Pegula may sell Bandits, Knighthawks lacrosse teams to Seneca Nation of Indians in cash crunch

Pegula Sports & Entertainment may be in such a serendipitous cash crunch that billionaire Terry Pegula may be willing to sell his two National Lacrosse League franchises — the Buffalo Bandits and the Rochester Knighthawks — to the Seneca Nation of Indians, at a very significant loss.

Experts in the sports marketing industry explain that lacrosse franchises derive the vast majority of their revenues from tickets, concessions, and sponsorships — with negligible revenue derived from broadcasting.  Now, with a global pandemic still underway, it’s unlikely that in-venue audiences will be allowed for the duration of next season — making the teams’ revenue prospects dire.

For Pegula, the team could be a major cash drain.  Team and staff salaries, operating expenses, promotions, and game-day expenses across both teams undoubtedly feel heavier to the Pegulas this season.  If the Senecas were willing to assume those operating losses for the next season or two, depending on when in-venue audiences can resume), it’s likely that Pegula would transfer ownership to the Senecas and simply absorb the loss.

Sources tell The Chronicle that the Seneca Nation may be willing to acquire the team under those conditions.  The NLL believes that lacrosse will generate new revenues with a pay-per-view revenue model for broadcasts of the games, much the same way that boxing events are promoted.

Seneca Nation President Ricky Armstrong pictured above placing a bet at Seneca Gaming’s new sports betting parlor at the Buffalo Creek Casino. It’s rumored that the gaming corporation plans to roll out a new digital gaming platform that will allow users to place sports wagers remotely.

On March 27, 2018, the league announced a partnership with B/R Live app, Turner Sports‘ live streaming service, to stream all live and on-demand games starting with the 2018-2019 season.  B/R Live is available to anyone in North America and costs $39.99 for the season, $7.99 for the month, and $2.99 per game. The service is available on iTunes and Google Play, as well as on Apple TV, Roku and Amazon Fire TV.

The league has not yet marketed electronic gaming products on Xbox 360, PlayStation, Nintendo, Gamecube, Wii, or other platforms.  As the league grows over time, electronic gaming could become a multi-billion dollar source of revenue for the league.

At the moment NLL franchises derive almost all of their revenue from tickets and sponsorships. If the transaction does happen, the Native American business community is likely to coalesce around the team to participate in sponsorships and advertising.  It’s thought that Grand River Enterprises, Smokin Joe’s, Seneca One Stops, Seneca Gaming & Entertainment, and other tobacco and gasoline retailers would be eager to advertise with the sports franchises.

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The NLL was charging a $5 million expansion fee for new franchises prior to the COVID-19 pandemic.

The NLL had a one-season broadcasting deal with CBS Sports, which ended in 2017.  Some teams broadcast home games and select road games in their local television markets.

WHAM-TV will broadcast six selected Knighthawks games in the Rochester market.  While there is no current broadcasting contract for the Buffalo Bandits’ games, it’s thought that Phil Arno, owner of WBBZ-TV Channel 5, and Bill Yuhnke, owner of WJJL-1440 AM, are interested in broadcasting the entire seasons of both franchises.

Phil Arno purchased WNGS and relaunched it at WBBZ-TV in 2011. Sources say that he would be willing to pay a significant fee for the Buffalo-area broadcasting rights of the Bandits’ 18-regular season games. That deal could generate the Bandits franchise between $200,000 and $300,000 this season.

Terry Pegula is a wealthy man — valued by Forbes at more than $4 billion when energy prices were trading under normal circumstances — but he is not particularly liquid at the moment.  With natural gas at rock bottom prices, and energy demand generally down by 40% or more this month, his natural gas wells have stopped production and his sports franchises don’t know what next season is going to look like.

The Buffalo Bills’ share of television revenues from the NFL are expected to float the sports enterprises through next season (which is unlikely to include in-venue audiences).  Without ticket sales, it will be difficult for the Buffalo Sabres to afford its $80 million in players’ salaries, because the sport depends much more heavily on game-day revenues like concessions, ticket sales, parking, and merchandising.

That could create a serious cash-flow problem for Pegula that could be, in small part, alleviated by partnering with Seneca Nation — which, observers postulate, would then lease the arenas from Pegula at cost.

Pegula acquired the Rochester Knighthawks from Six Nations businessman Curt Styres, who moved his franchise to Halifax and rebranded the team.  The Pegulas purchased the team’s intellectual property, venue lease agreement, and some sales assets for an undisclosed sum.

As part of that deal, the Pegulas paid a $5 million expansion fee to the NLL.

The Haudenosaunee invented lacrosse hundreds of years ago, and the game plays enormous significance in the social and civic life of Native American communities across New York, Ontario, and Quebec.

“Since there will be no in-venue audiences for the next season or two, it might be a great time to launch a slew of teams, understanding that revenue will be limited to pay-per-view until pandemic conditions change,” one source explains.

“If you keep player salaries tight and plan to play at empty arenas for a few years, the pay-per-view and broadcasting agreements could make a bare-bones franchise profitable with sponsor-advertising agreements,” he postulates.  “It also excites me, in part, because of legalized sports betting.”

On average, professional lacrosse players make between $10,000 and $25,000 per year, with first-year players earning $7,000 to $9,000 per year.  Many athletes have full-time jobs in addition to playing lacrosse, or they negotiate endorsement deals with brands to supplement their salaries.
The Seneca Nation has invested heavily in on-territory athletic centers that include indoor lacrosse arenas and a slew of other training facilities. It’s thought that those athletic programs could play an eco-system-building role for the two franchises.

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