Could the Jackets *Really* Move to the Eastern Conference? A Trip Down the Rabbit Hole of NHL Relocation in Phoenix and Atlanta
By now, you've probably seen the reporting. The Dispatch has kept their fingers on the pulse of the potential for Columbus to move to the Eastern Conference, and Sunday brought us new information as well as some very well-reasoned arguments for why the NHL might pick Columbus to move to the East. Porty still lists it as "wishful thinking" at best, but he makes legitimate arguments for how it might start moving in the near term.
All of this talk is predicated, however, on one very large domino falling: Atlanta would need to pack up and move to Winnipeg, and they'd have to do it quickly. Now that the Phoenix Coyotes are staying put, this is basically the last hurdle that would need to be cleared for Columbus to make a legitimate case to move to the East.
But, how likely is it that Atlanta might move this summer? That, to me, is the most important question, as all of the logic in the world for why Columbus in the East makes sense doesn't matter if Atlanta doesn't move to Winnipeg.
The fine people over at both Bird Watchers Anonymous and SBN Atlanta are keeping much better tabs on this potential move than any of the local Columbus/CBJ press, and so I thought that would be a good place to start to see how likely a move of the Thrashers might be. It's also important to note that it's being reported by the Atlanta Journal Constitution that the Thrashers and the True North Entertainment group are negotiating on a sale that would move the team to Winnipeg.
To get to that present, though, we first have to take a look at how the Thrashers have gotten to this point.
To analyze how a sports franchise gets to the brink of relocation, one first has to look at the biggest variable: ownership. The Thrashers were originally owned by Time Warner, but were sold in 2003 to the Atlanta Spirit group (that also owns the Atlanta Hawks as well as the operating rights to Philips Arena, where both teams are housed), led by Bruce Levenson. However, in January of this year, it was revealed via a lawsuit against an Atlanta law firm that the group has been losing money for six years (sound familiar?) to the tune of $150 million.
The lawsuit centers around the belief that the law firm gave "poorly considered, self-interested, and, in many cases, blatantly wrong" advice in a dispute with former partner Steve Belkin, whose interest in the club the other partners had been trying to buy out back in 2005 in an effort to then turn around and sell the team outright in an effort to capitalize on the NHL's new labor agreement. Belkin fought them, and the lawsuit claims that the Atlanta firm King and Spalding fumbled the transaction with Belkin, and over-inflated his stake in the team.
Belkin's interests were finally settled in December of 2010, which them prompted the Atlanta Spirit group to sue King and Spalding. In doing so, they were then forced to reveal their losses in an effort to show that King and Spalding had inflicted damage on their ownership stake by causing them to fight with Belkin.
The lawsuit also reveals a pretty spicy meatball: the group had immediately tried to sell the team after completing a deal to grab the Hawks, Thrashers, and the arena rights right after the NHL Lockout in 2004-05, hoping to capitalize on the new labor deal. From the lawsuit:
"Plaintiffs expected that once the new labour agreement was finalized there would be substantial interest from potential buyers and that they would be able to sell the franchise. As plaintiffs anticipated, the value of smaller market franchises increased and potential buyers came forward."
Also, unfortunately for the Atlanta fans, Levenson isn't exactly publicly touting the benefits of owning the team. The damning quote here? When asked about an (seemingly pretty simple) option of just holding onto the team into the coming season while trying to continue to find a legitimate local buyer now that their legal issues with Belkin are settled, Levenson actually laughs:
"That's a scenario we haven't even thought about. [LOL] We just continue to try to find somebody or a group of people who are interested in keeping this team here. We'll do everything we can to make that easy for them. We'll retain a portion of the equity if that's what they want. That's what we've been working on now for a long, long time."
When asked if he wanted to be the owner at this time next year, Levenson didn't even sugar coat it:
"Well, no. I hope we find somebody who can come in and take either a controlling interest, or, if it's of their choosing, own the whole thing. We've been pretty clear about that for a long time."
In other words, the current ownership group isn't interested in finding a solution to keep the team in Atlanta; they're interested in unloading it as quickly as possible. They've been trying to unload the team for almost six years, and now that Belkin is out of the way they are in high gear to try and get it done.
As Tim Fabiniak from Bird Watchers Anonymous told me via e-mail: "There are purportedly two interested local groups, one being put together by Tom Glavine. Other names that come up in rumors include Arthur Blank, Anson Carter, and Stephen Rollins, though I wouldn't put much credence in any of those reports. I think, given time, a local buyer could be found, but the Spirit appears to want to unload the team NOW. That's the problem at hand."
So, we know that the ownership situation for the Thrashers has been, to put it lightly, messed up for the last five or six years. Sounds a lot like the situation out in Glendale, no? Yes, and no. We know that, prior to declaring bankruptcy in 2009 and being taken over by the NHL, the Coyotes' ownership was losing tons of money. But, there's more to it than that, at least from the NHL's perspective. Let's take a trip down memory lane with the Coyotes, shall we?
If the Coyotes were losing MORE money than the Thrashers have been, why then did the NHL not allow the Coyotes to move to Hamilton back in 2009, or to Winnipeg now?
First, let's look at Hamilton, and Blackberry magnate Jim Ballsillie. By now, you've no doubt heard about his countless exploits to try to buy an NHL team and move to to Ontario. He's got the money (he offered to buy the Coyotes out of bankruptcy in 2009 for $212.5 million), and the drive to be a dream NHL owner (he also tried to buy the Penguins and Predators previously). So, why doesn't he have a team?
Again being cynical, it really seems to come down to the fact that Balsillie is trying to end-around the NHL's standard relocation rules, and in so doing is also trying to embarrass Gary Bettman. While the latter is pure speculation on my part, the former rings true.
The NHL had basically secretly taken control of the Coyotes in 2009 as owner Jerry Moyes filed for bankruptcy. Even while getting help from the NHL, Moyes then went behind everyone's backs and struck a deal with Balsillie. The NHL turned around and basically said, "You can move the club to Hamilton, but the league won't sanction it and the club would no longer be part of the NHL." At that moment, what would be the point for Balsillie?
In a nutshell, Bettman and the NHL blocked the move to Hamilton because Moyes and Balsillie tried to make the move in secret, and tried to dick over the NHL in the process. There were other, lesser offers on the table at that time in 2009, so Bettman had the leverage he needed to again block Balsillie from trying to force his way into league ownership. The courts agreed, and blocked the sale.
So, why not Winnipeg now for the Coyotes?
Later in 2009, Moyes agreed to a buyout deal from the NHL for $140 million. The NHL intended to re-sell the team to a group committed to keeping the Coyotes in Phoenix, and has been very vocal about keeping the team in Arizona. There were two suitors who emerged from the ashes of the fallout with Balsillie and the bankruptcy and sale from Moyes: Jerry Reinsdorf (owner of the Chicago Bulls and Chicago White Sox), and Ice Edge Holdings (the company of Thunder Bay, Ontario businessman Anthony Leblanc). Both bids intended to keep the team in Glendale, though Ice Edge wanted to host five home games in Saskatoon, Saskatchewan.
In December of 2009, Ice Edge had signed a letter of intent to buy the club, but as more and more time passed it was umored that Ice Edge was not able to secure the money necessary to complete the deal. In April of 2010, the city of Glendale received two offers to buy the team: one from Ice Edge, and the other from Reinsdorf's Glendale Hockey group. The city initially preferred Reinsdorf's deal, despite the calls for the city to assume much of the financial risks--including bond issues putting the city on the hook for $65 million to be paid to the NHL, altered tax codes for the arena area as a potential revenue source, and an "out clause" for Reinsdorf if the financial situation hadn't improved in five years' time. Subsequent negotiations with Ice Edge--which in turn prompted Reinsdorf to walk away--also fizzled, and the Coyotes were back at square one, and the NHL was still tasked with running and propping up the team financially.
Chicago businessman Matthew Hulsizer stepped up with Ice Edge as a minority owner, but the proposed deal would have been more expensive for the city of Glendale than both Moyes' proposed deal and the original Reinsdorf and Ice Edge proposals. It required the city to raise $100 million in bonds to buy back the parking rights for the arena, and then to operate the arena for at least the next five years. It also had an out-clause of sorts, allowing Hulsizer to get out of a seven year agreement to keep the team in Glendale if legal wrangling deemed ANY part of his contract to be invalid.
In mid-2010, True North--the Winnipeg group now rumored to be trying to grab the Thrashers--stepped into the picture, but appeared more as a fall-back position if the Hulsizer deal fell through. The Goldwater Institute of Arizona threatened to sue to block the deal with Hulsizer, and though it's been denied by the league, this threat seems to have been a big stumbling block for the sale to Hulsizer's group. As of February 2011, the bonds went on sale to cover Glendale's portion of the deal with Hulsizer; as of April, they had not sold, and the Goldwater Institute threat has been cited as a reason why.
The team is in a holding pattern in Phoenix, and since the city of Glendale continues to put forward $25 million each year to cover the NHL's losses, there appears to be no rush to move the team, at least from the league's perspective. The NHL owns the team, and will wait for the best deal to get return on its investment. The league is treading water right now, and with the city of Glendale being willing to continue funding the team in Phoenix, there's no rush to sell now to True North in Winnipeg. Contrast that with the Thrashers' situation, in which the ownership group is NOT the NHL, and they want to sell the team as quickly as possible to cover their losses. They're also not getting help from their city, as the Coyotes currently are.
When I asked the guys from Bird Watchers Anonymous, Tim concurred: "The [Atlanta] mayor's spokesperson has said that the city is unwilling to provide financial assistance. There are groups - mostly tourism groups - making some public statements of support, but there won't be any money."
So, naturally, the NHL is probably working to keep the Thrashers in Atlanta, just like they've done for the Coyotes, right? Not so fast.
The seemingly most damning factor for the Thrashers seems to be the action (or non-action) of the NHL powers-that-be. After working almost tirelessly to keep the Coyotes in Phoenix, the silence from the NHL offices about the Thrashers' situation is almost deafening. The Atlanta Journal Constitution's Jeff Schultz managed to snag an interview with Bill Daly about this very subject, and the answers were confounding. Daly would not guarantee the Thrashers' existence in Atlanta next season, and when Schultz asked him point-blank why he and Gary Bettman have not been seen publicly lobbying for the Thrashers to stay put, the spinning began:
"The situations are very different from a host of perspectives, not the least of which are the bankruptcy issues we had [in Phoenix], the fight in bankruptcy court and the league having to purchase the club. There were a unique set of circumstances that required the league’s presence in Glendale. The bottom line is, we owned that club."
Schultz followed up by asking if that precluded the NHL from showing some support to keep the Thrashers in Atlanta:
"If there was some reasonable sense that a public appeal would move the process along, then something would be done. But we’re not at that point."
If I might editorialize, it seems as though the NHL is trying to make sure that they, in no way, put themselves on the hook for keeping the franchise there. They want there to be no public record of them working to keep the franchise in Atlanta, so that if/when the team moves they're not culpable in any way. Though Daly repeatedly offers the coverall decree of "You don't know what we've been doing behind the scenes!!" and later reiterates the NHL's public position that they work to keep franchises from relocating, Daly again--when pressed--stopped short of guaranteeing the Thrashers' continued residence in Atlanta.
One is forced to wonder: since Atlanta likely won't cut $25 million checks to operate the team, is that the biggest difference between Glendale and Atlanta in terms of "franchise viability" in the NHL's eyes?
There are reports that two groups have stepped up and offered $110 million for the franchise. The rub here? One group is actually paying $170 million, as $60 million would then go to the league if True North buys the team and moves it to Winnipeg. I hate to be cynical, but as wise people have always said, you have to follow the money.
If you're the NHL, you have to consider the following factors:
- The money is the same for the current ownership group regardless of whether the club stays in Atlanta or moves to Winnipeg.
- NHL hockey has been brought to Atlanta twice, and both times it's floundered. The Flames lasted just eight years before moving to Calgary in 1980, and the Thrashers have been losing money steadily for six years.
- Moving the team to Winnipeg not only brings hockey back to a Canadian market--which has been one of the league's goals--but it puts $60 million into the league's coffers.
For a league stuck in a weak TV deal (my opinion) and struggling for wider appeal, this move makes a ton of sense from the eyes of the NHL, as much as I hate to say it.
So, where does that leave us, as Jackets fans?
First and foremost, as a fan of the Cleveland Browns, I can never, ever go on record advocating the relocation of a sports franchise. It's one of the reasons I can't allow myself to root for the Oklahoma City Thunder in this year's NBA playoffs, despite my desire to do so. And, even though I know how completely AWESOME it would be for Columbus to move to the Eastern Conference, it is because of this experience as a Browns fan that I can't openly root for the Thrashers to move to Winnipeg.
All of that out of the way, what is the real likelihood that the Thrashers might move? As more and more information comes out, it looks like it's better than 50%. Tim from BWA noted that he has "gone from 'not at all concerned' to 'moderately concerned' over the past two weeks," and he noted that with the Coyotes' situation no longer providing any cover for the Thrashers, the attention it's now getting has turned up the pressure.
The two biggest stumbling blocks--ownership with a commitment not to dick over their fanbase and the league working to keep the franchise in Atlanta--seem to be non-existent. It's clear that Atlanta Spirit wants nothing more than to be out from under the ownership of the team, and it's also clear that the NHL isn't going to lace up its boxing gloves to fight to keep the team in Atlanta despite its continued insistence that they want to keep teams from relocating. After all, money talks, and with two identical offers theoretically on the table--and one of those offers bringing $60 million to the league directly--it would be difficult to argue for the NHL to take the *worse* of the two deals.
I must say that last part doesn't comfort me as a Jackets fan, even as we've been told repeatedly that the league won't want the Jackets to move in the future as their financial losses continue to mount in the face of a bad arena lease.
At the end of the day, the fact that the NHL isn't commenting AT ALL about trying to keep the Thrashers in Atlanta is the most damning evidence of all. The league stands to make A LOT of money if the team moves to Winnipeg. And, the big difference there vis a vis Phoenix? The league isn't on the hook for the franchise sale price as they are in Phoenix, and they aren't being bailed out by the local government in Atlanta.
Whether or not a move of the Thrashers would result in the move of Columbus to the Eastern Conference, it seems clear that the likelihood of the Thrashers moving is pretty high at present... much higher than the likelihood of the Coyotes ever may have been. The NHL seems caught in a tiny conflict of interest, as their ownership of the Coyotes--and the resulting direct financial relationship with the city of Glendale--has caused them to work hard to keep the team in Phoenix. The only direct financial interest in Atlanta--despite the TV market size--appears to be the $60 million in relocation fees that would go directly to the league if the Thrashers move to Winnipeg.
In short, we'll cross the actual bridge of conference relocation if or when a slot in the Eastern Conference opens up. In the short-term, however, it would seem that the financial hypocrisy of the league is coming closer and closer to making that hypothetical a reality.