The Pittsburgh Situation

Discussion in 'The Business of Hockey' started by egger66, Jul 23, 2005.

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  1. egger66

    egger66 Guest

    The draft has generated a lot of talk about the Penguins and their arena situation. It is obvious most people who post opinions, and talk on TV for that matter, understand zip about what is really going on. Here is the reality.

    1. A Little history. To understand where the Pens are, you need to understand how they got there. It all begins with Howard Baldwin trying to buy the team on a shoestring. He had little money, so he sold off most of the revenue streams for up front money so that he could buy the team. This put the team in a shaky financial place from the start. Baldwin was also a jock sniffer who could not say "no" to players. He wildly overpaid but used deferred money, because he had sold off the revenue streams putting him in cash starvation. The biggest error was signing Lemieux to a $45 contract that paid him – now get this – whether he played or not. Lemieux promptly retired 2 years later with $30 million still owed. Still owed for hockey never played. This, among other things, forced the team into bankruptcy. Lemieux can back to buy the team and save his $30 million. If anyone else had bought the team, he would have been just another unsecured creditor who received a few cents on the dollar. This didn’t solve the problem, unfortunately, since the Lemieux group was shallow pocket.

    2. The market. Before talking about the arena, it is worth killing the idea that Pittsburgh is not a good hockey market. Before the team started selling off its player the last few years, the Pens had been in the 1/3 of the league in attendance. Unlike places like Edmonton who artificially build up attendance with cheap ticket prices, the Pens tickets were also in the top 1/3 of the league. The Pens had a lot of fans and fans who were willing to pay. With regard to TV, Pgh is in the top 5 stations for Fox local NHL rating, and Fox has the rights to almost all US teams. Again, Pgh must be at least in the top 1/3 for all NHL TV markets. Hockey has grown in Pgh to the point where it is starting produce NHL players. In short, it has been a proven and successful hockey market. It is ridiculous to lump it together with places like Carolina, Florida, Phoenix, Nashville, Atlanta, etc.

    3. The Arena. Get one thing straight - the city has nothing to do with any arena. No one has ever expected them to contribute a dime. It didn’t cough up a dime for the Pirates or Steelers and there has never been any expectation that they would contribute money to a new arena. The city is broke. The public money can only come from two places, the county and the state. The state once had $60 million possibly ear marked for a new arena. The governor, however, is from Philly and couldn’t care less what happens in Pgh. That $60 may or may not still exist. But he insisted on local support first .The County isn’t interested in spending money on a new arena. They probably don’t have the money anyway. But if there is political will for a new arena based on public money, it would have to come from the county, not the city. The other problem is that the Pens are unwilling to put up much toward an arena themselves. Pens were willing to put up about 20% The Pirates put up 33% and the Steelers put up 40%. They did not get a free ride, as so many misinformed people say. If the Pens would have moved up to 30-40%, then things might have been different because they provided the state with proof of local support. But the Pens want a free arena. They have made this clear again and again. They not only want an arena, they want full control over it.

    4. Where things stand. There is no public money for a new arena. Sidney Crosby isn’t going to change that. The county commissioners are clear that they are not going to play for a new arena. The only plan on the table is based on the awarding of gambling licenses for slot machines. Several bidders tried to get an edge with the politicians awarding the license by saying that they would use a percentage to pay for a new arena. This may have been grandstanding and the status of these bidders is unclear. The Pens then decided that they should go for a slots license themselves. That has become their goal. They not only want a free arena, they want to rake in the hundreds of millions a year that a slot license would give them.

    5. So this where things stand. The decision on who gets a slots license is a year away. The arena will hinge on the decision. There is no other magical source of money, Crosby or no Crosby. However, the idea that the Pens are not viable without a new arena is untrue. Naturally, they say that people they want a free arena. The reality is that they have now gotten back all of the revenue streams that Baldwin sold off and the new CBA means that they can at least compete with a $25-30 million payroll. Pittsburgh is a good, if not great, hockey market and they can have again have 15-16K a game. They could survive in Pgh with the current arena, but they would not be rich, which is what they want.
     
  2. Tekneek

    Tekneek Registered User

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    Having Crosby will raise the value of the franchise and make it easier to move.
     
  3. littleD

    littleD Registered User

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    Only opinion I've ever heard on TV is that Pittsburgh "needs" a new arena.

    Thanks for the info though.
     
  4. NYIsles1*

    NYIsles1* Guest

    Where is Smg in this because they are part of the Pens problem. This is the
    company that has killed the Islanders by taking all parking, concessions and even about ten percent of ticket revenue. They are a big roadblock in stoping the Lighthose project for a renovated Coliseum and their lease with the Isles runs until 2015 plus they have some say over what get's built past that.

    Wang is trying to break or have Nassau condemn the lease.
    Only difference between the Pens and Isles is Charles Wang has been willing to take the losses to spend to the league avg, losses Howard Milstein did not want to absorbe.
     
  5. Big McLargehuge

    Big McLargehuge Registered User

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    SMG is definitely a big reason for Pittsburgh's problems along with the lingering aftertaste of the Howard Baldwin ownership.

    Simply put, we need a new arena. We have new ownership waiting in wings and what will definitely be a revived fan base with the goings on of the past year. All that doesn't mean anything unless the idiots in Harrisburg realize that Mellon Arena isn't a viable option.
     
  6. hockeydadx2*

    hockeydadx2* Guest

    I'm guessing that what will happen is that there will be a proviso that whoever gets the license, builds the arena. One of the applicant groups, besides Lemieux's group, has already pledged to do this, and has challenged the others to do the same. I suspect that they will all fall into line. Having Crosby come in, with all of the inevitable sellouts (especially with today's news that Malkin can now get out of the Russian league easily, if signed by Aug 15th), will only ratchet up the pressure.

    And besides, when have we ever heard of some team not getting their new arena or stadium eventually? One way or another, they always get built.

    Six months ago, I was worried. I'm not overconfident yet, but I think it's all starting to fall into place.
     
  7. Wisent

    Wisent Registered User

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    Just a question. The Mellon Arena is old, OK, but it's big enough. Why would the Pens need a new Arena? It's out of date but not unusable.
     
  8. hockeydadx2*

    hockeydadx2* Guest

    It's not unusable at all. In fact, it's in darned good shape, and a great place to watch a game. It doesn't have any superboxes down low, though, and it can't be expanded to include other "amenities" (i.e. other things that can produce revenue). There is nothing wrong with it except that it doesn't maximize the revenue potential.

    In a different era, this would be one of those buildings that is a civic treasure, not a dump. That is one of the reasons that there isn't much public support for tax dollars financing it.
     
  9. boredmale

    boredmale Registered User Sponsor

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    It would be sad to see the NHL leave Pittsburg. I consider Pittsburg one of the best "sport towns" int he US, the fact there is no basketball team there only give Pitts more reason to succeed.

    If the NHL does move a team(such as pittsburg), they might be smart to try get them to move to Las Vegas, once you get casinos behind you, that's tons of potential free marketing(abiet indirectly)
     
  10. BigE

    BigE Registered User

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    Winnipeg, please Winnipeg. ;)
     
  11. Grizzly

    Grizzly Registered User

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    I guess you've never heard of the NY Mets, NY Jets or NY Islanders. :shakehead
     
  12. hockeydadx2*

    hockeydadx2* Guest

    New York is a different kettle of fish altogether. But your point is well taken. Outside of NY, though, these things always get built. Even in Pgh the taxpayers voted down funding for PNC Park and Heinz Field, and they still got built almost immediately after that. It will happen somehow.
     
  13. Tekneek

    Tekneek Registered User

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    You gotta love hockey, but if I was a taxpayer I would never vote for tax dollars to be spent for an arena like that. Maybe a loan for it, but not just paying out of the tax revenue.
     
  14. Just wondering what the odds might be for a private ownership group to step forward and fund a new arena --- in conjunction with Mario's team ownership group_--- now that the excitement of seeing Malkin, Crosby, and Fleury should assure an increased gate?
     
  15. egger66

    egger66 Guest

    You have it exactly backwards. Having an NBA basketball team makes if far more likely to succeed. Why? Because there is someone to share an arena, making it a viable investment, even for private money.
     
  16. egger66

    egger66 Guest

    All this talk of Las Vegas is bogus. Even the NHL has to learn sometime - you can't keep forcing hockey into warm (or should I say hot) market cities where there is no hockey culture. Surely, even the NHL couldn't be so stupid as to make the same mistake again.

    Or could they?
     
  17. egger66

    egger66 Guest

    The fact is that the vast majority of people Pittsburgh, let along Pennsylvania, have no interest in paying for a new arena. Just because the state officials have different priority for public money and are essentially following the will of the majority hardly makes them idiots. If there any idiots around here, it is not they.
     
  18. thinkwild

    thinkwild Veni Vidi Toga

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    I remember an early idea floated by the league was to create an arena fund from revenue sharing and player contributions. Say they took the alleged upper limits of $80mil allocated for revenue sharing a year, and applied it to teams building new arenas. Would that be a better use of money? I wonder if they built anything into the business model that allowed them to help each other build new arenas as they become needed. Taxpayer funds for these glorious ice palaces were vigorously shot down in Canada. Seemingly also in the States now more often. Did they set anything aside in the CBA to help here?
     
  19. Kritter471

    Kritter471 Registered User

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    *raises hand*

    You can move teams to "non-hockey" markets, provided the moving teams/league puts an investment into the sport at a grass-roots level and markets the sport well to the familiar-with-but-fairly-apathetic-to-the-sport locals.

    Dallas has done a fan-freaking-tastic job of "growing the game" in a market everyone looked at and went "the heck?" at one time.

    San Jose has also grown a very large hockey-market in a non-traditional city.

    Las Vegas is out, I think, for other reasons. But using a broad brush to paint "hot weather" cities as bad markets for hockey is foolish.
     
  20. Hawker14

    Hawker14 Registered User

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    i have no doubt the nhl will eventually return to winnipeg, but i sure hope it's not the pens because they have great fans (at least when the product is legitimate).

    crosby and lemieux will be alot of fun to watch this year.
     
  21. bcrt2000

    bcrt2000 Registered User

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    i just hope that when the Penguins build their new arena, they make it as big as the Bell Centre.. I hate the fact that the Leafs made an arena with a capacity of only 18,800 when they could have easily made it as big as the Habs arenas (21,273)

    not sure if it would cost too much more to maintain a bigger arena, but if it doesn't, it will be better because the ticket prices can be slightly lower than a smaller arena
     
  22. egger66

    egger66 Guest

    You make some good points. But Dallas is not typical. It hanever suffered through a poor team. It is also a particularly sports-mad city. San Jose is a better comparison. But again, you are talking about a unique situation - an extraordinarily wealthy area that has a lot of educated people. I'm not sure Las Vaga would be the same.
     
  23. egger66

    egger66 Guest

    I have no doubt that the NHL will never return to Winnepeg:

    1. It provides no increment in TV market.
    2. It is a relatively poor city with little opportunity for corporate sponsorship
    3. The new rink is not NHL up to standards and, as I understand it, cannot be upgraded.
    4. Small Canadian cities are a terrible draw in the US.
     
  24. John Flyers Fan

    John Flyers Fan Registered User

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    A "good hockey market" should support a team team even when they aren't Stanley Cup contenders, and have one of the games 3 best players on the ice.

    The top 5 Fox TV rating is a bit deceiving. The following US teams are not shown by Fox (and there are probably a few I'm missing): Philadelphia, Washington, Chicago, Boston, Buffalo, NY Rangers, NY Islanders and the NJ Devils.
     
  25. Jaded-Fan

    Jaded-Fan Registered User

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    Look to my post about Crosby in Ottawa on 9-29 . . . Pens' president Ken Sawyer was quoted in the Pittsburgh Post Gazette saying that the Pens' will spend what amounts to $30 to $35 million next year. (specifically saying middle of the road to upper middle). No - I do not think that the Pens will be in the Cup hunt next year. But that is some serious cash - by my calculations something like $26 million to spend on 19 players . . . and two of them (if Malkin comes) will be playing under the rookie cap. The Pens may not be in the Cup hunt as I said but will make some real noise and be very fun to watch.
     
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