​Hockey Night in Vegas: The NHL's Newest Franchise May Not Make Sense, But It Will Bring Dollars

Yes, it's really happening: the National Hockey League commissioner Gary Bettman really held a press conference today at a casino—hint, hint—in which he announced that for the first time in 17 years, the league will be expanding in 2017. And the new member of the professional hockey club will be not be located in Quebec, nor Seattle, nor Houston, nor anyplace in the top metro areas by population or by hockey fandom.

Instead, the NHL's newest franchise will be in Las Vegas, playing in an arena right on the Strip, enriching league owners via a reported $500 million franchise fee while ending Sin City's reign as the largest TV market without a major pro sports franchise outside of Hartford, Greenville, West Palm Beach, and Austin.

There are two ways to react to this. If you're a hockey fan in Vegas—say, one of the 14,000 people who put down $150 deposits on season tickets for the new team—or a hockey fan who likes to visit Vegas, you may be excited at the news. On the other hand, if you're a sentient sports fan anywhere else on the planet, you're more likely wondering: Hockey in the desert? Didn't the NHL learn anything from the Arizona Coyotes fiasco?

There is certainly much to point and laugh about with regard to the new Vegas hockey team, starting with its as-yet-to-be-announced name, which may or may not end up being the Black Knights. (We can only hope their team motto will be "None shall pass," and that the theme music will be this.) But we must be responsible analysts of sports business, and avoid cheap schadenfreude, at least for the duration of the next few paragraphs. So let's try to answer the pertinent question: Can a major-league hockey team in Las Vegas really work, and, in the twin bizarro worlds of Vegas and the NHL, what does "working" even mean?

Certainly, Las Vegas has a lot of attributes that make it a less-than-ideal NHL market. It's the nation's 40th largest TV market, just ahead of Grand Rapids/Kalamazoo/Battle Creek; it ranks below the U.S. average in per capita income, and would rank 19th in the NHL by that measure; its corporate presence only shows up on the map at all because of the casinos based there—businesses that will be competing against the new hockey team for entertainment dollars, and therefore unlikely to spend big on ticket or ad buys. Oh, and there's also Nate Silver's assessment that there are just 91,000 hockey fans in Vegas, a number that can certainly be quibbled with, but isn't helped by the fact that the local minor-league hockey team went out of business last year after 11 seasons of unspectacular attendance.

Meanwhile, the counterargument pretty much comes down to: It's Vegas, and Vegas is different. Yes, Las Vegas residents are largely poor and work crazy hours that make it hard to get to games on a regular basis. Las Vegas tourists, on the other hand, have money to burn and all the time in the world, at least once they get tired of the blackjack tables. Basing a pro sports business model on people who don't live in your city would be unprecedented, to say the least—the nearest analogue might be spring training baseball, and even that draws plenty of locals—but if any city could make it work, it'd be Vegas, right?

Unfortunately, there are some problems with building your ticket base on the backs of out-of-towners. First off, while Vegas gets 40 million visitors a year, and some of them are doubtless hockey fans, they're not the easiest market to sell to: None of them are going to want to buy season tickets, let alone Black Knights jerseys. The only existing team owner to try anything like this, notes economist Roger Noll, was Disney's purchase of the Anaheim Angels and creation of the Mighty Ducks to create a kind of sports theme park, and that plan never really worked out all that well.

But what about those 14,000 season ticket deposits? That's a clear sign of fan interest, right?

Well, maybe. First off, those are deposits, not actual season ticket purchases—if the buyers check out ticket prices and the likely quality of play for an NHL expansion team before the 2017 season and decide to bail, they can get their deposit money refunded. Moreover, we don't actually know whether those 14,000 people are all puck-starved individual hockey fans, or if they're corporations or ticket brokers or casino employees "encouraged" to goose the numbers. (VICE Sports contacted Black Knights ticket sales vice-president Todd Pollock to ask for a demographic breakdown. He did not respond.)

There's also a strong historical precedent that strong advance interest doesn't necessarily translate into repeat business once the fresh-zamboni smell wears off. The Atlanta Thrashers managed to collect 12,000 season-ticket deposits in 1999, then barely managed to surpass that number in average attendance for their entire 11-year run in the city before moving to Winnipeg in a cloud of apathy.

If there's a likely scenario, it's that the new franchise will open with strong attendance, especially since the curiosity effect is bound to be strong in a city getting its first major pro sports team. Then those same crowds will tail off, with occasional year-to-year upticks, settling in among the bottom of the NHL ratings barrel, just like what happened with the Arizona Coyotes.

The Coyotes, of course, are the worst-case scenario here: A team mired in so many years of losing, poor attendance, and being passed around from owner to owner that there are probably Phoenix residents who are surprised to learn that they still exist. (They do, and are now seeking their third arena in 20 years of existence, because surely that will fix everything.) That's not to say that a Vegas team would be doomed to Coyote-dom—that'd be a tough disaster to replicate even if you tried—but when you add up the poor demographics, non-hockey-hotbed location, and untested market, the main difference that jumps out is that Las Vegas is a lot smaller than Phoenix, and so has an even more uphill battle to make this work.

Given the above, why, oh why, did the 30 existing NHL owners vote to approve a Las Vegas franchise, in the persons of Florida financial-services billionaire Bill Foley and former Sacramento Kings owner clowns the Maloof brothers, as the newest members of their little fraternity?

There's going to be much talk of Bettman's Sunbelt Strategy, the grand plan that gave us the Thrashers (briefly) and the Coyotes (so far) and the Lightning and Panthers (tops in the Atlantic Division last year, as Bettman noted today, but still at the bottom of league revenues). No doubt the notion of expanding into a new market is appealing for a league chieftain who has always been more about speculative growth than figuring out who already wants to watch hockey in the first place. ("The Vastitas Borealis? I bet we can triple our TV ratings there if we give it a team!")

Ultimately, though Vegas is getting its first pro sports franchise for one reason, and one reason only. Some rich guys are waving a $500 million check under the league's nose, and none of the other rich guys in the room could find it in themselves to say no.

In fact, the truly stunning part of today's deal is less that Las Vegas is the city getting an expansion team, and more that someone is paying a half-billion to make it happen. The last NHL team to change hands, the Coyotes, changed hands for a mere $170 million three years ago; the Thrashers fetched a similar price when they were bought and moved to Winnipeg in 2011. The average NHL franchise, according to Forbes' annual estimates, is only worth about $400 million, and Las Vegas would be nowhere near the league average in market size or (probably) fan support.

We are in a weird place right now, though, where sports franchise prices have very little to do with how much money you can make off running a team, and far more with a speculative bubble driven by team scarcity and too many rich dudes wanting to sit in the owner's box. There are nearly three times as many billionaires in the U.S. as there were 20 years ago, and since there are only so many yachts or private islands that one person can have, lots of them would like to own sports teams, too. Seeing little reason to dilute their monopolies just because more people are showing up at the door looking to get in, sports leagues have largely avoided wholesale expansion to meet the increased demand. (The one exception: Major League Soccer, which has effectively announced it will hand a franchise to anyone with a $100 million check and some kind of stadium plan, with the result that the U.S. will soon have more pro soccer teams than Dunkin' Donuts outlets, despite the fact that America is actually pretty good at making donuts.)

Instead, we get crazy sale prices like Steve Ballmer paying $2 billion for the Los Angeles Clippers, and even if he ends up getting half of that back in tax deductions, that's still an awful lot of money for the Clippers. No one, you have to imagine, is actually spending this kind of coin because they think it's the best way to turn an operating profit on their investment. Rather, it's something really fun to do with your money, and hey, if a few years down the road you get bored with playing real-life fantasy sports, you can always cash out by selling your new plaything to the next sucker who comes along—and given the way the U.S. economy is going, there likely will be more suckers coming down the pike.

Looking at things this way, $500 million makes a kind of sense. Sure, it's a ridiculous amount of money to pay for an NHL team, but if you want one really badly and it's the only way to get one, why not? (In his press conference today, Bettman made it sound like he and the league owners really wanted to take Quebec's money, too, until they realized it had pictures of waterfowl on it.)

All of this is just fine. Really. If billionaires want to overpay for sports teams in order to have new toys, that doesn't really harm sports fans, or taxpayers, in any way. The Vegas NHL deal—which will involve the team playing in a privately built arena with no taxpayer subsidies, at least none that have yet been revealed—is certainly far less dangerous to the general public than the proposal to build a Vegas stadium to bring the Oakland Raiders to town, a plan that will include tax kickbacks that could inflate the public cost to $1 billion.

Before you go out and declare your allegiance to the Black Knights, though, you might want to have a backup plan in place. After all, this is a team that's owned by one billionaire from Florida and two others who not too long ago tried to move their basketball team from California to Seattle; whose marketing plan is to appeal to rootless hockey fans not from the local area; and who've just paid a price that makes sense more as an entrance fee to an exclusive club than an investment in a particular city. It's not too hard to picture another announcement a few years down the road that the Black Knights just didn't work out—and now, they're going to Disney World. Or maybe Quebec.