Carolina Hurricanes Blown Off Course By Financial Troubles
Raleigh, North Carolina, Nov. 16 (Bloomberg) -- Carolina
Hurricanes owner Peter Karmanos said his National Hockey League
team was driven south from Hartford, Connecticut, by a governor
who didn't care about the sport.
Two-and-a-half years later, the franchise once known as the
Hartford Whalers is still heading south financially.
Now, with losses since the move having exceeded $75.5
million, the franchise is at the crossroads. To break even in a
new yet-to-be-named arena in Raleigh, North Carolina, the
Hurricanes must average 15,000 people a game. The problem is,
they've sold just 6,000 season tickets and attendance is falling.
If the red ink continues, Karmanos said he would slash the team's
$28 million player payroll.
``When you look at it right now, it's scary how bad it could
be in two or three years,'' said Dean Bonham, a Denver-based
sports-franchise consultant.
The agent for Carolina's former captain, Keith Primeau,
thinks it's bad enough already. Primeau, an unsigned restricted
free agent who had 26 goals and 63 points last season, wants $4
million a year, $1 million more than Karmanos has offered.
Primeau says he'll continue to sit until he's traded.
``To me, they've already made a decision that this isn't
going to work down there,'' said Don Reynolds, Primeau's agent.
And today, saying it was necessary to restructure the
organization, Karmanos accepted the resignation of the team's
president, Dean Jordan, who hadn't even been in the position for
two years.
The move to North Carolina, where a state-of-the-art NHL
arena wasn't nearly ready, was borne in acrimony. Even now, the
heated feelings of the 1997 departure from Hartford have yet to
cool.
``The reason the Hartford Whalers are gone has nothing to do
with the owner and everything to do with the governor who didn't
understand the sport,'' Karmanos said. ``He just absolutely
stonewalled any effort to keep the team there.''
Asking for More
Gov. John Rowland blames Karmanos, the 56-year-old chairman
of Compuware Corp., a company he helped found in 1973. Karmanos
is co-owner of the hockey franchise but speaks for the team as
the representative to the NHL's Board of Governors.
``Every time we gave the Whalers what they wanted, they'd
come back to the table and ask for something more,'' said Dean
Pagani, a spokesman for Rowland.
Connecticut offered to build a $145 million arena in
Hartford at a cost to the club of $2.5 million a season in rent
and a 10-percent surcharge on tickets.
The Whalers would have operated the arena and received all
revenue not related to college basketball. The state offered a 20-
year agreement that guaranteed about $45 million a year in arena
revenue, including the sale of 80 luxury suites.
State and local officials also agreed to underwrite $20.5
million in losses for the team to cover the two seasons it would
take to build the arena.
Bleeding Money
It wasn't enough for Karmanos. He demanded a rent-free
building at taxpayer expense with all revenue going to the
Whalers, no ticket surcharge and a 20-year lease with the option
to terminate after 10 years under certain conditions.
``We weren't looking to make a fortune, but we were bleeding
red ink,'' he said, noting that Rowland later offered to build a
rent-free stadium in a failed effort to lure the National
Football League's New England Patriots down from Boston. `If the
governor had offered us a similar deal we would've been in
seventh heaven.''
The agreement Karmanos got in North Carolina, though, wasn't
much better than Connecticut's final offer.
The team invested about $40 million in the new $154 million
arena in Raleigh and will pay $3 million in annual rent for the
next 20 years, Karmanos said. The arena has just 61 suites, four
of which aren't sold. As in the Hartford proposal, the team keeps
all non-college basketball-related revenue.
Hurricanes officials have also faced the task of selling
hockey in a Sun Belt state where college basketball is king --
North Carolina State sold more than twice the number of season
tickets the Hurricanes did in the same building.
Television Rights
The Raleigh-Durham area, meanwhile, is the U.S.'s 29th-
largest television market, slightly smaller than Hartford, the
27th-largest. The Hurricanes' $2 million cable television
contract is just $500,000 more than the agreement the franchise
had in Hartford three years ago.
``It's not the most lucrative TV arrangement in the world,''
said Jordan, whose job it was to market the team to the area's
corporate community.
It proved to be a tough challenge. Two seasons spent playing
80 miles away in Greensboro, North Carolina, while the Raleigh
arena was under construction only compounded the problems. The
Hurricanes averaged 9,052 people in the minor-league Greensboro
Coliseum, even though the team was successful, winning the
Southeast Division title last season and making the playoffs for
the first time since 1992.
In contrast, the Whalers, because of a save-the-franchise
ticket selling campaign, averaged 13,657, or 93 percent of
capacity in the Hartford Civic Center during their final season.
Starting Over
Even in the new building, where the team has yet to sell the
naming rights, attendance is dwindling. The team averaged 13,803
for its first five games after selling out the Oct. 29 opener at
18,730. But the announced attendance has gone down significantly
every game since to a low of 10,288 last Saturday night.
``It's like we're starting all over again,'' Jordan said
before his departure.
It's no wonder then that Karmanos admits his team would've
been in about the same financial shape had it remained in
Hartford in a new building.
``The Carolina move was suspect right from the beginning,''
Bonham said.
For now, the absentee owner -- he still lives in Detroit and
plans to attend just 20 home games this season -- remains
defiant. He recently boasted that after completing estate
planning to leave the team to his children, he can sustain
financial losses for the length of his 20-year lease.
Others aren't so sure.
``They're paring the payroll down and they'll unload it,''
Reynolds said. ``There's a lot of disappointed people in
Hartford. There really should be a team there still.''