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Keeping the Penguins in Pittsburgh. November 16, 2006. Zack Baginski John Gross Gorana Smailagic Colby Whitman. Overview. Our recommendation Background information Three different options Plan B Stay in Pittsburgh Relocate. Our Recommendation. Plan B Keep the Penguins in Pittsburgh

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slide1

Keeping the Penguins in Pittsburgh

November 16, 2006

Zack Baginski

John Gross

Gorana Smailagic

Colby Whitman

overview
Overview
  • Our recommendation
  • Background information
  • Three different options
    • Plan B
    • Stay in Pittsburgh
    • Relocate
our recommendation
Our Recommendation
  • Plan B
    • Keep the Penguins in Pittsburgh
    • Construct new arena
    • Funding from casino, state, and team
background
Background
  • Founded in 1967
  • Oldest arena in the country
  • Some key players:
    • Randy Carlyle, Les Binkley, Rick Kehoe, George Sullivan
    • Mario Lemieux
    • Paul Coffey, Kevin Stevens, Rob Brown, and John Cullen from the minors
    • Tom Barrasso from the Buffalo Sabres
background5
Background
  • 1990s: Drafted Jaromir Jagr
  • Mark Recchi, Joe Mullen, and Bryan Trottier signed as free agents
  • Larry Murphy, Ron Francis, and Ulf Samuelsson
  • League's best team
background6
Background
  • Formidable team throughout the 1990s
  • The stars of the Stanley Cup years were followed by Martin Straka, Petr Nedved, Alexei Kovalev, and Robert Lang, Sergei Zubov, Kevin Hatcher, and Darius Kasparaitis
background7
Background
  • Filed for bankruptcy in 1998
  • Lemieux bought the team
background8
Background
  • Not much has changed over the past 8 years
  • The team doesn’t want this to happen again, therefore a new arena is a must
plan b overview
“Plan B” Overview
  • Created in case Isle of Capri deal falls through
  • Still allows for construction of arena
  • Relies on bid-winning casino, the Penguins, and the state
the arena
The Arena
  • Cost: $225m
  • 18,000 seats
  • Lower Hill District
plan b finances
“Plan B” Finances
  • Over 30 years…
    • $7.5m/year from casino
    • $7m/year from state fund
    • $2.9m/year from Penguins
    • $1.2m/year from naming rights
    • $8.5m upfront from Penguins
  • Total of $563.5m
additional plan b information
Additional “Plan B” Information
  • Majestic Star has already agreed
    • Plan B payments
    • $350m to Hill District
  • No taxpayer dollars
  • Generates needed tax revenues
  • Ed Rendell supports plan
staying in pgh financials
Staying in Pgh: Financials
  • Total revenue: $71 million (includes ticket sales, parking)
  • Steelers revenue: $187 million
  • Pirates revenue: $125 million
staying in pgh financials16
Staying in Pgh: Financials
  • Cheapest Ticket Price: $35
  • Most expensive Ticket Price: $140
  • Salary Floor: $21,500,000
  • $37m Player Expenses
  • Home Games: 41
  • Avg Attendance: 15,804 (’05-’06 season)
  • Sell Out Capacity: 17,537 seats
    • 90% attendance
staying in pgh pros
Staying in Pgh: Pros
  • Politics
    • Rendell, County Chief Exec Dan Onorato, Mayor Ravenstahl, and City Council want to keep Penguins in Pittsburgh
slide18
Pros
  • 650,000 hockey fans per season
  • Young, affluent fans
    • 57% of fans are 25-34 years old
    • 1 in 4 attendees have a household income of at least $100,000
    • 1/3 of women 35+ are fans
    • 45% of men 35+ have watched a game
slide19
Cons
  • Last December, Penguins projected $7 million US loss this season
  • That was assuming the team drew near-capacity crowds and advanced to Round 2 of Stanley Cup playoffs
potential solutions
Potential Solutions
  • Penguins and the SEA to negotiate a long-term lease for the Mellon Arena for $1 million per year
  • Penguins can tap into non-hockey events
    • Advertising and concessions
  • Market the arena for concerts, ice shows and other non-hockey events
potential solutions21
Potential Solutions
  • Directly appeal to community for money
    • Winnipeg
  • If the Penguins are truly a valuable asset to Pittsburgh, then there must be corporations and individuals who benefit substantially from the presence of the team
other teams relocation
Other Teams’ Relocation
  • St. Louis Blues and Los Angeles Kings in 1999 reported substantial losses in the last few seasons.
  • 2002-2003 NHL season, the Ottawa Senators (Corel Centre built in 1996) and Buffalo Sabres (HSBC Arena, 1996) declared bankruptcy
  • Four more teams, none with an arena more than 10 years old, are for sale
kansas city make chart of related teams and avg ticket prices hobbies what people spend on
Kansas Citymake chart of related teams and avg ticket prices. Hobbies/what people spend $ on
  • Sprint Center
    • Opens Fall 2007
      • Seating capacity 18,000+
        • 72 Luxury Boxes
          • Average Price of $110,000
  • Downtown Construction
    • $3 billion worth underway
    • More activity and investment than any other U.S. city
kansas city contd
Kansas City (contd.)
  • Metropolitan area population of 1,947,694
  • Median income (household) of $37,198
  • Median income (family) of $46,012
  • 14.30% of population below poverty line
houston
Houston
  • No new arena currently under construction
    • Would use Toyota Center
      • Seating capacity of 17,800
      • 103 Luxury Suites
      • 2,500 space parking garage connected to arena
  • Metropolitan area population of 5,300,000
  • Median Income (household) of $36,616
  • Median Income (family) of $40,443
  • 19% of population below poverty line
portland
Portland
  • No new arena currently under construction
    • Team would use Rose Garden Arena
      • Opened in 1995
      • Also used by Portland Trail Blazers
      • Seating capacity of 17,544
      • 70 Luxury Suites
  • Metropolitan area population of 2,000,000
  • Median income (household) of $40,146
  • Median income (family) of $50,271
  • 13.10% of population below poverty line
las vegas
Las Vegas
  • No new arena currently under construction
    • Must use Orleans Arena
      • Seating capacity of 9,500
  • Las Vegas worries NHL because of sports betting
  • Metropolitan area population of 1,700,000
  • Median income (household) of $44,069
  • Median income (family) of $50,465
  • 11.90% of population below poverty line
winnipeg manitoba talk about it
Winnipeg, Manitoba (talk about it)
  • Largest city in Canadian province of Manitoba
  • Population 619,544/ Metro 706,900
  • Pop. Growth .05%/year
  • 2004: 4th highest crime rate among Canadian cities
  • AHL Team: Manitoba Moose (minor league)
  • 1996: Winnipeg Jets moved to become the Phoenix Coyotes (NHL)
  • Current Arena: MTS Centre (133.5 million, 2004, 15,003 seats, 48 luxury suites)
  • Median Family Income: $46,698
  • 27% of Family’s Incomes < $30,000
hartford connecticut
Hartford, Connecticut
  • Population 121,578 / Metro 1,188,241
  • Median Household Income: $24,820
  • Median Family Income: $27,051
  • Population living in Poverty: 30% (no discretionary income)
  • Current Arena: Hartford Civic Center (15,635 seats, 46 luxury suites, 1975, $75 million)
  • 1997: Hartford Whalers moved to Raleigh, NC to become Carolina Hurricanes
  • Why they left? The primary factors in the Whaler’s departure from Hartford were market size and lack of modern playing facility. In close proximity (2hr. Radius) with 4 other NHL teams
hamilton ontario
Hamilton, Ontario
  • Check and see if crosby is from here
  • City in province of Ontario, Canada
  • Population 490,268 / Metro 714,900
  • Median Household Income: $47,855
  • Median Family Income: $58,396
  • Current Arena: Victor K. Copps Coliseum (17,500 seats, 0 luxury suites, 1983, $35.8 million)
  • NHL Lack of Approval: Buffalo Sabres and Toronto Mapleleafs are located too close; those teams would lose revenue if Hamilton had a NHL franchise.
columbus ohio
Columbus, Ohio
  • Population 711,470 / Metro 1,708,625
  • Median Household Income: $37,897
  • Median Family Income: $47,391
  • Current Arena: Nationwide Arena (18,136 seats, 78 luxury suites, 2000, $165 million)
  • Columbus is considered a "typical" American city; often used as test market for products
columbus arena financing
Columbus Arena Financing
  • Nationwide Insurance build a privately funded arena for the new team.
  • While arena is being built by the insurance company, the county's convention authority invested $11.7 million in buying land for the arena. It will get $150,000 a year back during the arena's first 10 years, $165,000 a year back from year 11 to year 25, then $165,000 plus an inflation adjustment through the arena's 50th year.
  • The payments will be made from the $3 million a year the NHL Blue Jackets will pay annually in lease payments. After 10 years, the team's lease grows to $3.3 million and any agreed-upon increases.
  • At the end of 50 years, the convention authority owns the arena unless Nationwide exercises an option to buy it.
conclusion
conclusion
  • “several more hockey nights in pittsburgh”
  • “it’s a great day for hockey” (intro?)