June 22, 2012; Pittsburgh, PA, USA; Nail Yakupov poses for a photo after being selected as the number one overall draft pick to the Edmonton Oilers in the 2012 NHL Draft at CONSOL Energy Center. Mandatory Credit: Charles LeClaire-US PRESSWIRE

“Edmonton is not necessarily a great hockey market”


Daryl Katz finally did what is so very rare for Daryl Katz to do; speak to the media. Specifically he sat down for a hour-long interview with David Staples and John MacKinnon of the Edmonton Journal. If you haven’t already read/heard the interview, you can find it here.

Obviously he does this given the fervour that has surrounded the proposed arena district, specifically, revelations that Katz has gone back to Edmonton City Council demanding to receive an annual $6-million subsidy to cover operation costs. The optics of which are a bit of a sticking point, given that a 6 million dollar subsidy would more than offset the 5.5 million dollars the Katz group would pay in annual instalments. This has led to a shift in public support in the project, especially in the Council chambers at City Hall.

Katz goes on to try and clarify his position and reasoning for asking for an operations subsidy, to be honest, I find a lot of it to be suspect, and there’s some real gems in the interview that leave me flabbergasted.

 

“Edmonton is a great hockey town, not necessarily a great hockey market. We have the best and the most knowledgeable and, to be honest, the most loyal fans in the NHL. That’s what we believe. But Edmonton is tied for the smallest media market by far. And we have the lowest percentage of corporate season ticket holders.” – Daryl Katz, interview with the Edmonton Journal, September 18th

 

This is quite possibly the hardest statement for me to reconcile. Not so much the latter end, as yes, Edmonton’s media visibility and corporate base is smaller than most other markets in the NHL. Despite this, Forbes has Edmonton as the 6th highest revenue generating hockey club in the NHL. I’d say that if you outperform a vast majority of other markets, despite having a smaller media presence and smaller corporate base, you’re a pretty damn great hockey market. I’d even wager to say the 6th best in North America.

 

“I bought the Oilers (in 2008) because the EIG (Edmonton Investors Group) was fractured and Edmonton’s ability to keep the team was at risk. OK? Nobody can doubt that. That was only four years ago. EIG knew and the Katz Group knew that the key to Oilers’ sustainability was a new model and a new arena.  … Now I’ve been at this five years. I spent $200 million on the team. I’ve funded operating losses since. I put $70 million into acquiring land. Nobody can question my good faith or my commitment.”

 

That’s some rather nice revisionist history there; the EIG was fractured, but mainly due to the increased pressure Katz put on the EIG to sell the Oilers. Cal Nichols of the EIG stated that it was akin to a hostile takeover. “This is not about dollars. This is about Edmonton. An ownership group is best-suited for Edmonton and the Oilers.” Nichols was quoted as saying at the time, contradicting the statement that both the EIG and KG knew that the Oilers needed a new model to remain sustainable.

While I do know the difference between revenue and profits, I find it very odd that the Oilers, one of the top revenue generating teams in the league, has had operating loses of any consequence. Open the books and prove it; if that statement checks out, I’ll admit to being wrong. Until Katz does, I’ll feel free to doubt it as much as I want to.

 

 “I asked Katz why any public subsidy of the arena is needed, with Toronto, Montreal, Ottawa and Vancouver all building arenas in recent decades with largely or fully private financing. But Katz pointed out that various owners, Rod Bryden in Ottawa, the Molsons in Montreal and the Griffiths in Vancouver, all suffered huge losses and lost control of their arenas and teams.”

 

We continually hear the virtues of what economic benefits the proposed arena district will bring to downtown, but sporting venues carry a large amount of financial risk, as Katz points out his reasoning against going all in and funding the project himself. The issue of financial risk doesn’t simply go away by flipping the switch from “privately-funded” to “publicly-funded”, it merely shifts the liability. One only needs to look at the financial disasters of the SkyDome in Toronto and Olympic Stadium in Montreal. I get that people are frustrated by the lack of progress on this deal, I really do, but this is something that needs to get done properly; and I’m glad that now Edmonton City Council seems to be a little more for the best interests of the city after giving Katz a sweetheart deal.

It’s not 1997 any more.

This wasn’t really anything addressed by the interview but  lot of people have taken the timing of the events, and quotes from the Katz Group such as “All bets are off” as veiled threats to move the team if he doesn’t get what he wants in terms of the arena deal. I see it as veiled threats as well, but ultimately empty ones at that. Katz is a shrewd businessman, one that will use anything to his advantage, and that includes exploiting the scare of Edmonton losing the Oilers. I think most of us remember the scare of the mid 90′s fairly well, and it’s obviously lingered in the back of our collective conciousness. It makes no sense from any logical standpoint to move the Oilers, Edmonton is one of the NHL’s strongest markets, despite it’s size; there’s no market out there, not served by the NHL that would be stronger than Edmonton. We nearly lost our team because we had a financially challenged owner and operated in a small market at a time the Canadian Dollar had no strength, this is no longer the case.

The Oilers aren’t going anywhere, folks.

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Tags: Daryl Katz Edmonton Arena EIG