On this date in 1917 the Seattle Metropolitans beat the Canadiens 9-1 to become the first American team to win the Stanley Cup.
Earlier today, Chris Daniels reported an article about the Final Environmental Impact Study on the SoDo Arena has been slowed down and is not expected until the end of summer at the earliest. A tweet publicizing the post had text that said “could hold up NHL” even though the article failed to really address the potential delay.
Seattle Arena EIS on hold; Could hold up NHL to Seattle: http://t.co/GtN9aYG8Am
— KING 5 News (@KING5Seattle) March 17, 2014
This seemed to cause a minor tornado on Twitter and Facebook. After people had a chance to read the article, most people reached the same conclusion I did, there was no change. Similar to “news” items in the past, I felt the need to explain why it really was not news.
This is a very complex and fluid situation and since no parties are talking publically, we have to connect all the dots as they are revealed to us. We then need to speculate on the gaps, issues and anything else we can think of that will get us a team to Seattle. In order to illustrate the complexity of the situation and what I see has the major open issues I created a diagram. I try to identify the major open issues in each area and it is clear to me why everyone involved is staying close to the chest. What is not clear is the sequence of events to start resolving everything.
Let me know your thoughts and feedback. I will constantly be refreshing this as we learn more.
We have heard much of the news lately about 3 potential ownership groups interested in brining an NHL franchise to Seattle. It is also clear that the NHL views Seattle as an attractive market. So what makes Seattle such an attractive market?
Regional Sports Networks (RSN) are a critical revenue stream to pro sports these days. Seattle is the second biggest DMA that is currently without a regular NHL team on a local RSN. Root Sports Northwest currently serves about 3 Million households a month in Washington, Oregon, Idaho, Montana and Alaska. Although small, those last two states are fairly significant considering their appetite for hockey.
From a national perspective, having a team in Seattle should help NBC/NBC Sports numbers as well. It should be pointed out that our current viewership is split with CBC. That will change over the next few years as the HNIC broadcast will be of lower significance as the Rogers deal in Canada takes hold.
Of the top 50 biggest metropolitan areas in the country, Seattle ranks 7th in Average income and is the 2nd highest average income city without an NHL team. Hartford has a slightly higher Average Income but roughly a third of the population of the Seattle area.
I posted an article on SonicsRising last week on the risk to the city of amending the Memorandum of Understanding (MOU) to allow an either NHL or NBA scenario. Currently the MOU reads that an NBA team must be obtain before breaking ground on the SoDo Arena. I wanted to document the same content here so if you read the SonicsRising post, you probably don’t need to read this one.
The premise of the MOU is simple. ArenaCo will pay the city rent + taxes generated specifically at the arena will be the mechanism on which how the City of Seattle gets paid back the loan for the Arena. So on that last part, taxes on ticket sales and concessions will be applied to the loan from the city. (I am trying to keep this simple).
My argument is that the City has less risk if an NHL team is the lone tenant in the building vs. the NBA. This is backed up with data from 3 supportable metrics.
1) Attendance: NHL averages higher attendance than the NBA. Higher attendance = higher tax revenues
2) Ticket Prices: NHL averaged higher ticket prices than the NBA. Higher ticket prices = higher tax revenues
3) Demo Profile: According to The Nielsen Company report, 53% of NHL fans income is greater than $75K per year vs. 33% of NBA fans who have income over 75K a year. More disposable income = more money spent at the arena and therefore more tax revenues.
Now the reality is that the Sonics are more popular than a potential NHL team but the city used league averages to run their risk analysis models. Therefore the logic I lay out above should stay true when evaluating the risk of changing the MOU to potentially lead with the NHL. From a city’s perspective, changing the MOU should be an easy exercise.
The complexity comes from the other party in the MOU agreement, ArenaCo.