City Bonds Were a Non Starter

The soap opera continues.

Earlier today AEG, one of two bidders to renovate the KeyArena, notified the mayors office of their withdrawal from the RFP process.

This shocking Sunday afternoon development occurred amid persistent rumors that the city was poised to announce the selection of their competitor, the Oak View Group as early as Monday. While there was some debate regarding the timing, it was clear that an answer was expected next week, and AEG appeared to be scrambling to make up ground in response to a leaked story indicating the cities preference for the Oak View proposal.

If the decision to formally withdraw from the process came as something of a surprise, then the accompanying letter, written by AEG President bob Newman, was absolutely stunning. The letter, which could only be described as "scathing," included allegations that the city had failed to conduct a collaborative and iterative process, blaming city misconduct for the withdrawal, and directly challenging the credibility of the Oak View proposal.

This stands in stark contrast to an e-mail written by Newman to city consultant Carl Hirsh just a few weeks ago. In this letter, Dated May 18th and obtained by SonicsRising, Newman praises the city process, stating:

"We applaud the City for executing a thoughtful public process. Engaging with teams from the City and the public has strengthened our proposal and crystalized our approach....Our passion for this project has only grown through this process….Thank you for your commitment to bring this vision to reality."

The e-mail also seemed to address what many considered the Achilles heel of the AEG proposal, a surprising request to utilize public bonding capacity to facilitate construction of the arena. In defense of their bonding request, which is something of a standard practice for AEG facilities, the mail prefaces a defense of their financing mechanism by stating:

"It is also important to share a few thoughts about our financing model. We did not take our request to leverage City bonding lightly."

AEG's decision to rely on public bonding capacity came as a surprise to city officials and was viewed by many within city hall as a deal breaker which would surely be rejected by council. AEG's perceived refusal to move away from that model has largely driven the perception that OVG would be awarded the bid.

As the process entered June and expectations for an early decision began to mount, many people close to the process felt that AEG would revise their bid, perhaps removing the request for public bonding and potentially striking a clause that would have prevented competing arenas, such as Hansen's Sodo facility, from being built. Sources close to the situation indicate that the city had hoped that AEG would respond to commentary about the public bonding in similar fashion to OVG's parking lot change last week. As news of a press release today began to spread, the hope and expectation was that it could potentially be a change of terms that would get them back in the game.

No such luck. Rather than modifying their terms AEG, left and burnt bridges behind them, creating a potentially awkward situation as they remain under contract to manage the existing facility for the foreseeable future.

This scorched earth approach is the latest salvo in an escalating, and seemingly quite personal feud between the two companies and their principal owners. In a recent article Billboard Magazine attempted to describe the roots of the conflict:

"Industry insiders note that the seeds of the feud may have been sewn around 2008 when (Oak View Group co-founder Irvine) Azoff was the CEO of Ticketmaster. He and (James) Dolan approached Anschutz about merging the ticketing company with MSG and AEG to take on Live Nation. The negotiations collapsed resulting in bad blood among the parties (and in 2009 Azoff emerged as the CEO of a merged Live Nation and Ticketmaster). Leiweke’s relationship with Anschutz also deteriorated in the wake of his abrupt departure from AEG in 2013."

More information about Leiweke's relationship with AEG is available in this fascinating article which, while several years old, casts some light on the relationships and personalities involved in this high stakes battle of industry superpowers.

In recent months this conflict has only escalated. Azoff, responding to accusations that he had initiated a "booking war" with AEG chose not to deny the allegations. Instead, he defended the process, in which entertainers are blocked from performing coveted shows in OVG's flagship Madison Square Garden if they chose to perform in AEG operated venues by issuing a fascinatingly candid statement which concluded:

While I realize Phil [Anschutz, owner of AEG] may not be happy with Los Angeles being a competitive market, that's the American way.

-- Irving Azoff

P.S. We are extremely flattered by Staples' feeble attempt to replicate The Forum’s game room at AEG's Microsoft Theater... Thanks for loving what we do.

Make no mistake. The city of Seattle has been aware of this competition and has done everything in its power to leverage the feud into better terms than either company would have been likely to offer on their own. It is perhaps for this reason that they were so startled by AEG’s tone deaf decision to include public bonding in the first place, as well as their refusal to craft a solution more palatable to city government. Perhaps nobody expected them to simply “bow out” in this fashion without putting forward a proposal to amend those terms.

As a fan it is most important to me that SOMEONE win this fight. AEG, by choosing to depart the process in this seemingly spiteful manner has cast a blow to the process, and now fans must turn their attention to the two remaining contestants and hope that the city did not overplay its hand by asking for too much, offering too little, and leaving us yet again without a viable opportunity to bring the NBA and NHL to town.

It is time for Chris Hansen and the Oak View Group to show us what they’ve got. I’m ready for the showdown.