clock menu more-arrow no yes

Filed under:

Report: Funky deal has Islanders' future finances looking fruitful at Barclays Center

New, comments

The Hockey News details the unusual and possibly very lucrative arrangement between the team and Barclays Center.

Waving a new flag.
Waving a new flag.
Anthony Gruppuso-USA TODAY Sports

Contrary to popular belief, the Islanders aren't leaving Nassau Coliseum - their home for 43 years - because the arena is too old and/or too small. There are old NHL arenas and there are small NHL arenas.

The reason the Islanders are moving is the reason anything in the world moves: money. Specifically that the Coliseum generates very little of it for its one-time primary tenants.

So what will change when the team moves to Barclays Center? According to a report by Stu Hackel in The Hockey News, the Islanders are trading in fickle streams like ticket sales and advertising for a guaranteed payout by the owners of the arena.

We've known about the arrangement for some time, but Hackel's article goes into more detail on the partnership through comments from Barclays and Nets CEO Brett Yormark. The Islanders have essentially turned their entire business operation - tickets, suites, sponsorships and others - over to the suits at Barclays, who in turn will fork over tens of millions to the club on a annual basis.

Essentially, the hockey team no longer administers or controls its own business operation, a highly unusual situation.

The agreement to move the franchise includes the provision that the arena pays Islanders ownership an annual sum to play at Barclays Center and, in exchange, Barclays Center acquired all ticket and suite sales, sponsorships, marketing and promotions and their revenue.

That arrangement was confirmed by Brett Yormark, the CEO of both the Barclays Center and the NBA Brooklyn Nets, the original team in the building, in a late June conversation.

Yormark added, "Charles made a promise to us and he's delivered a very good team to us, and we're going to monetize it."

The actual price tag still isn't known and Yormark isn't saying. But he does tell Hackel that the number is based on how much money Barclays brings in. Should the Islanders exceed the target, Barclays would keep the surplus. The team's share does have an unknown maximum, which Hackel pegs at possibly around $100 million using Yormark's clues and Forbes' franchise revenue list.

And no one would confirm how much the Islanders receive, although last year The New York Post reported that Barclays has guaranteed the Islanders $50 million annually.

Yormark told The Hockey News the maximum guarantee is contingent on the revenues his organization generates and claims it is a relatively easy target.

"We did make a revenue guarantee - I'm not going to discuss what the number is - but the number, when we hit it, would only put us 20th in the NHL in revenue," he said.

In other words, the Islanders aren't getting money just for showing up at Atlantic Avenue. They've still got to ice a competitive team that people want to pay money to see. The difference here is that the money they get for their efforts will ultimately come from their landlords and won't go straight from the box office into their own pockets.

A Most Unusual Arrangement

As Hackel points out a few times in the piece, this isn't how most teams operate, which has never stopped the Islanders before. This time, however, it could work out in their favor.

When Wang and former partner Sanjay Kumar bought the team in 2001, there wasn't a long line of suitors waiting to outbid them. Anyone stepping up to the plate knew that it would basically be flushing money down the Coliseum toilets for a decade. The lease with the county and the arena management agreement with SMG was extraordinarily restrictive, limiting the club mostly to merchandise, a long broadcasting contract with Cablevision and sales to the smallest and least-luxurious selection of luxury suites in the NHL. Parking and concessions all went to Nassau/SMG as well as a portion of all ticket sales. And that doesn't mention rent, taxes and utilities that the team had to pay also.

At Barclays, Wang and in-coming owners Scott Malkin and Jon Ledecky (who take over full time in 2016), will have a streamlined and basically guaranteed bankroll to work with, so long as the team hits Yormark's targets.

Will this work for Wang and his two partners (who will become the majority owners in the 2016-17 season)? Considering his long-standing annual losses at Nassau Coliseum, Wang is likely quite happy. This not only provides him and his partners a degree of financial certainty, but they're probably no longer swimming in red ink.

"For him, it's better than losing $20 million a year, or whatever he was losing playing out of the Colisuem," said Glenn Gerstner, chairman of the Sports Marketing Department of St. John's University in New York, and a longtime Islanders fan.

Gerstner, whose background is in economics, also points out that ownership's bottom line increased by outsourcing the team's business department. "The savings for Wang is that he just cut his overhead," he said.

And when you throw in the estimated $20-$30 million a year the Islanders get from New York's least favorite blues musician, plus league TV rights revenue sharing and possible expansion fees, the team is looking at flipping the script in a big way. Instead of festooning every inch of the Coliseum with advertising and sales tables trying to squeeze every penny they could out of the place, the Islanders are looking at  - pause for effect - actually making a profit? Waitwhat?

That could all total around $90 to $100 million annually in revenues for Islanders ownership this season, which would wipe out their annual losses. That upper end is obviously a good chunk more than $83 million - and all without the overhead of maintaining a marketing and sales department.

Brave New World

Hackel ends by discussing ticket sales with Yormark, specifically where the sales are coming from. Yormark is (of course) bullish on the numbers so far and says that while a quarter of the sales are Long Islanders willing to make the trek, over 33 percent of the sales are from Brooklyn and 21 percent are from Manhattan, a bastion of expat Islanders fans for decades.

So get ready for a whole new class of Islanders fan, one that might care less about tailgating and more about corporate networking.

It has traditionally been a family-oriented fan base, and the club did its initial ticket sales push last winter exclusively to Long Islanders. But when the Isles home schedule was released this summer, those fans noted that the Isles play a weeknight-heavy schedule with just four home games on Saturdays — the final two in April - and just three Sunday or holiday Monday matinees.

"That's geared for a corporate crowd," said Jim Johnson, who worked for the Islanders in the '80s and '90s, including six years as the team's director of marketing and ticket sales. "It seems they took their best shot on Long Island but then went to Plan B. Their objective now is to bring in a whole new audience and build off the legacy of the championship years and the good faith derived from last season."

Johnson also points out - and personally, I agree - that Islanders fans have traditionally been spoiled with a neighborhood team just a short drive away. Eat dinner, pile the kids into the station wagon, see a game and be home before 11 pm. And even with that family-friendly plan, people still stayed away when the team was garbage on the ice.

Those days are over. And for the Islanders to survive, they have to be.

Bank Job

Even if the team could have worked something out with Nassau County and stayed closer to their original home base, it's unlikely that it would have been this lucrative. Hempstead's rejection of the grandiose Lighthouse Project and its subsequent (tentative) approval of Bruce Ratner's renovated version of the Coliseum plus a few stores and a bowling alley points to the town's desire to keep things as they are; with the tenants paying up. The Islanders would most likely have remained in the same boat they have been bailing water out of forever.

Moving to Barclays is a blow, but one that needed to be made in order for the team to be competitive in the 21st century and beyond. In the Islanders' division alone, there are teams owned by broadcast giants, massive cable providers and the generally filthy rich. Nearly every team in the NHL owns their own arena and rakes in crazy money even when their teams aren't playing.

"Let's put on a show and sell a lot of tickets, you guys!" isn't a sound business plan for a pro sports team anymore, if it ever truly was in the first place.

There's going to be a lot of skepticism about this, as there is with pretty much everything Islanders. Cutting an entire department isn't a good look for the team. The people that worked on the business side of the Islanders probably (although the article doesn't say) lost their jobs along with any of the workers at the Coliseum. The faceless Barclays folks will be behind every ticket price hike and sponsorship. "Charles made us a promise" is definitely going to be a log thrown on the eternal Wang Conspiracy Fire.

But on paper, the Islanders have a chance to finally be on the same level financially as the rest of the NHL and turn more profits than they ever have, including during the Dynasty years.