 05:25 PM
  #490
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So if there are no buyers, liquidate baby. The owner gets the proceeds from the sale of the equipment. Good enough!
Looks like it. That will be great for attracting future investors.

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12-18-2012, 05:29 PM
  #491
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Looks like it. That will be great for attracting future investors.
It would make a guy think twice instead of starting up in the middle of nowhere. There should be a penalty for operating in stupid locations.

Edit to add: By the way, nice research

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12-18-2012, 05:35 PM
  #492
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If you read the NHL Constitution that is essentially #3.
Yes & no. The League only has the right/obligation to liquidate the team under an Involuntary Termination - and the protections under Bankruptcy law would trump the NHL Constitution and likely prevent the termination. Any disposition/liquidation would be probably be done by the court, not the NHL.

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12-18-2012, 05:40 PM
  #493
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Yes & no. The League only has the right/obligation to liquidate the team under an Involuntary Termination - and the protections under Bankruptcy law would trump the NHL Constitution and likely prevent the termination. Any disposition/liquidation would be probably be done by the court, not the NHL.
I see what you are saying, but the liquidation option does exist under voluntary termination. I doubt the NHL or an owner will ever allow that case to occur, so Stix and Stones idea that 4-6 teams are going to be or could be "liquidated" is pretty far fetched.

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12-18-2012, 05:45 PM
  #494
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Yes & no. The League only has the right/obligation to liquidate the team under an Involuntary Termination - and the protections under Bankruptcy law would trump the NHL Constitution and likely prevent the termination. Any disposition/liquidation would be probably be done by the court, not the NHL.
Well apparently it has been discussed here before, there is the owner will not put the team in bankruptcy clause. That all owners sign.

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12-18-2012, 06:36 PM
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Well apparently it has been discussed here before, there is the owner will not put the team in bankruptcy clause. That all owners sign.
Which note, has never been enforced (witness the Pens, Sens, Sabres, 'Yotes, etc) - and one of the copies of the NHL Constitution released in the 'Yotes filings was hand annotated as "Not Enforceable" by the term where bankruptcy was grounds for Involuntary Termination.

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12-18-2012, 07:28 PM
  #496
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If they wanted to, the league would have the ideal opportunity to contract a team with the Devils, given their bankruptcy situation. They won't do it but still.

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12-18-2012, 07:31 PM
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The whole point of the 90's expansion was geared towards convincing TV execs that hockey wasn't a fringe sport with only regional appeal. If folks would flock to see the game in Raleigh or Phoenix, than surely they would tune in to see Pittsburgh play Washington on Sunday afternoons. Now that they've got their TV deal, all these non-traditional markets are expendable.
The point is rather, they didn't get their tv deal, it didn't work, time to move on.

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12-18-2012, 07:53 PM
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If they wanted to, the league would have the ideal opportunity to contract a team with the Devils, given their bankruptcy situation. They won't do it but still.
The Devils are an elite NHL franchise, and not bankrupt. Why not contract the piece of garbage 20 years with no cup Habs instead?

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12-18-2012, 11:15 PM
  #499
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The Devils are an elite NHL franchise, and not bankrupt. Why not contract the piece of garbage 20 years with no cup Habs instead?
The Devils would have better attendance if they were located in Swift Current. I joke but seriously, even in the playoffs they are known for empty seats. Those teams they have had should of instilled a generation of fans. Now we wait...

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12-19-2012, 12:38 AM
  #500
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The Devils would have better attendance if they were located in Swift Current. I joke but seriously, even in the playoffs they are known for empty seats. Those teams they have had should of instilled a generation of fans. Now we wait...
Oy Vay, this again. It must be all the trapping....
Anyway, as I was telling the guy before, The Devils have for the last few years been a top 10 revenue team that is in the black on operating income....and yes, every game during the playoffs was actually sold out.

However, this does highlight an issue that is overlooked by relocation, specifically places like Hamilton. Do you think it is likely that if a team was relocated there next season that hardcore generational Leafs fans would en mass become Hamilton Coyotes fans? I doubt it. It would take a long while, and the first years would be extremely hard, probably a disaster if they were not competitive. The Devils had the same issue, being moved right smack in territory that for generations belonged to hard core Rangers fans in the North and Flyers fans in the south (add the Islanders, who were immensely popular back in the 80s and early 90s). The people who have been Rangers fans for 30 years, who's fathers were Rangers fans, and who are grooming their kids to be Rangers fans arent going to suddenly do a 180 and become hardcore Devils fans.
Things have started looking up on that front the last decade, and they've established a loyal and growing fan base (also a young one), but it took years of being there and then it took more years of being really good to carve out a place (and as I said are now an above average revenue team). A plus for that is that is that it was done in a Metro Area that has over 20 million people (not including the Philadelphia area that covers the Southern part of the state), and still has tons of room to grow.
The entire population of Ontario is half that.

It's not a sure shot that moving a team there would be successful, and it would not happen quickly, meaning it is not a short term solution and might not be long term viable unless they were able to convert many Leafs fans. Or it might work great, if you didnt obsess about comparing gate attendance over several decades. Either way, it would have all the problems of the Devils moving to the New York City area, but without the population and media potential for long term growth..meaning it would not be a cake walk


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