Penguins ownership seeking investors: What we know, don't know

Even deep-pocketed owners prefer to make money. Fenway Sports Group is no different.

Considering what it paid for the Pittsburgh Penguins a few years ago, money since invested, and an on-ice downturn that hasn’t helped business, it’s reasonable for FSG to sell a percentage of its NHL franchise to a partner or partners that fits with its ideals and can boost the bottom line.

FSG has done this before with Liverpool Football Club. The Penguins’ previous owners sought minority investors last decade, following the lead of the NFL’s Steelers in the mid-2000s.

Pro sports are business. They also are a club for extraordinarily wealthy people. If FSG can entice a person or group to hand over millions to be part of the Penguins while retaining no say in how the team operates — why wouldn’t it try?

It’s not an uncommon move. Still, Penguins fans have questions. Let’s try to answer some of the big ones.

Why is FSG seeking investors?

“Big debt.” That’s the term used by FSG’s Teddy Werner at a mid-season ownership meeting, according to multiple sources with knowledge of the meeting who were granted anonymity because they were prohibited from speaking publicly. Werner, FSG’s appointed overseer of the Penguins, said new investors would bring in needed capital and cash.

How much debt?

FSG and its subsidiaries are private companies, so their financial situation is unknown. However, we can deduce plenty from new and previous reporting:

• The Penguins have played only three home Stanley Cup playoff games since FSG’s purchase. They previously budgeted for between four and six home games annually, not an unusual practice for contenders. A team source estimated a home playoff game to be worth about $2 million for the team.

• Gate revenue remains the largest economic driver for NHL franchises, and Penguins attendance has continued to wane. There is dispute as to how long their home sellout streak lasted, as FSG officers felt tickets were being devalued because of a policy to give away or sell reduced-cost seats in the final seasons under previous ownership. A new pricing structure was introduced for the 2022-23 season, and multiple team sources said the result was increased ticket revenue despite fewer sellouts.

The Penguins have the largest percentage drop of the NHL’s 32 teams in average net revenue per game from last season, a team source said.

• Under AT&T SportsNet, the Penguins were paid $24 million annually for local television rights. When AT&T folded two years ago, FSG started SportsNet Pittsburgh (SNP), a regional sports network similar to FSG’s NESN in Boston and other northeastern markets. Though the Penguins continue to generate top-tier local TV ratings, an industry and team source said the money brought in under SNP is not close to the annual revenue from AT&T SportsNet because the SNP assumes all costs.

• Former president of hockey operations Brian Burke and former general manager Ron Hextall each had one season remaining on their contracts when fired in April 2023. Those contracts combined to cost over $6 million annually. Kyle Dubas, who filled both vacancies, has an annual salary of $5 million. That means the Penguins sent at least $11 million to three men doing two jobs last season.

• FSG invested $30 million into upgrades for PPG Paints Arena during the summer of 2023.

• The Penguins continue to spend to the NHL’s salary cap, which increased to $88 million for this season. NHL commissioner Gary Bettman projected at least $92.5 million for next season, and FSG will again spend to the maximum allowed, FSG chairman Tom Werner said in October 2024.

Have the Penguins done this before?

Yes, and that’s been the norm for a super-majority of the franchise’s history, including with the Mario Lemieux/Ron Burkle group. The closest the Penguins have come to having a singular owner is Edward DeBartolo Sr., whose corporation owned the team from 1977-91. However, the sports landscape was different then, and the DeBartolo family owned multiple sports entities, including the NFL’s San Francisco 49ers.

So, how does all of this work?

FSG is required to inform the NHL of its intentions to seek investors. That has happened.

FSG has hired two third-party firms to identify and vet interested parties, multiple league sources said. One of those firms is the sports property sales division of CAA, which also operates a hockey agency run by Pat Brisson and JP Barry. Brisson (Sidney Crosby) and Barry (Evgeni Malkin) represent the Penguins’ two biggest players, but neither agent is involved with CAA Sports Property Sales.

The NHL does not view FSG using CAA to solicit investors as a conflict of interest, a team and league source said. The NHL did not have approval rights over which firms are working with the Penguins. Any minority partner FSG wishes to bring into the Penguins must be approved by the NHL.

There is no timeline for the process. FSG does not require immediate cash flow for the Penguins to operate and is willing to play a long game to find an investor who fits with the franchise brand, multiple team sources said.

Is it a sign that FSG regrets its purchase?

“Regret” would be overly harsh, but it would also be a surprise if FSG wasn’t somewhat disappointed.

Its sports portfolio already had higher-profile properties with higher-revenue leagues (English Premiere League’s Liverpool Football Club, MLB’s Boston Red Sox). It added investors to Liverpool, a global soccer giant with millions of fans in North America, and brought in a new owner for NASCAR’s RFK Racing earlier this decade. This is an established business strategy for FSG.

Still, playoff appearances are a distant memory. Not all seats are sold regularly. The best and most beloved players (Crosby, Malkin and Kris Letang) are aging out. The current season will probably end with the Penguins in the bottom third of the NHL standings, if not lower.

Also, the NHL’s $7 billion annual revenue is well below the other leagues with which FSG has properties.

There is no indication FSG regrets buying the Penguins. However, it’s accurate that FSG is much more influential in the MLB and EPL than the NHL.

What is FSG’s end game?

Tom Werner said in October the goal is to “win the Stanley Cup” — same as, oh, 30 or so of his peers.

This is not to suggest Werner isn’t serious; the Red Sox, Liverpool, and RFK Racing have won league titles under FSG. There’s also, though, a rapidly depleting amount of evidence that these Penguins are mid-table team, let alone a contender — a fact that’s complicated by Werner saying that he doesn’t believe a teardown is necessary for a return to prominence.

His actions back up his words. FSG wouldn’t have offered Dubas a seven-year deal, well beyond NHL standards, or extended Crosby if they anticipated a sale. “Patient to a point” is how an FSG source described its view on the Penguins.

All indications, including the potential additional minority investors, show FSG is trying to best position the Penguins to contend as quickly as possible. Whether Dubas can thread that needle — and he has full autonomy over hockey decisions — is another matter.

Does this mean FSG is going to sell the team?

This is unlikely but possible.

Any conglomerate that has taken on investors has at least strategized about the “too good to turn down” offer. “We won’t buy part of it,” the hypothetical suitor says, “but we would buy the whole thing.”

If that were to happen, FSG would need to weigh any immediate return on investment ($950 million, plus costs added) against the down-the-line benefits of shared revenue from two anticipated NHL expansion teams, a new Canadian TV deal and, perhaps, a successfully rebuilt on-ice product.

An influx of cash or capital from a minority investor, though, would only strengthen the Penguins’ bottom line as their business side, overseen by president of business operations Kevin Acklin, continues to integrate with the larger FSG model. That process picked up with layoffs of about 30 longtime staffers last summer. Most of those positions were filled or recast, Acklin said at the time.

Even as it expands, if FSG envisions a future with a property in each of North America’s big five professional leagues (NFL, NBA, MLB, NASCAR, NHL), selling the Penguins before that becomes a reality wouldn’t make sense.

How will this impact the Penguins on the ice?

It won’t.

That is not to suggest the on-ice outlook is pretty. It’s not. Dubas has already started acquiring future assets with the (don’t-call-it-a) rebuild in mind. Malkin has only one season remaining on his contract and will probably retire afterward. Crosby is signed for two more seasons, as are Letang and coach Mike Sullivan.

Werner said in October that FSG’s resources are limitless to Dubas building out the hockey department, ideally transforming it into a modern standard-bearer with state-of-the-art data and technology. He also said the Penguins will continue to spend to the salary cap.

All of this was said before a season that will likely feature the Penguins failing to make the Stanley Cup playoffs a third consecutive time. There is no indication anything has changed, but then, there’s no predicting the fallout of another trip to the draft lottery.

Unlike MLB and the EPL, though, the NHL is a hard-cap league. Absent a tactical reason — such as preserving space to take on bad contracts or to add players in-season if the team overperforms — there is not much to gain for FSG failing to spend to the cap. The difference will not make or break the Penguins’ finances.

What about that Civic Arena development?

This is PPG Paints Arena’s 15th NHL season. The site of its predecessor, Civic Arena (the Penguins’ original home) remains mostly undeveloped parking lots except for FNB Financial Center, a 26-story building. It opened in mid-December 2024, but most of the office space remains empty.

The Penguins anticipate that changing this year when First National Bank employees transfer to the headquarters. The Penguins are also considering relocating some of their offices at PPG Paints Arena to the highrise, two team sources said.

FSG expects to break ground this year on an indoor concert hall on the Civic Arena site similar to MGM Music Hall at Fenway Park in Boston. A 2026 opening is targeted.

Penguins officials have long insisted the windfall from a fully redeveloped Civic Arena site is overstated. Still, for the past 15 years, the only money made off the site has been limited to parking for people working in the city or those who attend games, concerts and events at PPG Paints Arena.

Pittsburgh’s North Shore, where the NFL’s Steelers and MLB’s Pirates had stadiums open in 2001, looks completely different than before those facilities were built. That land is teeming with mid-sized hotels, restaurants, parking garages, an indoor/outdoor music venue and a couple of stops for the city’s light rail transit. That took time; it also didn’t take a decade and a half.

Development has been slow for many reasons, ranging from U.S. Steel killing a plan to build its headquarters on the former Civic Arena site to the COVID-19 pandemic’s negative impact on the city as a whole but also construction costs. There also have been strained relations between the Penguins and officials with the Lower Hill District neighborhood that predated the redevelopment efforts.

Will this affect ticket prices or the game-day experience?

Probably not.

FSG poured $30 million into PPG Paints Arena before last season. A modern video board and updated wiring have allowed the Penguins’ game night operations staff to use more bells and whistles, and there seems to be more emphasis on entertaining customers between breaks in play.

Ticket prices were restructured three years ago. The costs of parking and concessions have been a constant source of frustration for fans, but prices are in line with what’s charged at the Steelers’ Acrisure Stadium and Pirates’ PNC Park.

I’m worried about all of this. Should I be worried?

This is a star-crossed franchise. Five titles and two bankruptcies. Its first star, Michel Brière, died after playing only one season. Its two icons, Mario Lemieux and Crosby, had chunks of their primes wiped out by injuries and illness. There’s a lot more, but you get the idea.

There is rarely a middle ground with the Penguins. It’s either high time or hard times.

Still, FSG is the most resourced ownership the franchise has known. Nothing in FSG’s history suggests it’s a quick-to-bail conglomerate. The company is still figuring out both the Pittsburgh market and the NHL at large.

All reasonable signals point to the Penguins carrying more debt than FSG prefers, so the company is getting out in front of it by seeking investors to keep a healthier bottom line.

As the saying goes in Penguins Land, though: It’s never boring.

(Photo: Justin K. Aller / Getty Images)