So like I said, the Coyotes got a miserable deal here. They're paying $4+ off the top of each ticket plus $300k per year in rent. They are entering an untested market which has spectacularly failed at hockey in the past (mid-season fold with an under 1,400 attendance). They have an effective 5 year lease with a substantial penalty if they pull out before that.
I bet their travel costs will be substantial - they are 6 hours from San Diego, 6.5 hours from Ontario, 9 hours from Bakersfield, 12 hours from San Jose, 12 hours from Stockton, and 12 hours from San Antonio. Seems like they will have to fly to most, if not all their games. I read that St. John's pays each team $27k to subsidize road trips there, so I have to make a SWAG that Tucson will make at least 20 flights per season which is $500k. Maybe peanuts to an NHL team, maybe not - but definitely huge in the context of a $2.2m AHL team budget. If NHL teams see a few million for "development" as a "cost of doing business", then why are they even charging their farm teams the franchise fee? Why do so many of them skimp on talent for their affiliates to the point where they are noncompetitive?
This deal has to be looked at from two perspectives. The City of Tucson and Rio Nuevo relationship with the Coyotes which is hammered out in the lease agreement and Coyotes opting to move their affiliation to the west coast to be closer to their base of operations.
I don’t think the Coyotes are getting screwed by the lease at all. It’s their own doing for wanting to move to the west coast. I don’t see anything nefarious with the agreement. It’s a fairly standard AHL lease.
Rent is about average for market size. Team and Arena share most revenues 50-50 with the lone exception of static ad revenue which the team keeps 100%. The fees are a little high than most markets, potentially being anywhere from $3 to $6 dollars in total fees.
The major protection for the Rio Nuevo is the team paying back the remaining balance of the $3.7M in capital expenses. The protection for the City of Tucson comes from several revenue sources, rent, net profits from concessions, parking, signage and naming rights.
According the figures given by council for paid attendance of 1000 per game, they estimate total revenues to be $605,270. On the flipside, they estimate operating cost to be 356,000, which is explained in Sec. 7 and 8 of the lease agreement. You can see the breakdown for paid attendance of 2,500, 3,500 and 5,000 per game…. I tend to believe they’ll fall somewhere in between 3,000 and 5,000 in paid attendance.
So it’s a pretty fair lease for all parties in that regard.
However, this is going to be a huge money loser for the Coyotes, but it’s the cost of doing business in the AHL now as NHL teams want their AHL affiliate closer to them and not clustered as the AHL has done in the past. The biggest expense increase that teams in the AHL will have to deal with moving forward is going to be travel within the league, not travel to recall a player. In just the last two seasons, travel has increased by more than 30% percent according to a pair of “now former†AHL team executives. What was once 2.2M to operate a franchise has jumped to $3M depending on the market. With the loss of Portland, Manchester and Worcester in the northeast those cost are going to climb. It’s already a high cost in the western conference with new Pacific Division. You’re correct. Tucson will likely have to fly to most locations or fly to a central location and bus for the remaining road trip. It will become that way even for teams in east eventually as what was once regularly three or four hour bus trips will be six or seven hour bus trips. It’s going to lead to teams making a decision on flying and that’s going to lead to more hotel stays, less practice and rest time that only five years ago every western GM praised as a primary reason for wanting to be in the northeast, the east coast or within the midwest cluster. They tried to counter that by less games, but that’s only made a mockery of the AHL having one group of teams play 68 games vs. the rest playing 76 games.
Personally, I believe the days of teams being clustered in order to reduce travel cost are over. The league will become more spread out and travel cost will be just become part of the business. Western NHL teams want to say it’s for development purposes, but I call ********. It’s for salary cap reasons. They need to use development as a way to justify the move. It is what it is. In fact, I know by just looking at the northeast with Portland, Manchester, Worcester gone not for lack of fan support, but rising cost eventually several other northeastern markets with lose their AHL teams NHL team move their affiliate closer to the parent club.
The affiliation fee helps offset player’s salaries, but it’s not required to be used to offset veteran salaries. It’s just salaries in general. In the case of an NHL team that owns its affiliate, it’s just moving money from column A to column B in a ledger. As far as skimping on talent, that’s going to become a more regular occurrence as teams seek to have more prospects in the lineup on a nightly basis. The PHPA fought hard to keep the veteran limit at five-plus-one, but I’m willing to bet at some point it will be reduced as more NHL teams own their AHL affiliates.
