NHL, MLB, NFL, NBA Win, Hamilton and Balsillie Lose
By Evan Weiner
September 30, 2009
10:30 PM EDT
(New York, N. Y.) -- So Jim Balsillie has dropped out of the bidding for the bankrupt Phoenix Coyotes National Hockey League franchise after a bankruptcy judge in Phoenix, Arizona decided that sports leagues are a private entity and that sports owners have a right to pick owners and territories. The judge, Redfield T. Baum, turned down Balsillie's bid and an offer by the NHL to buy the financially ailing franchise that sits in Glendale, Arizona not in downtown Phoenix because of a terrible decision by the sitting city council in the late 1980s when they buckled to Phoenix Suns CEO Jerry Coangelo's want for the perfect basketball arena with perfect seating for HIS customers and not approve an all purpose use for the building.
The saga of the Phoenix Coyotes should be studied by urban planners and sports business management professors, experts and students as soon as possible because of the action of the elected officials of Phoenix who made a badly flawed decision which resulted in an arena that could only sell 75 percent of the available seating because of obstructed views. Coangelo wanted a hockey team in the building but not own it. He wanted money off of the team as he got the lion’s share of the revenues of any activity in the building because of the lease he demanded and got from the Phoenix officials. Coangelo knew an NHL franchise could not succeed in that building and various Coyotes owners reached the same conclusion very quickly.
The Coyotes franchise became a piece of real estate with a subsequent owner coming up with a plan to try and build an arena in Scottsdale less than five years after Richard Burke and Steven Gluckstern purchased the Winnipeg Jets and moved the franchise to the Valley of the Sun in 1996. Gluckstern quickly cashed in and bought the New York Islanders in what was a real estate grab that did not work out for him in Nassau County, N. Y.
Burke sold the Coyotes to real estate developer Steve Ellman in 2001.
Eventually, after no arena materialized in Scottsdale, Ellman found a willing partner in Glendale and built the arena as part of a real estate development deal.
In 2006, Ellman sold the majority stake of the Coyotes to one of his real estate partners Jerry Moyes in a deal that gave Moyes the hockey team and allowed Ellman to take over the development of the real estate parcel in Glendale. Within two years, Moyes threw his hands up and walked away leaving the NHL apparently to pay off the bills. In May 2009, Moyes decided bankruptcy was a good option and found a willing individual to buy the franchise in Balsillie in a bankruptcy proceeding. The NHL apparently was trying to sell the team to Chicago White Sox and Bulls owner Jerry Reinsdorf as Moyes walked into Judge Baum's court.
Reinsdorf's Major League White Sox franchise was already doing business in Glendale as Reinsdorf moved his spring training headquarters from Tucson, Arizona to Glendale in the winter/spring of 2009.
Balsillie had twice before gone after an NHL team. He had an agreement to buy the Pittsburgh Penguins in 2006 and dropped out after to agree to some NHL stipulations. In June 2007 he made his biggest mistake in his dealing with NHL owners and NHL Commissioner Gary Bettman. Not too long after he signed an agreement to buy the Nashville Predators from Craig Leipold, he announced that he planned to relocate the team to Hamilton, Ontario in 2008-09. Soon after his plans became public, the deal was called off.
Balsillie is obvious a smart guy given his success with Research in Motion and BlackBerry but he actions in the Nashville matter and subsequent behavior in the Phoenix dealings were silly. Prospective sports owners have to understand that becoming a major league sports owner is not a right but a privilege. You have to prove that you a worthy to join their private club, Balsillie might be raking in the cash with BlackBerry but that does not mean that he will be allowed in the brotherhood of owners.
There must have been a huge sigh of relief from the law offices of Major League Baseball, the National Football League, and the National Basketball Association when they found out that Judge Baum in his decision wrote.
"In the final analysis, the court cannot find or conclude that the interests of the NHL can be adequately protected if the Coyotes are moved to Hamilton without first having a final decision regarding the claimed rights of the NHL."
Judge Baum understood from day one that the NHL is a private entity that has its own rules not too much different than a golf course which can allow or reject prospective members. Oakland Raiders owner Al Davis was able to move his team to Los Angeles after the National Football League blocked his planned relocation in 1981 by a 22-0 vote with five abstentions by joining with the Los Angeles Coliseum Commission's lawsuit which charged that the NFL violated antitrust laws by not allowing the move. Davis and the Coliseum Commission won the case, Davis moved the team to LA and the NFL was forced to tighten up its relocation rules. The NFL has not stopped any moves since the Davis case as Robert Irsay took his Baltimore Colts to Indianapolis in 1984, Bill Bidwill took an offer from Tempe, Arizona in 1988, Davis moved back to Oakland in 1995, Georgia Frontiere moved her Rams from Anaheim to St. Louis in 1995, Art Modell accepted an offer from Maryland and pulled his Cleveland Browns out of the Ohio city in 1995 with the team landing in Baltimore in 1996. Bud Adams finally made good on his threat to move the Houston Oilers in 1996 and took them to Nashville in 1998 with a stop over in Memphis in 1997.
The National Basketball Association blocked the sale of the Minnesota Timberwolves to a group led by boxing promoter Bob Arum in 1994. Arum and his partners wanted to put the team in New Orleans. The NBA led by Commissioner David Stern wanted to keep the team in Minneapolis and found a local owner who bought the team. But Stern did not block Donald Sterling's relocation of the San Diego Clippers to LA in 1985 even though he was against the move. Under Stern's watch, the Kansas City Kings franchise moved to Sacramento, George Shinn left Charlotte for New Orleans; Michael Heisley moved his Vancouver Grizzlies to Memphis and Clayton Bennett has a basketball team in Oklahoma City after leaving Seattle. All of those moves got the approval from NBA owners.
Major League Baseball has an antitrust exemption. They could act without worry but the owners and the Commissioner's office got sloppy and were sued in 1992 by Frank Morsani and his Tampa Bay Baseball Group. Morsani and his investors accused Major League Baseball of reneging on its promise to grant the group an expansion team for the Tampa Bay area. In 2003, Morsani and Major League Baseball reached a settlement in the case.
There are many people who are pointing the finger at Gary Bettman for the Phoenix situation and for what people see as a flawed plan to expand hockey into the southern and southwestern part of the United States. Never let facts get in the way of a good story. Bettman was still in the NBA when the 21 NHL owners in 1990 decided that they needed to expand their league footprint.
Bettman was not the NHL Commissioner when the league split the Minnesota North Star franchise and moved a piece of the team to Daly City, California and the Cow Palace then to San Jose in 1991. Bettman was not there when the league added Tampa Bay and Ottawa in 1992-93 or when Wayne Huizenga's Miami-based Florida Panthers and the Disney-owned Mighty Ducks of Anaheim joined the league or when Norman Green decided to move his Minnesota North Stars to Dallas. All three moves were orchestrated for 1993-94 and even though Bettman joined the league on February 1, 1993, he inherited the business moves.
Bettman's so-called southern strategy wasn't so southern when the league expanded in 1997. Nashville joined in 1998, Atlanta in 1999 but two northern cities, Columbus and St. Paul, Minnesota started play in 2000. The Hartford Whalers owner Peter Karmanos apparently was enticed by Raleigh, North Carolina's plan to build an arena for an NHL expansion team and decided to relocate his team to the Research Triangle area but Karmanos had some good reasons to move. Connecticut Governor John Rowland seemed uninterested in building a new Hartford arena and put turned his attention to building a Hartford football stadium for New England Patriots owner Robert Kraft. Karmanos got a number of perks for his hockey team and his Compuware business with the move.
Bettman and the NHL owners did not stop the sale of the Quebec Nordiques by owner Marcel Aubut to Ascent Entertainment and Charlie Lyons in 1995 after Aubut could not get a new arena in Quebec City.
A sports commissioner can make suggestions to owners but at the end of the day, a commissioner works for the owners, a notion that certain sportswriters, fans and apparently some "experts" who teach sports business classes cannot grasp. Just ask former Major League Baseball Commissioner about autonomy. A Commissioner has some rope but not much. A Commissioner is a lobbyist, in Bettman's case, a negotiator when a collective bargaining agreement with the players is done, and gets TV and marketing deals done. Someone in the NHL decided that Phoenix was an important market and was worth keeping.
The NHL is the only buyer left standing with Balsillie gone. Judge Baum wants the NHL to be kinder to Moyes and Wayne Gretzky in making them whole. The Phoenix area has been hard hit by the recession and the real estate bust but demographers think there could be as many as eight million people in the Valley of the Sun metropolitan area by 2050. Phoenix and the surrounding area was one of the fastest growing United States markets in the 1990s and into the 21st century. But that is in the future. Phoenix has a lot of western Canadian snowbirds along with American Midwesterners who winter in the Valley. Those people are potential customers, the Phoenix business community needs to step up as well to keep the team there. The Coyotes franchise also needs an owner who understands that hockey has to be sold not only on the NHL level but on the youth level.
The Dallas Stars franchise resides in a major Sun Belt market with months of very hot weather yet the Metroplex has embraced youth hockey and Texas has more professional hockey teams than any other state in America.
Balsillie will probably be back but he needs to be rehabilitated if he wants an NHL franchise. He needs to understand that the NHL has rules and regulations and until he gets into the club, he needs to abide by the owners and the Commissioner's wishes.
As far as Hamilton, the city officials of the 1980s were not much smarter than those in Phoenix who knuckled under and gave into Coangelo's demands. The city's arena was built without a thought of the future and lacks sufficient luxury boxes and club seats. The Hamilton building is not up to NHL standards and it will cost taxpayers in an economically depressed city hundreds of millions of dollars to get the building up to snuff. Then there is the question of how much money that a potential Hamilton owner has to pay Maple Leaf Sports and Entertainment for invading the Toronto territory and how much money that owner has to give Buffalo Sabres owner Tom Galisano for encroaching the Sabres northern territory not to mention worrying about the United States Senate and New York Senators Charles Schumer and Kristen Gillibrand. The two New York lawmakers were not happy with the thought of a Hamilton team because it might take business away from Buffalo.
For those who think the game is the most important part of sports, think again. Or read Judge Baum's decision.