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This Sure Doesn’t Sound Like Good News

from the CP at TSN,

"(I'm) not sure there is any reason to meet if there is nothing new to say," deputy commissioner Bill Daly told The Canadian Press in an email. "Our position was communicated to the union pretty clearly last Tuesday and then again on Thursday.

"If they have a desire to meet with regard to the proposal we have on the table, they know how to reach us."

The sides touched base by phone over the weekend following a busy few days that saw each of them table new offers. They had been expected to gather in New York at some point this week.

"They say they want a deal but then they say they only want to meet if it is on their terms," said Steve Fehr, the NHLPA's special counsel. "Strange. That is not the way to reach an agreement. Bargaining is give and take -- not just take."

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Comments

HockeytownOverhaul's avatar

SSo Daly is saying f*ck negotiating.. its my way or the highway huh?  Stay classy NHL

Posted by HockeytownOverhaul on 10/22/12 at 07:58 PM ET

Red Winger's avatar

How is Daly saying that?

What I see is a players association that is fully ready to scrap this season, if not more, to get their demands. Fehr is the guy to do it; they didn’t hire him by mistake, they knew full well what he was capable of.

Who knows, maybe what the players want will, in the end, create a stronger league, even if we don’t see NHL hockey for months and months. But how one sees this as Daly being the only ‘bad guy’ is a stretch, IMO.

Posted by Red Winger from Sault Ste Marie on 10/22/12 at 08:09 PM ET

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If it’s true that there are around 18-20 NHL teams which lose money every year, then since the NHLPA’s plans don’t appreciably bend down the cost curve what those plans essentially say is ‘go ahead and keep losing money for the next 2-5 years, 18-20 NHL clubs.’

That’s not exactly what I call ‘negotiating’ either, at least in the way HO is attempting to use the word.

This bears repeating: the NHLPA is cutting it’s own throat by prolonging a lockout.  The NHL will get the deal it wants.  A 50-50 split of HRR under previous definitions is reasonably fair.  If it’s not with this group of players, it will be with whichever players want to play in the NHL next year.

The owners are under very, very little financial pressure to play hockey this year.  According to Forbes…

http://www.forbes.com/sites/kurtbadenhausen/2012/09/18/nhl-lockout-is-all-about-the-benjamins-and-who-doesnt-have-them/)

... the whole NHL made a collective 127 million dollars last year.  As in, a grand total of 127 mil in profit if you add up the bottom lines of the 30 teams.

If nary a game of NHL hockey is played the NHL stands to make 200 million dollars this year from their NBC contract alone.

The pressure the NHL is under is from their existing sponsors and media partners.  That’s a problem, but the NHL is already a fringe league.  Joe’s Tire Barn isn’t going to start advertising with the NFL.  There is some danger there, but not nearly enough to counterbalance the basic economic disaster that the league’s current model resembles at the moment.

Posted by HockeyinHD on 10/22/12 at 08:22 PM ET

Evilpens's avatar

They are being driven over the cliff in a Clown car by Fehr, They are going to lose a season of their career & will accept the NHL Plan next season

Posted by Evilpens on 10/22/12 at 09:53 PM ET

HockeytownOverhaul's avatar

How is Daly saying that?

What I see is a players association that is fully ready to scrap this season, if not more, to get their demands. Fehr is the guy to do it; they didn’t hire him by mistake, they knew full well what he was capable of.

a)(I’m) not sure there is any reason to meet if there is nothing new to say,” deputy commissioner Bill Daly told The Canadian Press in an email. “Our position was communicated to the union pretty clearly last Tuesday and then again on Thursday.

“If they have a desire to meet with regard to the proposal we have on the table, they know how to reach us.”

I guess this was verbally but it may have been a written statement he provided.

b)  It’s not the NHL’s fault for using a lockout as a bargaining chip in negotiations.  The fact they premeditated this course of action, assuming it’d be blamed ont he players, again and low-balled the f*ck out of them?  NHL was ready to scrap the season, they just want the fans to believe it’s all the players fault, trying to create a context benefitial to them to the ignorant like some ignored people on here.

Posted by HockeytownOverhaul on 10/23/12 at 02:41 AM ET

Alan's avatar

The owners are under very, very little financial pressure to play hockey this year.  According to Forbes…

... the whole NHL made a collective 127 million dollars last year.  As in, a grand total of 127 mil in profit if you add up the bottom lines of the 30 teams.

Wait, what? Just this morning, Paul posted a link from ESPN quoting Daly as saying:

“If we end up missing and not rescheduling games through Nov. 2, we will have over $330 million in lost revenue,” Daly told ESPN.com Monday morning.

If the league is being propped up by three to five team helping to offset the losses of 25-27 others, a CBA that bends its players over the table isn’t exactly the droids the owners are looking for. Or, perhaps droids are exactly what owners are looking for. Or, maybe we just need to figure out what the hell is going on with those teams that are accounting for so many losses, and try to fix the problems.

But, moreover, if the league is going to lose an estimated $330M in revenue by not starting play on 2 November, then claiming the owners have all the incentive in the world to wait for the players to sign on to an agreement they don’t like is futile. The owners are not in a position of strength, and I assure you, they will fragment much like the players did in 2004-2005.

Posted by Alan from Atlanta on 10/23/12 at 03:47 AM ET

creasemonkey's avatar

If you buy the Forbes numbers, I have some beachfront property in Arizona to sell you. They are claiming the Blackhawks lost money last season (and even lost during their Cup run) and the Sharks lost money even though they sell out most, if not all their home games. The owners pay smart people lots of money to hide most of their profits in other companies, claiming the team itself lost money while the operating company posts a profit. SOP for most pro sports teams. 

One thing I’m getting annoyed with is the claim that both sides waited so long to start negotiations. The NHLPA did not receive the necessary financial documents until July. You cannot expect them to propose a feasible plan without knowing the exact numbers being discussed in terms of what teams hide what money where. It was tens of thousands of pages that Bettman claimed were insignificant.

I’m still of the belief this season is a lost cause; I’d be okay with it if it means fixing EVERY issue with the league, not just financial but all around, allowing for (at least) 10-20 years of lockout NHL hockey. Otherwise, it’s just a bandage over gut-spilling wound and it’s just a matter of time until the next lockout in 6 years.

Posted by creasemonkey from sweet home san diego on 10/23/12 at 04:25 AM ET

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“If we end up missing and not rescheduling games through Nov. 2, we will have over $330 million in lost revenue,”

Revenue vs. profit.  Revenue is incoming funds.  Profit is what remains of revenue after all expenses are paid.

If the league is being propped up by three to five team helping to offset the losses of 25-27 others, a CBA that bends its players over the table isn’t exactly the droids the owners are looking for.

Let me address the apparent hyperbole of that comment.  If the NHLPA went from 57% of HRR to 50% of HRR under previous definitions we are talking about a pay cut of around 12%.

Since we’re dealing with percentages, however, assuming even the fairly pedestrian growth of the NHL’s total revenue pie (say 5%) that’s a pay cut which goes away in around 3 years.  Meaning, by year 3 or 4 of even an immediate dip in HRR to 50-50 the players share of the HRR pie would be as large in terms of total dollars as it was in 2012.

So to be clear, you are saying a temporary pay cut of 12% that completely disappears in 4 years tops is “a CBA that bends its players over the table.”

They are claiming the Blackhawks lost money last season (and even lost during their Cup run) and the Sharks lost money even though they sell out most, if not all their home games.

Well, let’s just take the Blackhawks and the Sharks as two examples, then.  According to Forbes in 2010-11 the Hawks had 70 mil in player expenses (salary plus benefits) and 50 mil in gate receipts (including club seats).  So in a pretty heavily gate-driven league Chicago’s starting out -20 mil, and they are a big name team in a really big market.  I’m sure they have some local TV deals, and they get a cut of whatever the TV contracts are… but -20 mil is a tough place to start from.  And it doesn’t include operating expenses either.

The Sharks are in an even worse spot.  They had 65 mil in player expenses and 46 mil in gate receipts.  A -19 mil starting point.  Pretty similar story.  And it’s nice that the Sharks are selling out their building, but even doing that they had the 18th highest home attendance in the NHL last year.

The owners pay smart people lots of money to hide most of their profits in other companies, claiming the team itself lost money while the operating company posts a profit.

That’s not impossible.  However, it’s important to note that the NHL can’t find anybody who wants to buy their teams.  Seems like if an NHL club was a money-maker in any real way that wouldn’t be the case, right?  And there are at least 2-4 teams which actually make a ton of money and report it as profit, right?

IMO Forbes’ numbers are about as close to accurate as we’re going to be able to get.  Not perfect, no, but pretty close.

The NHLPA did not receive the necessary financial documents until July. You cannot expect them to propose a feasible plan without knowing the exact numbers being discussed in terms of what teams hide what money where. It was tens of thousands of pages that Bettman claimed were insignificant.

I don’t buy that argument because the nature of the debate is incredibly simple and incredibly obvious: it’s percentage points of HRR.  From the beginning the NHLPA knew what it would be willing to accept and what it would refuse.  That’s why you see so many of Fehr’s proposals revolve around the total dollars the players would recieve.

Neither side’s position is particularly arcane.  The NHL wants to back out operating expenses and then split the pop 50-50.  The NHLPA wants to hold back the amount of what is backed out as much as possible and then get 55-57% of what is left.  If the idea from the NHLPA truly was a new way of doing things then no, they didn’t really need a tugboat full of supporting documents to have a general framework ready.

All of that aside, the start time of the negotiations is meaningless because I have to assume pretty much everyone understands that neither side would make any concessions until some degree of pressure was applied to them.  That tends to be the way it goes in most negotiations.  If it’s not going to cost the NHLPA a dime, why should they ‘give away’ 7 points of HRR without refusing to sign any deals for a while?  If the NHL is really only making 130ish mil a year as an entity why should they sign a deal that keeps things status quo for another half a decade?

Posted by HockeyinHD on 10/23/12 at 06:16 AM ET

J.J. from Kansas's avatar

According to Forbes in 2010-11 the Hawks had 70 mil in player expenses (salary plus benefits) and 50 mil in gate receipts (including club seats).

But not including luxury suites… of which there are 212 in the United Center. Each of those come with between 12-14 people in them. That’s more than 2,500 fans every game in seats that cost $175 per person per game back in 2008.

So provided that the Blackhawks didn’t raise executive suite prices at all after they won the cup (which is a stupid assumption to make), let’s see:

12 people x 212 suites x $175/person x 41 home games = $18,253,200.

 

Posted by J.J. from Kansas on 10/23/12 at 08:12 AM ET

Red Winger's avatar

But not including luxury suites… of which there are 212 in the United Center

Do we know for sure those are not counted?

Each of those come with between 12-14 people in them. That’s more than 2,500 fans every game in seats that cost $175 per person per game back in 2008.

You’re assuming those sellout every game. Is there a basis for this assumption?

Posted by Red Winger from Sault Ste Marie on 10/23/12 at 09:23 AM ET

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So to be clear, you are saying a temporary pay cut of 12% that completely disappears in 4 years tops is “a CBA that bends its players over the table.”

You mean a CBA in which, after record growth and record revenue, the players will have their share cut and it will be four years before they get back up to the level they are at right now instead of having their share grow as the game grows?

I’m guessing back in 2005 you were saying that the new CBA with a hard cap and 24% rollback was a win for the players…

Posted by Garth on 10/23/12 at 09:34 AM ET

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But not including luxury suites…

I do not know that this is the case.  But, for the sake of argument, let’s presume it is.

Even if your estimate of the number of seats is correct…
Even if your estimate that the seats sell out completely is correct…
Even if your estimate of the price per seat is correct…

... it gets the Hawks just shy of break even Players Salaries vs. Gate Reciepts.

Does that sound like terribly a positive economic dynamic to you?  One that can continue absent some significant adjustment?

I mean, we’re not talking about the Columbus BJ’s here, JJ.  We’re talking about a major team in a huge market that’s won a Cup and been in the playoffs all the time in a market that’s had NHL hockey for just about 90 years.

And they can’t get gate revenue to catch up to player costs even assuming a boatload of things missed from an analysis.

You mean a CBA in which, after record growth and record revenue, the players will have their share cut and it will be four years before they get back up to the level they are at right now instead of having their share grow as the game grows?

I don’t quite get the question, Garth.  I think it’s pretty obvious that it is a cut of their share.

I’m guessing back in 2005 you were saying that the new CBA with a hard cap and 24% rollback was a win for the players…

Are you okay?  I’m asking seriously here… is everything all right?  Of course the last CBA wasn’t a ‘win’ for the players.  They went from 74% of revenue to 54% (then 57%) of revenue.

If this issue is about which side ‘wins’ in your opinion, you’re going to have a hard time looking at this stuff objectively.  Just because the players are going to have to give back some of their share doesn’t mean a bad thing is occurring.  The NHL is going to fail as a sport if teams only get 43% of previously-defined HRR.

That’s simply not enough money to have it make any sense for anybody to own a team.  This is why nobody wants to own a team that comes up for sale, and the people who do end up owning teams are almost always financially unable to support them at any realistic level.

So then we end up with teams with crappy owners, or with ownership groups always in flux.

So then we end up with a league that’s always a mess because 3-6 teams have new owners, absentee owners, broke owners or crazy owners.

So then we end up with lockouts all the time, because there are going to be so many teams in dire financial straits.

Look, there’s nothing wrong with being pro-union.  Obviously.  Where I start to question that kind of outlook is when it leads to positions on issues which clearly and obviously are big factors in the degradation of the business in which the union exists.

And having to give away 57% of post-expense revenue is clearly and obviously a big reason why so many NHL teams are a financial mess.

There are others, of course.  Until the 57% issue is resolved, however, it’s pointless to try and address any of the other ones.

Posted by HockeyinHD on 10/23/12 at 10:18 AM ET

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Does that sound like terribly a positive economic dynamic to you?  One that can continue absent some significant adjustment?

And it should be up to the players to provide that adjustment.  It should not be on the owners to run their businesses better.

I mean Jesus Christ it’s not like these owners are multi-billionaires who are self-made men

I don’t quite get the question, Garth.  I think it’s pretty obvious that it is a cut of their share.

Yeah, the question is why should the players be taking a pay cut when, 100% because of the players, the league’s revenue is at an all-time high.

You make it seem like taking a huge cut, with the assumption that their share in dollars will eventually back to what it is now, is a good thing that they should be jumping up and down about.

In four years of continued growth the money that the players get shouldn’t be approaching what they got this year, it should be growing FROM what they got this year.

“Hey, look at all the money we’re bringing in!  Oh, by the way, everyone who made this happen?  We’re going to cut your salaries.  But don’t worry, as we continue to grow you’ll eventually make what you made this year…”

Are you okay?  I’m asking seriously here… is everything all right?  Of course the last CBA wasn’t a ‘win’ for the players.  They went from 74% of revenue to 54% (then 57%) of revenue.

Every once in a while it’s refreshing to meet someone who has absolutely no concept of sarcasm.

Posted by Garth on 10/23/12 at 10:30 AM ET

J.J. from Kansas's avatar

I do not know that this is the case.  But, for the sake of argument, let’s presume it is.

Why would Forbes say they include club seats but not luxury boxes?

I built that assumption purposefully low. It’s not 12 people and it’s not $175 per seat per game. It also doesn’t include things like the box “investment” where people have to pay for the right to simply be able to pay for the box. 

Hell, bring it up to 13 people (since the boxes traditionally come with 12-14) and raise the price-per-person to $176 and you’re exactly at the break-even on that consideration.  Throw in the fact that my estimates are intentionally extremely lowballed and you get it positive.

...then, consider that the Forbes numbers which you called “close enough” actually said the Hawks ran at a positive $8.7M operating income.  Assume that if the Forbes numbers are as good as they can be and are close enough, then the $20M in hidden luxury box receipts that were missing from the final numbers that showed the club made almost $9M and yes, that sounds like a terribly positive economic dynamic to me.

Then you go ahead and factor in “operating expenses” and I’ll go ahead and factor in TV deals, concessions, partnerships, merchandise, licensing fees, parking, positive loan interest, and all the fun Hollywood accounting procedures that go along with the Hawks ownership co-owning the United Center and getting to write their own lease on whichever terms benefit the overall organization the most AND that the Hawks ownership owns the beer/liquor distributorship inside the arena and can set prices on multiple levels of the supply chain spread across two and sometimes three companies and I’ll reiterate: Every piece of information available on a popular club leads me to believe that their ownership of the team is a terribly positive economic dynamic.

I also don’t believe for a second that the Sharks (or the Capitals for that matter) are as badly off as the Forbes numbers suggest.  Doesn’t it seem odd that three very similar teams all with very similar popularity, very similar payrolls, and very similar deals where their parent companies own the arenas and lease it back to the team all have essentially that magical $20M difference between player costs and gate receipts?

I mean, the player expenses and gate receipts numbers are all within $5M of each other too… yet the Blackhawks net $8.7M while the Sharks and Caps lose a combined $15M

In the Blackhawks case, it’s wholly possible that the $15+M difference in year-to-year net operating income is caused by the Forbes numbers being “close enough” where they’re just doing ok for themselves while those other two extremely similar teams are positively dying alive in hopes that a better cut of the revenue share will save them.

... or it’s possible that the Blackhawks are making a dickload more money than the Forbes numbers suggest and, by extension, so are the Sharks and Capitals.  The way those two teams behave financially and how they’re run by businessmen who specialize in arena-event moneymaking and who haven’t made the business decision to sell off those poor, struggling teams while still charging them for use of the arena that the parent companies own leads me to believe that it’s much closer to the second of those scenarios than the first.

 

Posted by J.J. from Kansas on 10/23/12 at 11:04 AM ET

J.J. from Kansas's avatar

Do we know for sure those are not counted?

If Forbes says they count club seats specifically, why wouldn’t they also specifically say they count luxury suites?

You’re assuming those sellout every game. Is there a basis for this assumption?

http://espn.go.com/nhl/attendance/_/year/2012

If you’ve got a better assumption, I’m all ears.

 

Posted by J.J. from Kansas on 10/23/12 at 11:07 AM ET

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Where I start to question that kind of outlook is when it leads to positions on issues which clearly and obviously are big factors in the degradation of the business in which the union exists.

So, its the players and the unions fault that billionaire business owners got everything they wanted, and couldnt manage their business in a period of record growth and record profits?

And having to give away 57% of post-expense revenue is clearly and obviously a big reason why so many NHL teams are a financial mess.

This argument is ridiculous, and I’m tired of reading it.  The players are both the Product and the Labor in this industry, so its kind of hard to make comparisons, but 43% is a pretty impressive profit margin.

The problem is that the money isnt evenly divided between teams, but the expenses are essentially equal.  Taking more money from the players isnt going to change this.  Lowering the salary floor or increasing revenue sharing would however.

The players have essentially agreed to move towards 50-50 split, but I think they are right in refusing to accept an immediate rollback, without a change in revenue sharing.

Otherwise, we’ll be right back here in another 5-7 years, with record profits for the league as a whole, but the NHL demanding salary cuts for players because they still insist on not supporting smaller market teams via revenue sharing.

 

Posted by jwad on 10/23/12 at 11:21 AM ET

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43% is a pretty impressive profit margin

This is the profit, but the revenue left over after player salaries. It is a little bit more complicated than that, but it isn’t what the owners are left with to spend on yachts, cigars and other hobbies.

Posted by hockey1919 from mid-atlantic on 10/23/12 at 12:41 PM ET

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typo - this ISN"T profit.

Posted by hockey1919 from mid-atlantic on 10/23/12 at 12:48 PM ET

WingsFaninCO's avatar

This is why nobody wants to own a team that comes up for sale

How many teams have come up for sale in the last 10 years?  And, as a follow-up, which teams?

Posted by WingsFaninCO on 10/23/12 at 01:22 PM ET

HockeytownOverhaul's avatar

and that 43% was AFTER all of their “write-offs”.. so they’ve already put some money in their pocket, before dividing up the kitty between themselves and the players.  They’re doing their damndest to try to shift the arguement away from that fact.  And that 57% of the PARTIAL revenue the players get is divided by over 700 players.

Posted by HockeytownOverhaul on 10/23/12 at 01:30 PM ET

phillyd's avatar

Don’t confuse revenue with profit. The NHL has seen record revenue not profit since the last CBA was signed. As for suites, generally, those are sold as leases, not as individual seats and they are generally sold by the arena itself, not the teams. Teams instead get some percentage based on their leases if the club doesn’t own their arena. In fact, it’s that very reason why the revenue from leases isn’t included in HRR, there’s too much disparity among clubs. Club seats may be sold to companies also, but they’re issued as single tickets, not as passes like suites are.

Posted by phillyd from Southern New Jersey on 10/23/12 at 01:31 PM ET

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And it should be up to the players to provide that adjustment.  It should not be on the owners to run their businesses better.

Okay.  Describe for me what your comment there means.  I, for instance, could make the case that getting a much better labor deal is something which could be included under the auspices of an owner ‘running his business better’, but fine.

Tell me what the owners of the 18ish team who lose money every year should be doing to ‘run their businesses better’.

Yeah, the question is why should the players be taking a pay cut when, 100% because of the players,

Now that’s an interesting comment.  Are you saying you would pay as much to see an NHL game if it were held in a barn?  If the food was awful or non existent?  If the teams were 100+ miles away from your house?

I think you have a skewed perception of why things are worth what they are worth.

Every once in a while it’s refreshing to meet someone who has absolutely no concept of sarcasm.

Or those who know how to employ it? wink

Why would Forbes say they include club seats but not luxury boxes?

I have no idea, JJ.  I would advise you, though, to be fairly restrained in the leaps of logic you are willing to take in this case given your occasionally strict requirements of vetting and disclosure on other topics.

So, its the players and the unions fault that billionaire business owners got everything they wanted, and couldnt manage their business in a period of record growth and record profits?

I touched on this in another post so I won’t go into a full retelling here, but you are attempting to place fault where it is pointless to do so.  I don’t ‘blame’ the players for the situation the NHL is in financially.  It is not their responsibility to manage the league.  It is the owners in general and the NHL’s.

However, I also don’t think it’s particularly fair to take a flamethrower to the NHL or the owners when they attempt to run the league better when in their opinion that means trying to save costs on by far their most significant liability year in and year out: player costs.

The players are both the Product and the Labor in this industry, so its kind of hard to make comparisons, but 43% is a pretty impressive profit margin.

This has been addressed, but no… 43% isn’t profit.  It’s revenue.

The problem is that the money isnt evenly divided between teams, but the expenses are essentially equal.  Taking more money from the players isnt going to change this.  Lowering the salary floor or increasing revenue sharing would however.

No, it wouldn’t.  Let me address the flaws of your salary floor argument first:

Scenario 1) NHL teams collectively spend $3 B on player salaries in SPCs, NHL HRRs are $4 B, and the players are scheduled to receive 57% of HRR.  How much do players get?

Answer: They get $2.28 B.

Scenario 2) NHL teams spend $1 B on player salaries in SPCs, NHL HRRs are $4 B, and players are scheduled to receive 57% of HRR.  How much do the players get?

Answer: They get $2.28 B.

In short, the flaw with your salary floor argument is that it simply does not matter how much NHL teams pay their players in SPCs.  Players will collectively get exactly as much as they are supposed to get under the terms of a CBA.  No more, no less.

Let me now address your second flawed argument, “The problem is that the money isnt evenly divided between teams, but the expenses are essentially equal.”

If you divided up profits (operating revenue) evenly between all 30 NHL teams they would amount to right around 5 million bucks a year per team.

5 mil.  A team.  That a guy or group of guys had to pony up 150+ mil to own.  You’re talking about a 3% ROI, and that’s if you went Full Socalist and threw all profits from everything into a kitty and split them up, drawing no distinctions between teams that were any good and teams that always suck.

No, the problem isn’t a redistribution of existing profits.  The problem is a scarcity of profits.

Don’t confuse revenue with profit. The NHL has seen record revenue not profit since the last CBA was signed. As for suites, generally, those are sold as leases, not as individual seats and they are generally sold by the arena itself, not the teams. Teams instead get some percentage based on their leases if the club doesn’t own their arena. In fact, it’s that very reason why the revenue from leases isn’t included in HRR, there’s too much disparity among clubs. Club seats may be sold to companies also, but they’re issued as single tickets, not as passes like suites are.

That’s awesome info, phillyd!  After JJ’s question regarding suite revenues I dug around for solid info and only got a few vague hints.

Posted by HockeyinHD on 10/23/12 at 02:00 PM ET

J.J. from Kansas's avatar

Teams instead get some percentage based on their leases if the club doesn’t own their arena. In fact, it’s that very reason why the revenue from leases isn’t included in HRR, there’s too much disparity among clubs.

Well, that and Suite leases cover across multiple things, so it’s not necessarily fair to charge 100% of the Panthers’ suite leases to the club when that arena puts on about 160 events which aren’t hockey games.

Where it gets tricky is in the leases and with who owns the arenas.  There are a number of teams whose arena is owned by the same company who owns them (and in many cases, where the arena is operated solely by that company, but owned municipally, like in Nashville). 

When you have arrangements like that, arena leases get incredibly tricky because the team can sign what looks like a pretty crappy arena deal where they receive absolutely nothing from luxury suites (I know they do this in Florida and Washington, but haven’t seen every lease out there).  This way, the team gets to claim that their gate receipts are incredibly low, but the money is still going to the same person/people who own the team.

Posted by J.J. from Kansas on 10/23/12 at 02:19 PM ET

J.J. from Kansas's avatar

I have no idea, JJ.  I would advise you, though, to be fairly restrained in the leaps of logic you are willing to take in this case given your occasionally strict requirements of vetting and disclosure on other topics.

Translated: I’m ok to call the Forbes numbers “close enough”, but don’t argue because there’s no way you can know.

I’ll take your advisement into consideration.

 

Posted by J.J. from Kansas on 10/23/12 at 02:22 PM ET

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In short, the flaw with your salary floor argument is that it simply does not matter how much NHL teams pay their players in SPCs.

Not true at all. It affects each market differently. The problem is that HRR is defined league wide, but expenses and revenue are accrued locally and the cap floor and ceiling are defined against league generated HRR. So for every dollar of revenue the Leafs make, Phoenix has to pay more in terms of the cap floor. The players get the same exact share in total, but the revenue is not distributed evenly and affects each team differently.

Team X makes $100 million, team Y makes $10 million. Revenue is $110 million, $62.7 million of that goes to the players if they get 57% of HRR. If team max payroll is capped at $40 million and the minimum is $22.7, there is no way for team Y to do anything but go in the red. Team X has $60 million to operate on and Team Y is $12.7 million in the red before any expenses are even paid.  So if on average it costs $20 million to operate a team, team X would make $ 40 million in profit and Team Y would be in the hole for $32.7 million. The total league profit is still $7.3 million. None of these numbers are real, but it illustrates how defining HRR is only part of the problem. You can keep adding to the total revenue, but if it is team X always making more it is just pushing team Y deeper into the red as the cap floor rises. You can shift HRR to 50/50 and it still wouldn’t help if the disparity in earning between the two teams is great enough.

According to Forbes “for the top 5 teams profits hit $212 million with the remaining 25 teams posting a loss of $86 million.” The losses are driven in no small part by trying to keep up with a floor that exceeds what they can pay and it is continually driven higher by 5 teams that make, on average, around $40 million in profits - not total revenue. The system, by design helps the rich get richer.

Posted by hockey1919 from mid-atlantic on 10/23/12 at 03:24 PM ET

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