NHL slow-rolls on Las Vegas: Big-picture payoff trumps potential $500M expansion fee

NHL slow-rolls on Las Vegas: Big-picture payoff trumps potential $500M expansion fee

BOCA RATON, Fla. — The NHL expects to meet with the potential Las Vegas ownership group sometime next week. Businessman William Foley probably won’t be there, but as deputy commissioner Bill Daly said, he has “people.”

The league expects to discuss the specifics of the season-ticket drive Foley wants to use to help gauge the viability of the market. Will fans have to make multi-year commitments? Will they have to put up real money?

“Ultimately he’s going to do what he wants,” said commissioner Gary Bettman on Tuesday after the league’s board of governors meeting. “But I guess he’s looking for some impact so, from his standpoint and ours, we might judge if it’s meaningful.”

Bettman said if he had to guess, the season-ticket drive wouldn’t start before Jan. 1. Daly said in his view, it wouldn’t happen until mid-to-late January at the earliest. So there is a ways to go before this starts, let alone finishes with at least three-quarters of the board approving an expansion franchise.

“Before there’s ever a vote,” Daly said, “I think we have to get to a point where we have a [formal] process.”

What would constitute a formal process?

“We define it,” Daly said. “But it’s really having the discussion with ownership, ‘Is this something you want us to pursue?’ ”

The league has not had that discussion yet.

“I think we’re a couple board meetings ahead of any vote being taken on anything,” Daly said.

How early is the NHL in “this process which isn’t a process,” as Bettman put it at one point? The league hasn’t taken a position on the issue of potential betting on a Las Vegas NHL team. Bettman said the league hadn’t focused on it (though he did know the NHL comprised about one percent of the take in sports books).

Attendees at the NHL board of governors meeting leave the conference room at the end of the day. (AP)
Attendees at the NHL board of governors meeting leave the conference room at the end of the day. (AP)

“Again,” Bettman said, “for those of you who think this is a done deal in Vegas, it’s not.”

There is no rush. There should be no rush, even if an expansion fee would bring in as much as $500 million, to use the highest estimate batted around by some of the governors themselves. The arena rising on The Strip won’t be ready until the 2016-17 season. If the NHL is going to put a team in there, it better be darn sure there will be people in the seats for years to come.

It’s hard to present the mood of the governors accurately because you can’t talk to them all. The best you can do is check the mood of the governors who are willing to talk – and virtually all of those will talk only off the record for fear of speaking out of turn and incurring Bettman’s wrath. But this seems clear: There are a lot of individual, nuanced opinions, and there are enough questions and concerns about expanding to Las Vegas that the NHL needs to take it slow.

“You don’t do expansion just to add clubs,” Daly said. “You do expansion because you think it’s going to make the league bigger and better, right? That has to be their mindset if they approve an expansion. It’s not necessarily just because, ‘I want my up-front expansion fee.’ It’s because, ‘I think long term this is good for the league. It’s good for the value of my franchise long term.’ ”

Is the talent pool deep enough for expansion? Some governors think so; others aren't so sure.

Shouldn’t the NHL make sure it has 30 stable franchises first? Bettman and Daly both insisted the Arizona Coyotes and the Florida Panthers are not relocating, but several governors pointed out those franchises have problems that need to be fixed.

Will the expansion fee be worth it? That depends.

“I think each owner does that computation totally differently,” Daly said.

If someone pays $500 million for an expansion franchise, that should raise franchise values across the league. Divide $500 million by 30, and you get $16.67 million per team in instant cash.

But consider this: Hundreds of millions of dollars in NHL revenue this season is national – TV contracts, outdoor games, sponsorships, etc. That number is expected to grow in the future and is divided by 30. If you’re an owner, do you want to divide it by 31 (or 32 or more)?

The NHL sets the terms of expansion, and it could get creative. It could say an expansion team couldn’t receive a share of national revenue for a certain period of time, or phase it in, or something. Daly said there have been examples of relocation fees being paid out of shares of future national revenue.

But the bottom line is this: A new franchise should add, not subtract. It should help make money for other teams, not cost money for other teams. It certainly shouldn’t struggle and need to be propped up by revenue sharing, further eroding that expansion fee. One governor said the NHL already pays $20 million a year to help the Coyotes and the Panthers.

Which brings us back to the season-ticket drive.

Las Vegas isn’t like other cities. It has never had a major pro sports team. No one knows how one would work amid all the gambling, all the entertainment options, all the people working at night. The NHL – and apparently the potential ownership group, too – want to make sure an expansion franchise would be supported by locals, not by tourists and casinos.

“I think there’s been a lot of research done on the demographics of Vegas as a market,” Daly said. “Testing what that means and how that translates to professional sports is kind of a … I’m not sure you can ever have a definitive answer. Not that you can have a definitive answer on other markets, but it is a very unique market. That’s in part why I think this will be an interesting exercise.”

Oh, it will be interesting all right.

“It’s a novel idea,” said David Poile, who has been general manager of the Nashville Predators since they entered the league as an expansion team in 1998-99. “Better to be safe than sorry, so to speak.”