The National Hockey League’s Phoenix Coyotes filed for bankruptcy today. The club has over $108.4 million in unsecured debt, most of it money loans from Coyotes CEO Jerry Moyes. The team can’t make lease payments on its government-owned arena, and the National Hockey League has been
bailing out loaning Moyes cash just to meet basic expenses. The bankruptcy petition proposes selling the club to a group headed by Research in Motion co-CEO John Balsillie, who has offered $212.5 million, provided he can move the team to Hamilton, Ontario, where he’s already lined up 12,000 season ticket holders.
So it sounds like the market is working pretty well. A failed business will be liquidated and relocated to a market where it’s likely to do better. Except NHL Commissioner Gary Bettman is adamantly opposed. He’d much rather continue losing money in Arizona:
NHL deputy commissioner Bill Daly said in a statement Tuesday that league has been notified of Phoenix’s dire situation.
“We have just become aware of today’s Bankruptcy Court filing purportedly made on behalf of the Phoenix Coyotes,” Daly said. “We are investigating the circumstances surrounding the petition, including the propriety of its filing. We have removed Jerry Moyes from all positions of authority to act for or on behalf of the Club. The League will appear and proceed before the Bankruptcy Court in the best interests of all of the Club’s constituencies, including its fans in Arizona and the League’s 29 other Member Clubs.”
Sources tell ESPN.com’s Scott Burnside the NHL will oppose the Balsillie’s move to purchase the team, as will the City of Glendale. It is believed the city will argue filing for bankruptcy does not give the team the right to break their lease, and that commissioner Gary Bettman was dealing with the situation in Phoenix when he was informed of the bankruptcy proceedings and the bid to sell the team to Balsillie.
Bettman is “dealing with the situation” by simply throwing more money down the hole. He doesn’t want to admit that the NHL’s artificial-boom-fueled expansion and reliance on government-funded arenas was a poor business strategy. The NHL is the sports equivalent of the Fed; it’s been printing worthless money in the form of new franchises for decades. Consider this: From 1978 to 2008, the National Football League and Major League Baseball increased their total “output” of regular season games by about 15%; during that same time, the NHL increased output 81%. Somehow, baseball and football remain more popular and profitable despite a slower growth rate. Some would say there’s a lesson here.
The Coyotes’ situation demonstrates the basic problem with sports “commissioners” – they’re politicians, not businessmen. Bettman has no equity stake in the NHL or its member clubs. His primary concern is managing political relationships, particularly with the cities he fleeced to fund arenas. Relocating the Coyotes to Hamilton makes terrific business sense, but politically, it’s a challenge to Bettman’s authority and his myopic view that the NHL can support 30 healthy franchises in today’s economy. (The New York Islanders may be the next to go.) Bettman can’t prevent franchises from failing, but he will pretend like they’re not failing to avoid responsibility. Hey, it works for the Fed, right?