Nhl Brass Crying Wolf Over Cash-flow Woes

[Z-Man]

I hate to agree with Brooks, but I've been saying the same thing all along about revenue sharing. A hard cap alone won't save the bottom 10 teams.

NHL BRASS CRYING WOLF OVER CASH-FLOW WOES

http://www.nypost.com/sports/6238.htm

By LARRY BROOKS

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September 21, 2003 -- THERE they go again, telling everyone how bad business really is, how much money everyone is losing, dispensing selective and unverified numbers to the media in order to win a PR war the other side has no interest in joining. Just when it's time to focus on hockey, the NHL is on a campaign to remind its fans how much trouble the league is in, how it can barely afford to open its doors this season. Brilliant.

The NHL claims that it spends 76 percent of its revenue on player salaries and benefits, way more than any other league, an assertion that media outlets across the continent have accepted as fact even without the league providing details to support its allegation. What does the league define as hockey-related revenue, anyway? Does income from suites count? Do parking and concessions? How about local television deals? All of it, some of it, none of it? Ah, who cares?

The outraged writers - nearly all of whom either belong to unions or did, before they were broken by management - dutifully repeat the numbers provided by billionaire ownerships as if they're gospel.

As we first reported in June of 2002, the NHL intends for the next CBA to include a hard cap of $32 million per team, about $9M less than last year's average payroll. But without massive redistribution of revenue within the league, what aid would this provide for the 10 franchises who were under (most well under) $32M last year; teams such as Nashville, Atlanta, Tampa Bay, Ottawa, Pittsburgh, Florida, Edmonton and Buffalo that perennially lead the league in whining about the evil-doing big-market spenders?

As far as we can tell, since a cap inevitably becomes a floor as well as a ceiling, these teams would lose millions more spending up to $32M. As far as we can tell, capping clubs at $32M merely guarantees that teams such as the Rangers, Red Wings, Maple Leafs, Stars and Flyers would wind up with millions more in profits stuffed into their owners' pockets.

The NHL purports to have lost a collective $300M last season; that's apparently what VP Bill Daly told The Wall Street Journal. We have an idea how that loss can be erased in one quick stroke. The league can just take the $300M war chest it has amassed in anticipation of next season's lockout and give it back to the clubs. Couldn't it?

*

So Jeremy Jacobs, whose lose-at-low cost philosophy finally drove even loyal disciple Raymond Bourque out of Boston and whose Bruins have not won the Stanley Cup in the 29 years he has owned the club, says that when the league gets a salary cap, that's when good management will mean something. Oh.

Meanwhile, Jacobs' guarantees the next CBA will include a salary cap have been rewarded with a fine, sources confirm, probably the same combined $110,000 as Pat Quinn and the Maple Leafs were hit with last season when the Toronto genius-who has won as many Cups as Jacobs-babbled on about a lockout.

*

Not to make a big thing out of this, but you tell me: if Bobby Holik is between Dan LaCouture and Jamie Lundmark while Mark Messier centers Chris Simon and Matt Barnaby, which do you figure is the third line? And which is the fourth?

While Adam Graves had essentially agreed on a one-year deal to return to San Jose, the Sharks needed to move a contract in order to accommodate the budget. And, we're told, the player they tried without success to deal was none other than our old friend, Heartbeat Todd Harvey, due to earn $1.3M this year. When they couldn't move Harvey, whose reckless style has been severely compromised by the numerous concussions he's sustained, they told Graves the deal was off. And so Gravy sits at home outside Toronto, unemployed.

News: Referee Mark Faucette, dismissed by the NHL, objects, claiming he never received so much as a single, failing mark from supervisors grading his performance last season.

Views: Wish I'd had those supervisors giving me my grades when I was at Bronx Science.

So whom, by the way, do you think the Rangers are protecting with their cover story of Brian Leetch re-injuring his left ankle on a Holik wrist shot? Holik, for taking a one-time slap shot in a pre-camp game of shinny? Or Leetch, for going on the ice without his ankle guard?

*

Finally, I grew up listening to Bob, Lindsay and Ralph on a transistor radio that I kept under my pillow at nights. Thanks, Murph, for all of the recaps.

[Derek21]

Just when it's time to focus on hockey, the NHL is on a campaign to remind its fans how much trouble the league is in, how it can barely afford to open its doors this season. Brilliant.

And this right here is why the league can't draw more interest. It is such a negative outlook on things. What are fans supposed to think when this is what they present as their product? Imagine having some positives heading into a season instead of the Same Old Crap. That's called PR. Apparently, the league doesn't seem to care who watches. It's ashame.

I will be seeing a buddy of mine that works for the NHL at a Hockey Draft next month. Maybe I'll try to get more info.

I also see Brooks included the same info Sheeps had on Faucette. Good stuff. He also happens to be right about Leetch. Holik didn't even take a hard shot. That's the same Leetch that had a few too many to drink and tripped over a sidewalk back in '93. Some of you might recall the Rangers story on that about Leetch tripping over some ice like it was some sort of freak thing.

Z-man, Larry is capable of putting together good articles like this one. It's just that sometimes he'll write something to tick some of us off. He's been in the business a long time. I'd love to meet the guy and talk about the game. He certainly cares about it.

Edited September 21, 2003 by Derek21

[Maine Devil]

The owners created what ever financial problem they presently have, if in fact they even have one. It's time for them to open the books, both sets and start to manage the hockey business as businessmen and not children.

The players can't be faulted for being given these salaries or taking them if in fact the salaries are the problem in the first place.

Hockey is a difficult game to watch in person because of the speed and therefore it is very hard to watch for some on TV. The real money made in most sports leagues is the revenue from TV. The NHL has a problem with TV revenues and ability to get a good or decent TV contract. So they suffer because of the control of the TV contract.

Revenue sharing as suggested earlier in this thread is the answer for the smaller teams and Canadian teams with the dollar difference and financial balance that is necessary to sustain the NHL for the future.

The richer owners don't want revenue sharing so they will accept a strike to rid themselves of the small market teams and Canadian teams that can't compete against the US Dollar vs Canadian Dollar.

In the meantime the fan will suffer because of the negatives in the final season before the lockout and NHL hockey will be less when all is done.

['7']

didn't Bettman say something like "We can have revenue sharing tomorrow if we wanted" or something like that...

Hockey is a difficult game to watch in person because of the speed and therefore it is very hard to watch for some on TV. The real money made in most sports leagues is the revenue from TV. The NHL has a problem with TV revenues and ability to get a good or decent TV contract. So they suffer because of the control of the TV contract.

and imagine how it's going to be when they have no national TV contract after this year. That's a very real possibility.

[Triumph]

The reason why people don't watch hockey on TV is because most people are not raised with hockey and fall into it because it is entertaining. But they only watch their hometown team and know little to nothing about other clubs around the league.

The owners are winning the PR war. I guarantee they have the majority of fans on their side. Who cares about the numbers, people are used to owners of things in the United States making money as a result of their product. People are not used to atheletes making millions of dollars. And the richer owners want cost certainty too, believe that. Even the big market teams are trying to cut salary this year. Does Brooks really think this is an act by Dallas and Detroit, who've let big time players go?

Will a hard cap save the bottom ten teams? It remains to be seen. As usual, Brooks has no grasp of causality.. the reason why the lower budget teams can't compete at all is because their best players have to leave in unfair trades. Make those deals fair, make the fans in those cities realize that the league wants there to be parity, and you'll see an increase in fan interest in those cities. Put it this way, if Edmonton got fair return for Weight and Carter, they'd be a playoff team for sure in the West.

You give a franchise a fluky Cup run like Carolina and Anaheim, and you're bound to make hockey fans of some people who weren't before. With a hard cap, these sorts of things are more likely..

[NewarkDevil5]

Here's one way of looking at it:

23 players on an active roster. $400,000 is more or less the NHL minimum wage. A $32 million cap means an average player salary of about $1.4 million. That means that the very top players will probably be forced to accept salaries of about $4-6 million at max and even those will be rare, maybe a max of 3 or 4 to a team. A top line of forward, defense and goalie all being around $5 million is $30 million (such as a team like Colorado might have had), so there's no way that you can afford that and still pay the rest of your team. Unless you're Wayne Gretzky you can't get paid more than $6 million because the whole salary structure would fly out of whack. I think I can live with athletes having a glass ceiling of $6 million since the chances of me seeing that sort of money all together in my lifetime is around the same as me getting struck by lightning while in an airplane that got its left wing taken off by a meteor.

Lets face it, the fact is that no matter how much we dislike them and no matter how much we hate to admit it, the game of hockey wouldn't be what it is today without the owners. Without people willing to invest the sort of money that these owners have in the game there would be no NHL. The owners in many ways are more important than the players because players are a dime a dozen. Even when comparing a guy like Gordie Howe to a guy like Jeremy Jacobs, fact is that Gordie Howe would be a car mechanic had it not been for people like Jacobs investing the money in buying and upkeeping an NHL team.

You may reply that its a lucrative business (which most say it isn't but regardless). Who cares if its a lucrative business? Its not as though the NHL players are starving here. They get more money in one year, some of them, than the average Canadian Family will see in a lifetime. For what? Are they curing cancer? Are they putting their lives on the line for our safety? They're putting their health on the line for our entertainment, thats granted.

We like to think of athletes in the same lines as poor besotted actors and actresses who desperately want to make it big and therefore "deserve" a certain amount of money. How many times have you read from some poster on this or other boards talking about "market value" and players "getting what they deserve." Players make money. They make a lot of money. They make more money than we care to realize. We talk in millions about the salaries of others while our own salaries are in the tens of thousands. We talk about them "deserving more" because we pay so much in ticket prices. Well here's my theory: if players didn't make so much money maybe we wouldn't have to pay so much to see them play. I'd dearly like to see a $60 gold circle seat again. Its been a long time now. Players get it all. They get the glory of being heroes and they get money beyond their wildest dreams. When I hear someone say that a player "deserves" his "fair market value" of $7 million a year because he's the best goalie or defensemen in the league, well I got to just ask that person what they make at work. Whats their "fair market value"? What sort of glory do they take home from their job of pushing papers all day? I've heard this sort of talk from people who've just gotten laid off! How can you say things like that if you can't even afford to go to games?

The owners made poor decisions. They set poor precedents on salaries and see it escalating beyond hope of control. It is not only their right, but it is their duty as businessmen to admit when they've made a mistake and to take steps to correct it. I don't care how you slice it, sports owners should be making a profit, not breaking even. There should be incentive to become an owner. Owners are more important to this league than players are. There are players all over the world wishing they could play in the NHL. We all would love to own a sports franchise and be able to make the decisions that are the entitlement of that status, but how many people can? Only the most successful people. Of the most successful people how many are interested enough in sports to do it? Not many. For all the Mark Cubans of the world there aren't that many successful people with ridiculous sums of money to throw around on sports teams. Maybe if sports team owners were treated with a half decent amount of respect, but they're not. They're blasted in the media on a regular basis. They are expected to take a loss to make a winning team for the good of people who hate their guts. They aren't supposed to make money yet are supposed to take money out of their own bankrolls to pay for arenas and stadiums according to public opinion. Make up your mind. If you want professional sports you have to understand that its a capital intensive business.

Owners are tough to come by because there's no glory and little if any profit margin. When owners in the real world are faced with tough times in such businesses they mostly fold. The plastics business is the one I'm most familiar with because my parents own their own company in it. They're one of 2 family owned companies to have lasted the last 30 years without changing ownership or declaring bankruptcy. They're a small company and are facing tough times right now as most people are. The business they're in has very small profit margins and its difficult to make ends meet. They, like many in their industry, are faced with the possibility of a make or break year this year. That means 200 jobs that are on the line depending on my parents decisions. Each time I talk to them I ask them how they're gonna manage it and I get the same answer: "We've been in this situation before and we just have to do what we can." There's a responsibility that goes with owning a business and part of that is being able to sign payroll checks without fear that they'll bounce. Ottawa's payroll checks bounced.

Sports owners have the fortune of having other businesses to fall back on, but what happens when both lose money? I used to hate John McMullen for what I felt was squeezing the state for all it was worth, but I'm starting to realize that owners have it very difficult. Most of them lease their buildings which means they have to convince someone else to build them. Yes, someone else has to build what you lease. Thats the way it works. You don't pay for the construction and buy the land for an apartment that you're leasing, your landlord does that. They pay players exorbitant amounts of money to play a game and are lambasted for it when they attempt to "stiff them." They knuckle under and accept less than satisfactory bottom lines because that is what the media and the fans demand of them and then get blasted for it when they attempt to bring things back in line.

There is so much hypocrisy on the part of everyone involved in professional sports that to call owners hypocrites is meaningless. We as fans are hypocrites on an hourly basis. Even now, its the owners' fault for offering the salary, yet if they don't and the player sits out and the team suffers in the standings the owner has "made a bad decision" and is promptly reviled. We get angry when the owner raises ticket prices in one breath but in that very same offseason demand they sign free agents for whatever the player's agent asks. Players are hypocritical. They demand "market value" and go on strike when they're paid more than most CEO's to play a game that wouldn't even exist as a profession if it weren't for the people they are demanding money of. Don't complain to me about the plight of the players or the plight of the fans either. We're just as responsible for this as the owners and just as responsible as anyone else are the players.

[Triumph]

Might want to split that up into paragraphs ND, got lost in the middle of it.

Owners are important, but you'll never hear that one on sports talk radio..but the reason why owners are expected to take a loss is because most of them (those who are single owners and not corporate consortia) don't make it sound like a for-profit enterprise.. take Golisano in Buffalo or Melnyk in Ottawa as examples.. but the owners do need some incentive; winning a championship is hard and buying one is even more difficult.. but now I sound like a Libertarian, so I'll have to go take a shower..

[NewarkDevil5]

Heh, sorry, got a bit carried away in my rant.

Notice the situations though in the cities you mentioned. Ottawa's ownership fell apart at the seams because they were losing so much money. They were bought up by a group of "philanthropist" type people who did it for the good of the city. Buffalo had a slightly different but similar situation. How much money are you willing to spend in charity for the good of the community? Hell, most people are upset that their property taxes are too high and that they shouldn't have to pay for schools if they don't have children!

['7']

I guess owners nowadays are taking losses that are just too big, owning a hockey team is no longer a worthwhile venture. Most of the other businesses they're in are probably not doing as well because of the stagnant economy. So they cut there losses. They see no light at the end of the tunnel with the NHL, taking all things into account, the league has a very murky future.

there are only a handful of teams that are proven, consistent moneymakers, and the rest seem to be losing millions. There is no middle ground of teams that make a few mil. or lose a few mil.

This day in age, you'll never see 30 healthy franchises that can compete, unless you expand the playoffs to where 24 of the 30 make it, and it adds more dates and sellout crowds, perhaps better TV ratings in local markets. Maybe then you'll see more teams come closer to breaking even. That's what you had in the 80's and early 90's, most fans knew there team had a shot even though they might've had a 65 point regular season. The buildings might've been smaller, but they were filled more to capacity then they are now.

[point]

Part of the reason for expansion was to gain a national audience for the league. Unfortunately, the ownership pool is not that deep. Look at AOL Time Warner- with the financial resources they have, they are looking to sell the Thrashers and Hawks.

[sammyk]

Part of the reason for expansion was to gain a national audience for the league. Unfortunately, the ownership pool is not that deep. Look at AOL Time Warner- with the financial resources they have, they are looking to sell the Thrashers and Hawks.

They've already been sold. They were going to sell it to some car salesman from Houston (David McDavid), but they backed out and sold to a group of investors.

[rbdf]

You probably need a combination of the cap and revenue sharing in order to make the NHL work, at least until the day that their TV revenues are more in line with the nba, nfl or mlb contracts.

Here's the way I see it:

Put a cap in place and the teams like NYR, Col, Dallas and Tor - who are always at capacity, get top $ for every inch of ad space, sell every lux suite for top $, and have good local tv contracts, just make more money. A team like buffalo or calgary, maybe they can break even at 32 or 35 mil payroll, but at least would have more competitive players, rather than stacking them ALL on Colorado or Detroit. Then the rich teams owners get richer, the players grumble and creative agents and team lawyers find ways around the cap.

Put revenue sharing in place and the rich teams will at first complain, LOUDLY. But the fact is that you need teams like calgary and vancouver, ottawa and buffalo etc. There aren't enough big markets to only have big market teams. I for one don't want to go back to 6 teams playing each other, especially considering that the rag's would remain and the dev's would fold.

I don't buy into the whole dilution of talent thing either. There is more talent in Atlanta or Minnesota, new expansion franchises, than there were on some of those 1970's nhl teams. Opening up Europe and Russia has done wonders for the league. The talent pool is so deep, and with US players finally starting to catch up to their Canadien counterparts, it's only getting deeper.

The owners all know that they need each other too, so after the grumbling stops, what they should probably do is concede to each other. A 30 team NHL is good for the sport. Some kind of cap will keep teams like the Rag's from just driving up player salaries unjustly (Bobby Holik at $10 mil? How bad did that F-up the salary scale - can you see the negotiations "Hi, I'm Tie Domi, Holik makes 10 mil, therefore I must be worth at least 5 mil"). So you put the cap around 45 to 50, and yeah, calgary will never get there, but the rags and detroit don't need to dump 75% of their rosters. Then you work out a formula to redistribute some of the wealth. Something geared toward "paying" the visiting team at your arena some percentage of your local ad and tv revenues. That way a team like calgary would have to pay the visitors to their arena a flat percentage of their meager local revenue, but on the road, would collect the same flat percentage of their opponents likely higher local revenue. Say it was 0.5% of local revenue. With 41 visitors, you'd pay out 20.5% of your local revenues. You'd also collect a similar 0.5% 41 times that you went to someone else's rink, however, if your calgary, you're paying out 0.5% of say $2 million, while the rangers are paying you 0.5% of $8 million. (I'm just making up numbers, but you know that a dasher board advertisement in New York City is substantially more expensive than in calgary). This would distribute a small portion of the wealthy team's money to the poorer teams, based on the poorer team's contribution to the wealthy team's home schedule. Maybe you base it on attendance or something else, but you need to get some kind of formula that throws a couple million at the small market teams.

The overall benefit to the owners, is that a healthy 30 team NHL, where you don't have teams filing for bankruptcy, then becomes more valuable. The market price for buying a franchise starts to rise again, and big business men see an opportunity to invest and make a few bucks again.

The devils, stars, sabres, senators, kings, ducks, predators and rangers were among the teams up for sale last year, the only ones that changed hands were through the bankruptcy court, for about $75 mil each. That drove down the value of every franchise in the league, no matter how many championships or how many hundreds of millions of dollars were spent on them. That is not a good thing for any owner. Jeez, the sen's and sabres changed hands for significantly less than minn, columbus, atlanta or nasheville paid for a new franchise fee. How bad is that for those investments.

[RowdyFan42]

Revenue sharing - A must. Exactly which revenue streams get dumped into the pool and which ones stay with the individual teams depends on how loudly the rich teams whine, and for how long.

Salary cap - I'm not a fan of the NFL's hard cap. Something like the NBA's soft cap (although hopefully nowhere near as complicated), where you can overspend to keep your own guys, seems more palpable.

Did You Know: Gary Bettman was one of the primary forces behind the creation of the NBA's salary cap. (Source: washingtonhockey.com)

[NewarkDevil5]

I'm personally in favor of a hard cap AND revenue sharing. Again, there has to be an incentive to be an owner. Big market teams will make their money regardless, but the small market teams are what make the league what it is and therefore must have an incentive for ownership. In that way its a guaranteed good investment to be a team owner in the NHL which raises the sale value of all the teams.

['7']

I don't think we'll ever see a hard cap in the NHL, they'll settle on a luxury tax and revenue sharing, or maybe a soft cap.