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NHL Expansion: Houston Ready For Professional Hockey

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Las Vegas is the main potential market you see mentioned right now, but Houston should be at the top of the list.

Troy Taormina-USA TODAY Sports

Editor's Note: This is a post that has been in the works for over a year. The timing is right now for it to be completed. Hopefully it adds to the NHL expansion discussion. It's a very long post, but there is a lot of information to cover to appropriately present the case for Houston as an NHL city. I hope you enjoy.

Houston is a big diverse city. It has flaws like any place. Some would argue it has more strikes against it than advantages, but the size and diversity of the city make it an ideal location for all major North American professional sports.

It is sometimes hard to comprehend how big Houston really is. Houston is the fourth most populous city in the United States. The southern half of the fourth largest city in America is the 10th fastest growing region in the country according to Forbes. That information doesn't include Katy, Cypress, Tomball, and many other heavily growing areas.

The fourth-largest city in the United States currently supports three of the big four sports. It has supported hockey when it has been available, but currently there is no high level of hockey played in the city.

Seattle, Hamilton, Quebec City, Kansas City, and Las Vegas are mentioned as suitors for NHL teams. The NHL is now open for business and listening to bids from parties interested in expansion.

Why not Houston?

The Billionaire

Rich people that like hockey are good candidates to purchase NHL teams. Les Alexander is a rich man. For hockey to return to Houston, he is by far the most important person to the story. Since 1993 he has been a significant figure on the Houston sports scene. He purchased the Houston Rockets. They then won their only two titles. In 2008, Forbes named him the best owner in the NBA.

As the owner of the Rockets and Houston Comets he pushed to get Toyota Center built in downtown Houston. Toyota Center is a major cornerstone to a bid successfully luring an NHL team to Houston.

In 2006 he was named the 322nd richest person alive.

It's 2015, and Alexander is still rich. Alexander somewhat recently bought some really expensive New York real estate. He paid $42 million for an apartment in Gramercy Park.

For the $42 million, Alexander bought himself 5 bedrooms, 5 bathrooms, a library, an infinity pool and a heated whirlpool.

That's 6,500 square feet of indoor space and another 2,000 in outdoor terraces in the 1927 building, which used to be a hotel.

He also got a key to the famed Gramercy Park and Uma Thurman as a neighbor.

Neat.

On the home front, he attempted to buy the Houston Dynamo of Major League Soccer but was denied. MLS teams aren't cheap these days. Interested parties are paying expansion fees of around $100 million for teams. Eight different MLS franchises were worth at least $100 million as of the close of 2013.

That list includes the Dynamo. They were valued at $125 million, the fourth highest value of any MLS franchise. The sale ultimately didn't go through, but it shows how much money he can make available should an interesting opportunity present itself.

Speaking of interesting opportunities, the NHL has had some interesting sales in the past few years. The Stars were sold for $240 million, of which only $50 million was in cash due to their interesting financial situation. The Atlanta Thrashers were sold for only $170 million, $60 million of which was a relocation fee that was split among the other 29 owners.

As recently as 2005 Alexander had financial backing for acquiring an NHL team from an investment bank:

"I am trying to get a team. I am trying," Alexander said. "I went to see the commissioner. I told him about my interest. I can't disclose teams, but I've been talking to people (in the NHL) and to investment bankers.

"I had conversations a month ago with an investment banking firm. I'm looking to buy a team. So people know my interest. You hear from time to time that teams might be for sale, then it changes or something else happens. But my interest is out there."

If another franchise finds itself in trouble there is little reason to think Alexander would have difficulty putting financial details together if he wanted to relocate a team to Houston. Now that the league is considering expansion the door is wide open for Alexander to make another case for the NHL to add another southern team.

The South

The south raises the collective anxiety of the NHL. The massive expansion into the southern half of the United States hasn't followed the Gary Bettman blueprint as well as he would have liked. The NHL and its fans have sensible reasons for being wary of another team being placed below 39.7 degrees north longitude.

The Phoenix Arizona Coyotes saga is one example. Wikipedia will have to do for a source. If the situation were an onion it would need to be AT&T Stadium-sized to appropriately depict the number of layers of nonsense surrounding the Coyotes sale. The saga continues to drag on with the city of Glendale threatening to cancel the Coyotes lease.

The Dallas Stars sale also slipped into chaos.

A man named Boots once owned a not insignificant chunk of the Nashville Predators.

Hockey in the south has too often been a welcome punchline for a sizable chunk of NHL fans. Ownership battles like the three just mentioned and low attendance figures make criticizing southern hockey an easy task. Some southern teams have gone so far as to beg for criticism by essentially wearing targets on their chests.

Some of the vitriol undoubtedly comes from southern markets "stealing" hockey from the north. The relocations of the Hartford Whalers, Minnesota North Stars, Quebec Nordiques, and Winnipeg Jets left a bad taste in the mouths of a lot of fans, particularly as three of the four went on to win Stanley Cups in their new locales. These teams left northern markets while the Anaheim Ducks, Atlanta Thrashers, Florida Panthers, Nashville Predators, San Jose Sharks, and Tampa Bay Lightning were introduced to the league via expansion. Denver, North Carolina, and Phoenix all ended up with teams during the same time period. The south acquired eight teams while the north remained stagnant (three relocations but three expansion franchises).

With that being said, the reality is that southern teams generate revenue for the league. Anaheim, Arizona, Carolina, Colorado, Dallas,  Florida, Los Angeles, Nashville, San Jose, and Tampa Bay accounted for 28% of the league's revenues in the 2014 season. 33% of the teams in the NHL accounted for 28% of the revenue. They're kind of important.

The problem is operating income. These teams combined to generate -9.2 million in operating income. As a whole they're losing money. This is highlighted by the poor attendance figures several of these areas routinely show. Three of these teams (Carolina, Florida, and Tampa Bay)  combined to lose 40 million dollars in 2014 alone. Those three are also the three cities with the lowest populations of the ten cities in question.

Population

Raleigh was used for Carolina. Anaheim doesn't really count given their proximity to Los Angeles. If metro areas were used this list would look a little different, but that isn't going to change the purpose of the list. Dallas and Houston in particular would still dwarf the cities further down the list. The cities at the bottom of the list in non-traditional markets happen to be the teams who have lost the most money recently. Coincidence? Maybe, but then maybe there are a few poor markets that shouldn't be allowed to speak for hockey in the southern half of the United States.

The baggage around adding further teams in the south is immense, but the root of the issue is the question as to what any of that has to do with Houston as a hockey market. The failures of other southern markets does not predict a failure in Houston. Houston could fail as an NHL market, but to damn it based on the sins of other markets is to brush aside a giant market in a state with a growing love for hockey that already supports one franchise.

A Wild Team Appears

Professional hockey made its first appearance in Houston in 1972. The Aeros were an original franchise of the World Hockey Association. They came to existence when the Dayton Arrows franchise was relocated due to the lack of a proper arena and little fan interest.

Houston_aeros_1973_medium

The Aeros were a solid draw for the WHA. The chart below shows the Aeros total attendance, average attendance, and attendance ranking for the six seasons they participated in WHA games in the 70's.

Aeros_attendance_wha_medium

In their initial season the Aeros were a modest draw, but in the 1974 season they saw an average attendance spike of 2,200 fans per game. Their total attendance jumped by 85,000 fans, and they were third in the WHA in attendance.

Their ranking dropped significantly overall for the 1975 season, but attendance only dropped by ten fans per game. They consistently drew fans until the league began collapsing. They still drew 7,676 fans per game in 1978 despite league membership dropping almost in half over a span of two years.

A driving force behind the strong support the Aeros received from 1975-1978 is unquestionably the presence of Mr. Hockey himself, Gordie Howe. He was a key member of the team during the 1976 and 1977 seasons, the two seasons with the highest attendance totals in early Aeros history.

HoweAeros

But, no one should kid themselves into thinking he is the sole reason for the strong attendance. The franchise drew well the year prior to Gordie signing on. And to be perfectly honest, does it really matter if fans made their way out to watch the Aeros play because of the presence of a legendary figure? No one asks how teams draw fans to the rink. They just ask how many fans came out.

Boring teams with no marquee draw are going to be a hard sell in most markets. (See Chicago before the arrival of Patrick Kane and Jonathan Toews or the Penguins between Mario Lemieux and Sidney Crosby.) All the presence of Gordie Howe on the Aeros does is strongly suggest that an interesting and/or successful professional franchise in Houston would be a draw.

The initial Houston Aeros closed shop July 9, 1978 after learning the franchise would not be part of the proposed NHL/WHA merger. Aeros owner Kenneth Schnitzer tried very hard to bring NHL hockey to Houston. He attempted to bring the Aeros over as an expansion team separate from the other WHA teams, and he tried to relocate a current team to Houston after the merger. Neither effort was successful.

The NHL and Houston

Many efforts have been made to bring the NHL to Houston since the failed attempt to get the Aeros into the league.

In 1998 Alexander agreed to purchase the Edmonton Oilers from Alberta favorite Peter Pocklington. The agreement called for the Oilers to remain in Edmonton for three more years with a purchase price of 85 million dollars. The deal fell apart when a local group stepped up to purchase the Oilers.

Alexander was also involved in efforts to acquire an expansion franchise at the same time. Before the Oilers deal fell through a crazy rumored scenario popped up where Nashville Predators owner Craig Leipold would have swapped franchises with Alexander before the Predators even took the ice.  Leipold shot this down violently.

The Pittsburgh Penguins flirted with Houston in 2007. Mario Lemieux even flew down to investigate the area. The team was more likely headed to somewhere like Kansas City if they left Pittsburgh, but they were seriously considering a move regardless according to ex-CEO Ken Sawyer (thanks Pensburgh):

"If the governor ever pulled the deal off the table in Pennsylvania, the team was not going to be in Pittsburgh," said Sawyer later. "Whether it was going to Kansas City or not, I don't know, but there was no future. You had to lay the groundwork for eventualities."

And that was eight years ago. Houston wasn't a threat to take the Penguins, and that was the most recent publicized link to an NHL franchise. A large reason why Houston wasn't a serious threat is Alexander and his stewardship of Toyota Center.

The New Arena, The Summit, and NHL Expansion

Professional hockey returned to Houston in 1993 when the Aeros were created as an expansion team for the now defunct IHL. When that league folded in 2001 the Aeros were one of six teams to join the rival AHL. A few short years after their initial return the Aeros and Rockets were at the center of a bitter fight over arenas in the city.

The Summit, now the Lakewood Church Central Campus, was the main show in town in the 90's. It housed the Houston Rockets. Owned by Alexander, the Rockets played in the Summit under a lease with Aeros owner Chuck Watson. Yes, an NBA team was signed to a lease with a minor league hockey owner.

A new arena was a big topic of discussion. Watson and Alexander fought for control of the as yet built arena, eventually Toyota Center. Alexander began making noise in 1995 on the heels of Rockets championship number two. Watson refused to let him break the lease with the apparent motivation being control of the eventual Toyota Center. The two sides agreed to share the arena in late 1997 in a deal later killed by a referendum.

1997 is the pivotal year when the NHL was putting expansion plans together. Houston was reportedly a favorite to get an expansion team in the last round of expansion (Atlanta, Columbus, Nashville, and Minnesota).

It's widely believed that NHL owners want to award the first two franchises to Atlanta and Houston because of their huge television markets. Nashville's state-of-the-art arena and sweetheart lease make it the logical third choice. The fourth spot appears open.

But..

...the inability of Watson and Alexander to settle their differences has put Houston and the NHL in a ticklish situation.

Though the NHL covets Houston and its large television market, league commissioner Gary Bettman has made it clear that the 15,242-seat Summit is not acceptable for the long term. The city has expressed interest in building a new facility that would house the Rockets and the NHL team, but it has been unable to negotiate a lease because Alexander said he will not share the building if Watson gets the NHL franchise.

Three separate groups made presentations to the NHL attempting to buy an expansion team to play in Houston. Alexander and Watson were the two main candidates. Both gave amusing quotes after their presentations:

Watson: ''We have an arena and new financing. In the last three years, our group has spent $30 million creating the demand for N.H.L. hockey.''

Alexander: ''I have the Rockets, a women's basketball team and an Arena football team. I think you need a major sports background, not just a hockey background. I don't think running a minor league franchise does that for you.''

That quote may be funny, but this feud is one of the reasons, if not the singular reason, why the NHL isn't approaching a 20 year anniversary in Houston:

But several NHL sources have hinted that the league will not go into Houston if Watson and Alexander keep feuding, meaning two spots could be open.

Houston would have been an ideal fit for NHL hockey in 1997 had singular stable ownership with a clearly available quality arena been in place. With the removal of Watson from the scene and the complete control of Toyota Center awarded to Alexander, Houston is as stable of a possibility as you will encounter.

Toyota Center

Alexander is significant to the hockey story still because any NHL team that plays in Toyota Center would either be owned by Alexander or be his tenant. The relevant Wiki information:

As part of the lease agreement between Toyota Center (which is NHL capacity, with 17,800 seats in its hockey configuration) and the Houston Rockets, only an NHL team owned by Les Alexander, owner of the Rockets, is allowed to play at the Center.

That isn't quite right. I dug up the Rockets lease agreement. There is actually a passage in the agreement referencing a hockey tenant:

Leaserockets_medium

Any NHL team brought into Toyota Center that isn't owned by Alexander or an affiliate of Alexander would be subject to a one time fee payable to the Houston Sports Authority. It also says no prospective owner can be given any monetary benefit not also offered to Alexander. This also requires Alexander to negotiate a lease agreement in good faith with a prospective hockey owner.

In English, any team moving into Toyota Center not owned by Alexander has to pay rent, expansion or relocation fees, and a one time fee to the Houston Sports Authority. It isn't required that Alexander has to own an NHL team in Toyota Center, but the barriers to entry for anyone else are enormous. Someone would have to really be motivated to make it happen. The Rockets would also presumably get parking money still, further decreasing the revenues of a prospective owner.

If you're still trying to figure out why the Penguins didn't seriously consider Houston you should probably re-read that last paragraph. It has nothing to do with the city or the viability of Houston as a hockey market. That's a lot of cash for a presumably struggling franchise to come up with in efforts to relocate without selling the franchise.

End of the Aeros

The Aeros took up residence in Toyota Center until the Minnesota Wild moved their affiliate to Iowa after the 2013 campaign. This event has been used to push various agendas in the interim. It has been used both an example of Houston not supporting hockey and Alexander not having interest in patronizing hockey anymore. The first is almost certainly not true, and evidence for the second is sketchy at best.

Let's take a look at the facts first as best we can.

1. The Aeros moved to Iowa because of a rent increase.

From the Houston Business Journal:

The Aeros were paying about $23,000 per game (with 38 regular home games per season) on their Toyota Center lease, but the team will pay less than half that amount at the Wells Fargo Arena in Des Moines, Iowa.

The Aeros didn't move to get a huge reduction on the $23,000 rent, that just happened to be the end result. Sensational stories about this event will point to a "300%" increase in rent suggested by Alexander. There are several references to this available, but let's consider what that actually means.

300% is tripling rent, which would be upsetting for anyone. Tripling rent would mean the Aeros were asked for about $70,000, but that could just be rounding. An interesting number to consider is that the starting cost for renting Toyota Center for a night is 60,000 dollars. More or less the Aeros were asked to pay what anyone else would be paying. It doesn't sound like they were offered a discount, but given that Alexander didn't own the Aeros what motivation did he have to offer one? It's business.

2. Alexander wanted Toyota Center available for concerts.

This is a commonly expressed view:

There's been talk of unreasonable rent demands, especially a large rent hike. And there's also been talk that Les Alexander and his minions have determined that it's more profitable to keep the arena dark, keeping it available for concerts, than in leasing the building out to the Aeros.

Minions.

This may be the case, but there is no concrete way to know for sure. I've seen reference to big shows giving a percentage of profits on top of rent when they book arenas so it isn't out of the question that Alexander makes some serious cash from shows. The presence of the Aeros didn't keep every concert from taking place. We're talking about a handful of extra concerts by having the arena fully available versus a full season of Aeros games.

Then again, the basic math here is that one concert at the very minimum is worth three Aeros games. You would only need 13 extra concerts (38 home games divided by three) to match revenue from every Aeros game. That assumes a cost of $60,000 per night for concert and no other benefits. Concerts are paying higher than that, and in a lot of cases probably significantly higher. They realistically only need five or six extra concerts to recoup money from an entire Aeros season. Business-wise it's a slam dunk again.

The empty nights also remove another barrier for an NHL team. Alexander has control of an arena with plenty of empty dates that could be filled by an NHL schedule.

Now you come to a matter of interpretation. Does Alexander want hockey to be gone, does he really make extra money with concerts than the Aeros, or is he trying to keep the arena dates open for an NHL team? Any scenario could be sold if you want to buy it, but I'd lean towards a mix of the last two.

If you're the Wild, there was no reason on earth to stay in Toyota Center. You're paying high rent for an AHL team, not getting parking revenue, and likely not getting anything from concessions. There is only so much you can fight through if you're a business. The Aeros moved not because of the fan support they received, but because of the bad business they would have been forced to participate in if they wanted to stay.

Houston Supports Hockey

Gauging fan support is an inexact science. A good percentage of the details will be anecdotal. We'll start with those that aren't. In their last season in Houston the Aeros averaged 6,793 fans per game. Their total attendance for the year was 258,122. If they had played the 2015 season only six markets (Hershey, Providence, Lake Erie, Lehigh Valley, Grand Rapids, and Chicago) would have topped them in attendance. They would have been right above San Antonio for attendance, an area where a Houston NHL team could draw fan support. Houston and San Antonio then can be said to be the best southern markets the AHL had.

Facts are neat, but so is anecdotal evidence of the support hockey has in Houston.

Twitter shows a very specific and small segment of any population. Expecting it to reflect full fanbases is unrealistic, but a somewhat useful way to use Twitter to gauge interest is to compare the followers of the various AHL franchises. I put this together in 2014, one year after the Aeros moved to Iowa.

Aeros_twitter_medium

I have no idea where the Aeros fit at their peak, but a year after they relocated they still had a strong Twitter presence. It has continued to dwindle in the year since this was put together, but the support was there.

A year ago "vandals" painted a hockey rink in Katy, TX. We covered it here. It's hard to find anyone who isn't in favor of the rink remaining in the parking lot. Katy Magazine posted this Click2Houston story on their Facebook page. 28 comments and they're all either supportive or mocking the Katy ISD Police Department for missing people with industrial equipment painting a hockey rink on school property.

A fully supportive Reddit thread from r/Houston also exists. You may not want your children or Canadian friends to read that thread. As Reddit can be, the thread is a little explicit.

It's Time For Hockey in Houston

The NHL requirements for a market to be considered for expansion have been clear for a long time:

The NHL has always said a market needs three essential things to have a chance at an expansion team or a relocated team: Strong ownership, a suitable building and that the market fits well within the current geography of the league.

There is no city in North America currently without hockey that checks as many boxes as Houston. They have the owner, they have the arena, and they could easily slot into the Central Division or temporarily with the Atlantic Division if the league needed to re-align again.

The NHL Owners love money. A 500 million dollar expansion fee is coming from each team which is a smaller barrier in Houston given the NHL-ready arena. Expansion teams will most likely qualify for revenue sharing which requires richer teams to share revenue with poorer teams.

Here is how revenue sharing works under the current CBA:

First, a maximum of 50% of the Redistribution Commitment is drawn from the Top 10 highest-grossing teams based on pre-season and regular season revenue. Each team's contribution is based on how much they earn over and above the 11th-ranked team

A team in Houston wouldn't be eligible for a full share:

Now, teams in media markets of more than 3 million households can receive 50% of what the calculations would otherwise dictate.

Houston being accepted into the league would benefit 20 different franchises because Houston wouldn't dip into their cut of the revenue sharing pie as deeply as other potential markets. Is that a huge chunk of change for each team? No, but it is something.

Most importantly, Houston wants hockey. From the 2011 Calder Cup Finals:

Fans purchased more than 17,000 tickets to watch the Aeros split the first two games of the American Hockey League's Calder Cup finals against Binghamton at Toyota Center on Friday and Saturday.

The minor league team is seemingly thriving here, on and off the ice. But because this is considered a major league city, some wonder what might be.

"We love having the Aeros," Janis Schmees said. "They're a great team. But if we're able to bring in a NHL team, we're going to jump at that opportunity."

Schmees is the executive director of the Harris County Houston Sports Authority. That organization would be one of the driving forces behind any such venture.

Barry Melrose chimed in from the same article:

"It's one of the biggest cities in the country and one of the wealthiest," Melrose said. "I think Houston has to be one of the premier spots the NHL would consider. With Dallas having a team, it would set up a great natural rivalry, which is something the NHL doesn't have nearly enough of."

In the June of 2014 Mike Ozanian of Forbes said the NHL was looking at Quebec, Seattle, and possibly Houston as expansion possibilities.

Las Vegas is the one of the trendy picks for expansion. According to the American City Business Journals from April of 2015, Las Vegas is the second best possible expansion location the NHL could consider. Seattle was found to be inadequate. Houston was easily the top candidate.

According to the study, Houston with it's enormous population (6.5 million — the 4th largest city in America) and deep pockets (total personal income of $335 billion), not to mention its NHL-ready arena (Toyota Center), long hockey history, and rivalry with the city of Dallas (setting up a battle for Texas bragging rights), would make it an ideal location for either an expansion franchise or a relocated team.

There are some who would have you believe it is never going to happen. They may be right, but to believe for sure it will never happen you have to ignore almost 20 years of evidence of Les Alexander showing open interest in hockey and maneuvering to make Houston attractive to the NHL, and open interest in the NHL expressed by the Houston Sports Authority as recently as 2011.

Houston is ready to join the NHL ranks. The NHL is now ready to expand again. The makings of a great NHL market are there if the NHL is open to listening.

[Ed. note: We reached out to the Houston Rockets for comments on this article but received no response. If they respond we'll add it to the post.]