Sports & Recreation

NHL losing money?

  • Last Updated:
  • Feb 11th, 2005 11:37 am
Tags:
None
Deal Expert
User avatar
Jan 27, 2004
52935 posts
18144 upvotes
ONTARIO

NHL losing money?

Im not to familar with the Politics of the NHL...

But the other day i was watching a comedy skit on this hour has 22 minutes... or some sort of Canadian based comedy type show, not sure what it was. They were making fun of the NHL lockout situation and one of the interesting points it made is that th eNHL is losing money because they took all the hockey teams away from cold/winter areas like Quebec, and Minnesota and put all the teams into warm american cities, where hockey isnt so popular and tried to make it popular that way. However the new teams allocated in warm climates and parts of the US (Most americans arent into Hockey) caused economic probs for the NHL with viewership and the such...

Is there any truth to this joke? The skit seemed to have some truth to it since i know that show likes to take existing current events effecting canada and then make skits with alot of sattire.
12 replies
Deal Addict
User avatar
Jul 24, 2003
3787 posts
67 upvotes
there are teams that are obviously losing money, and then there are teams that are obviously making money hand over fist.

it is the middle teams that all apparently seem to be losing money, yet are simultaneously opening up brand new multi-million dollar arenas.

this is one of main bones of contention between the two sides. the nhl wants to have an economic partnership, but in a true economic partnership, the books are opened up to all of the partners--something that the league refuses to do for the nhlpa.

furthermore, it makes it really hard for meaningful revenue sharing under a true 'partnership' to occur if the nhl insists on keeping the books a secret. the league has to be willing to have an independent auditor walk in and clinically examine the books.
Deal Expert
User avatar
Jan 27, 2004
52935 posts
18144 upvotes
ONTARIO
ahh .I did some research on this, and i noticed some opinions from other people. Although high salary demands from players are part of the problems, alot of the opinions regarding the lockout is due to overexpansion of hockey in the states... they noted that Canadian Curling viewership, and poker competitions has more viewership then the Russia Vs. USA hockey game in teh states.

Kinda makes sense..
hockey in North CArolina?
Deal Addict
User avatar
Jul 7, 2001
1323 posts
afong56 wrote:this is one of main bones of contention between the two sides. the nhl wants to have an economic partnership, but in a true economic partnership, the books are opened up to all of the partners--something that the league refuses to do for the nhlpa.

furthermore, it makes it really hard for meaningful revenue sharing under a true 'partnership' to occur if the nhl insists on keeping the books a secret. the league has to be willing to have an independent auditor walk in and clinically examine the books.
Completely untrue. The league has had an independent audit clause in all their offers:
Following the end of each League Year, the League's Hockey-Related Revenues will be audited by an independent auditor jointly selected by the NHL and NHLPA, and the escrowed funds will be distributed either to the Players; or to the Clubs; or to both Players and Clubs in order to ensure that the Players receive 54% of the League's Hockey-Related Revenues.
12. JOINT AUDIT CONTROLS FOR CALCULATION OF CLUB REVENUES

-- Each year's accounting will be performed by an independent accounting firm jointly selected by the NHL and the NHLPA.

-- Mandatory $2 million fine and loss of 1st Round Draft Pick for first Club offense for failure to disclose required financial information.

-- Mandatory $5 million fine and loss of three (3) 1st Round Draft Picks for second Club offense for failure to disclosed required financial information.
The players on the other had haven't offered anything in the way of independent auditors. They were invited to participate the last time an independent auditor was hired but refused. Do a search in NHLPA's offer, the word audit doesn't even appear.

The Flames opened their books to the players, and the players came back saying they were suprised (of course they couldn't disclose what they saw, I'm sure they signed an NDA or something).

The owners shouldn't have to open their books to the players, but I totally agree that auditors have to be involved, and a dollar of revenue has to be decided. The NHLPA is the one though that appears to not want that (I believe because it would be the first step into accepting a link between costs and revenues, something they don't want).
Deal Addict
User avatar
Jul 24, 2003
3787 posts
67 upvotes
temporalillusion wrote:Completely untrue.

The owners shouldn't have to open their books to the players, but I totally agree that auditors have to be involved, and a dollar of revenue has to be decided. The NHLPA is the one though that appears to not want that (I believe because it would be the first step into accepting a link between costs and revenues, something they don't want).
this is news to me. please provide a link for verification, thanks.

if this is true, then why was an independent auditor that both the league and the nhlpa agreed on not employed from the beginning? it is pretty hard to build an atmosphere of trust and "partnership", when the nhl shut out the nhlpa by hiring levitt.

temporal, i think we have discussed this issue already. the writer from forbes found huge discrepencies with the 'independent' findings of levitt.

as for calgary, the team was already doing comparatively well under the current system, so they were not the ones that would need profit sharing--it would be the 11 teams or so that would continue to lose money under the new nhl proposal that really need the help (of course, that would be using the numbers that the nhl reported, so it is not 100%)

i think deep down, even the 'pa realizes that linkage between revenue and salaries is rational. the big question is at what level will the linkage occur. the second big question is whether the owners will be full and complete in their reporting, penalties notwithstanding.

i still don't know how bettman will get the really rich owners to accept meaningful profit sharing, so that all the poor teams have a shot at profitability. can anyone answer that one?
Deal Fanatic
Mar 6, 2004
9318 posts
204 upvotes
[QUOTE]as for calgary, the team was already doing comparatively well under the current system, so they were not the ones that would need profit sharing--it would be the 11 teams or so that would continue to lose money under the new nhl proposal that really need the help (of course, that would be using the numbers that the nhl reported, so it is not 100%)[/QUOTE]
uh subtract this season where they made money cause they went to the Stanley Cup finals and maxed out the number of home games in EVERY series and your statement is false.

consider that 12 home playoff games which are kinda like pure profit for the owners and you will look like you are doing comparatively well.

their payroll was small cause frankly they stunk before this last season and their roster was not full of proven talent.

that will change once Kipper gets paid his market value and you fully account for Iggys new mega contract.

that is probably OVER five million dollars EXTRA on the payroll right there for just these two guys.

PLUS the flames were fortunate that had a player with the integrety of Turek.

They signed him a few years ago to a BIG multi million dollar contract but since then has basically stunk the joint.

He VOLUNTARILY agreed to cut his pay in light of this.

What other player do you know has done this?

then there is the question of Reghr who deserves a mega contract for being one of the better defensive defensemen in the league.

suddenly the Flames if they do not repeat another Stanley Cup run do not appear to be so well off financially.
Deal Addict
User avatar
Jul 24, 2003
3787 posts
67 upvotes
Montague wrote:suddenly the Flames if they do not repeat another Stanley Cup run do not appear to be so well off financially.
i am aware of those circumstances. my statement is still correct. they are doing comparatively well when compared against the other teams who are definitely losing money (according to the nhl).

is there any doubt that the flames would have made money this season, even under the old deal? consider the extra ticket sales that would have been generated from building on last season's cup run. consider the extra money to be generated from local sponsorships, possible television revenue. consider also that the value of the canadian dollar this year over last year has already added 10% to the potential value of this season to the flames, both in revenues in and salaries paid out.

is there any question that they would benefit with a luxury tax system and a strong revenue sharing mechanism? no. the flames could definitely use some of the extra 24% profit the leafs stand to pocket under any likely deal.

the question still remains, how will bettman get the rich teams to swallow it?
Deal Fanatic
Mar 6, 2004
9318 posts
204 upvotes
[QUOTE]is there any doubt that the flames would have made money this season, even under the old deal? consider the extra ticket sales that would have been generated from building on last season's cup run. consider the extra money to be generated from local sponsorships, possible television revenue. consider also that the value of the canadian dollar this year over last year has already added 10% to the potential value of this season to the flames, both in revenues in and salaries paid out.[/QUOTE]
Unless you got a crystal ball I do not see how you can say with any certainty which way the Canadian dollar will go though that risk could be somewhat controlled through the use of forward/future currency contracts.

Any doubt the flames would have made money this season under the old deal?

Nope but in subsequent years yes.

"extra" money from sources other than ticket revenue is a "drop in the bucket" since the NHL is primarily a ticket revenue driven league.

And what if last season was a fluke and Kipper ends up being a sieve like Turek?

Remember these guys have actually WON the Stanley Cup before and been the finals a few times yet STILL had been in DEEP trouble financially earlier in the nineties.

Look at the Canucks with their relatively modest budget.

They are barely in the black themselves despite have decent crowds and SEVERAL decent regular seasons.
Deal Addict
User avatar
Jul 7, 2001
1323 posts
Without the Canadian assistance program the Flames would have probably moved or folded.. they've been losing for quite a while and while it's not spectacular #'s like $30 million / yr like some, it's enough that they support the current effort for a linkage. The Flames owners are some of the wealthiest out there, but they're also business men and run the Flames like a business so mounting losses aren't acceptable to them.

As far as a links:

NHLPA Offer, no audit:
http://www.nhlpa.com/Proposal/NHLPAcomProposal.pdf

NHL Offers, Audits:
http://www.nhlcbanews.com/news/nhlproposal020205.html
http://nhlcbanews.com/news/nhlresponse121404.html

Most auditors are hired by the company they are auditing, so the fact that the NHL paid Levitt doesn't mean anything. 2000 hours of time and 10 months by a respected auditor, a team of forensic accountants, going out of his way to hire the best auditor in the country not working for the Big 4 (who might have have worked for NHL teams), and by any definition independent doesn't add up to a fake report. The fact that the 24% offered by the players duplicates the dollar losses reported by Levitt might say something as well.

On the flip side, Forbes has no access to any of the information given to the team of Levitt forensic accountants. And by either report the league is in poor financial shape, the only difference is by degree. I'd lean towards Levitt's #'s though. If Leavitt's #'s were out to lunch, the owners would have caved by now.

As to how Bettman gets the rich teams to accept profit sharing... maybe that's why the league has been so hard on their specific #'s and not going much higher but indicating other things are up for negotiation (like free agency). Maybe the owners won't go for any meaningful profit sharing so they have to put the cap low enough to make it safe for everyone. Good question though.
Member
User avatar
Aug 11, 2003
236 posts
4 upvotes
Summerland, BC
afong56 wrote:i am aware of those circumstances. my statement is still correct. they are doing comparatively well when compared against the other teams who are definitely losing money (according to the nhl).

is there any doubt that the flames would have made money this season, even under the old deal? consider the extra ticket sales that would have been generated from building on last season's cup run. consider the extra money to be generated from local sponsorships, possible television revenue. consider also that the value of the canadian dollar this year over last year has already added 10% to the potential value of this season to the flames, both in revenues in and salaries paid out.

is there any question that they would benefit with a luxury tax system and a strong revenue sharing mechanism? no. the flames could definitely use some of the extra 24% profit the leafs stand to pocket under any likely deal.

the question still remains, how will bettman get the rich teams to swallow it?
The Flames would have lost between 5-7 million if it wasn't for their playoff revenue.

As to your question on revenue sharing and how to get the rich teams to accept that, all Bettman has to do is point to the NFL and say look at them. Revenue sharing makes the league more successful, which makes the franchises more valuable and the big market, highly profitable teams are worth the most.
Deal Addict
User avatar
Jul 24, 2003
3787 posts
67 upvotes
temporalillusion wrote:NHL Offers, Audits:
http://www.nhlcbanews.com/news/nhlproposal020205.html
http://nhlcbanews.com/news/nhlresponse121404.html

Most auditors are hired by the company they are auditing, so the fact that the NHL paid Levitt doesn't mean anything. 2000 hours of time and 10 months by a respected auditor, a team of forensic accountants, going out of his way to hire the best auditor in the country not working for the Big 4 (who might have have worked for NHL teams), and by any definition independent doesn't add up to a fake report. The fact that the 24% offered by the players duplicates the dollar losses reported by Levitt might say something as well.

On the flip side, Forbes has no access to any of the information given to the team of Levitt forensic accountants. And by either report the league is in poor financial shape, the only difference is by degree. I'd lean towards Levitt's #'s though. If Leavitt's #'s were out to lunch, the owners would have caved by now.

As to how Bettman gets the rich teams to accept profit sharing... maybe that's why the league has been so hard on their specific #'s and not going much higher but indicating other things are up for negotiation (like free agency). Maybe the owners won't go for any meaningful profit sharing so they have to put the cap low enough to make it safe for everyone. Good question though.
thanks for the links.

some thoughts--you are correct about the nhl's offer to include independent auditors in future determinations of revenue sharing. . .but, i think it will be a sticky situation when it comes down to negotiating what constitutes "hockey-related revenues" (hrr)--i looked throughout the proposal, and couldn't find a clear definition of that. i believe this was one of the major issues that the nhlpa had with the nhl's offers.

the appointment of an independent auditor will be meaningless if clearly defined guidelines on what are "hockey-related revenues" aren't laid out. specifically, according to the levitt report, there were numerous 'grey' areas that were not included in their calculations of hrr.

about levitt: you and i both know that a team of professional auditors, using the same numbers, can produce drastically different results--one could report a huge loss, and another a tidy profit. that is what they are paid to do.

the fact that forbes was able to uncover discrepencies in reporting, such simple things as, correct me if i'm wrong, the blackhawks not including their entire revenue from luxury boxes, leads me to believe that the report is not entirely credible.

more importantly, why wasn't the nhlpa brought in on this process from the beginning? in what way was bettman fostering the idea of "economic partnership" by not including them in the initial stages?

no one here doubts that the league is losing money. the question is how much, and how truly committed to "economic partnership" is each side.

at this stage of the game, to be fair, it is now in the nhlpa's hand to come back with some negotiation on the triggers. the nhl came in with their low limits, so the 'pa should come back with really high ones--then the negotiations can really begin.

i really hope that what some of you wrote is correct, and that the richest teams will see the logic of revenue sharing, but i somehow doubt it. the ed snyders of the world didn't get there by loving their fellow man.
Deal Fanatic
Mar 6, 2004
9318 posts
204 upvotes
[QUOTE]i really hope that what some of you wrote is correct, and that the richest teams will see the logic of revenue sharing, but i somehow doubt it. the ed snyders of the world didn't get there by loving their fellow man.[/QUOTE]
Neither do the certain mercenaries players of the NHL playing in the UHL where there IS a cap in place and where they take the jobs of working class joes.

Some "love for their fellow man" and their stance on being against "caps". ;) ;)
Deal Addict
User avatar
Jul 7, 2001
1323 posts
So you could probably put Leavitt on one side of the extreme and Forbes on the other side, and the "truth" (if there can be any such thing in the complicated finances of these things) would be somewhere in between.

That constitues a dollar of revenue would be something to negotiate. In fact right now the NFLPA is going to their league and wanting some things to be added into the formula, so even if we had a salary cap, it wouldn't eliminate the fighting it would only change it :cheesygri

Leavitt used the NFL's formulas to calculate dollars of revenue in his report. Not exact of course, but an approximation that obviously works for the owners' purposeses (I've even seen the owners quote Forbes before, when it meets their needs).

I wish I could find the link, but I'm pretty sure the NHLPA was invited to participate in the Leavitt report but didn't. A hockey forum I'm on had a huge thread on that and that was the result, I just can't find it to say why! I'll have to plead no contest here, the only comments I can find are the NHLPA discounting the report because it was paid for by the NHL.

At the end of the day, I just can't fathom why the NHLPA can't accept (as the owners have) that the prospect of a big TV contract is gone and the drug like expansion revenues aren't coming anymore. The economics have changed. Any good business sets a budget, and that's what a linkage is.

Heh, If you want a true free market, dissolve the union. Then a salary cap would be illegal! Of course then so would the draft.

The PA better come back with something today or tomorrow; they really aren't helping things if they're trying to stop an impasse. Bob is a last minute type guy though, and I think he REALLY wants to see if the owners will cave or cancel the season; to see if they really are comitted to their position.

Top