Sunday, December 11, 2005

Lemieux Putting Pressure On Pittsburgh To Buy Them A Rink

Mario Lemieux is claiming that it is doubtful that the Pittsburgh Penguins will remain in Pittsburgh after 2007 when their current lease with the Mellon Arena ends. These kinds of threats were the kind of thing that we (naively) hoped and were often promised would go away in the cost certainty CBA. In a cost certainty system teams would find it hard to lose money unless they did idiotic things like significantly raise their payroll while playing in arguably the worst arena in the NHL (of course this assumes that they do not have other business reasons for wanting to show a financial loss from their hockey team). So the Pittsburgh Penguins came along and spent a lot of money bringing in free agents like Sergei Gonchar, Zigmund Palffy and Mark Recchi and trading for Jocelyn Thibault. None of these guys are playing at the all star level their salaries command. In fact, Thibault was placed on waivers and cleared them (nobody else in the NHL would take over his contract). Pittsburgh is reporting that they are expecting to lose $7 million this year (those projections have them making the second round in the playoffs - which looks highly unlikley at this point). From this I conclude that Pittsburgh is either extremely ineptly run or have reasons that they want to show a loss on their books this year (and I think the second explanation is far more likely).

In the first place, how certain can we be about the claims made about Pittsburgh's financial situation? They may be often repeated in the media, buit this does not make the claim credible. I think their actual books must look better than these reports. These reports are made to make the people of Pittsburgh more sympathetic to the Penguins. It will make local government more likely to buy a new stadium for the Penguins. Pittsburgh is a good hockey market with a bad stadium. It is well known that no owner will actually spend their own money on a stadium when they can extort it from the local government.

Mario Lemieux is quoted saying:

I think we're really running out of time. We probably ran out of time already. It's been unfortunate that the city and the county haven't been willing to work with us over the last two or three years.

Realistically this means that they want to government to work with them now. There is plenty of time for this as long as they can force the government to play ball.

Pittsburgh is a marketable franchise. They have the most marketable young player in hockey in Sidney Crosby (even if he should not be considered a Calder trophy leader at this point). Kansas City has stepped up and announced that they want the Penguins. Kansas City is not as good a hockey market but they will have a first class arena. Other markets exist like Houston, Winnipeg and Southern Ontario that would make for better markets then Kansas City.

Should Pittsburgh move, I think it will because they failed to extort an arena from the local government and they succeeded in extorting one from a more distant city. This is exactly the same business of hockey crap we had been hearing before the new CBA. Cost certainty may have increased the profit margins of the owners, but it doesn't stop them from wanting even more profits on the back of the local governments.

Here is TSN's story on Lemieux's announcement.

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