Amid Broadcast Drama, San Jose Sharks Can’t Afford a Total Teardown
For a decade spanning their first two Stanley Cup wins in the early 90s to the NHL lockout in 2005, the Pittsburgh Penguins watched the makings of an all-time team fall victim to an all-time horrorshow of ownership and management incompetence.
Eventually, the Howard Baldwin era ended, and franchise icon Mario Lemieux took over as owner along with California business magnate Ron Burkle.
The team began to gather itself. General Manager Craig Patrick collected blue chip draft prospects the summer following every league-worst season. If the present was lost, the future, it seemed, held hope.
Eventually, those prospects became roster staples, and the team seemed to be on the rebound. Fans were returning. For a season, Mario and Sid skated the same ice.
On the hockey end, things were coming alive.
Still, by 2007, there was reason to believe that the team and its myriad financial uncertainties would be on the move to Kansas City, where the stability of a new arena, and perhaps new ownership, would be waiting.
Maybe that deal would have gone through, if not for a bevy of factors both too long and too incredible to list here.
Through all, the Penguins were no sure bet to stay in Pittsburgh. As turmoil reigned behind the scenes, the hockey improved. Fans were engaged, committed — there was no question that where there was good hockey in Pittsburgh, there would be good fans.
By early 2007, Mario took the ice before the Mellon Arena crowd, announced that the planets of an arena deal had indeed aligned and since then his Penguins have rebounded to become one of the NHL’s healthiest clubs — last valued at $480 million by Forbes Magazine, fifth-most valuable among American franchises.
Not far behind them are the San Jose Sharks, the 9th-most valuable US franchise and one that saw its total value climb some 82 percent (to an estimated $405 million) in the last year-over span.
The Sharks have posted franchise valuation increases in every season since 2006 and hold the league’s second-longest playoff appearance streak at 10 seasons and counting.
The hockey is good in San Jose, and the fans are good as well — better than 97 percent attendance in 2013-14 for a franchise that is among hockey’s newest in a market that is one of its most unproven.
Like Pittsburgh, San Jose has a good product on the ice (if one that doesn’t always live up to expectations). But now, like Pittsburgh, the Sharks could be entering a period of turmoil off the ice.
It took a few years of viable hockey to turn Pittsburgh’s business model into a good one. Over the last decade, few teams can match the Sharks’ level of sustained success.
So if the on-ice product in San Jose is good (and it is), why are the Sharks suddenly in danger of being swept up by the NHL’s business undertow?
Certainly, a poorly negotiated television deal can’t be the straw that’s breaking the Sharks’ back?
According to Mark Purdy of the San Jose Mercury News, that could indeed be the case.
Simply put, the Sharks’ local television contract is not acceptable to them. They think it stinks. Stinks so bad, in fact, that it could affect the team’s long-term ability to stay in San Jose and the Bay Area.
How serious is the concern over the Sharks’ television deal? I have learned and confirmed that National Hockey League commissioner Gary Bettman has taken the extraordinary step of personally intervening in the matter. Bettman has contacted high-level honchos at Comcast corporate offices in Philadelphia to see if the Sharks’ local television deal can be reworked. Comcast is the parent company of Comcast Sportsnet Bay Area, which broadcasts Shark games.
So far, the Bettman talks have not been fruitful.
NHL teams, like every big four sports franchise, rely on television broadcast deals to float their bottom lines. In recent years, deals with regional sports networks (RSNs), which usually cover most regular season games and some playoff games with the NHL, NBA and MLB, have grown astronomically more valuable.
The New York Rangers bring home $35 million per season in rights fees from their RSN deal with MSG+. The Toronto Maple Leafs earn $41 million a year from their deal with Rogers Sportsnet, whose parent company recently struck a $5.232 billion deal with the NHL to broadcast national games in Canada.
Across the big three RSN sports (all NFL games are broadcast on network TV), teams are finding new and huge revenue streams with RSN deals.
And, at just $7 million per season (for 14 more years) from Comcast Sportsnet Bay Area, according to Purdy, the Sharks are in shallow financial waters as far as RSN deals go.
Renegotiating the deal is on the table, but not necessarily a sure thing. Comcast, which holds the deal with the Sharks through its Sportsnet Bay Area subsidiary, owns NBC, with whom the NHL has its massive US national broadcast agreement. Flyers owner Ed Snider is the chairman of the group that owns Comcast Sportsnet and is among the league’s most active owners.
As far as connections go, there is no shortage of business ties between the league and NBC. Good or bad, communication between the league and Comcast Sportsnet is assured, if nothing else.
However, as San Jose Sharks blog Fear the Fin notes, this isn’t the first time NHL Commissioner Gary Bettman has become involved with one of his franchises in a tenuous business situation.
What struck me as interesting about Purdy’s article was the reference to NHL commissioner Gary Bettman intervening in the dispute as an “extraordinary” measure. I’m not so sure it’s all that extraordinary.
When he isn’t locking out players, securing the interests of team owners is Bettman’s job. It’s an established part of the playbook at this point.
Threatening relocation is a fairly standard scare tactic for sports franchises looking for a handout. That handout is usually from taxpayers to finance a new arena deal (which, based on Purdy’s article, might be the next chapter of this book), here it’s to force a rights holder to adjust a contract in the Sharks’ favor.
As noted, threats of relocation are to the business of pro sports as the endless napkin is to a bad magician. It’s an old tactic, one aimed at leveraging bargaining power and one that rarely results in actual relocation.
We saw Bettman side with Oilers owner Darryl Katz in getting approval for a new, publicly-financed arena in Edmonton. Ditto Pittsburgh, and nearly every other team that has sought financing for new venues in recent years.
If the deal with Sportsnet Bay Area is indeed so bad that it is sinking the Sharks’ finances (and Forbes does report operating losses in five of the last nine seasons, despite playoff runs in each year and rosters that typically reach near the upper limits of the salary cap), a reworking of the deal might in fact be essential.
More essential than that is that the team continue to play winning hockey. And that’s not going to happen if the team falls in love with an ill-advised roster rebuild.
Following their dramatic reverse sweep at the hands of the Los Angeles Kings this postseason, the Sharks were left again to answer questions about their postseason flameouts.
However, the same factors that open them to postseason criticisms — namely, their regular season success — are the ones they rely on to field a good team of any kind.
The Sharks finished with 111 standings points last season, tied for third-best in the Western Conference and the fifth-best overall record in the NHL.
As Yahoo Sports’ Nick Cotsonika noted in his latest column, the Sharks just had too much going for them last season to think a full teardown is the solution.
But the Sharks have made the playoffs for 10 consecutive seasons – only the Detroit Red Wings’ 23-season streak is longer – and have made the Western Conference final three times in that span. They were the third-best possession team in the NHL during the 2013-14 regular season, behind only the 2012 champion Kings and the 2013 champion Chicago Blackhawks. They had 111 points, tied for fourth-most in the league.
When things go well until the postseason, there is the inclination to create change.
For this, there are cautionary tales to be had.
Following a President’s Trophy win and first-round upset in 2010, the Washington Capitals uprooted their high-flying, offense-first philosophy, adopting new tactics that were unfit for their roster.
Washington hasn’t matched that performance in any season since, not even close. This year, they missed the playoffs entirely.
The Sharks have already parted ways with mainstay defenseman Dan Boyle who, at 37, is still an effective player. Martin Havlat seems soon to follow him. Though the Sharks are under the salary cap ceiling, more changes could be in store.
If those changes should include drastically altering a formula that kept the Sharks near the top of the standings in an unbelievably competitive Western Conference last season, they will not be better served for what will be billed as turning an eye to the future.
San Jose has never reached a Stanley Cup Final, but even with that all-time loss to the Kings fresh on everyone’s minds, tearing down an otherwise strong team reads more like change for the sake of change than anything else.
Especially if the team’s finances are so dire that an end to the playoff streak could mean taking an operating loss for the year.
According to Forbes, the Sharks have posted profits or losses somewhere within $10 million of breaking even over the last nine seasons. Home playoff games tend to be huge revenue generators. Missing out on those dates, even one series’ worth, could be the difference between posting a profit and a loss.
As always, what goes on behind the scenes informs what will happen on the ice. However, as Pittsburgh has proven, what happens on the ice can sometimes force the hands of those working in the upper offices of the arena.
If the Penguins continued their losing ways as the time to decide on a new arena drew close, there’s little reason to believe they wouldn’t be in Kansas City right now, operating out of a new arena designed to squeeze every sponsorship dollar possible out of a given game.
By returning a competitive product to the ice, Pittsburgh reasserted itself as a viable hockey market, keeping the franchise from uprooting itself and helping to validate the league’s relocation scare tactics as a genuine tool for hammering out more favorable business deals — be it with a sponsor, a broadcast partner or even a city council.
With San Jose looking at significant renovations to the SAP Center in the coming seasons and no sure fixes for their terribly low RSN deal, continuing to play strong hockey is essential. The Sharks need to keep people coming out to the arena. In a market where attendance is guaranteed no further than the team’s ability to play hockey worth paying to see, the Sharks must continue to field a winner.
They will be much closer to doing so by sticking with the formula and the core parts of a roster that has taken them to 10 straight postseasons.
Even if that means standing by the shame of another bad postseason loss in the process.