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Sports Management: A Case of Arizona Coyotes Hockey Club

Introduction

Professional sports is one of the industries of increasing interest in the economic world for the past three decades or so. In this industry, league policies are used to share revenues and regulate costs (Pitts & Zhang, 2017). Most clubs in different leagues acquire their financial stability through sponsors and fan bases. Bradbury and O'Boyle (2017) argue that in case there is a fall in the attendance of a team’s fans during the team’s events along with nonexistence of sponsors, then a team is likely to be economically unsustainable. The main reasons that exist to explain possibilities of fall in attendance of a team’s events are the team’s arena location and results. Taking a case of the Arizona Coyotes Hockey club of the NHL, this paper will argue that relocation of the Coyotes club from Glendale is the most appropriate solution that should be employed to salvage the club’s economic instability and unsustainability in the NHL. 

Article Summary

In the article titled ‘Coyotes’ next move tricky to unpack’ by Arthur (2017), the author provides shares a letter by Bettman to Arizona state legislature regarding the Coyote’s club. In his push to help preserve Coyotes future in Arizona, Gary Bettman, the NHL commissioner, penned a strongly worded letter to the lawmakers of the state petitioning for a bill that would guarantee the team’s acquisition for the charter. In the letter, Bettman details that the current location of Arizona Coyotes, Gila River Arena, is unprofitable and therefore uneconomically capable of backing a fruitful NHL charter (Arthur, 2017). He expounded on the uneconomical nature of Gila River Arena by stating that the Arizona Coyotes Hockey club could no longer survive in Glendale since the location is both economically and geographically wrong; it is far from most of the Coyotes’ fan base, especially the club’s corporate sponsors and premium ticketholders.

He notes that for the past fifteen years, several efforts, including those by the National Hockey League (NHL) itself, have toiled the NHL officials and office to discover all possible choices to make Glendale along with its arena to function as the home to Coyotes. Several series of ownership collections have been permitted. Nonetheless, the result has been consistent; continuous economic losses. He thus concluded that there is dire need for a relocation of the club, preferably to Phoenix, which he stated is conveniently in close proximity to most of the club’s sponsors and fans (Arthur, 2017). 

Economical Polices Regarding Economics of NHL’s Professional Sport

Pitts and Zhang, (2017) note that it is considerably hard to determine the economic size of professional sports industry, especially when it is perceived as putting fans on seats as well as getting sponsors. Nonetheless, Schulenkorf and Frawley (2017) argue that the most appropriate way of determining the economic stability of this industry is by considering the attendance notwithstanding the technique’s limitations. In North America, the attendance of the professional sports industry has exhibited a rapid rise as from 1970s, with an average yearly rate of about 4.5% except for 1994 as well as 2004 (Wright, 2010). The period 1967-1975 registered the fastest growth, averagely 16.5% yearly. This was attributed to the increase in the number of teams from the initial 6. Nonetheless, a drop in attendance was also recorded between 1976 and 1980, which was attributed to the determinations of by the competitor World Hockey Association (WHA) to penetrate some of the marketplaces to NHL (Wright, 2010). Brown et al. (2017) studying about the economic implication of the positive trend in the attendance of NHL’s event noted that there was a similar positive trend in the amount of revenues received by teams in the NHL, implying a direct correlation between the attendance the amount of revenue received by the NHL. A trend in the number of populations attending the NHL sports can be illustrated by figure 1 below.

Figure 1.

Trend in NHL’s Events Attendance: Adapted from Wright (2010).

From the above trend, it is evident that there has been an increasing trend in the number of people attending NHL sports events. Nonetheless, the case has not been the same with Coyotes Hockey Club, which has registered a downward trend in the number of fans attending its events. According to Hoye et al. (2015), the two main reasons that have been leveled against this trend: the club has registered a poor trend in its league performance, appearing among the bottom three teams in the seasons past and the club’s inconvenient location away from the club’s sponsors and fan bases. Késenne (2007) points that owing to the poor performance, the fans’ pride in the team has slimmed down and the distance further demoralized the sponsors and fans to access the club’s events. With the low attendance, the revenues received by the team during its events, in addition to the reduced funding from the few remaining sponsors, is not sufficient to guarantee a smooth operation of the club (Ionescu, 2015).

Unlike several professional sports structures in the world, North America’s sports does not generally operate a structure in which poorly performing teams are substituted with teams that perform well in a country’s lower-level leagues (Andreff, 2011). For this reason, Coyotes club cannot be replaced by any other team but has only three ways by which its economic stability can be recovered: joining or forming another team, club expansion to or buying an inexistence club franchise, and relocating it (Gratton, 2012). Considering these options, there are a number of policies that are employed to determine the most appropriate solution to a team undergoing challenging situations like Coyotes. First is the antitrust protection. In Canada and U.S.A, there are legislations that serve to protect consumers from unscrupulous organizations besides serving to promote rivalry within industries. Companies or organizations that violate the antitrust policies are subjected to fines (Pitts & Zhang, 2017). However, in the context of Coyotes club, this economic policy will not apply because the region exempts the professional industry making it possible that it can assume any of the three options.

The second economic policy in the North America’s professional sports industry is league regulations to share revenues and regulate costs. According to Késenne (2007, the principal professional sports leagues within North America employ salary caps  both on team payrolls and individual players to permit increase of costs in a well-regulated manner. Additionally, the share revenues from large marketplace teams to small ones to insure that there is a league’s financial and economic stability (Ionescu, 2015). Regarding this, there are a number of efforts that have been put on Coyotes’ case in the last 15 years, including a series of ownerships by groups like NHL but the result has remained the same; continuous losses (Brown et al., 2017). As such, funding from any other revenue source may work but not sufficiently, eliminating the option of buying an existing franchise or expanding the team due to limited funds.

The third economic policy that will determine the apt solution for Coyotes is restriction on entry of new teams into the industry. A new team that is contemplating entering North America’s professional sports must undergo several approvals by several existing club owners (Ionescu, 2015).  This applies to clubs that desire to sell and relocate. Nonetheless, since it is already established within the industry, Coyotes will not need several documents to relocate as opposed to when entering the market afresh. For that reason, the option of forming a new team is invalid for Coyotes. Thus, the most appropriate option for Coyotes is relocation. In North America, when relocating a team, the economic system of league franchise structure is employed (Andreff, 2011). Additionally, since clubs are largely owned privately and operate in accordance with the desires and wishes of their owners, relocation of teams is a very common practice.

To conclude, alike to several teams that have migrated within N.A’ professional sports industry, Coyotes’ should relocate because of its financial problems, challenges with scarce facilities, lack of backing or the wishes of team owner(s). The main reason why relocation of Coyotes will serve it positively is that by moving to the rumored Phoenix, the club will be able to develop big fan bases and draw a wide pool of sponsors owing to the fact the club will be close and accessible both to the fans and sponsors. As such, it is wise for the club to be moved to another location, just as was advanced by Gary Bettman, the NHL commissioner.