Wednesday, August 26, 2009

NHL wants to buy one if its franchises

The drama in Phoenix that began in May continues to surprise with the announcement that NHL surrogate, Jerry Reinsdorf, has withdrawn from the bidding for the Coyotes and has being replaced by bid by the NHL itself. Bettman’s boast that a number of parties were interested in purchasing the Coyotes has now proven to be fiction. Without another legitimate bidder, the court would likely have handed the team over to Jim Balsillie so the NHL has no choice but go head to head with Mr. Blackberry. It creates a bizarre situation where the NHL is bidding to own one of its franchises.

I have frequently suggested that the franchise was dead and could not possibly draw serious buyers who would be willing to keep the team in Phoenix. The team was stuck with an arena in a bad location, with a bad lease, with a bad on-ice product and no fan base. The NHL understands that the team will have to move, but it will continue to fight tooth and nail to prevent it moving under Balsillie’s ownership. So the NHL’s new strategy is likely the following:

  • Take control of the team by winning the auction
  • Operate the team out of Phoenix for the current season
  • Search for a new owner and location for the 2010-11 season

The eventual sale would have to produce enough revenue to reimburse owners for the money they will have put out to keep the franchise alive. Afterall, there are other teams under financial stress who could not possibly willing to lose money on Phoenix in addition to their own team. One scenario would have the NHL search for a new owner and city in Southern Ontario. This would freeze out Balsillie once and for all, from the market he so desperately wants to get into. He would not likely want to put a third team in the region. But also, it would generate a higher sale price and provide some cash starved owners with additional revenue.