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Coyotes ‘out clause’ means more uncertainty in the desert

Jul 3, 2013, 11:20 AM EDT

Last night was a good one for Coyotes fans. The prospective owner of the club, Renaissance Sports and Entertainment, got its $225 million arena-management agreement approved by the City of Glendale, allowing the club — to be called the Arizona Coyotes — to remain in the desert.

“For the people of Arizona and for Coyotes fans, we’re finally in a position to begin focusing on life without all the uncertainty,” NHL commissioner Gary Bettman said.

But with all due respect, much uncertainty remains. In large part because of this:

source:

That there is the contentious out clause that RSE was able to negotiate, allowing it to terminate the agreement (and relocate the team, presumably) after five years should cumulative losses reach $50 million.

RSE has repeatedly said its intention is to keep the franchise in Glendale for the long term and that the out clause was only needed to satisfy lenders.

Others are more skeptical, wondering if RSE’s end goal has always been to relocate the Coyotes. It should be noted that, in five years, new arenas could be standing in Seattle, Quebec City, and Las Vegas.

Whatever you believe, the following questions are worth asking now and monitoring going forward:

Will Coyotes fans rally around the out clause, knowing if they don’t support the team they could lose it? Or, will the out clause serve as an ongoing roadblock to making a financial and emotional investment?

How will the Coyotes address payroll? They’ll need to spend wisely to keep losses to a minimum; however, if they don’t spend enough they’ll risk icing a bad team and missing the playoffs (which would, of course, hurt revenues).

How high will the salary cap/floor reach over the next five years? Some have suggested it could go up considerably, making it even tougher on the NHL’s have-nots.

Yesterday, Bettman sounded optimistic at the potential for success with the Coyotes no longer being run by the league.

“With ownership that’s committed to making the franchise a success, with an opportunity for businesses and fans to know that there’s no uncertainty, we think that this franchise can do very, very well,” said Bettman.

We shall see.

  1. sjsblitz - Jul 3, 2013 at 11:24 AM

    Better start attending games, FLINT MICHIGAN TROPICS!

  2. 950003cups - Jul 3, 2013 at 11:26 AM

    5 years and losses of $50,000,000…

    It’s pretty simple.

    If the people want the team to stay, which I imagine they do, then they’re gonna have to go to games.

    It’s up to the Coyote fans of Glendale now.

    • alexbaymac - Jul 3, 2013 at 11:54 AM

      Coyote fans of Arizona…

    • dbara43 - Jul 3, 2013 at 5:43 PM

      Yeah. All 500 of them

  3. tmoore4075 - Jul 3, 2013 at 11:36 AM

    Fans kept saying if they had stable ownership that more people would show up. Time to prove it. I for one am skeptical of the out-clause. As said, there will be arenas in those mentioned cities. Although Quebec is probably getting an expansion team. So they could end up in Seattle in 5 years anyway.

    • mrpinkca - Jul 3, 2013 at 1:10 PM

      I’d say that the out clause adds a lot of uncertainty to their stable ownership.

      Sure it’s stable ownership, but it will also be stable ownership in 5 years when Quebec and Seattle have an arena…

  4. bucrightoff - Jul 3, 2013 at 11:41 AM

    Sorry but I still see moving as the end game. Does anyone really think this team will draw fans when they’re the 10th-15th best team in the conference? And they will always be 4th in the sports pecking order out there (5th behind shuffleboard if you wanna include that).

    • Jackson Scofield - Jul 3, 2013 at 12:59 PM

      They must be really bad to be the 15th worst team in a conference with just fourteen teams starting next season.

      • bucrightoff - Jul 3, 2013 at 1:33 PM

        You’re right. 5,000 fans for a 15th place team, but since its only 14, it’ll be 4,000. Seriously, get rid of this abortion of a franchise and put it in a market that will succeed.

  5. timmylaz99 - Jul 3, 2013 at 11:57 AM

    Just move the team already! It’s clear to anyone with a brain it’s not going to work in Glendale!

  6. onwisconsin42 - Jul 3, 2013 at 12:03 PM

    Jason,

    Why did you leave out RSE’s willingness to repay all of Glendale’s losses if they move the team?

    Just wondering.
    Doesn’t completely fit the whole RSE-wants-to-flee-ASAP narrative, I get it.

    But an important fact, nonetheless.

    Disingenuous, but I’m surprised that I’m even surprised at this point.

    • Jason Brough - Jul 3, 2013 at 12:20 PM

      It’s largely immaterial. The out clause is still there.

      • gbrim - Jul 3, 2013 at 1:12 PM

        Capping Glendale’s losses at 6 mil per year, the amount budgeted to manage the arena with, or without, the Coyotes, is hardly immaterial. Without it and the Spectrum arena management contract being added, the risk to the City was much greater, and the Coyotes would be on the move right now. It adds to the incentive for RSE to make this work, and gives Arizona fans a chance to embrace a team in limbo ever since they got here.

        Don’t forget, the Jets left Winnipeg because the new Phoenix owners (actually from Colorado) smelled a Scottsdale real estate deal for an arena and related commercial development. When that didn’t happen they almost left for Portland, but a Phoenix billionaire bought them, hired Gretzky and ignored the whole operation until he tried to dump the thing into bankruptcy in violation of NHL rules. Since then the team has been a ward of the NHL with a very uncertain future. Say all you want about whether hockey will work in the Phoenix area, or whether the arena location is a serious liability (both reasonable questions), the worst thing about bonding the Coyotes to the Phoenix area has been the abysmal/nonexistent ownership. We now have some guys with not quite enough money to pull off what they are attempting, which is the best ownership this team has had in its tenure in Phoenix.

  7. ruddigervancity - Jul 3, 2013 at 12:06 PM

    The out clause was clearly needed by anyone making this investment/taking on this potential money pit. The bigger problem is – what happens in a scenario where, after 2 years, they’ve got $30 million in losses. Where is the incentive to turn a profit then? It’s basically the plot from Major League – except stretched out over 3 years…

  8. endusersolutions2013 - Jul 3, 2013 at 12:17 PM

    Having the Yotes in Ariz is good for a reason that the articles rarely explore – it avoids having a worse conference alignment (set to be 14 teams west, 16 east next year) Any expansion needs to be west – Seattle, Portland, so the league can get to even conferences and a playoff structure that makes sense. Either you have conference series then a cup series, or true division then conference and cup. Next year, a team from the far west conference could end up being a “wild card” in the central western division. So if they somehow win, how are they then the division champs. Only way the league can expand to Quebec is if DET or CBJ are shifted back west.

    • tmoore4075 - Jul 3, 2013 at 12:55 PM

      They’ll figure realignment out if needed. They will not skip over Quebec just because it’s easier on realignment. You have a salary cap, a 50-50 revenue split, revenue sharing, a new Canadian tv deal coming, strong Canadian and Quebec economy, a new arena and a strong ownership group in Quebec. All things that would have helped in 1995.. If they have to move a team or teams West they’ll do what they have to. Detroit was ok staying West with a divisional playoff format, like the one the NHL proposed in December of 2011, where the furthest they’d go is Dallas or Winnipeg and the latest an 8:30 start time in the playoffs. And actually your idea of Seattle and Portland screws things up because then you’ll have 9 teams in the Pacific Division and 7 in the Midwest/Central.

  9. thenewraoulduke - Jul 3, 2013 at 12:21 PM

    So you have zero evidence to support what is basically a conspiracy theory that can only happen 5 years from now but its such an important topic that you felt it deserved to have a post dedicated to it?

    Also there is the other option, which is pretty common, where even if RSE loses money on the team they are able to make that money back by managing the arena and putting on other events.

  10. steelers88 - Jul 3, 2013 at 12:22 PM

    So why keep the Coyotes in Arizona if there is a out clause? If I were one of the free agent NHL I wouldn’t want to go to Arizona I would want a franchise that is stable and maybe that’s why the fans aren’t showing up because the franchise isn’t stable.

    • valoisjoeybfeld69 - Jul 3, 2013 at 4:54 PM

      The lesser of two evils right now is to keep the team in AZ. Quebec, Seattle and LV are not ready to host a team. Here is why the Yotes are on life support. “In 2008 documents filed with the court indicated that the team had lost $73 million over the last three years, and that the projected loss was $45 million for 2008–09.In the September 2009 bankruptcy hearings it was noted that an audit had shown that the team had never made a profit since moving from Winnipeg, Manitoba in 1996 and lost $54.8 million in 2008 alone.”

      Safe to say they will be exercising the out clause in 5 years, and that’s if they haven’t relocated before then, which would be surprising. Wait! Remember this; ‘Dave Tippett signs 5-year extension to remain Coyotes coach” – June 21

      “Coyotes Announce Long-Term Contract Extension for General Manager Don Maloney” – May 24 Could this also be a 5-year extension. Something doesn’t smell right….

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