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Under Eugene Melnyk, Senators have lost $94 million


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#1 thefiestygoat

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Posted 17 August 2013 - 05:31 PM

Ottawa Citizen Link

 

This is a very long read, but it goes really in depth into the Senators debt situation, Melnyk's personal finances from when he took over the team to this day, and how he's been spiraling downward for some time now. I'm trying to keep the quoted section small but their is a lot of stuff I'm leaving out. I highly recommend checking out the full article.

 

 

The proprietor of the Ottawa Senators since 2003, Melnyk had seen his once-staggering wealth — more than $1.5 billion when he bought the team and arena — shrink significantly. But his diminished fortune — estimated in the hundreds of millions of dollars — is tied up in a variety of assets and commitments unrelated to the hockey team. Melnyk has sufficient cash to cover his Senators’ cash losses — which have been averaging close to $10 million per year.

Prior to the expiry of the players’ collective agreement, he had been negotiating a new loan to cover the team’s $130-million debt — held by a syndicate of eight banks including Scotiabank and CIT Group of New York. The loan had expired at year-end 2011 and had been operating under a series of extensions, with appropriate financial penalties applied. Melnyk was being forced to cover millions of dollars in extra debt interest payments until he could line up a new set of lenders.

Ordinarily, Melnyk might have been able to convince the original group of eight to agree to new terms on a fresh loan. But some members of the syndicate had decided to get out of the business of lending to sports teams and others were concerned by the extent of the Senators’ debt load, which is approaching 50 per cent of the estimated $300-million value of the team and the arena. This is high, even by the standards of the NHL. The Senators consider it manageable.

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It was only after the league returned to action, allowing the Senators to generate revenues from ticket sales, that Melnyk finally arranged $150 million in fresh financing — this, according to Davies, the law firm that helped to negotiate the deal. He signed a four-year deal in April 2013 with a pair of U.S. specialty funds.

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On Melnyk’s decade-long watch, they say, the team has generated a grand total of just $6 million on operations — that is, total revenues minus the costs associated with paying and moving the players, advertising and managing the arena. After subtracting items unrelated to operations — such as interest on the team’s debt and capital expenditures to keep the arena up-to-date — Melnyk has had to absorb cumulative cash losses of $94 million. In short, he is losing an average of $9 million to $10 million a year. And this excludes the additional interest and fees related to the debt extensions.

 


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#2 Devils731

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Posted 17 August 2013 - 05:54 PM

This is a good example that you can't just stick any team into any Canadian market and start printing out profit.


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#3 The 29th Pick

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Posted 18 August 2013 - 01:39 PM

Why are so many NHL teams losing money?  is it just poor management or what.

 

I recently read that only 7 teams are "making" money 8 teams are breaking even and 15 (yeah 15) are losing money,

Also the top 3 teams make more money than the rest of the league combined.

How is this healthy for the future of the NHL ???


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#4 LucifersDog

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Posted 18 August 2013 - 03:49 PM

How much did the Devils lose under Vanderbeek?


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#5 DevsMan84

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Posted 18 August 2013 - 05:38 PM

How much did the Devils lose under Vanderbeek?


Same amount when Scrooge McMullen owned them
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#6 thefiestygoat

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Posted 18 August 2013 - 07:09 PM

Why are so many NHL teams losing money?  is it just poor management or what.

 

I recently read that only 7 teams are "making" money 8 teams are breaking even and 15 (yeah 15) are losing money,

Also the top 3 teams make more money than the rest of the league combined.

How is this healthy for the future of the NHL ???

EDIT: Just realized I wasn't paying attention to the question and my post is more on the trouble with some owners in the league and lack of stability than the actual reason teams are losing money. My bad.

 

I don't think I can fully answer this so hopefully someone else here that has a better grasp of it can. I suppose part of it is owners like Vanderbeek who don't really possesses the typical money to own and operate a team long term and another part of it is you have teams playing where there isn't a big demand for the product like the Coyotes situation. In this case, Melnyk reminds me of a mix of Vanderbeek and former LA Dodgers owner Frank McCourt.


Edited by thefiestygoat, 18 August 2013 - 07:25 PM.

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#7 sundstrom

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Posted 18 August 2013 - 07:36 PM

The NHL doesn't have the national TV revenue that the other big 3 have. That's the difference. The NHL is very dependent on gate revenue.

The NFL would make money of they didn't sell one ticket.
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#8 NJDevs26

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Posted 18 August 2013 - 08:03 PM

The NHL doesn't have the national TV revenue that the other big 3 have. That's the difference. The NHL is very dependent on gate revenue.

The NFL would make money of they didn't sell one ticket.

 

And until recently the players were getting a disproportionate part of that smaller pie (i.e. a higher percentage of HRR) compared to other sports.


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#9 Daniel

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Posted 18 August 2013 - 08:38 PM

The NHL doesn't have the national TV revenue that the other big 3 have. That's the difference. The NHL is very dependent on gate revenue.
The NFL would make money of they didn't sell one ticket.


Owning an NFL team, at least pre lock out was not as profitable as you would think. Limited number of games, and having to field enormous payrolls, even if average player salary is relatively low, adds up.

One owner, think it was the Ravens owner, complained that a good middle line backer would make more money than your average owner.

Bottom line is that pro sports is not a hugely profitable business, except for a few teams.


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#10 devilsrule33

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Posted 18 August 2013 - 09:22 PM

Owning an NFL team, at least pre lock out was not as profitable as you would think. Limited number of games, and having to field enormous payrolls, even if average player salary is relatively low, adds up. One owner, think it was the Ravens owner, complained that a good middle line backer would make more money than your average owner. Bottom line is that pro sports is not a hugely profitable business, except for a few teams. Sent from my iPad using Tapatalk HD

 

I don't see how it is true. The NFL is dividing a soon to be $7 billion TV deal with all the teams. That TV deal alone makes pretty much every team profitable. 


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#11 Daniel

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Posted 18 August 2013 - 09:32 PM


Owning an NFL team, at least pre lock out was not as profitable as you would think. Limited number of games, and having to field enormous payrolls, even if average player salary is relatively low, adds up. One owner, think it was the Ravens owner, complained that a good middle line backer would make more money than your average owner. Bottom line is that pro sports is not a hugely profitable business, except for a few teams. Sent from my iPad using Tapatalk HD



I don't see how it is true. The NFL is dividing a soon to be $7 billion TV deal with all the teams. That TV deal alone makes pretty much every team profitable.


It's something like $5 billion a year, I think, divided by 32. And that assumes all of the money actually goes into the owners' pockets, which it doesn't. Then payroll is something like $120 million per year, plus all of the other costs that we're not thinking of. Jets and Giants probably have to pay $20 million a year each on the mortgage for MetLife.

Don't get me wrong, Jerry Jones is swimming in cash, as are a few other owners as a result of owning an NFL team. But it's not the cash printing machine that many think it is.

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#12 GoArmySports

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Posted 18 August 2013 - 09:46 PM

The NHL doesn't have the national TV revenue that the other big 3 have. That's the difference. The NHL is very dependent on gate revenue.

The NFL would make money of they didn't sell one ticket.

 

The amount of cash each NFL team gets from the tv deals the NFL has actually covers most if not all player salaries.

 

The only team to be in the red in the last four years was the Lions.

 

On TSN they mentioned that the average NHL franchise expects 60% of their revenue to be from ticket sales which can be scary for a lot of teams out there.


Edited by GoArmySports, 18 August 2013 - 09:47 PM.

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#13 Daniel

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Posted 18 August 2013 - 10:02 PM


The NHL doesn't have the national TV revenue that the other big 3 have. That's the difference. The NHL is very dependent on gate revenue.
The NFL would make money of they didn't sell one ticket.



The amount of cash each NFL team gets from the tv deals the NFL has actually covers most if not all player salaries.

The only team to be in the red in the last four years was the Lions.

On TSN they mentioned that the average NHL franchise expects 60% of their revenue to be from ticket sales which can be scary for a lot of teams out there.


The key is you're saying "most of" of player salaries. Now if you own the Cowboys or the Giants, you're raking in the cash. If you're the Jaguars or Bengals that can't sell out their home games and have to tarp up the upper decks, the financial picture isn't all that rosy.

Don't get me wrong, there are no NFL teams that are circling the drain, and they're all perfectly stable as going concerns. Just keep in mind though that Joe Flacco is probably making more per year than the owners of the Ravens are in profits.

There's a reason why ESPN is willing to chalk up a ton of money for the rights to broadcast one NFL game per week, rather than investing in a team outright.


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#14 Devlin

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Posted 19 August 2013 - 05:38 AM

I remember when the NBA was going through it's lockout and a friend of mine who is BIG fan shared an article with me that actually broke down the cost of running a team and how they can show a loss of revenue by manipulating loop holes etc...in the end the teams were positive in overall worth and cash flow. I will ask today for that business breakdown, I couldn't believe it either how they can show a loss but continue to make insane profits at the same time.

One Article (dont think it's the one my friend shared)
http://deadspin.com/...28-million-loss

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Edited by Devlin, 19 August 2013 - 06:20 AM.

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#15 Devs4LIFE

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Posted 19 August 2013 - 08:30 PM

I feel bad for the Senators, they've lost so many great players through free agency and now this. I've always thought of them as the Devils of Canada.


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#16 LucifersDog

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Posted 20 August 2013 - 07:22 AM

According to Forbes: http://www.forbes.co...-with-big-loss/

 

 

Although Vanderbeek is getting $2 million from the incoming owners to “walk away,” the team lost around $90 million during the nine years he was the controlling owner. Debt, lack of an NBA team in the arena, and only one trip past the second round of the Stanley Cup playoffs combined to push Vanderbeek too far into the red to get out.


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#17 DevsMan84

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Posted 20 August 2013 - 08:03 AM

Is having an NBA team that critical for NHL teams who own their arena survive?  I know a bunch of NHL teams in the NHL who play in their arena without an NBA tenant and they seem to thrive quite a bit.  To me it is the arena debt and their fortunes in the post-season that was really the tipping point, not the lack of an NBA team.


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#18 Daniel

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Posted 20 August 2013 - 08:07 AM

According to Forbes: http://www.forbes.co...-with-big-loss/


Although Vanderbeek is getting $2 million from the incoming owners to “walk away,” the team lost around $90 million during the nine years he was the controlling owner. Debt, lack of an NBA team in the arena, and only one trip past the second round of the Stanley Cup playoffs combined to push Vanderbeek too far into the red to get out.


Considering how consistently wrong Forbes has been when it comes to the Devils, I don't think you can trust them for much else.
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#19 LucifersDog

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Posted 20 August 2013 - 08:26 AM

Considering how consistently wrong Forbes has been when it comes to the Devils, I don't think you can trust them for much else.

 

You maybe correct and I am not defending them but:

 

They did report that Vanderbeek was broke

They did report that Vanderbeek had missed a loan payment

They did report that the NHL had advanced the Devils and loan them money to meet expenses

They did report that outside sources had loan Vanderbeek money to meet the payroll and expenses.

They did report the NHL was going to take over the Devils while that was denied by the NHL after all is said and done it appears that would have been the only choice left if there wasn't a buyer for the Devils. 

 

Just saying


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#20 Daniel

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Posted 20 August 2013 - 10:13 AM

You maybe correct and I am not defending them but:

 

They did report that Vanderbeek was broke

They did report that Vanderbeek had missed a loan payment

They did report that the NHL had advanced the Devils and loan them money to meet expenses

They did report that outside sources had loan Vanderbeek money to meet the payroll and expenses.

They did report the NHL was going to take over the Devils while that was denied by the NHL after all is said and done it appears that would have been the only choice left if there wasn't a buyer for the Devils. 

 

Just saying

 

Point is, is that team profits and losses are not made public (maybe there's an exception though for teams that are owned by public companies like the Flyers).  In the past I got comments from one of the Forbes writers, who claimed there were X amount of losses, and he just said something to the effect of "I've seen documents" or "someone told me". 

 

Also, left out are whisperings that Vanderbeek was taking a sizable salary from the team, which should inform the calculus as to whether he came out a net loser.

 

Ultimately though, it doesn't matter from a fan's standpoint. 


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