Would an NHL team in Las Vegas be a good gamble?
Render of proposed Las Vegas arena (MGM Resorts International)
Would an NHL team in Las Vegas be a good gamble?
Sin City offers plenty of temptations that even the NHL can’t resist exploring, but would a team in Vegas stay in Vegas? Veteran reporter Stu Hackel takes an in-depth look.Is a Vegas wedding in the NHL’s future? Las Vegas brands itself as the live entertainment capital of the world, and the NHL believes its games provide best live sporting attraction in the world. It seems like a natural fit. But there are as many reasons to be skeptical as there are to believe this would be a long and happy marriage. In early December, after months of media speculation, the NHL’s board of governors gave would-be franchise owner Bill Foley permission to conduct a season ticket drive in Las Vegas to help determine that city’s level of interest. Foley is chairman of mortgage giant Fidelity National Financial, and he has been in discussions with NHL commissioner Gary Bettman for some months about acquiring a team for the internationally renowned resort city. Foley’s partners in Hockey Vision Las Vegas LLC are the Vegas-based Maloof family, who once owned the NBA’s Sacramento Kings, a lucrative beer distributorship and majority stake in Las Vegas’ Palms hotel and casino. The 2008 recession eventually forced them to sell all of that except two percent of the Palms, and their level of ownership participation is unclear. Some believe they’re included largely because they have local roots, which the league smiles upon (Foley currently lives in Florida, California and Montana), and because they have experience in sports ownership.
If this group gets a franchise, their team would play in a 20,000 seat, $375-million state-of-the-art sports arena and event center, which began construction last May in a prime location on the Vegas Strip, between two major hotel/casino complexes, New York-New York and the Monte Carlo. Set to open in 2016, it’s privately financed by MGM Resorts International and AEG, which owns the Los Angeles Kings. It’s being built to NHL (and NBA) specifications and will feature lucrative revenue-producing amenities, like 50 luxury suites, more than 25 luxury loge boxes and numerous food and beverage options.On the league’s checklist for potential expansion markets, a suitable arena and strong ownership are two boxes that must be X’d off. A third is the market itself. If Las Vegas has checkmarks by the first two, it’s the third one – a market everyone calls “unique” – that remains blank. That’s why Foley requested the ticket drive and set up a website, lasvegas-hockey.com, to help gauge local interest. Although Foley has acknowledged Bettman assisted him in taking that step, the commissioner took great pains to explain that green-lighting the ticket drive was not part of a “formal expansion process.” “There is no vote that was taken today,” he told reporters covering the board of governors meeting. “There is no vote that was contemplated. We don’t have an agreement to sell anybody an expansion franchise. However, the interest that we are getting from Las Vegas has raised lots of questions about the market itself and the interest level in supporting a professional team in Las Vegas.” Just like the construction of a new arena in Quebec City won’t guarantee that city an NHL team, Bettman stressed nothing has been promised to Las Vegas, even if the ticket drive goes well. Deputy commissioner Bill Daly seconded Bettman’s caution. “I know people would like to speculate that we have already decided that we are expanding, but the fact of the matter is that we haven’t,” he told The Hockey News via email. Foley also attests he’s received no promises. But his ticket drive won’t do anything to slow the rampant belief that Vegas is, if not “a done deal” – the term first used by Tony Gallagher in the Vancouver Province in a story in August – then pretty close to it. Nor will Foley’s sudden visibility in the hockey world. He disclosed in various December interviews that both Wayne Gretzky and former NHLer Murray Craven were advising him, that he believed the city was ready for an NHL team and that his own confidence in getting a franchise had “increased dramatically” following talks with Bettman and the board of governors executive committee over the past few months. Gallagher’s article and a tweet by Ottawa-based sports business publisher Howard Bloom ignited the media wildfire this summer by saying expansion was all but assured, and both prominently listed Las Vegas as a target city. Starting almost immediately, others added fuel, even though Bettman called the stories a “complete fabrication.” The price of a franchise was reportedly set at $400 million. Many suggested dates when this all might take place, and the league’s centennial season (2017-18) was the favorite, though some now believe Vegas might be admitted sooner. Speculation immediately began on names for the nonexistent franchises (Foley said he likes the “Black Knights,” a tribute to his alma mater, West Point) and some even conducted mock expansion drafts to see what expansion teams’ rosters might look like. The other three cities named last August are traditional markets and, on the surface, at least, made sense: Quebec City, a second Toronto club and Seattle – which has had a century-long succession of pro and junior clubs, including the first U.S.-based Stanley Cup champion, the Metropolitans in 1917, and would provide a perfect rival for the Canucks, Kings, Ducks and Sharks. But Las Vegas? The game’s roots lie shallow in the sands of the Mojave Desert. Pro hockey there goes all the way back to the 1990s – six seasons of the International League’s Thunder, two seasons of nothing, then the Western States League’s Rattler’s in 2001, which two years later became the ECHL’s Wranglers, whose franchise has gone extinct. Vegas has produced one NHLer, the Wild’s Jason Zucker, who grew up playing lots of roller hockey and on ice rinks located in hotels. He had to move north as a teenager to face better competition. That hasn’t dissuaded the NHL, which is intrigued enough by Vegas’ potential to urge Foley to take his best shot. Why does Las Vegas intrigue the NHL? First, it’s the largest U.S. metropolitan area – more than two million inhabitant – without a pro sports franchise and an astounding 40 million people visit Las Vegas each year. If the NHL became the first league in, it could conceivably capture the market. Plus, its location in the Southwest wouldn’t just add a team to the Western Conference –which has two fewer teams than the East – it would help fill out the NHL’s U.S. national TV footprint. That has been part of Bettman’s vision for 20 years. “The Las Vegas market has favorable resident income and fan demographics,” said Daly, adding that “TV ratings information would suggest a better than passing interest in professional sports and in hockey in particular.” Last season’s Nielsen ratings for NHL national U.S. telecasts confirm that interest. Vegas ranked 13th among all markets and third among non-NHL markets for viewership of combined NBC and NBCSN telecasts. This season, perhaps sparked by expansion buzz, it ranks ninth overall and first among non-NHL markets of NBCSN games. Daly believes the Las Vegas audience extends beyond those who have a betting interest in the games. “If all of those ‘eyeballs’ were gamblers,” he said, “ratings wouldn’t register as highly.” The biggest ingredient, of course, is the expansion fee. It’s logical – if not a foregone conclusion – for the NHL to consider expansion if only because of the huge payout each current club would receive. Bloom, a former college professor of sports business, points out two related facts that should drive expansion. First, the collective bargaining agreement guarantees labor peace until at least 2020, when each side has the right to opt out, if not until it expires in 2022. “When you have labor peace,” he said, “you can look at prospective investors and say, ‘Hey, now’s a great time to invest.’” Second, the value of NHL franchises has never been this high. When you consider that Forbes places the average club’s worth at $480 million and the Islanders recently sold for $485 million, Bloom said, “It’s reasonable that the NHL board of governors could ask $500 million for an expansion franchise.” The current owners would be overjoyed to take that money, and they’d get all of it. The players get none since the CBA doesn’t include expansion fees as part of hockey-related revenue. At $500 million, that’s well over $16 million to each existing team. Four additional franchises would mean more than $66 million each. Bloom also said the special nature of southern Ontario could lead the league to ask even more. Expansion works for the players, too, he said, by increasing the number of jobs and the size of the union. Four clubs means around 100 additional NHL spots. And the players would benefit from the four new markets likely increasing HRR, as long as those markets perform solidly. And that’s where eyebrows get raised about Las Vegas. “We’re talking about a market where there are far more questions than answers,” Bloom said. While there is plenty of sports interest in town, some maintain it has been built around spectacles – Ultimate Fighting Championship and annual NASCAR, PGA, National Finals Rodeo and boxing events – not teams. No one truly knows how big, or small, the interest is in the city for an NHL team now nor how long that interest would last. As one senior NHL executive said, “You don’t want to create a big problem for yourself.” The NHL has already had a big problem in a southwestern desert city, one that the league once believed was a viable market but has provided more headaches than happiness. The Coyotes’ seemingly never-ending troubles no doubt resonate among the owners, as the league dug $140 million out of its own pockets to buy the team out of bankruptcy – not to mention the many millions spent in legal fees – and had to partially underwrite additional millions in the team’s losses. Combine that with the sad images of large swaths of empty seats that one still sees in Glendale, and you suspect at least some owners will approach Las Vegas carefully, as will Bettman and Daly. Of course, no one knows how strong the Coyotes might have been had their arena been centrally located in the Phoenix area, as originally intended. Location won’t be a problem for a Vegas team playing on The Strip, but other issues are less clear. Some believe the difference between Glendale and Vegas is that the big hotel-casinos would purchase tickets and hand them to their guests and high rollers, filling the new arena, but there is no guarantee those free tickets would actually be used. In Daly’s view, the league cannot depend on tourists to pack the arena for every game. “We believe that any NHL franchise in Las Vegas would need consistent local support to be successful,” he said. Whether a local fan base can develop is an open question. Should the ticket drive succeed, what happens if the new team doesn’t win consistently? Will fans still care or vanish? And beyond that, the league must confront the fact that Vegas is not merely non-traditional. Its major industries – the entertainment and gaming businesses – are bound to create a challenging environment for pro sports if local residents have to decide whether to spend their discretionary income at the casinos or on NHL hockey. There’s also a new boom in nightclubs with world-famous DJs, outdoor events and music festivals that are remaking the city post-recession. Additionally, the nightlife nature of Vegas employs a huge part of the population. One third of the residents work in the evenings, which means a Vegas team is going to have to be creative with its home schedule to get fans to the arena. “(It’s) way, way too premature to have discussed this issue in depth,” Daly said, “but we are aware of it.” The Wranglers started at least one game for 11 consecutive seasons at midnight to accommodate the local workforce. Foley is reportedly interested in regular weekend matinee games and evening contests early in the week, as opposed to NHL teams’ favored dates of Thursday-Sunday, which are big nights for Vegas tourism and entertainment. Having the local economy so heavily tied to tourism presents another issue. Las Vegas, and Nevada as a whole, feel economic downturns more harshly than regions with diversified economies. It struggled badly after the sub-prime housing crisis triggered the 2008 recession. Unemployment tripled between 2007 and 2010, topping off at 15 percent. Some of that was due to a collapse in home building – Vegas had been American’s fastest growing city – but tourism also decreased, with casino revenue dropping for 22 straight months. Things have significantly improved since, with unemployment now less than eight percent, but experts believe Vegas remains vulnerable to fluctuations in the national consumer economy. Another recession would likely heavily impact the locals who are needed to make an NHL team work. The size of the local TV market could also prove problematic. Those Nielsen ratings for national games measure only the percentage of viewers who watch, and Nielsen ranks Las Vegas as the 41st largest in the U.S. with only 719,000 television homes, which is rather small. (Only Buffalo is smaller among current NHL teams, but that city is among the strongest local TV hockey markets in the U.S., something one should not expect from Las Vegas.) How much revenue local TV rights might bring is unknown, but, Daly said, the “ability to generate local revenues is part of any franchise equation and would be evaluated if it ever needs to be.” Not only is the market small, but viewership may not be strong. The city’s nightlife culture and workforce could depress tune-in numbers and make the TV property far less attractive. And finally, there’s the matter of gambling. Would the NHL want to prohibit the Vegas sports books from taking action on the local team’s games, something that was done with University of Las Vegas football and basketball? (That ban vanished 14 years ago.) While Daly told the Minneapolis Star-Tribune in November that, “You don’t want guys in the stands with bet tickets in their hands and the only reason they’re watching the game is so they can cash in on a bet afterwards,” the league’s approach is still unclear. In his email to THN, Daly said, “It’s an issue that would have to be focused on and addressed (or not) if we ever get to the point of having to address it.” And Bettman, too, while not addressing a potential Vegas franchise but legalizing wagering nationwide, voiced some relevant concerns about sports gambling. “Does it change the dynamic of the relationship that a child has growing up rooting for his or her favorite team to enter the concern of are you going to win your bet?” Bettman said. “Secondly, the issue is what does it do environmentally in a stadium and an arena where people’s rooting interests would tend to diverge from the obvious.” But if the NHL seeks a ban, it may run into opposition from the gaming industry. Some are already speaking against a potential ban on betting on the local team. “Bettman might not make the request, but if he does, there should be a unified effort to refuse a sports book blackout of the local team,” wrote Matt Youmans, a Las Vegas Review-Journal sports betting columnist. Youmans also quoted one Vegas sports book director who said that while the NHL only represents about two percent of the total amount wagered on sports, taking the local games off the board would set a bad precedent. Perhaps all these concerns tied to the uniqueness of Las Vegas will be successfully addressed by Foley and the Maloofs. But until that happens, they will remain hard issues to ignore. An NHL-Las Vegas marriage would place hundreds of millions of dollars on the table for the taking. But it also could be a big-time gamble. Should these two tie the knot? That’s what courtships are for. This feature appears in the Jan. 26 edition of The Hockey News magazine. 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