Coyotes sold but not out of the financial desert yet

Tuesday August 6th, 2013

IceArizona, the Coyotes' new owners, will have to confront the team's dismal attendance figures.
Christian Petersen/Getty Images

With the closing of the Coyotes sale on Monday to IceArizona, the operating group headed by Canadian investors George Gosbee and Anthony LeBlanc, and the approval of the NHL's Board of Governors, the impression is the league's long Arizona nightmare has ended.

But has it?

What has wrapped up is that the league's owners are no longer subsidizing a team that has lost in the neighborhood of $20-$25 million annually. They've won a hard-fought battle to hold on to the 12th largest TV market in the U.S., a region with a fair amount of Northern transplants and vacationers, and provided the franchise one more chance -- maybe one last chance -- to grow roots in the desert under more stable conditions. The considerable energy and resources that league executives have poured into keeping the Coyotes in Glendale at the Arena can now be directed elsewhere, which can only be good for the NHL, the sport and the Coyotes.

"It feels like Christmas morning around here," GM Don Maloney told the Canadian Press on Monday. "We're just very, very happy, relieved, grateful."

But if keeping the team in place was difficult -- and it was, given Jim Balsillie's 2009 attempted purchase out of bankruptcy and intended move to Hamilton and the summer-long legal proceedings, followed by drawn-out diplomatic and political wrangling to find new owners, involving fiscal strains placed on the community and the legion of potential buyers for the franchise -- what IceArizona faces now could be even more formidable: making the Coyotes a successful business. It has never been one and some doubt it ever can be.

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The team was competitive when it first moved to the desert, reaching the playoffs in six of seven years (although getting knocked out in the first round each time). Even the year the Coyotes missed the postseason, they had a 90-point campaign. But they didn't make money.

The one thing that has plagued this franchise since it moved to Arizona from Winnipeg in 1996 has been its home arenas. The Coyotes originally became tenants in America West Arena (now the US Airways Arena). Built for basketball, it was too small to truly accommodate hockey. The rink barely fit on the smaller than normal floor and, squeezed into the arena, it rendered about a third of the fans visually flummoxed, their view of one goal obstructed due to the building's design.

On top of that, they had a bad lease and the place only sat 16,201 for hockey, the second smallest capacity in the league. It wasn't a good recipe for making dough.

A new arena was planned for Scottsdale, the affluent suburb directly east of Phoenix. Not coincidentally, the eastern portion of the metropolitan area is where the Coyotes' fan base largely resided. Had that plan gone through, the chances of the Coyotes regularly drawing healthy crowds to their games and flourishing in Arizona would have been greatly enhanced.

Instead, then-Coyotes owner Steve Ellman (the man who originally brought Wayne Gretzky to the franchise) squabbled with the City of Scottsdale over all sorts of things, including the cost of removing debris from the Los Arcos Mall, the site where the new arena was to be constructed. They were merely a few hundred thousand dollars apart, pocket change when compared to the massive cost of a new facility and the revenues that would be attached to it.

Angered at the impasse, Ellman essentially told Scottsdale to take a hike -- and then he took one, to the western suburbs of the region, which are not as affluent and are more sparsely settled and less developed. Unlike the residents of Scottsdale, Tempe, Mesa and other East Valley communities, those living in the West Valley had shown little interest in hockey. But the land was cheap and the local government in Glendale was interested in new investment and growth.

Ellman quickly struck a favorable deal with Glendale, and the place opened in December 2003. It all seemed grand -- except his customers had been abandoned. He had relocated his club to an area that had insufficient highway access for many of the region's residents and insufficient mass transportation. For the fan base the Coyotes had built, getting to and from games would always be a lengthy inconvenient ordeal, a bumper-to-bumper crawl through local streets often ending in watching another Coyotes defeat.

And they did lose, failing to make the playoffs in each of the first five seasons in their new digs until Jerry Moyes, to whom Ellman had unloaded the club, waved the white flag and declared bankruptcy. They only played strong hockey at home in the last of those pre-bankruptcy campaigns, 2008-09, and the average attendance, never much more than 15,000, dipped below that.

Even though things turned around on the ice under the league's stewardship --Maloney's tenure as GM with limited resources and Coach Dave Tippett's stingy defensive system forging the Coyotes into a playoff club -- the crowds actually got much worse, as low as an average of 11,989 per game in 2009-10, as the bad publicity and uncertainty around the franchise's future soured fans and the organization lacked the funds to properly market the team.

The funding will surely change now. IceArizona should bulk up both the hockey department and the marketing/sales/promotional side of the business.

"The only way you can ever win long-term is to have a strong ownership and now that we have ownership in place, it gives ourselves a chance," Maloney said last month. "I think if you just give us a little more time, we're going to show people we know what we're doing and we're going to put a good team on the ice."

But if he builds it, will they come? As much of a relief as the sale may be to Maloney and the people on the business side, it doesn't change one crucial element: The arena hasn't moved. The Coyotes still play in Glendale, and it's still a haul for fans to get there and back. There is a loyal core who have been fierce supporters of the club through this elongated mess, but in order for the team to survive in Arizona, its numbers must expand, and that's no certainty, especially when one examines their most recent attendance figures.

The Coyotes averaged 13,923 fans per game last year, 29th in the league. They only filled 81.3 percent of Arena's capacity. That's coming off their run to the Conference Championship round in 2012, the best playoff performance in franchise history, including the years in Winnipeg. Twenty-six NHL clubs filled better than 90 percent of their seats in the abbreviated campaign, which benefited from the scarcity of games. The Coyotes averaged 12,420 fans in 2011-12, the league's last full season, playing to only 72.5 percent of the arena's capacity.

Of course, these numbers reflect the less-than-ideal circumstances under which the team operated, and that's why IceArizona and the NHL have hope for the future.

The team's new owners have negotiated a 15-year lease with the City of Glendale for arena, and yet they can break the lease and sell or move the team if its losses hit $50 million or more after five years.

That out-clause disturbed some in Glendale's government and other critics of the complicated arrangement that sees the City pay the owners $15 million a year to manage the arena, which was essential in keeping the team in town. But Gosbee sought to reassure them Monday when he said, "Nobody in my group talks about moving or where we would move. Half the guys have financial or real estate interests in Arizona, and some are moving or retiring down there. We think the model works, and there are lots of attributes that make Phoenix attractive. I want to own this team for the next 30 to 40 years in Arizona."

Still, LeBlanc sounded a more sober note, saying of the out-clause, "The reality is it's an investment and we have to protect ourselves."

And that reality will hover over the Coyotes for the next few seasons.

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