Positive News On the Phoenix Coyotes' Business Front

Matt Kartozian-USA TODAY Sports

Forbes' annual valuation of NHL franchises values the Coyotes at $200M. Is that significant?

Phoenix Coyotes fans may be pleased to learn that the Coyotes moved from 29th to 25th in the NHL in Forbes Magazine's annual valuation of NHL franchises. With a value of $200 million, this places them above the New York Islanders, Carolina Hurricanes, St. Louis Blues, Tampa Bay Lightning, and Columbus Blue Jackets.

If you have been following the ownership saga that only recently resolved itself, you probably also noticed that the Coyotes are now considered worth $30M more than the NHL's purchase price of $170M. So if Forbes' numbers are correct, IceArizona could in theory sell the Coyotes today and make a profit.

Now, as a caveat, we have no way of knowing how Forbes acquires its data or if its figures are even all that accurate. Like most non publicly-traded companies, the NHL is extremely tight-fisted when it comes to information about its franchises. Also, per Forbes in their introductory article:

Our data comes primarily from sports bankers, public documents (municipal arena leases and financial reports), consultants who provide research and conduct studies for cities on the economic impact of an NHL team, arena naming rights and arena financing, credit rating agencies, player agents, network and cable executives, arena operators and, in a few cases, the teams themselves. Our revenue figures include proceeds from non-NHL events that go to the team owner, such as concerts, and subtract arena-generated funds that are used to pay arena debt.

So, Forbes acknowledges that much of their information is second-hand, which means a fair amount of guesswork is involved. So there is no clear way to know how accurate Forbes' valuations are.

Some Takeaways

There are a variety of reasons why Forbes could have valued the Coyotes more than in years past. Though still slightly down from last season, attendance is far ahead of pace at this point in the last full season. Given Phoenix's tendency to draw more fans after January, higher attendance means a healthier bottom line.

The Coyotes also benefited from signing long term contracts with Fox Sports Arizona and Levy's Restaurants to manage television broadcasting and arena concessions respectively. In addition to projecting an image of stability, longer term deals tend to provide better value than annual ones.

Speaking of that bottom line, Forbes also included an operating balance statistic in their final results. Currently, they estimate the Coyotes operating with an annual loss of $8.9M. Why is that significant? Well, if you are familiar with the arena management agreement, the dreaded "out clause" for the Coyotes only opens during a 180 day window after year five. The team has to lose $50M by then. An annual operating loss of $8.9M is still not good, but over five years (assuming no improvement) it adds up to less than $50M. For Coyotes fans, that likely means IceArizona will keep the franchise in Phoenix for the full 15-year agreement.

Conclusion

There's still plenty of work to be done. The large operating loss will likely hamper the franchise's ability to upgrade its payroll in substantial ways. It also means the Coyotes will likely have a hard time making a substantial profit even if they do get their balance sheet back in the black. Yet virtually every major indicator suggests that, since the sale, the Coyotes are trending in the right direction off the ice.

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