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NHL Owners Need To Fix Their Own Problem

from Ian Hudson (professor of economics at the Univ. of Manitoba) at the Winnipeg Free Press,

The owners' statement of the problem and its solution is misleading and simplistic. In fact, the league as a whole was profitable in 2010-11. While the poorest 27 teams (out of a league total of 30) were a combined $44 million in the red, $24 million of this was lost by Phoenix as a result of a disastrous league decision to hang onto that franchise. The three highest-earning teams (Leafs, Rangers and Canadiens) combined for an operating income of $171 million.

In other words, the NHL's real problem is its income is very unevenly distributed. The NHL (along with the NBA) has the weakest revenue-sharing provisions in North American sports. In contrast, the NFL not only shares broadcast revenue equally between all the teams in the league but also money from ticket sales. Forty per cent of gate revenue goes into a league pool that is shared evenly.

If the NHL were really worried about the survival of small markets, this type of redistribution would solve the problem. In the NFL, the small-market Green Bay Packers can compete financially with the big-market New York Jets.

Owners are asking players to sacrifice for the stability of small market teams, but redistributing money between the owners would achieve the same goal. The owners prefer the salary-cutting option, of course, because it would transfer money to all of the owners, including those who are already making great piles of cash, while revenue sharing would reduce the profits of the high earners in the league.

When it comes to dividing up the $3.3 billion of revenue between owners and players, perhaps the owners should get their own house in order before asking for sacrifices from the players.

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Comments

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This article is based on a flawed premise.  “In other words, the NHL’s real problem is its income is very unevenly distributed.” is that premise.

Income is very unevenly distributed in all sports.  There are vast divides between the richest and poorest teams in all leagues.  9 teams spent 110 mil or more last year in MLB.  10 teams spent less than 80 mil.  4 teams spent less than 61 mil.  7 NFL teams had operating incomes of 50+ mil.  7 NFL teams had operating incomes of less than 15 mil.  15 NBA teams lost money in the last year of their old CBA.

The difference between the NHL and those other sports (now that the NBA has changed their CBA) is that the lowest revenue teams are still marginally profitable because the revenue splits in all those other leagues is much more conducive to owners.  No other league pays it’s players more than 48.5% of its defined revenue pie, so their percentage of gross revenue is significantly smaller, probably around 35-40%.

Posted by HockeyinHD on 10/13/12 at 11:46 AM ET

J.J. from Kansas's avatar

Yes, gosh. That economics professor sure doesn’t get it.

Posted by J.J. from Kansas on 10/13/12 at 11:52 AM ET

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Yes, gosh. That economics professor sure doesn’t get it.

Posted by J.J. from Kansas on 10/13/12 at 11:52 AM ET

HockeyinHD is an NHL/CBA savant, and everyone else from posters here, economists, hockey analysts, and you name it, are wrong, idiots, or completely fooling themselves.  I thought everyone knew that by now J.J.

Posted by Valek from Chicago on 10/13/12 at 11:59 AM ET

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Yes, gosh. That economics professor sure doesn’t get it.

You are JJing again.  I didn’t say he was wrong, I said he was operating from a flawed premise because he was looking at the NHL and only at the NHL.  The two lone mentions of other sports in his piece come tangentially to his main point in reference to revenue sharing, and considering the enormous differences between the revenue streams being divided it’s not a terribly persuasive point of rhetorical entry.

IMO considering the amount and types of revenue being backed out by other leagues, that the NHL only backs out operating expenses is certainly comparable.

HockeyinHD is an NHL/CBA savant, and everyone else from posters here, economists, hockey analysts, and you name it, are wrong, idiots, or completely fooling themselves.  I thought everyone knew that by now J.J.

There are some people who can have substantive disagreements about issues and not have to wildly overreact in affront when their opinions are challenged on the merits and paint the people who disagree with them as bomb-throwing aggressors.

And then there are others. wink

Posted by HockeyinHD on 10/13/12 at 12:21 PM ET

J.J. from Kansas's avatar

And then there are others.

Admitting you have a problem is the first step to recovery.

I didn’t say he was wrong, I said he was operating from a flawed premise

It’s cute that you’re trying to turn my name into a pejorative verb, but I’ll remind you that I didn’t accuse you of saying he was wrong. If we’re going to play Asperger’s Semantics, I’d welcome a long diatribe on all of the various ways your re-framing of what I said is somehow vastly superior to my re-framing what you’ve said. It should be riveting.

I mean, I’m not going to read that long diatribe, but you’re certainly welcome to introduce one.

Posted by J.J. from Kansas on 10/13/12 at 12:38 PM ET

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There are some people who can have substantive disagreements about issues and not have to wildly overreact in affront when their opinions are challenged on the merits and paint the people who disagree with them as bomb-throwing aggressors.

And there are some people who can have “substantive disagreements” and do it while not treating everyone around them like children.  You have on many occasions made very good points, HD.  I’ve said that before.  Unfortunately, you do it in manner that makes me tend to disregard what you’ve said right after I read it.

Here you are talking about people’s opinions being challenged, and yet time and time again when someone has said they’ll never come back to the NHL because of this lockout you come right out and say something to the effect of, “yeah you will, you’re either lying or kidding yourself since you came back in 2004”.  You can try to say that’s not an affront, but replies like that seemed designed only to start a fight.  I’m not sure how anytime someone replies to something you said they’re flying off the handle, and yet all your replies are supposedly calm and reasoned.

Posted by Valek from Chicago on 10/13/12 at 01:13 PM ET

Primis's avatar

Yes, gosh. That economics professor sure doesn’t get it.

Posted by J.J. from Kansas on 10/13/12 at 11:52 AM ET

He doesn’t get it, JJ.

For being so studied in the economics of things, his comparison of the Green Bay Packers competing in the NFL with much larger markets is pointless and ridiculous.  Green Bay competes fine because they have a huge, enormous waiting list for season tickets.  They have no problem selling out Lambeau, nor have they ever.  THAT is why they can compete financially with the Jets:  because they’re drawing 70,000/game and the revenue that brings.  The Jets, for reference, draw 79,000 only because of a slightly larger stadium.  Both float at around 98% capacity.

Nobody will mistake GB for NY as a market, yet… when you’re drawing similar attendance figures, your finances will be more similar as well.  You’d think a professor of economics would know and be able to figure out a simple thing like that.

I’m pretty sure that if the Coyotes would draw 18,000/game for a few seasons the financial questions would take care of themselves.  Instead they’re only drawing 12-13,000/game.

The question is not how to share revenues.  It’s how to bring people in to Glendale to watch games.  And in to Sunrise, Nassau, and Columbus.  Because THAT is the only real economic fix for those teams and markets.

Posted by Primis on 10/13/12 at 01:54 PM ET

Joe Z.'s avatar

Income is very unevenly distributed in all sports.  There are vast divides between the richest and poorest teams in all leagues.  9 teams spent 110 mil or more last year in MLB.  10 teams spent less than 80 mil.  4 teams spent less than 61 mil.  7 NFL teams had operating incomes of 50+ mil.  7 NFL teams had operating incomes of less than 15 mil.  15 NBA teams lost money in the last year of their old CBA.

kind of ironic accusing someone of “operating on a wrong premise”, whilst doing it yourself. just look at your statement, you’re convinced that a unevenly distributed income is good. you aren’t even making an argument about it. it’s 100% faith.

 

Posted by Joe Z. from Austria on 10/13/12 at 02:28 PM ET

J.J. from Kansas's avatar

The question is not how to share revenues.  It’s how to bring people in to Glendale to watch games.  And in to Sunrise, Nassau, and Columbus.  Because THAT is the only real economic fix for those teams and markets.

They could start by playing hockey in those markets this season.

Posted by J.J. from Kansas on 10/13/12 at 02:45 PM ET

Primis's avatar

They could start by playing hockey in those markets this season.

Posted by J.J. from Kansas on 10/13/12 at 02:45 PM ET

In that we both agree.

Posted by Primis on 10/13/12 at 03:56 PM ET

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Admitting you have a problem is the first step to recovery.

Well?

It’s cute that you’re trying to turn my name into a pejorative verb, but I’ll remind you that I didn’t accuse you of saying he was wrong.

Did I say you said I said he was wrong?  No. wink

You’ve been intentionally misrepresenting things for so long you’re out of practice with trying to discuss on the up and up.

kind of ironic accusing someone of “operating on a wrong premise”, whilst doing it yourself. just look at your statement, you’re convinced that a unevenly distributed income is good. you aren’t even making an argument about it. it’s 100% faith.

You weren’t listening.  I didn’t say unevenly distributed income was good or bad.  I took issue with the author’s inferred premise that it was more unevenly distributed in the NHL than it was in other sports, and was therefore a problem the NHL had that other sports did not.

Clearly this is not the case.  All leagues have pretty significantly uneven revenue streams, especially compared to each other.  Yes, the other leagues have more robust RS setups than the NHL does, but in the cases of the NFL and MLB their revenues are such that I would be surprised if their % of RS is much more than the NHL’s.

I mean, a full share of an NHL teams RS pot was almost 10 million dollar back in 2005-6.  Considering that was right around a quarter of the cap at the time, I’d be moderately surprised if RS in other league ended up being a quarter of their caps.

They could start by playing hockey in those markets this season.

This remains a poor argument.  If a team is losing 1-25 million bucks a year, merely playing another year within the same dynamics that caused them to lose money doesn’t improve anything about the team.

Posted by HockeyinHD on 10/13/12 at 04:45 PM ET

J.J. from Kansas's avatar

Did I say you said I said he was wrong?

Oh, so you’re just bad at communicating.

This remains a poor argument.

Fine then. You provide a solution to getting more fans to attend Coyotes games in Glendale that doesn’t include the Coyotes playing games in Glendale, then we’ll talk.

Posted by J.J. from Kansas on 10/13/12 at 04:54 PM ET

Avatar

Oh, so you’re just bad at communicating.

I think your tendency to misrepresent what has been said makes the option you suggest rather unlikely.

Fine then. You provide a solution to getting more fans to attend Coyotes games in Glendale that doesn’t include the Coyotes playing games in Glendale, then we’ll talk.

I disagree with the premise of the request because I don’t think there should be an NHL team in Glendale.  This absurd Quixotian desire to jam NHL hockey down the throats of consumers in non-traditional markets that you and Bettman share is a big part of the reason the league has so many financially shaky franchises.

Here are the 10 lowest revenue teams in the NHL per Forbes, from worst to least-worst.

Islanders, Phoenix, Winnipeg, St. Louis, Columbus, Florida, Carolina, Nashville, Colorado, Anaheim.

See a trend?  I do.  7 of those 10 are non-traditional markets.  The Isles are owned by a buffoon and Winnipeg’s numbers are trending upwards now that they are out of Atlanta.  St. Louis is the lone exception, and they are in the midst of an ownership crumble.

All of that aside… again, if a team is losing millions of dollars merely doing that more is a pretty stupid approach.  50 years of hockey in LA hasn’t done anything to move the needle on that sport in that town.  I see no reason to suspect that the 17th year of hockey in Phoenix will do any more to make the NHL more popular there than the first 16 did.

 

Posted by HockeyinHD on 10/13/12 at 09:33 PM ET

Primis's avatar

HockeyinHD, I’m curious.

Do you believe that the Coyotes would be in such bad shape if the org hadn’t been so poorly run?  Icing bad teams, making bad personnel decisions, thinking Wayne Gretzky was any kind of respectable coach, etc?

I bristle a bit at the idea that Glendale wouldn’t work for hockey, because what chance have they ever had?  Much like Atlanta and Columbus… when did the product ever represent an actual NHL product?  Shane frigging Doan is the franchise legend and still best player on that team… a guy that might be a 2nd liner on a number of other teams, or even a 3rd liner at this point in his career.

I’m more concerned with markets like Anaheim that have had a better product and for some reason it still doesn’t work very well.  That’s when you start questioning the actual market.

I mean, it’s not a coincidence that the “problem” franchises all tend to be laughingstocks on the ice…

Posted by Primis on 10/13/12 at 11:27 PM ET

J.J. from Kansas's avatar

The Kings were top ten in the league in revenue, beating out four of the Canadian franchises.

This is just like when you used operating income to make a point about revenue discrepancies in the NFL. 

That’s it. You’re just bad at communicating. Seriously. Nobody else has problems getting their point across like you do. The problem is with you.

Posted by J.J. from Kansas on 10/14/12 at 12:05 AM ET

Avatar

Do you believe that the Coyotes would be in such bad shape if the org hadn’t been so poorly run?  Icing bad teams, making bad personnel decisions, thinking Wayne Gretzky was any kind of respectable coach, etc?

I think a team that consistently wins can be financially successful almost anywhere.  IMO the problem is that hanging financial success on how the product performs on-ice is a risky proposition.  Especially in a hard cap, narrow salary band league.

What I see in pretty much all of these non-traditional markets is incredibly ‘soft’ support.  As long as the team is good those franchises break even.  Within about 7 minutes of it appearing that those teams are now “un-good”, the fans check out and attendance goes through the floor.

I believe fan support even in traditional hockey markets can fluctuate over time due to consistent on-ice success or failures, but in those non-traditional markets the shifts are tidal.

I’m more concerned with markets like Anaheim that have had a better product and for some reason it still doesn’t work very well.  That’s when you start questioning the actual market.

Dallas, Colorado, Carolina and Anaheim have all won Cups somewhat recently, with Dallas’ 1999 Cup the least recent and Carolina and Anaheims’s 06 and 07 Cups the most so.  None of those teams were above 22nd in the NHL last year, attendance-wise.  There was usually an attendance bump the year after that win, but within 4 years at the most attendance started to slide abruptly.

Speaking most broadly, if it’s a decent market a team that is run in a mediocre manner and that has mediocre success on-ice should be able to be financially successful.

The Kings were top ten in the league in revenue, beating out four of the Canadian franchises.

And were put up for sale in 4.2 seconds.  Why sell such a profitable asset?

This is just like when you used operating income to make a point about revenue discrepancies in the NFL.

I find it odd that while you moan and gripe and whine about all of the different forms of information I provide, you tend to provide precisely nothing substantive beyond trying to “re-interpret” my positions.  And then after mis-representing me…

You’re just bad at communicating. Seriously. Nobody else has problems getting their point across like you do. The problem is with you.

... you blame me for the confusion brought about by your failed attempts at rhetorical ju-jitsu.

My position in either this thread or in the others has never been even remotely opaque.

Here, it is “Income is very unevenly distributed in all sports.  There are vast divides between the richest and poorest teams in all leagues.”  Does that seem like a difficult to comprehend, hyper-nuanced rhetorical stance to you?  If you’d like I can distill a two or three sentence quote down for any of the other topics I’ve discussed here lately.

Where you get lost in the weeds, IMO, is in trying to nitpick apart fairly simple, obvious statements so you can wrangle about details.  After a couple posts of that type I’m sure trying to figure out exactly what you were talking about can get fairly confusing.  That’s a you-problem though.  I tend to make at least a token effort to re-connect your tangential concerns back to the issue at hand, to fairly rare success.

Posted by HockeyinHD on 10/14/12 at 05:27 AM ET

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And there are some people who can have “substantive disagreements” and do it while not treating everyone around them like children. 

I can’t control how people choose to interpret my comments, Vanek.  If the way I challenge opinions I disagree with leads you to that conclusion, there’s little I can do.

Here you are talking about people’s opinions being challenged, and yet time and time again when someone has said they’ll never come back to the NHL because of this lockout you come right out and say something to the effect of, “yeah you will, you’re either lying or kidding yourself since you came back in 2004”.

The problem is, my point is largely true.  I made exceptions for the tiny minority of the affronted fans who actually will stay away from hockey, but the last lockout showed us all that everybody comes back, in aggregate.  Every lockout or strike in the history of sports in North America has shown us that everybody comes back… and it’s not like Canada’s turning their back on hockey any time soon.

Yes, I can understand that people who are in mid-yell about how mad they are at the league would not like a bucket of cold reality dumped on them, and certainly don’t appreciate being interrupted in the middle of their incandescent, righteous fury.  Forums are a great means of letting off the moral outrage one might have about this, that or the other thing.

Hopefully though, substantive discussion can result in introspection.  If it just results in people getting pissed off… ?

I’m not sure how anytime someone replies to something you said they’re flying off the handle, and yet all your replies are supposedly calm and reasoned.

“There are some people who can have substantive disagreements about issues and not have to wildly overreact in affront when their opinions are challenged on the merits and paint the people who disagree with them as bomb-throwing aggressors.”

I don’t think your characterization of what I said is particularly accurate.  As far as I am aware, up to this point I’d say JJ and Hockeytown Overhaul are the two guys who have the hardest time having a reasonable discussion without overheating, while Garth, Nathan, Primis and most everyone else seems to not struggle to do so.

And I don’t think all my posts are calm and reasoned, either.  I enjoy a snarky, attitude-laced rejoinder as much as the next guy.  I just try not to make it my primary means of discussion. wink

Posted by HockeyinHD on 10/14/12 at 05:43 AM ET

J.J. from Kansas's avatar

you blame me for the confusion brought about by your failed attempts at rhetorical ju-jitsu.

I’m not confused. I just think it’s dishonest how you twist the information. When you want to talk about revenues, you talk about cash flows instead. You want to talk about how Southern expansion is the bane of the league’s overall success by talking about revenues and then you fail to mention the Kings (who you’re using in your example) are a top-ten team in the league as far as revenues.

Again, all of AEG is for sale. Presenting it as though the Kings are being unceremoniously dumped doesn’t do any good. Their 1/3rd stake in the Lakers is also up for sale as part of this package. The Lakers are worth $900M, so AEG’s stake in basketball is more valuable than their NHL stake. The Los Angeles Galaxy are the most-valuable team in MLS and they’re also up for sale as part of the AEG package.

Why sell such a profitable asset?

Oh, that’s right. AEG had to “throw in” the other billion-dollars-plus level assets just to see if they could get some sucker to take the Kings. Sure.

you tend to provide precisely nothing substantive beyond trying to “re-interpret” my positions.

My substantive contribution is to point out all the bullshit you’re spewing. In the last two days, you’ve presented yourself as more-knowledgeable than Bob McKenzie, perhaps the most-respected hockey journalist there is, and now a well-respected economics professor. My substantive contribution is a firm grasp on the truth.

As far as I am aware, up to this point I’d say JJ and Hockeytown Overhaul are the two guys who have the hardest time having a reasonable discussion without overheating

I would argue that your awareness on this situation is completely self-contained and that it’s a feature of your desire to frame your opponent as somebody who is angry and irrational. I would speculate various reasons for being a hyperstoic know-it-all who eventually steers all discussions toward himself, but I would figure that those are self-evident. The difference, HockeyinHD is that I’m not convinced I’m the only person capable of seeing this.

Posted by J.J. from Kansas on 10/14/12 at 10:30 AM ET

Avatar

I’m not confused.

I agree.  I think your ‘confusion’ is as feigned and dishonest as your ‘accidental’ misinterpretations of my comments are.

When you want to talk about revenues, you talk about cash flows instead. You want to talk about how Southern expansion is the bane of the league’s overall success by talking about revenues and then you fail to mention the Kings (who you’re using in your example) are a top-ten team in the league as far as revenues.

You’re JJ-ing again.  This time you’re doing it in two different ways.  1) The usual one where you exaggerate what I said and then pretend I said the exaggeration.  2) A slightly different variant where you take a series of comments regarding a variety of issues and then lump them together in order to pretend they all referred to the same topic.

I’d just like to point out that while the Kings are, in fact, a ‘top-ten’ revenue generating team… they accomplish that be being exactly 10th.  With a -2 mil operating income.

So, not exactly what I’d refer to as a fine example of economic success.  Especially considering the current owners bought the team out of freaking bankruptcy court.

Again, all of AEG is for sale.

And again, the LA Kings are included in ‘all of AEG’ because it behooves the current owners to make it so.  They could have kept or spun out any or all portions of that business group had they chosen to do so.

My substantive contribution is to point out all the bullshit you’re spewing.

Then that’s worth exactly nothing.  All you really do is choose to disagree, sans any kind of relevant substance to your position.

And obviously, there’s nothing wrong with that.

I just get a little bit of a chuckle out of you spinning nothing but unicorn toots while you yowl about me not providing the kind of info you like, simultaneously claiming that a moderately firm understanding of your own opinion qualifies as substance.

In the last two days, you’ve presented yourself as more-knowledgeable than Bob McKenzie, perhaps the most-respected hockey journalist there is, and now a well-respected economics professor.

Interesting.  So is it your opinion that MacKenzie is never wrong?  That a 400-word article by an Econ prof at the University of Manitoba is sacrosanct economic theory?

Eyeroll, J-ster.  Eyeroll.

If you spent a little more time actually reading fairly, you’d spend a lot less time saying silly things.

I would argue that your awareness on this situation is completely self-contained and that it’s a feature of your desire to frame your opponent as somebody who is angry and irrational.

Of course you would.  You’ve already demonstrated that you are much more than willing to frame anything you want any way you want to in order to try and argue about it.

I would speculate various reasons for being a hyperstoic know-it-all who eventually steers all discussions toward himself{/quote]

I find it amusing that the person who makes a pretty steady practice of being snarky and aggressive would try and now spin that the guy to blame for the snark and aggression is the target of it.

When it comes to what you say, the buck stops everywhere but with you, eh JJ? smile

Posted by HockeyinHD on 10/14/12 at 11:05 AM ET

J.J. from Kansas's avatar

a series of comments regarding a variety of issues and then lump them together in order to pretend they all referred to the same topic.

No, I lumped them together into my topic: that you intentionally misrepresent information.

Interesting.  So is it your opinion that MacKenzie is never wrong?

Did you just exaggerate what I said and then pretend I said the exaggeration? Sure looks like it.

Especially considering the current owners bought the team out of freaking bankruptcy court.

And then grew their value by more than $100M

I find it amusing that the person who makes a pretty steady practice of being snarky and aggressive would try and now spin that the guy to blame for the snark and aggression is the target of it.

When it comes to what you say, the buck stops everywhere but with you, eh JJ?

Hahaha “Daddy says I make him hurt me!”  Hahahahahahahaha

Posted by J.J. from Kansas on 10/14/12 at 11:17 AM ET

RedMenace's avatar

Aaaaaaaaand welcome, everybody, to the HockeyinHD show.

Same shit, different channel. Prepare your mute button.

Posted by RedMenace from the Church of Jesus Lashoff on 10/15/12 at 12:02 PM ET

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Paul Kukla founded Kukla’s Korner in 2005 and the site has since become the must-read site on the ‘net for all the latest happenings around the NHL.

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