Right about now, Gary Bettman must appreciate how Mark Zuckerberg felt 3 ½ years ago. That’s because it looks as though The Great Expansion Sweepstakes of 2015™ is looking an awful lot like when Facebook went public in May of 2012.
When Bettman announced in June that the league would open the expansion process, Bettman could not have in his worst nightmares imagined that so few people would show up to his party. It’s not that people didn’t want to go. It’s just that the price of admission, particularly when you don’t even know if you’re going to get a show, has turned a lot of people off.
Bettman was likely visioning multiple bids from Seattle, another from Las Vegas, one from Quebec City, one from Toronto and some tire kickers from places such as Houston, Kansas City and Hartford. Instead, only bids have come in from Las Vegas and Quebec City, with the possibility of one from Seattle from Connecticut businessman Ray Bartoszek, who is trying to get an arena deal in the Seattle suburb of Tukwila.
Prospective owner Victor Coleman tried to get a deal done for a rink in downtown Seattle and wasn't able to do it in time for the deadline. In Toronto, the costs of doing business have risen dramatically. In 2013, venture capitalist Graeme Roustan had a deal to build a rink in the suburb of Markham for $325 million. Had the city’s council accepted the deal proposed by Roustan and backed by its own mayor, they’d probably be putting the finishing touches on the rink right about now.
But that cost has risen by about $100 million in an economy where the Canadian dollar is tanking worse than the Buffalo Sabres did last season. And speculation is that the NHL would have wanted an expansion fee of up to $600 million, which is almost $779 million in Canadian funds. That puts the cost of an arena and a franchise at almost $1.2 billion in Canadian funds and there aren’t too many bankers willing to spend that kind of coin, even for a team in the most fertile hockey market in the world. It just doesn’t make sense.
(By the way, Roustan maintained in 2013 that at $325 million, the arena in Markham could have been sustainable without an NHL tenant. At $100 million more, that’s probably no longer the case. And without the assurance of a team, there's no point in building an arena. That was not the case a couple of years ago.)
In Seattle, where the NHL most certainly wants to be, it turns out giving someone a month to put together an arena deal isn’t really feasible. Victor Coleman, who appears to be the person of choice to own an NHL team in Seattle, still hasn’t been able to secure funding for a downtown arena and the good people of Seattle don’t seem willing to foot the bill for an arena that doesn’t include a basketball team. Coleman is reportedly working behind the scenes to continue his efforts on that, which makes you wonder how much of a firm deadline today really is anyway.
Maybe, just maybe, Gary Bettman is going to have to admit what has become obvious, that he overestimated the value of his product and he’s going to have to bring his price down. Even in the application process, those applying were guaranteed to lose at least $2 million. It turns out that a lot of guys who have a lot of money aren’t in the habit of throwing it down a sinkhole, even when it’s a relative pittance. That’s how most of these guys got rich in the first place.
The people who may come out of this the most disappointed are the good people of Quebec City, who built an arena with public money because the NHL said they wouldn’t get a team without it. The worst thing fans in Quebec could do at this moment is surmise that, if Seattle doesn't apply by today's deadline, they’re going to get a team. That may happen at some point, but all signs are indicating that the league wants Las Vegas and Seattle and that Quebec will get a team only in this round of expansion if all attempts to build an arena in Seattle come to a complete dead end.
And who knows? Bettman has gotten himself out of more jams than most executives over the years and has had a pretty good run of success. And after losing about 50 percent of their value, Facebook stock is red hot these days, trading at $98 a share. Perhaps Bettman’s public offering will end with the same success, but it doesn’t look particularly good at the moment.