Balsillie to buy the Predators
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by user Behindthejersey
Earlier this past week, Craig Leipold announced that he signed a letter of intent to sell his team, the Nashville Predators, to Jim Balsillie. Leopold has owned the team since it was introduced to Nashville nine seasons ago. Balsillie is believed to want to move the team to his hometown area, Kitchener-Waterloo in Ontario. He is co-CEO of Research in Motion, which created the Blackberry. Balsillie grew up watching and playing hockey and still plays competitively today. The sale has not been finalized yet as it has to be approved by the league, but it is believed that this sale will go through.
It’s interesting to me that the sale would be for $220 million, which is $86 million greater than the $134 million value projected by Forbes earlier this year. By overpaying for a team that’s losing money left and right, why would he want to keep the team in Nashville?
Balsillie almost purchased the Pittsburgh Penguins for $175 million this year, but had to drop out when when the league was going to make it hard for him to move the team.
How could Balsillie move the team from Nashville? Well, there is an exit clause in the Predators’ contract with the arena lease that if the team does not average 14,000 fans or greater, the Preds can leave Nashville after the 2007-2008 season. The city can choose to pay the team and make up for attendance if it is short of the 14,000. This year, the Preds average 13,800 fans so they aren’t that far off. But will some fans return this year if they know the team could leave the following season?
If I was Balsillie and I wanted to move my team as soon as possible to my hometown, I would not invest much in the Nashville team. The franchise has a lot of players who are UFAs this year and you may see the team reducing its payroll in order to cut costs. If Nashville already struggles to draw in fans with a top team, how do you think attendance would be with a mediocre roster? I certainly would not want to be a Nashville fan right about now. It has to suck.
What do I, as a Wings’ fan, think of this move? I love it. If the Preds are moved to Kitchener, the team would now be the closest one in the Central Division to the Detroit Red Wings. I went to my first Wings’ road game last year in Chicago and loved it. I plan on going to a couple road games next year (potentially Columbus and an East Coast team) with a friend. I know I wouldn’t be able to go to a Predators’ road game because I have classes and it’s too far by car. A closer city in Kitchener would definitely be better.
Here’s the time it takes to get to the other Central teams by car according to MapQuest:
Detroit to Kitchener, ONT = 3 hours, 18 minutes Detroit to Columbus, OH = 3 hours, 24 minutes Detroit to Chicago, IL = 4 hours, 28 minutes Detroit to St. Louis, MO = 8 hours, 38 minutes Detroit to Nashville, TN = 8 hours, 36 minutes
Kitchener is less than 100km away from Toronto. The Maple Leafs recently announced that they will be raising ticket prices by 5% this year. The team hasn’t won the Cup in 40 years, yet continues to sell out. Demand for tickets is so great that the team can afford to raise ticket prices despite failing to make the playoffs this season.
This area of Canada is so completely hockey crazy that they are willing to pay these high-ticket prices. I think adding another NHL team to compete with Toronto’s market would be great for the area. I have no doubt the team would sell out and be successful. Plus, you may see the Maple Leafs’ ticket prices level off when a competitive team appears nearby.
I do feel bad for Predators’ fans who’ve devoted a lot of time and money towards a team that will most likely move away. There are slightly less than 14,000 fans who regularly attend every game and they are the ones who will obviously lose in this sale. It has to be frustrating to them to watch a great hockey team consistently struggle in ticket sales despite being only one of two professional sports teams in the city. The other team is the Tennessee Titans (NFL).
Unfortunately, corporations just aren’t supporting the Predators to the extent that they need to remain a economically viable franchise. When the franchise was first introduced to Nashville in 1998-1999, the team had 8,500 corporate season tickets. This past season? Less than 3,000. The corporate support definitely suffered when the Titans arrived in the Predators’ second season. Due to the NFL’s popularity in America, there tends to be a bigger draw to football games than hockey.
Why is Leipold selling the team? According to a statement made by Leiopold in an email to Predators’ season ticket holders, the team has been losing lots of money for quite some time. Over the past ten years (nine seasons), the franchise has lost $70 million. In the last two seasons alone, the team has lost $27 million in real cash (not sure what that means).
Leipold tried to make it work here in Nashville. His team provided a good product on the ice and an affordable product on top of that. Plus, the Preds only had one other professional sports team to compete against in their market. Unfortunately, the team was losing money hand over fist despite receiving the most money from the NHL’s revenue sharing program.
If Nashville can’t float, who can? When looking at the mid-markets for NHL teams, one would think Nashville would have the best shot at making it. Why?
1) The Predators receive the most money out of any NHL team from the revenue sharing program. The franchise received $14 million after the 2005-2006 season. Even with this income, the organization is still losing money hand over fist. They lost $15 million during this past season.
2) The city of Nashville worked very hard to bring an NHL team to the city and continues to be very generous in that regard. Leipold had to pay the NHL $80 million to pay for a new league franchise. The city paid $25 million of the total cost. As if that wasn’t enough, the city absorbs any operating losses that result from the arena.
3) Leipold wanted to see his team succeed and has made going to games affordable. His average ticket price is $40.78 according to the Team Marketing Report with the league average at $43.13. They spent $50 million to market their team, but still can’t get 14,000 people to every game.
4) The salary cap looks like it will only continue to rise. That will make it even harder for teams already financially struggling to continue to compete, as they may have to restrict their payroll due to economic restraints. The Wings are very fortunate to be in a great hockey city with an owner who is willing to spend a lot to win. Unfortunately, not all owners can do that and many run a team like they would any other business and you definitely don’t want to lose $15 million in one year.
The outcome of Nashville’s situation certainly doesn’t bode well for other teams in non-traditional markets.
