Thursday, May 07, 2009

The nearly nightly Balsillie roundup

Someday, it will seem like this was coming from a mile away.

It is notable how it seems to breaks down along old media/new media lines on the eve of the big bankruptcy court showdown over the Phoenix Coyotes. It seems like the belief in some circles that Jim Balsillie will never own a NHL team reflects a desire to be reassured that othing is going to change in the NHL, everything is status quo, their place in the grand scheme is secure. The great upheaval is not coming (feel free to draw a parallel with any suffering media industry).

Stephen Brunt noted that the last time around (with the Nashville Predators in 2007), "the NHL propaganda machine worked to portray Balsillie as a loose cannon — which a large segment of the hockey press reprinted as gospel." It's noteworthy, in that respect, that Balsillie's people curried favour with bloggers more so than traditional media (and no, we didn't get the memo).

What people need to understand is that this is a collision between, for lack of less general way to say it, new money and old money. Tech companies such as RIM are not like traditional companies. They were formed by guys who did not conform to regular practices. Pro hockey tends to be the ultimately in stuffy, hierarchical corporate conformity, a model that's hopefully going to die out in our lifetime.

Balsillie approaches things from a different perspective. He is 48 years old, but he can be, for some intents and purposes, slotted in with net geners who prize transparency, to a point. (Obviously, that wouldn't have worked with his Coyotes plan.) Conversely, when one of the NHL old boy clubbers like Red Wings president Jim Devellano talks about how the NHL likes to do things on a "quiet basis," he's saying that costumers have no right to transparency, that they'll get whatever the powers-that-be decide is best for them. That is no way to run anything in the 21st century.

That's how you end up with the NHL that wants to fight a guy who is willing and able to increase their equity, all on the basis of some stupid, broken notion of expanding the American market.

It is funny as hell how Gary Bettman could stand there and say someone is trying to break the rules, when, as Brunt pointed out, Balsillie own the Pittsburgh Penguins if the league hadn't moved the net and tried to bind him to owning a franchise which has gone broke several times.

A lot hinges on what the court finds. A bankruptcy judge whom the Arizona Republic noted one possible ruling is that, a "non-debtor party (the league) shouldn't have the right to prevent creditors from realizing on that value." It seems clear as mud.

There are a million and one elements to this (does anyone even care who won the playoff games last night? Both were 3-2 overtime games). The CBC, whose playoff ratings have been hit-and-miss with no Eastern Canada team still alive, would obviously love it. Bell GlobeMedia (is The Globe covering anything else?) would love having the Ontario Coyotes or Golden Horseshoe Hammerheads to enhance the value of TSN2.

Whatever happens, happens. The NHL might find a way to keep Balsillie at bay, but that doesn't make it right.

Anyway, here's a selection of stuff from around the web:

Allan Maki, "The commissioner's job is to make the game popular and profitable. Right now, he can barely keep it stable and that can only mean the pressure from the inside may soon be as great as the pressure from the outside.

"You think NHL owners are eager for protracted litigation against moneybags Balsillie? You think the owners would prefer to lose bundles of cash funding a team in a questionable locale rather than have one managed by a rich owner in a solid market?

Kukla's Korner: "The NHL had been propping up the team financially and looking for a new owner who would keep the team in Phoenix. They had been trying to do this quietly, but the media got wind of it. It looked like the NHL had found their owner to keep the team in Phoenix. Jerry Reinsdorf, the owner of the Chicago Bulls and White Sox, was willing to buy the team at a cheap rate.

This idea didn’t go over very well for current owner Jerry Moyes. Why should he have to sell the team for a low price? He had a back-up plan. He had been negotiating with Jim Balsillie ... These negotiations had been ongoing - but unknown to the NHL."

Steve Simmons, Sun Media: "If Balsillie’s bid is accepted, the league will get its money back. If Balsillie's bid is rejected, the league will still be out $35 million. So how, if you’re Bettman, do you explain to your fellow owners that you are acting in their best interest in turning down repayment of league money in an economy where that is next to impossible?

"A high-end insolvency lawyer, who has been involved in other NHL transactions in the past, believes that Balsillie won’t be turned down by the bankruptcy court. He believes that a great deal of work went into structuring the offer, making certain that few loopholes were left unexplored and that the first responsibility of the court is to look after the creditors and not worry about franchise movement in the NHL."

The Globe & Mail: "Little Canada was marginal to the future that Mr. Bettman foresaw for the NHL (in the 1990s). Here, though, is big Canada, the Canada of high technology, globally aware, wealthy enough to rescue the financially distressed. And Mr. Bettman is putting up no end of roadblocks.

"His battle is not in the best interests of the game. There is no business case for it. The Phoenix franchise is ownerless (the NHL has been paying its bills), its revenues are in decline, and the marketplace is tough. Southern Ontario has a staggering appetite for hockey. It can't lose. But this seems personal with Mr. Bettman. This is a classic case of a chief executive officer who has been in the job too long; he clings to a failed strategy and puts personal vendettas ahead of the organizational good."

Anaheim Ducks left wing Teemu Selanne, via Jeff Blair: "Canada deserves more teams. It's sad that franchise (the Coyotes) has to move again. (But) there's always a market for one more team (in Canada)."


Greg said...

CBC Radio had a segment today on The Current about this whole situation: one way or another, Bettman is going to lose this fight. It may even involve him getting turfed out of his job.

Bettman has only one potential card to play with the NHL Board of Governors: The Domino Effect.

The argument goes that if this happens, Balsillie takes over and then moves the team to Hamilton, the league's "salary floor" will inch upwards. Maybe not by much in the grand scheme of things, but enough to cause some serious hardship to the small market franchises in the Sun Belt where hockey interest is feeble at best: I'm talking Atlanta, Florida, Anaheim, possibly Nashville. Columbus has to factor into this equation too, and the same goes for the New York Islanders. These are all franchises with serious bottom-line problems (not to mention attendance problems).

The turmoil across the NHL would be massive if this scenario plays out. Some of these franchises might start making noises about selling to Canadian ownership groups and having them move either to or back to Canada. Some might move to other American markets. Or some might dissolve altogether.

In any event, it all spells potentially terrible Doomsday Scenarios for the NHL. Businesses are attracted to brands that invoke stability, confidence and pride. The NHL is such a pathetic entity in America as is: how will this play out in terms of rebuilding the league's image? Or economic future?

The reality of the situation is this: this is the Great Financial Reckoning the NHL has been awaiting for years and the market shake-out is finally here. Bettman is about to face his endgame.

It's going to come down to the owners of financially precarious teams if the salary floor will increase to the point where it becomes financially untenable.

eyebleaf said...

Balsillie has gone about this wrong from day one.

Jeff Dertinger said...

I totally agree with Neate's point up top: It doesn't matter how you go about it.

As long as the end result is a stable franchise in a hockey-mad market that is making money for the league and all its owners, nothing else matters.

Bettman is a scourge on hockey. You know it, I know it, everyone over the age of 8 knows it. We've had 16+ years of this idiot screwing up the league. It's time to boot his behind out and impose some term limits or something.

At least with the terror reign of George W. Bush Americans could see the end near.

Dennis Prouse said...

This is a classic case of a chief executive officer who has been in the job too long; he clings to a failed strategy and puts personal vendettas ahead of the organizational good. In the past, I have often felt that criticism of Bettman was misplaced. I thought he handled the lockout brilliantly, for example, and I am a firm supporter of both the current CBA, and many of the rules changes brought forward.

Having said that, the editorial is spot on. A smart CEO is able to read the shifting winds, and adjust his strategy accordingly. In this case, Bettman is badly misreading both the hockey market, and a growing tide of anger in Canada. I don't think Bettman really "gets" just how outraged Canadians will be if he keeps publicly fighting this move. I suspect, though, that Canadian owners are hearing from their season ticket holders right now, and might have something to say on the subject.

Bettman did say yesterday that this would ultimately be in the hands of the Board, and that he doesn't get a vote. That sure sounded to me like a guy who might be getting ready to run to higher ground, which would be a smart strategy for him under the circumstances.

Greg said...

Jeff: I suspect that Bettman's time is drawing closer to the end than not. Bettman has made a lot of enemies in many different corners of the hockey world and has few vocal, public supporters left. This may be the last straw for the Board. It's impossible to say at this point until the endgame happens here.

Dennis: I don't think Bettman gives a shit about the Canadian market beyond the optics of maintaining the stable markets. He's been very upfront and clear in his efforts to expand the game to as many major American markets as possible since Day One. The problem with that strategy, however, has been Bettman's Hidden In Plain Sight approach -- of course people in Atlanta and Nashville will respond to ice hockey! It's one of the four major North American sports, no problem! Doesn't matter that they've never seen ice outdoors before or have no shared memory of hockey -- they will know professional sports when they see it, it's just hidden from them.

Too bad the NHL brand is about as valuable as Citibank stock.