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| Tuesday, December 26 Updated: December 27, 9:30 AM ET A new home will secure Penguins' financial future By Darren Rovell ESPN.com |
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As Mario Lemieux prepares to return to the ice on Wednesday, the assumption is his sights are set on the Stanley Cup. In reality, the Pittsburgh Penguins' player-owner could be focused on a much bigger prize. After all, during the last three years also known in Pittsburgh as the post-Mario years the Penguins have averaged 87 percent capacity, roughly 10 percent less than when Lemieux last dominated the ice. Knowing that a comeback would affect the relationship between a team's winning percentage and its attendance, could it be that Super Mario got in shape for the sake of sellouts and higher arena revenues? We already know that has worked. Before the season, the bad news was the Penguins had sold fewer than 10,000 season tickets. Now a seat at Mellon Arena, or even one for a Penguins' road game, is one of the toughest tickets in the NHL. But like a good investor, Lemieux envisions the future. Lemieux's real goal could be to control his team's future both on- and off-the-ice. The Penguins' 2000 franchise value of $132 million, as estimated by Forbes, is still $16 million below league average. Advancing deep into the playoffs may be worth a couple million dollars, and a Stanley Cup could add another $20 million to $25 million to the team's value. But as is any product without a fixed price, a team's franchise value is relative only to what someone is willing to pay for it. If Lemieux plays only a season or two, he will do little for the long-term health of the club and the team's value could remain static well into the future. So in the larger scheme of things, Lemieux has little to gain as an owner from a short stint back on the ice. The true prize, and easily the most profitable gain from his return, is a new arena.
With Lemieux playing, the likelihood of a sweetheart deal in which the team typically contributes less than 40 percent of the total cost of a new venue with the city and its taxpayers is more likely to happen. With a new arena to call home, the value of the franchise could possibly double, according to Bill Miller, executive vice president of the Leib Group, a firm that specializes in stadium-related negotiations. Some believe a new arena is more important for the Penguins than it has been for other teams that have cried poverty over the years, simply because of the Penguins' previous troubles with finances. "The Penguins need tens of millions dollars to survive for the long-term and in order to do that they have to have a new arena," said Dean Bonham, chairman of The Bonham Group, sports consultancy firm. "The franchise has gone bankrupt twice in the last 32 years and the best thing (Lemieux) can do is to make this team so powerful and popular that the community will not be able to do anything but build a new arena."
While some of Lemieux's partners reportedly want the team to stay in Mellon Arena, there will be few objections if the arena is financed in their best interests. The team quietly has been taking small steps toward moving into a new facility. In May, the Penguins paid financial consultant PriceWaterhouseCoopers a reported $80,000 to study the best mix of general seating and luxury boxes for a new arena and on Nov. 22 just 16 days before news broke of Lemieux's return it was announced that Lemieux Development LP was going to buy a former hospital location next to Mellon Arena for $8 million. "We haven't even talked about what our plans are going to be. We are not going to get into the arena-solution business until after this season," Penguins spokesman Tom McMillan told the Pittsburgh Tribune-Review. "At some point, we have to come up with an arena solution either a rehabilitation of Mellon Arena or a new arena." Sure, there are logistics to overcome, but that's why the timing of Lemieux's comeback is almost too perfect. New arena deals, from conception to completion, can take four to five years. By the 2005-06 season, only a couple years will remain on the naming rights contract and the team lease at Mellon Arena expires in 2007. So when Super Mario steps on the ice Wednesday night, it can't just be for the love of the game. Unlike a player who only wants a packed house for the roar, a player-owner also wants it for his pocket. The fan can expect to get his autograph, but the price might come in the form of taxpayer support down the road to help him build a new arena. Darren Rovell covers sports business for ESPN.com and can be reached at Darren.Rovell@espn.com. |
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