Despite a disappointing end to the 2006-07 season, the Nashville Predators organization began the summer looking forward to celebrating the upcoming season, the franchise’s tenth in Nashville.
They definitely did not expect to fend off fresh news it would be their last.
On the evening of May 23, Nashville's WTVF-TV announced that Canadian billionaire Jim Balsillie, the co-CEO of Waterloo, Ont.-based Research In Motion, the company which makes BlackBerry handheld devices, had signed a letter of intent to purchase the Predators and Powers Management (the company that manages the Sommet Center) from Craig Leipold for $220 million. Under the terms of the deal, the sale must be completed by June 30, and must be approved by 3/4 of the NHL's board of governors for the purchase to be complete. |
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Leipold confirmed the news in an e-mail sent to season ticket holders the following day, shortly before holding a hastily announced press conference at the newly christened Sommet Center that afternoon.
“We said from the beginning that we were going to run and operate this franchise as a business,” Leipold said.
Certainly, in terms of on-ice progress, the Predators have done just that, earning league-wide praise for the combined vision of general manager David Poile and the work of head coach Barry Trotz that resulted in Nashville dressing one of the best teams in the NHL last season.
Unfortunately, that hasn’t been enough for Leipold.
“I cannot make it work here,” Leipold said during the frequently emotional press conference. “I’ve carried the franchise as far as it can go from a business standpoint.”
Leipold added that the team has lost more than $70 million over the 10 years he had owned the team, including $27 million over the last two seasons and $15 million in 2006-07. Leipold said after years of fighting to gain more corporate support to make the team profitable, he was unable to boost ticket sales or find a local buyer interested in significant minority ownership.
Leipold again stated the team’s ticket sales are made up of about 65 percent of individual ticket sales, and 35 percent of corporate sales. Thus, he stated it wasn’t the average fan who weren’t supporting the team, but the business community.
“There are some major corporations that are just completely missing in action in our business,” Leipold said. “And it’s not because we haven’t been knocking on their door – we spent a lot of money and we tried to get them engaged.”
When asked if the team had ever made a profit in Nashville, Leipold had to smile.
“We had one year where we made money. It was $640,000.”
Balsillie, who was not present at the press conference, released a statement saying he would decline comment until the sale was complete, but added, “Craig and his organization have built a tremendous team and I look forward to continuing the pursuit of a Stanley Cup. Upon completion of the deal and board of governors approval, I will be anxious to get to Nashville and be in a position to talk to Predators fans and become more familiar with the community.”
Leipold indicated that the team’s first-round playoff exit sped up the decision for the sale, but that the two started discussing the possibility earlier in the season.
What Must Happen
Immediately after the news broke, Nashville sports talk shows and Internet message boards were littered with doom-and-gloom predictions that had Poile and Trotz emptying their offices and loading up the U-Haul truck already.
Many more fans responded with an outcry of support, devastated at the thought of losing the team they had fallen in love with.
Either way, it is important to remember that a lot of stipulations would have to be met before the Predators would be allowed to move.
First, Craig Leipold would have to exercise the so-called "cure" clause in the team's lease deal with the city of Nashville by June 19.
Assuming the sale of the team to Balsillie was approved by the league, the Predators would then have to average fewer than 14,000 paid fans for the 2007-08 season for the clause to take effect. The clause would be in effect because the Predators averaged 13,815 in paid attendance in 2006-07, a mere 185 tickets short of the 14,000 minimum. Then, the city would have the option of purchasing the balance between the minimum 14,000 and the remaining amount. At that point, if the city declines to pay the balance, Balsillie would be able to pay an $18 million exit fee to the city, and move, so long as the NHL were to approve the relocation.
Thus, there are several hurdles which would kill any potential move.
Most obviously, if fans and the corporations step up and ensure the Predators average 14,000 paid tickets per game, the team cannot move.
It isn’t a foregone conclusion that the city would be willing to make up the difference in ticket sales, though. Several city council members and most of the Nashville mayoral candidates have publicly stated they would not be in favor of subsidizing the Predators.
Still, it remains to be seen if those same politicians might not change their minds if faced with the decision of losing a professional sports franchise over a few thousand dollars.
Leipold was adamant at the press conference that the decision to exercise the cure clause was his, and his alone. While it might be naive to think Balsillie won't have input on the decision, Leipold stood firm that it was his choice.
However, an answer to a previous question might have unwittingly spoiled Leipold's choice.
"If the attendance mark is satisfied, even if it's not, if the city cures what would then be the default, this team is not going anywhere."
Leipold did announce that any prospective owner must sign a consent agreement with the league that prevents a new owner from moving the team for seven years.
However, it was emphasized that there would have to be a lease agreement in place for the non-relocation agreement to be enforceable, so invoking the clause would put a lease deal in question.
Bettman Sending Mixed Messages
During his annual state of the league address, given May 28 before Game 1 of the Stanley Cup Finals, NHL commissioner Gary Bettman had some interesting comments regarding the Predators' situation.
On the one hand, NHL commissioner Gary Bettman seemed adamant in his desire to keep the Predators in Nashville. "Bill Daly and I both met with Mr. Balsillie last week," Bettman said. "I specifically asked him whether or not he had specific plans or intentions with respect to moving the franchise, and he told me he did not."
Some have scoffed at the notion that a Canadian businessman with ties to southern Ontario would buy a hockey franchise in Nashville with no intention to move it, but chances are Bettman would not be amused if Balsillie lied to the commissioner face-to-face. Such a move would not bode well for a prospective owner.
On the other hand, Bettman spoke of being intrigued at the thought of a team returning to Winnipeg, and added that the current economic situations make such an idea much more feasible than they might have been three to five years ago.
Those comments seemed at odds with some of Balsillie's actions behind the scenes.
A week after Leipold's press conference, the mayor of Hamilton, Ontario, Canada announced that Balsillie had re-activated an agreement granting the billionaire exclusive rights to bring an NHL team to the Copps Coliseum in Hamilton, and said Balsillie was very interested in moving a team to southern Ontario.
Research In Motion also purchased 27 acres of land in east Cambridge, which is a suburb of Kitchener, Ontario, certainly a large enough area for an arena. Curiously, the area appears to be just outside the 50-mile radius of the Toronto Maple Leafs' exclusivity zone.
However, Bettman seemed to downplay the chances of a third team being added to the southern Ontario region, saying there were downsides to having multiple teams in a market.
Sale Price Surprisingly High
One of the most curious details of the deal is the sale price. In November of 2006, the Predators were valued at $134 million by Forbes Magazine. Even when taking into account there was a second bidding group interested in the team, the final sale price was still conspicuously high, particularly given the Predators’ history of losing money. Balsillie was only going to pay $175 million for the Penguins franchise, one which had won two Stanley Cups and has Sidney Crosby on their roster.
Thus, while Leipold spoke of losing $70 million over the course of owning the franchise as the primary reason for selling the team, it is doubtful there will be many tears shed regarding his finances. Even after the $80 million expansion fee Leipold paid back in 1997, he'll walk away with roughly $70 million in profit from the deal.
It was not made public at the press conference how much revenue secondary events at the Sommet Center such as concerts contribute to the building's income.
The Bottom Line
With all that has been said and yet to be done, it is important for fans to remember two things.
First, regardless of whether or not the cure clause is invoked, it is fully within the power of Predators fans and the community of Nashville to keep the team in the city. If enough fan and corporate interest in the team is attracted, and the team averages 14,000 paid, or better yet, significantly more than 14,000 paid, the cure clause could not be invoked and Balsillie would not be able to win league approval to move the franchise.
Second, all that has happened so far is a letter of intent has been signed. Jim Balsillie does not own the Predators, and there's a chance he might not own the team at all. He signed a letter of intent before, and that deal fell through, so it is certainly possible that this deal will too.
Much more will be learned about this situation by June 19, and again by June 30.
Despite another disappointing ending to their season, the Nashville Predators were looking forward to a positive off-season.
They didn’t know it might have been one of their last.
Center Ice Magazine will have much more on this situation in the coming months.
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