GLENDALE, Ariz. — A big black banner hung in front of Jobing.com Arena. "HERE TO STAY," it said in bright white letters, all caps, celebrating the new ownership of the Phoenix Coyotes and selling the fans on stability.
By the night of the 2013-14 home opener, it was already gone. A new one greeted fans as they walked around the Westgate Entertainment District, eating at the restaurants, listening to the live band, checking out the new ice girls, watching the TV analysts shoot the pregame show outside under the warm Arizona sun. "HUNGRIER THAN EVER," it said.
"We're past 'Here To Stay,' " co-owner George Gosbee declared on the scoreboard screen during Thursday night's game, a 4-1 victory over the New York Rangers. "We're on to building a winning organization."
In other words, the Coyotes are done surviving. Now it's about thriving.
For four years, as the NHL struggled to sell the franchise it bought out of bankruptcy, commissioner Gary Bettman said it was unfair to judge Phoenix as a hockey market without stable ownership. The Coyotes couldn't attract enough fans, sponsors, employees, free agents, you name it, when they had a tight budget and no one knew if they would move to Seattle or Quebec City or somewhere else.
The NHL sold the Coyotes to IceArizona Acquisition Co. for $170 million over the summer. The new nine-man ownership group faces the same old challenges – ice in the desert, an arena across town from all the money in Scottsdale. The new owners also have an out clause in their arena lease with the city of Glendale. They can bolt in five years if they lose $50 million. Even if no one wants to lose $50 million – even if "every incentive they have is to make this work," in Bettman's words – it's easy to be skeptical and say this franchise has not left limbo and the threat of relocation still looms.
But these are accomplished businessmen with backgrounds in investment banking, technology and energy. They have experience with distressed assets and marketing. They have deep pockets and a plan, and they're hockey fans, most of them Canadian, many of them with homes in the Valley. They're in this for the hockey team itself, not to use the hockey team as part of a venture like, say, a mixed-use real-estate development.
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To them, this is a classic buy-low turnaround opportunity – not just because the Coyotes have been poorly managed as a business and have room to grow, but because the bankruptcy allowed them to negotiate fresh deals, the NHL has a new collective bargaining agreement that helps small-market teams and league revenues are poised to pop. They are receiving $15 million a year from the city to manage the arena, no longer need to hit attendance targets to qualify for revenue sharing under the new CBA and will enjoy an equal share of the league's coming windfall from outdoor games, TV contracts and international events.
They got off to a late start because their purchase didn't close until Aug. 5. Still, they say ticket sales are already up 15 to 20 percent, suite sales are already up about 25 percent and sponsorships are skyrocketing. They aren't rushing into deals or settling for 50 cents on the dollar, like the Coyotes had to in the past, and are thinking far beyond five years. They're about to announce 12- and 15-year contracts for food and beverage and local television. Though they won't provide hard numbers and it depends on how conservatively they forecasted, Gosbee said before the puck even dropped they had beaten their economic projection for their first season.
"Is there something to prove? Of course there is," said co-owner Anthony LeBlanc, who has been after the Coyotes on and off for four years and is now president and chief executive officer. "We have to prove that hockey can be successful here in Phoenix. We strongly feel that way. That's why we've all written checks and are part of this."
"We'll prove it," said Gosbee, the executive chairman. "People can have misconceptions – the arena or the people in the seats and all that stuff. But when you fully understand the model and what we're doing, I think there's a lot of confidence."
* * * * *
Consider this: Gosbee said that among NHL owners, the Coyotes' group ranks in the top five in net worth. So collectively these guys are among the richest in the league. And when they bought the Coyotes – with $50 million in equity, plus financing that included $85 million from the NHL itself – they left themselves a huge cash cushion.
"One of the common problems that too many investors make is when they buy a distressed asset, they don't prepare for the worst," said Gosbee, who has spent 20 years in corporate finance, investment banking and global capital markets. "We just didn't buy the asset. We just didn't come in here and hit the purchase price. We have a lot of cash on the balance sheet, and I think Gary liked that. We really overcapitalized this thing. ...
"We have so much cash we don't have to go to a partner or a bank. If you took the Coyotes' worst year in financial history and that happened for four years, we still don't have to go back and talk to anybody and put more money in."
The brand was damaged badly when the Coyotes went bankrupt in 2009. Though they had ranked near the bottom of the league in attendance before bankruptcy, they averaged more than 14,800 fans. They plummeted to dead last in 2009-10, averaging only 11,989.
They continued to rank at or near the bottom of the league in attendance afterward. But their average crept up – 12,188 in 2010-11, then 12,420 in 2011-12, then 13,923 last season – despite the recession, despite the uncertainty, despite the lockout. Sponsorships and TV ratings also rose.
Why? Not marketing. The NHL was just trying to keep the lights on to maintain the value of the asset.
"The league, they're really good at managing the league," Gosbee said. "I wouldn't say they're really good at managing a hockey club, and Gary Bettman will be the first to admit that."
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The reason was winning. General manager Don Maloney assembled as much talent as he could under the circumstances, and Dave Tippett coached the hell out of it. The Coyotes made the playoffs three years in a row and went to the Western Conference final in 2012, before failing to qualify last season.
So as they negotiated the purchase, the new owners insisted the NHL re-sign Maloney and Tippett, not to mention goaltender Mike Smith. It was practically a condition of the deal. They didn't want to have to rebuild the hockey team and the business. They wanted a strong product so they could focus on rebuilding the business alone.
"This is a fair-weather market, and we've got to win," said LeBlanc before opener, looking ahead to a six-game road trip. "So my biggest fear? We go on the road and lose all six games. That scares me to death. That's how it goes wrong. ... If they keep doing what they've done the last four years, we're laughing. We're laughing. Like, we will literally be laughing. But if we don't win ... "
Well, we know who will be laughing.
Maloney has his budget – the Coyotes have a $62.3 million payroll, 19th in the NHL, according to capgeek.com – and Tippett has his roster. They have their job (win); the owners have theirs (sell). LeBlanc, who has been a sales and marketing executive for 20 years, compared it to when he was vice-president of global sales at Research In Motion, maker of the BlackBerry, from 2000-08. The tech folks made the product; his folks put it in people's hands.
Gosbee said the owners went over the plan at one point, and one of them noted that hockey wasn't mentioned. He flipped through the pages and joked there had to be a picture of captain Shane Doan somewhere. Over the long term, the plan is to provide more financial resources to the team as the owners execute their business model. At the same time, it's to become less dependent on winning in good ways – to become less of a fair-weather market, to generate revenue in multiple ways no matter what.
"We want to win the Stanley Cup," Gosbee said. "We're passionate hockey fans. I think the hardest thing our ownership group has to do right now is refrain from overspending, getting in Maloney's kitchen. When that press release went out and we were down here announcing the sale, I had this group of nine pretty savvy, strong businessmen turn into like the littlest boys, just giddy about, 'What's this free agent doing? What's this ...' I'm like, 'Whew, guys. We have a long-term model.' "
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One of the first things the owners did after they took over was put out an RFP (request for proposal) to advertising agencies. Gosbee had helped Chrysler recover from its bankruptcy and repay its bailout, serving on the automaker's board of directors and financial restructuring committee. He remembered sitting with Sergio Marchionne, Chrysler's chairman and CEO, talking about ad ideas.
"How do you come up with a marketing campaign for a company that probably didn't make the best cars, just laid of tens of thousands of employees, is owned by taxpayers?" Gosbee said. "You don't all of a sudden say, 'Hey, we're owned by the government! Buy our car!' But when you meet with the employees, people are committed. It's not their fault. They're trying to get through the adversity. So we tried to turn it around and pull at the heartstrings of America."
Chrysler aired its "Imported from Detroit" ad during the Super Bowl – showing the city's grittiness, showcasing its defiant, underdog pride to an Eminem soundtrack. The ad went viral.
The Coyotes aired their "Hungrier Than Ever" ad during the Arizona Cardinals' opener, when the local NFL team was on the road and the Valley's sports fans were a captive audience. It was 60 seconds of Doan glaring, eyes locked, nose bent, as the camera honed in and the highlights flashed and the narrator set the tone: "We're not like other teams. We're the underdogs who proved hockey belongs in the desert. ..."
"We called Fox and said, 'We need a minute,' " Gosbee said. "They said, 'Is this the Coyotes? A minute? You guys don't advertise.' "
They do now.
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The owners know the challenge they face – especially with midweek games, when many fans have to fight traffic to get to Glendale, and especially before U.S. Thanksgiving. Thursday night was announced as a sellout of 17,125, but there was a significant smattering of late arrivals and no-shows – for the opener, under new ownership, against the Rangers, no less – and they stood out because of the giveaway white shirts resting unworn on the seatbacks. The next home game is Oct. 15, Tuesday night, against the Ottawa Senators. LeBlanc said tickets sales aren't as bad as he feared so far, but it isn't close to a sellout. There will be nights early in the season when the Coyotes draw 12,000 or 13,000.
But the Coyotes, with great weather year-round next door to an NFL stadium, are introducing tailgating for weekend games. They are talking about ideas like providing bus service from Arizona State and Scottsdale restaurants; co-branding with rinks throughout the state; sponsoring youth development programs; contributing to charity; getting players out in the community.
Realignment and the new schedule matrix will help. With the Calgary Flames, Edmonton Oilers and Vancouver Canucks in the division, there will be more games to draw the thousands of western Canadians who live or winter in the Valley. Another idea: holding a Canada Day when there is no Canadian team in town to entice all those folks to see a team other than their own. Maybe they'll make the Coyotes their second team. With every team coming to town at least once, the Eastern Conference clubs and stars like Sidney Crosby and Alex Ovechkin can draw fans, too.
The Coyotes just hired two superstar salesmen: Jeff Morander, executive vice-president of ticket sales and strategy, and Mike Humes, executive VP of corporate and suite sales. Morander worked for the NHL, where he was VP of events and ticket strategy. Humes has worked for several pro sports franchises. He helped turn around the Washington Capitals and establish the Columbus Blue Jackets.
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LeBlanc said the owners are confident they can average 15,000 fans this season and grow from there.
"It's not going to be a problem for us," LeBlanc said. "We will not be the bottom-dwellers of this league. I feel that this team's natural place should be somewhere in the middle of the pack when it comes to attendance and revenues. If San Jose and Dallas can be successful, this market can be successful."
Again, the Coyotes don't need to hit attendance targets to receive revenue sharing under the new labor agreement, and they have other revenue streams – suites, sponsorships, naming, concessions, television.
They will receive 1/30 of the league's revenue from the outdoor games and 1/30th of the league's revenue from national TV contracts. A new Canadian TV deal is coming up and expected to be a blockbuster. They will receive 1/30 of the league's revenue from international TV deals and events like a World Cup.
And imagine this: If the NHL adds teams, the Coyotes will receive 1/30 of the expansion fees, too.
"We bought 1/30th of the NHL, and we're extremely bullish on the NHL," Gosbee said. "It's a fair model now for small-market teams. That was the last kind of check the box. A year ago, you would have bought the Coyotes. We're managing the Coyotes now."
* * * * *
LeBlanc stepped off the elevator during the second intermission Thursday night, racing between interviews and meetings, and he ran into some diehard fans. They awarded him a certificate. As he walked down the hall, he was recognized again and again.
"Thank you!" one fan said.
"Thank you!" another fan said.
He waved again.
These were the fans who stuck it out, the foundation upon which the Coyotes must build. LeBlanc ducked into a suite used for entertaining clients and tried to grab a bite. Radim Vrbata scored the second goal of a hat trick, but LeBlanc didn't see it. He was too busy talking to someone as his food cooled on the plate. Finally, he had a moment to finish eating. He walked over and glanced at the ice, only for a moment.
"Gotta go to work," he said, and he was gone.
Hungrier than ever.
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