Future of Penguins will be determined in next few months

It's possible the team won't survive past the 2006-07 season.
By TOM WILLIAMS
VINDICATOR SPORTS STAFF
PITTSBURGH -- In the 13 years since the Pittsburgh Penguins won their first of two consecutive Stanley Cup championships, the National Hockey League has added nine expansion teams, salaries and ticket prices have essentially tripled and television income is stagnant at best.
Depending on who you talk to, the Penguins, who today are by far the NHL's worst team, are either the league's poster child for contraction or the best-run franchise of the 19 teams reportedly losing money.
In the next year, the future of the Penguins' franchise likely will be determined by the powers in and outside of Pittsburgh. The contract expires Sept. 15 and a labor war is brewing.
Major issues
Here are some of the issues that must be resolved for the Penguins to survive past the 2006-07 season, when their Mellon Arena lease expires:
UA new arena. In Allegheny County, a fiscal crisis means there's no local money to help construct a new state-of-the-art arena to replace 43-year-old Mellon Arena, the oldest facility in the NHL. The Pennsylvania Legislature hasn't moved on the Pens' proposal to kick in $107 million for a new downtown arena, but the offer depends upon Mountaineer Resort & amp; Racetrack operator Ted Arneault being granted the state's final horse racing license and slot machines being legalized.
UCost containment. That's the NHL's way of saying salary cap. The NHL, which shares its limited national television revenues equally, has no restrictions on salaries, which have escalated so much that a new report commissioned by the NHL says 75 percent of revenue goes to the players. In comparison, the NFL and NBA, which work successfully with salary caps, have payroll expenses of less than 60 percent. That report, issued last week by Arthur Levitt, former chair of the U.S. Securities and Exchange Commission, indicated the NHL is on a "treadmill to obscurity" after losing $273 million during the 2002-03 season.
UA long labor war. The NHL will likely lock out its players when the collective bargaining agreement expires and won't settle without a salary cap. The National Hockey League Players Association vows it will never accept a salary cap. Will fans come back if a long break follows?
ULess television revenue. The NHL's current deal with Disney-owned ABC/ESPN expires at the conclusion of Stanley Cup playoffs in June. ESPN, which has contracts with the NFL, NBA and Major League Baseball, plans to offer about half of the $240 million it now pays to retain broadcast rights. The NHL's problem? No other U.S. broadcast giant is likely to bid. CBS has the NFL, college basketball and a share of the PGA; NBC has the Olympics and NASCAR; and FOX has the NFL and NASCAR. None need low-rated hockey telecasts.
UPlummeting ticket sales. Three years ago, the Penguins, led by owner Mario Lemieux, Jaromir Jagr, Alexei Kovalev, Darius Kasparaitus and Martin Straka, played in the Eastern Conference finals and Mellon Arena's 16,958 seats were filled. In order to contain their losses, Jagr, Kovalev, Kasparaitus and Straka were traded away for prospects. Last fall, Lemieux played 10 games last fall before a hip flexor injury ended his season. Despite discount giveaways, attendance is off approximately 3,500 this season, or fewer than 12,000 per game. The announced crowd for Monday's game against the Toronto Maple Leafs, one of the league's best teams, was 10,527, but there couldn't have been more than 8,000 in the building.
ULosing. The Penguins dropped their 12th straight home game Monday, a NHL record. They haven't won since Jan. 16 at Minnesota. Their last home victory came on Dec. 29. Fans who became spoiled over the past 15 years when the team featured the likes of Tom Barrasso, Ron Francis, Joe Mullen, Paul Coffey, Kevin Stevens, Ulf Samuelsson and Sergei Zubov aren't motivated to spend to watch prospects.
U Lack of optimism. The Penguins' payroll of $22.8 million is the lowest in the league and they are getting what they're paying for on the ice. Ed Olcyzk, had no coaching experience when he was hired last spring to replace Rick Kehoe. Last season, the Penguins lost $3 million -- according to the Levitt report the least of the 19 clubs in red ink. This year's loss is projected to be $5 million. It might have been worse if not for the season-ticket holders who ponied up for what was expected to be Lemieux's final season. Despite their tiny payroll, losses could grow next season if television income is reduced (from $8 million per team to $4 million) and season-ticket sales plunge.
UContraction. As many as four teams could be disbanded during or after a long lockout (fewer teams means less sharing of reduced television income). Without a new arena plan, the Penguins would likely be the first team whacked if the NHL ever realizes that it grew too fast in the past decade.
williams@vindy.com