Gosbee: Coyotes could achieve profitability earlier than expected
Local successes and record NHL profits have Coyotes eyeing financial fast track.
Coyotes chairman and governor George Gosbee said the Coyotes are on track to meet or beat ownership's plan to be profitable within three years.
By Craig Morgan
GLENDALE, Ariz. -- George Gosbee just doesn't get it. No matter how many long-term commitments the Coyotes make, all anybody wants to talk about is their short-term exit strategy.
"I wish people would stop looking at the five-year out clause and start looking at all the long-term deals we're signing," the team's chairman and governor said in a lengthy interview with FOX Sports Arizona. "I'm not sure it will matter if I say it, but we're committed to this market for the long run and we keep proving it."
Wednesday's announcement of a nine-year, hybrid partnership agreement with Gila River Casinos that will pay in the neighborhood of $3.5 million per year was the latest example of a long-term Coyotes' commitment to the Valley. The Coyotes have also signed a number of other long-term agreements, including a television rights agreement with FOX Sports Arizona last year. Other long-term deals include City of Glendale (arena lease, 15 years), LEVY Restaurants (food and beverage, 15 years) and Ticketmaster (10 years).
Those deals, and increased revenue from suite sales and tickets, have allowed Gosbee to pull back a bit from his involvement with the operations of the club during Year 1 of IceArizona's ownership. It also allowed former CFO and co-owner Avik Dey to pull back from his day-to-day duties entirely.
But it's the combination of the Coyotes' local progress and the financial success of the NHL overall that has Gosbee thinking once inconceivable thoughts.
"As an ownership group, we're really comfortable with how the club is working on financial platforms," he said. "We've always had a three-year plan for achieving profitability here, but with how well the NHL is doing, we think that could fast-track our plan and we could get there even earlier."
We've always had a three-year plan for achieving profitability here, but with how well the NHL is doing, we think that could fast-track our plan and we could get there even earlier.
The NHL reported record revenues of $3.7 billion this past season, and the new CBA, approved in January of 2013, removed revenue sharing restrictions for attendance benchmarks, business growth and market size. Based on various reports, that could mean anywhere from $15 million to $20 million in revenue sharing per club from the 2013-14 season.
Each NHL team will also receive an additional $5 million this season due to the success of the league's Stadium Series and the first payment of the 12-year, approximately $4.8 billion (US dollars using the current exchange rate) Rogers TV deal. Combine that with the NHL's current 10-year, $2 billion deal signed with NBC in 2011 and the NHL's TV rights money nearly matches the NBA's.
Reports vary on what the annually escalating Rogers TV deal will pay each U.S. club (Canadian teams get a larger share of the pie). Forbes reported last November that each team will receive an average of about $9 million to $15 million annually over the life of the deal (adjusting the Forbes figures for the current exchange rate). That's on top of the revenue coming from the deal with NBC.
Gosbee wouldn't confirm those numbers, but he admitted the amounts from Rogers are "a lot more than we had budgeted for."
The biggest indicator of IceArizona's commitment to the Valley -- and proof of its economic viability -- will of course be putting a winning product on the ice.
The Western Conference got better during the frenzied free agency period, and a strong argument can be made that the Coyotes got worse at the forward position -- a long-standing weakness that has been a product primarily of poor drafting and tight purse strings.
The team's decision to infuse youth into the lineup for the upcoming season came as a surprise to some within and outside the organization who expected the ownership group to be spend more freely in free agency. But a number of factors influenced the decision.
-- The Coyotes missed the playoffs the past two seasons, and the internal view was that the veteran mix had grown stale and needed more youth and speed.
-- The amount of money being thrown around in free agency seemed rash and potentially damaging in the long-term to a team that still needs to watch its bottom line and was still reeling from the failed Mike Ribeiro experiment -- its first foray into the major free-agent market under the new ownership group.
-- Finally, the team is not yet profitable; ownership has only been in place for one year.
"The goal is to become more competitive on the ice, and that comes partly with more dollars," Gosbee said. "The key is to get the franchise profitable, and that's not going to happen overnight.
"Again, we think we might get there earlier than planned. If it happens faster than we thought it would, great, but if it doesn't that doesn't concern us. Not everything is going according to plan, and we still have some areas like attendance and parking that need our attention, but we feel very comfortable with where we are in the process."