NHL commissioner Gary Bettman may have overseen a dramatic rise in league revenue this season, but the gap between the haves and have-nots remains wide.
The NHL expects to set another record for per-season hockey-related revenue (HRR), at $3.7-billion (U.S.) in 2013-14, yet on a per-franchise basis, there is a earnings disparity of about $160-million between the top and bottom teams. The Toronto Maple Leafs, as usual, hold the No. 1 spot with a little more than $200-million in HRR for the season. A familiar name also holds down 30th and last place – the Phoenix Coyotes, who pulled in a little less than $40-million.
Those numbers do not include revenue from the 2014 playoffs, so the Leafs could be knocked out of the top spot. They did not make the postseason, so the New York Rangers, having already hosted 12 playoff games, could pass the Leafs once the extra sales of premium-priced tickets, T-shirts and beverages are all counted.
The Coyotes are in their first season under new management after their long-running ownership saga finally ended a year ago, but the story of their finances remains unchanged. Revenue at Jobing.com Arena failed to hit the targets set out in the 15-year arena lease with the suburban city of Glendale, Ariz., which is paying the Coyotes $15-million a year, in part to manage the arena and increase its revenues.
However, those close to Coyotes lead owners George Gosbee and Anthony LeBlanc insist the team remains “on plan” despite another year of multimillion-dollar losses. The owners budgeted for losses in the first two years and are hoping to get into the black in year three.
LeBlanc argues the Coyotes hit the hockey numbers in the arena lease. That was in the form of surcharges on hockey tickets, money which goes to Glendale. While the Coyotes were last in the NHL in average announced attendance per game at 13,775, that represents an increase of 1,355 from the team’s previous full season, in 2011-12.
The Coyotes made the Western Conference final in 2011-12, which resulted in a jump in average announced attendance to 13,923 in the lockout-shortened season of 2012-13. However, the Coyotes fell to 10th in the conference and out of the playoffs that year, and they missed the playoffs again this season, which will make selling tickets for 2014-15 even more difficult.
The biggest shortfall in expected arena revenue came in parking. Fans were charged for parking for the first time, and this new income was expected to earn the team $2.2-million. But only $900,000 was pulled in, mainly because the number of non-hockey events at Jobing.com fell below expectations. The arena faces stiff competition from the NFL Arizona Cardinals’ nearby stadium and a basketball arena in downtown Phoenix.
“We didn’t appreciate the runway needed to build up the non-hockey-event roster,” LeBlanc said in an e-mail message to The Globe. The Coyotes expect that to improve this summer, starting with several concerts.
Still, LeBlanc, Gosbee and their partners face an uphill challenge in what is essentially a five-year gamble that they can be the first Coyotes’ owners to successfully sell NHL hockey in the desert.
The owners borrowed $85-million from the NHL and $120-million from Fortress Investment Group to buy the team and have some working capital. The NHL loan has favourable terms for the first five years. The arena lease allows the Coyotes to pull out if the team loses a total of $50-million in the first five years. The city also has the right to renegotiate the lease after five years.
Even though shared revenue from the league is higher than ever for each team, and will get a bump next season with the new $5.2-billion Canadian television deal with Rogers Communications Inc., the Coyotes will struggle financially. So they will qualify for a full split of revenue-sharing, which will boost the team’s income from all league sources to about $30-million. That, plus its $40-million in HRR and the $15-million from the city gives the team about $85-million this season to cover its $62.3-million payroll and other expenses.
But – and there’s always a but with weak-link teams – the conventional wisdom in the NHL is that teams need to pull in between $30-million and $40-million above payroll to break even. And teams such as the Coyotes usually have high non-operating expenses, including interest payments: The NHL may have given the Coyotes favourable terms on its loan, but interest payments to Fortress could run as high as $10-million or more per year.
As a result, Quebec City and Seattle should stay alert.