That’s the only reasonable way to look at it. If Balsillie buys the Coyotes and moves them to Hamilton, the league loses a potential expansion fee for Hamilton, but they gain a potential expansion fee for Phoenix. The numbers themselves are ridiculous (he estimates a Hamilton team would have revenues about $29m higher than a Phoenix team next year and increase from there, so how can the expansion value only be $12m higher?), but the method is sound.

66The PSE lawyers made such a big deal about how much money Hamilton would be worth and made it a point that Phoenix was and has always been a loser with no value at all. I don’t wonder that they don’t want to use that formula for this … there was a big difference between the 2.

PSE has made an issue of how successful Hamilton would be, and how unsuccessful the current team and current lease and current situation is in Phoenix. Not that Phoenix would/could never be worth a damn as a hockey market, period. Zimbalist is talking about how successful Hamilton would be with the current team in a new situation, versus how success a new Phoenix team, with a new lease and new situation could be.

I can well believe that a PSE hired expert would set the values so low and not look at the past history of relo fees. Regardless of what that expert says, I look for a relocation fee to be somewhere between 29M – 450M that has been paid by the other sports teams in the past.

As I said above to Dominic, its basically “Opportunity Gained – Opportunity Lost = Net”. In the past, most of those fees have not been relocation fees, but expansion fees, in which a team was created from scratch. Because a team was created from scratch, there was never any opportunity gained, through a freed up market, only an opportunity lost, through the granting of an expansion market. 0 – X = X to be paid to get the team. In this situation, there is an opportunity created in the freed up Phoenix market, so its Y – X = Z.

Yes, the numbers are all silly. The correct way to find the price of an expansion franchise in Hamilton is to have an auction, but that’s not possible for a variety of reasons. A process like Zimbalist’s is necessary, of course, because you can’t just pull a number out of nowhere. But it’s silly because of how sensitive it is to some of your starting assumptions. For instance, here’s how he arrives at that $163m figure for Phoenix:

1. He took the Coyotes’ revenue last season, $52.8m (of which, $13m was from revenue sharing).
2. Added the potential subsidies that Reinsdorf wanted from Glendale (the figure is blacked out).
3. Subtracted the reduction in revenue sharing that would result from the increased revenue from the subsidies (blacked out/not in the document).
4. Multiplies the resulting potential revenue by 2.4 (league-wide value/revenue average), resulting in $162.7m (which implies that the subsidies in step 2 were at least $15m per year, by the way).

This is problematic because it includes subsidies that don’t yet exist, uses the revenue of an established brand (inasmuch as the Coyotes can be called a “brand”, I guess) instead of a potential new franchise, and uses the league average multiplier (by Forbes’ numbers, the actual multiplier for the Coyotes is 2.1). All those factors will inflate his estimate. Since it uses Coyotes numbers, it also presupposes the team playing in Glendale instead of downtown, which will push his estimate down. On net, I’m fairly confident that his estimate is too high. Note that Reinsdorf evidently thought so too, since his bid was only $148m.

Here’s how he arrives at the $175m figure for Hamilton:

1. Take the $72.9m estimate for first-year revenues for a team in Hamilton.
2. Multiply by 2.4.

This is problematic because the first-year revenues for an expansion team will obviously understate the revenue potential of that market, especially in a situation like Hamilton, where the arena will be undergoing renovations for four years. For instance, he estimates revenues in the fifth year to be $104m, given the a growth rate of 9.2%, faster than his assumed league average (5%, although he runs the numbers for different values). Deflate that figure back by 5% a year, and you get an estimate of what first-year revenues would be if the renovations were already done: $85.3m. Multiply that by 2.4, and you get a new value of $205m. Of course, 2.4 is probably a high estimate for the value/revenue multiplier for a Hamilton franchise. But note that Balsillie’s willing to pay $212m, so $205m can’t be overstating it too much.

Assuming no additional subsidies for the Coyotes from Glendale, you get a value of and using the hypothetical $85.3m first-year revenue figure instead of the $72.9 for a team in Hamilton, you get a relocation fee of $78m. And that’s from changing only two of Zimbalist’s assumptions (actually, only changing one assumption and fixing one methodological error). The moral of the story here is that numbers like these are very sensitive to the assumptions you make going in.

100M in revenues for Hamilton?

Isn’t Toronto the only team thats breaking that number, or is at least part of a very very small number of teams to do so? While Hamilton would probably do well, its a bit of a stretch to think that they would be right up there with Toronto in revenues.