The Arizona Coyotes are being surprisingly candid about how much money they lost in year one of private ownership.
LeBlanc giving update on losses for #Coyotes for first fiscal year: $16.6 million. Model had it at $20 million.— Sarah McLellan (@azc_mclellan) March 13, 2015
The losses are expected to continue this year, somewhat unsurprisingly.
LeBlanc anticipates loss for current fiscal year will be "substantially lower" than $16.6 million.— Sarah McLellan (@azc_mclellan) March 13, 2015
Let's unpack this a little bit. The initial loss report is about $7.4 million below what was initially reported back in October of 2014 by New York Post reporter Larry Books, amid the first rumors that Andrew Barroway was interested in purchasing the team. That the figure is that far below what was reported in October would help to explain why Barroway would put so much money into the team.
The other good news for the Coyotes is that the critical component in bringing costs down has comparatively little to do with average attendance figures, at least according to LeBlanc:
LeBlanc said one reason losses were less than projected in year 1 is that the franchise did well in corporate sales/sponsorships.— Craig Morgan (@cmorganfoxaz) March 13, 2015
Corporate sales and sponsorships are particularly important for a variety of reasons. The most obvious reason is that they tend to pay a lot more than an average season ticket or even an individual suite does. The other reason is that businesses, especially larger corporations or partnerships, tend not to be transient. So even though ticket buyers come and go, corporations looking to generate business via advertising tend to stick around so long as they perceive a benefit to doing so.
There are still many questions that remain unanswered though. How exactly the ownership group calculates its revenues/expenditures is still a secret. And why LeBlanc and IceArizona decided to become candid now about the team's financial losses is also an open question. With the desire to reduce or eliminate ticket surcharges on certain events at Gila River Arena, perhaps this information is designed to persuade Glendale city councilors that there is no need to fear making changes to the arena management agreement.
It will be very interesting to see how Glendale, who has the right to audit the team's finances after every fiscal year, responds to this news. However, the number that gets reported to Glendale for purposes of determining the out-clause came in significantly higher than what IceArizona is saying the franchise incurred.
#Coyotes had to report $34.8 mil loss to Glendale, which included 1-time closing cost of deal ($7.8mil) and full Ribeiro buyout ($10.4 mil).— Sarah McLellan (@azc_mclellan) March 13, 2015
Correction: it's $34.4 million as the loss reported to Glendale, which is the number that applies to the out-clause.— Sarah McLellan (@azc_mclellan) March 13, 2015
$34.4 million represents 68.8% of the loss threshold necessary to trigger the out-clause window after the fifth fiscal year. Even "substantially lower" losses in the second and third years could very easily push the total number over $50 million, especially if the rebuild significantly drives fan/corporate interest away.
So overall, there's plenty of good news and plenty of bad news. The financial picture of the Coyotes is clearer now than it has been before. Where the team goes from here, and what direction the team's finances trend in, will likely determine if the franchise remains in Arizona after 2018.