Demythologizing Ice Edge: A look at the Coyotes' potential new owners

 

Ice Edge Holdings, LLC is either a group of deal-savvy businessmen intent on taking a struggling NHL hockey franchise and building it into a winner, or it is the biggest collection of fools on the planet.

There seems to be nothing in between. At least, not if you ask fans and pundits around the National Hockey League.

IEH and the NHL have each signed a letter of intent for Ice Edge to purchase the Phoenix Coyotes from the league, and pending approval from the Board of Governors the group could end up as the official owners of the club before the end of the 2009-2010 NHL season.

According to the Ice Edge mission statement, the investors in the potential ownership group

...believe that the Coyotes are an undermanaged and underutilized asset. It is the group’s intention to pursue a strategy to keep the team in Arizona for the longer term. Ice Edge Holdings has developed a detailed plan to create a viable hockey future in Arizona.

Seems pretty straightforward, right? Not according to people who purport to know hockey and the business thereof, who are casting doubt on Ice Edge based on misconceptions and faulty or incomplete information about their plan.

As a public service, therefore, Five For Howling will address some of these misconceptions and, hopefully, will clarify the picture for those who cannot believe that anyone would throw money away on an ice hockey team in the desert.

MYTH: Ice Edge is proving that hockey will not work in Arizona by needing to play games in Saskatoon.

FACT: Ice Edge is indeed hoping to play up to five regular season home games in Saskatoon, Saskatchewan, but not for the long term. In fact, the proposed Saskatoon games are a short-term "subsidy," as Ice Edge's Anthony LeBlanc described it, to buttress the team's bottom line while the ownership group assesses the team's financial outlook and rectifies the mess left over from the previous administration. Certainly, if the plan was to play five "home" games in Saskatoon or another Canadian city in perpetuity, it would be a different story. But IEH principals are adamant that their idea for Saskatoon is intended to be a win-win for everyone - bringing NHL hockey to a hockey-mad Canadian city that is simply too small for an NHL franchise, and pumping operating capital to help solidify the franchise's finances in the short term.

MYTH: Ice Edge's Anthony LeBlanc is planning to flip the franchise in a couple of years and relocate it to Canada.

FACT: Ice Edge is planning to assume the original lease with Glendale established when the team moved from downtown Phoenix - a 30-year lease that has 26 years remaining on the term. Ice Edge does plan to negotiate with the city to make the lease conditions more favorable financially to the franchise, but the lease duration has never been part of those negotiations.

Part of the reason why this myth has been spread is that LeBlanc previously worked for Research in Motion (RIMM), the Blackberry-manufacturing corporation whose CEO is Jim Balsillie, the man who attempted to purchase and move the Coyotes to Hamilton, Ontario. LeBlanc spent 8 years at RIMM as the Vice President of Global Sales. Some pundits and fans believe that LeBlanc is keen on finishing the job his former boss started - some of the more tinfoil-hatted theorists believe that Balsillie is, in fact, one of Ice Edge's silent investors. However, LeBlanc has been very public in his statements that his connections to RIMM are coincidental with regards to his interest in the Coyotes. Common sense would further indicate that it would be a true measure of his business acumen - and a jab at his old boss - if he were to be a part of a successful Coyotes salvage when Balsillie claimed that the team could not be saved.

Another reason why this myth has found purchase is the revelation that Ice Edge is hoping to have the Coyotes' farm team take up residence in Thunder Bay, Ontario - a cause dear to the hearts of LeBlanc and fellow IEH investors Keith McCullough and Daryl Jones. The three have been trying to get an OHL team to Thunder Bay for several years, and the opportunity to purchase the Coyotes presents them with a golden chance to benefit their hometown. Their plan is to end the Coyotes affiliation with the San Antonio Rampage and establish a new AHL franchise in Thunder Bay.

MYTH: The Ice Edge investors are insane for throwing money away on a team that will lose at least $30 million a year no matter what else happens.

FACT: The entire intent of the Ice Edge ownership group is to prove, through their own business and marketing acumen, that a mismanaged sports franchise can be salvaged through common sense and forward-thinking operations. "What we found was what I like to refer to as a business case of how not to run a business," LeBlanc has said. "This was perhaps the most poorly run business I have seen in my experience and my partners feel the same way."

Now, let's not beat around the bush. The Coyotes stand to lose a lot of money this season - a result of nearly a decade of mismanagement by Jerry Moyes that saw the team's operating costs skyrocket to the highest in the NHL even with a salary budget near the cap floor, as well as a summer's worth of image demolition by Moyes and Balsillie during the Coyotes' bankruptcy proceedings. And indeed, the losses are not likely to stop for a couple of years at least while Ice Edge restructures the team's operations and works to win back a skeptical fan base.

But the idea that the Coyotes will hemorrhage money because they always have is ludicrous. At least the Ice Edge people think so. In their minds, buying the Coyotes at a bargain basement price with a brand new arena in an area that is quickly becoming one of Metro Phoenix's major sports hubs is a terrific deal - a classic case of buying low to sell high. Ice Edge will be fronting a great deal of the purchase price in upfront cash so that their debt load will be minimal, and from there they plan to put sound business principles in play to get the franchise's books healthy.

MYTH: Even discounted tickets and a good team are not helping to sell out Jobing.com Arena. Nothing Ice Edge will do can change that.

FACT: There are two enormous obstacles to Phoenix fans trusting the Coyotes, even with exceptional management from Don Maloney, great coaching from Dave Tippett, Dave King, Ulf Samuelsson and Sean Burke, and a solid playoff-worthy record.

First, they need to know the team is staying. Everyone in the world seems to be telling Phoenix fans that there's no way in hell that the Coyotes are staying in Phoenix - no matter what anyone says to the contrary. IEH, consequently, chose to step into the original arena lease instead of negotiating a new one. They did so, according to Ice Edge's Daryl Jones, to help Phoenix fans "open their hearts" and invest their trust in the franchise again.

The second thing that needs to be overcome is skepticism over the Ice Edge principals' competence and passion for the game. For almost a decade, the Coyotes were run by a trucking magnate who rarely involved himself at all in the team or in the game of hockey itself. The Ice Edge principals have one enormous notch in the plus column that Jerry Moyes never had - they know, love, and have even played hockey. They are not approaching the Phoenix Coyotes as a chip in a game of high stakes real estate poker like Jerry Moyes did. Moyes came to hockey by accident and kept his distance from the sport over the entire duration of his ownership. The team was an asset that he used while shuffling his money around, and very little else. The Ice Edge partners, on the other hand, have been involved with the game of hockey their whole lives. They have a personal stake in making Phoenix sports fans love the game the way they do - unlike Jerry Moyes, for whom hockey was a notation in a ledger, the Ice Edge partners plan to proselyte the game to the citizens of Phoenix as if they were hockey missionaries.

Part of the Coyotes' problem over the decade they have been in Phoenix is that the city has accepted them only as another in a portfolio of pro sports franchises - an additional feather in the city's cap. Hockey cannot succeed that way, no matter the location. Ice Edge is intent on building a hockey culture in Phoenix. While it is true that, in an ideal world, such a culture would have existed prior to the NHL moving the Winnipeg Jets to Phoenix, it is certainly better late than never in this case.

MYTH: This is never going to work.

FACT: Nothing is ever certain in life. Ice Edge may not be able to save the Coyotes despite their best efforts. But their odds of succeeding are far, far greater than anyone seems to be giving them credit for at this juncture. And for fans of the Phoenix Coyotes, hope is a currency far more valuable than gold.

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