Canes now skating toward goals
Triangle Business Journal - by Kim Nilsen
RALEIGH After working for several seasons to get a foothold in an untested market, executives of the Carolina Hurricanes can say they have something even stronger momentum.
Now comes the test of converting the swell of support generated by last year's underdog victories on and off the ice into sustainable community backing. The franchise ended the season in April with a dramatic playoff run that helped power it through a season-ticket sales blitz that doubled its base.
"They've developed some roots. They've developed some relationships," says Harvey Schmitt, president of the Greater Raleigh Chamber of Commerce, who has unabashedly supported the Hurricanes' organization. "They're at a significantly different place."
The hockey team begins its season with that season-ticket campaign already in its win column. But while the franchise seems to be running on all cylinders, the state's economy is idling. It's unclear how layoffs and stock plunges plaguing many Triangle companies will impact the Hurricanes' draw at the box office and among corporate sponsors.
Some effects already have been felt. A few businesses could not make good on commitments made in the spring to buy season tickets, says Jim Cain, the team's president. Midway, the Morrisville-based airline that bought signs inside the Entertainment and Sports Arena and had planned to hang its name in the building's soon-to-open bistro, is now bankrupt. Executives are negotiating with other companies that might be interested in the restaurant package.
Nortel did not renew its league-wide sponsorship with the NHL. The telecommunications giant had been mentioned as a possible buyer for the rights to the ESA name. But Nortel has trimmed its staff in the region, and it recently warned of earnings losses and more job cuts to come company-wide.
"I think that, certainly, all businesses are going to find the next several months to be a challenge," Schmitt says. For the Hurricanes, the hurdles include the following:
• Achieving more sellouts and larger crowds. The season ticket push succeeded in taking the team's baseline from 6,200 to about 12,300. But by late September, the team had not reached the 85 percent renewal rate it had hoped for from last year's ticket holders.
As a result, the total dropped back below 12,000. Cain says he expects the numbers to move back up to the goal by mid-October. Either way, the gain impressed NHL officials and should be enough to keep the Triangle's spot as host of the 2004 NHL All-Star Game.
• The rights to the ESA name are still for sale, and Cain says a deal should be signed before hockey season ends in the spring. But arena backers have run into roadblocks in past seasons, and now they're shopping for a deal in a shaky economy.
"We've had some good discussions with a couple of companies that are very interested," Cain says. A weakened economy may slow the sale, but in the end is not expected to dilute the price, he says. Arena backers have pushed for as much as $80 million over 20 years.
The Hurricanes' primary owner, Pete Karmanos, invested more than $40 million in the publicly owned arena when he moved his Hartford Whalers to the market. He has operated the team at a loss each year since the 1997 move. A naming rights sale would help push the team toward the break-even point.
But disagreement among officials from N.C. State University, the Centennial Authority and the hockey team over how money from the sale would be divided has hampered the talks.
Mike Reisman, principal of Velocity Sports & Entertainment, analyzed the ESA for a special report on naming rights published recently by SportsBusiness Journal, a sister publication of The Business Journal. Reisman says of the Hurricanes' situation: "local government has been so slow to legislate approval that they've missed the opportunity to sell in a good economy. It's cost them at least 30 percent annually."
The report put a $1 million annual value on the rights to the arena name. The same study put a $2.75 million value on Lambeau Field, the home of the Green Bay Packers, and a $2 million value on the Phoenix-area arena where the NHL's Phoenix Coyotes play.
• What a difference a day makes. Last season, the Hurricanes were blessed with 25 weekend home games during the regular season. Friday and Saturday games traditionally draw the biggest crowds. No such luck this time: This season, that magic number drops to 17, and those dates are clustered early in the season with only five falling in 2002.
Part of the problem a league-wide National Hockey League hiatus in February that will allow some players to participate in the Winter Olympic Games.
But, for the Canes, the momentum is there, and it showed a few days before the home opener when business leaders gathered at the ESA for the annual huddle with the team. Bankers and merchants, developers and fans lingered a little longer when the speeches were over. More people asked players for autographs, chatted with coaches and pocketed souvenirs.
Schmitt says the new dynamics are easy to understand: "This is a Carolina team. This is no longer the Hartford Whalers doing business as the Carolina Hurricanes."
Kim Nilsen can be reached at knilsen@bizjournals.com
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