Monday, September 24, 2012

Daryl Katz fuels #yegarena P.R. war with trip to Seattle

I hate writing posts about the stupid arena. I love my hometown, I moderately enjoy the Oilers - I certainly don't want them to leave. At the same time however, one can't help but recall Edmonton's shaky financial past with this team.

Twitter is all a flutter with the news, spreading from a CHED radio host, the #yegarena hash tag instantly jumped to a local trend. The Katz out of the bag, so to speak.

Previously on this blog, I have written that any threat to move the Oilers is quite likely a bluff with a U.S. economy teetering on collapse. Maybe I'm wrong, maybe Katz would move the team. Seattle, financially, seems to be in a similar situation with Edmonton or other Alberta localities.
Overall, the city budge office is forecasting $11.4 million in additional revenue through 2014, which will obviously help close Seattle's projected $32 million budget shortfall. So while city departments will still face roughly $20 million in cuts this fall (and next), McGinn says the city will also be able to invest some in city resources.
As far as U.S. municipalities go, it's not bad. They're still in the red but lately things have also been looking up. Of course, given the financial environment and all of the manipulation and fraud surrounding it this temporary upbeat outlook probably doesn't mean much. However, unlike Edmonton they have been able to secure an arena deal. Not with Katz mind you, I imagine if the Oilers did move there they would be renting like they do here.

But what's more? Well they have more TVs. According to David Staples:
Katz says that ticket sales don’t count, that what really matters when you look at a market is its total population, or “media market,” as that determines how many people can watch the game on TV, with television rights and sponsorships being where the real money is.

There’s some truth to this notion, but it only goes so far. If population were the main determinant of the success of an NHL team, there would be an NHL team in Atlanta today, not Winnipeg. There would be NHL teams in Mexico City and Houston, not Edmonton and Calgary.
That's right Edmonton, those overpriced tickets? Not important. The overpriced beer? Not important either. What's really important is how many of you chose to not actually buy tickets, but rather sit at home and watch the game on your couch.

The logic might make some business sense, but hockey is not America's Next Top Hooker. It's a sport, based on fans, team loyalty, the wave. It seems to me Edmonton's fan loyalty and sold out games is being equated in value to advertising space. Nice. So why exactly then do we need this huge grand arena? Will that make our market bigger? Will the people who apparently didn't realize you could watch hockey on TV suddenly be showing up there?

As the deal has been manipulated and made worse, my reasons for not liking the arena deal have also adjusted. At first, I did not like the propaganda technique being used to convince people it will "revitalize downtown". At this point, all I really wanted though was to see an alternative, fiscal argument for the arena. Something that was tangible. Revitalization is a catchy umbrella term but really means nothing. The estimates for the amount that was to be brought in by ticket taxes and the surrounding development taxes I believe to be overestimated, influenced by our period of low interest rates and various global quantitative easing.

Of course though, in the end if none of these other concerns existed, there would still be a matter of a missing $100m, which no matter how much people would like to just "get 'er done", when you're short 1/4 of the estimated cost it'll be "almost done" if you're not careful.

At this point in time though, monetary concerns like this were not really being taken seriously. Hell, the U.S. hadn't even lost their triple AAA rating yet! So, eventually I gave up and resumed my posting about what I see as important current events.

The issue though then had to arise again, after the meeting between Bettman, Mandel and Katz. The new deal, which looked nothing like the old deal, also sucked a whole lot harder. Despite more outrage, many people still stayed loyal to the Daryl Katz plan, because we "need this arena". At this point I figured it was probably a done deal and left it. The Edmonton public had decided that the arena was iconic, and more important than the socialist resemblance of subsidizing a very profitable private organization. After all, it would be the city's arena - even if the city could only receive indirect benefits for owning it. So be it.

Throughout all of this, the arena deal has had fairly consistent public support until the recent request for a $6million subsidy, and this trip to Seattle. There was also a little gaffe on the Oiler's twitter feed. It's gone now, and no explanation given.

Despite this trip, I still believe he is bluffing. The U.S. has a perilous and uncertain financial road ahead of it, not the sort of certainty a businessman looks for. Of course, economic hardship does tend to drive up cheap entertainment numbers, so that means a lot more TV's will be flickering. Of course, you're competing with a seemingly unlimited number of channels and a fair amount of pro sports to boot.

Yet, the damage could be done already. The Oilers still have Rexall leased until 2014 and I'm guessing that if it is apparent by say.. October 17th that the Oilers will be moving, I would anticipate their last year in their home city would be uncomfortable, to say the least.

Daryl, threatening a move now doesn't provide much security on a 35 year deal. You've continuously complained about how long this deal has taken to seal, yet you continue to change the terms of agreements and even refuse to justify these changes with real numbers and verifiable facts. You were winning completely on good faith with the public. Keyword: were.

PS, David Staples,

I appreciate your addition this time of:
The only things that will change that willingness to pay are an Oilers owner pulling a Pocklington and selling off star players, or the Canadian dollar taking a huge hit while the local economy goes in the tank. In the first instance, the owner himself controls that. In the second, Katz or any Oilers owner does have some cause for worry.
But in what business is there no worry? That is also the nature of business, no?
There is always worry in business, but what needs to be addressed is the allocation of risk/reward. Good business decisions properly account for this risk, and due to the global financial situation right now this risk - I believe - is quite high. The odds of which outweigh the alternative.

None-the-less, I appreciate you mentioned this as a real concern.


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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

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