2012 CBA Discussion Part IV (Lockout talk here)
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11-18-2012, 08:57 PM
Join Date: Oct 2007
Originally Posted by
FV are just an arbitrary number, a paper number if you will. The owners gain nothing from it until they sell. The problem is, trying to find a potential owner that is willing to pay the said value. In 2005 the NHL was lined up with potential owners wanting an existing franchise or expansion. Why? Because they had cost certainty with the CBA. While the CBA did a lot of what it was intended to do, it failed on that part which is why the league is having a hard time finding owners now. So the Bruins value of $325 million is only true if I'm willing to pay that. If I bought them at $300 million, isn't that their actual value because that's all JJ could get for it? Isn't that the new value of the franchise?
Sure they are arbitrary but they are based off comparable situations. Some sell for more than Forbes number, some sell for less. The facts are that if you run your team with even half a brain and a lot of times even if you don't that you will make money. Look at the prices through history even before this CBA when owners were paying out more with no cost certainty. Look at the number of teams during this CBA that have sold. There were smart rich people willing to buy then and there are smart rich people willing to buy now and it is because they are profitable. Maybe not solely on hockey operations but overall with everything that comes with it.
Let me use a personal example: The last house I owned before this one i purchased for $169,900. It was appraised at $209,900 when I put it on the market. For various reasons, the best offer I got was $176,900. And for various reasons sold it at that price. So is the value now $176,900 or $209,900 ? The new owners wouldn't be able to get that $209,900 if they tried to sell either so the actual value is what you get for it when it's sold. Works the same way for an NHL franchise.
I'm a loan officer - among other things so I know how this works, and in Arizona in a declining market over the last few years there were many sales below appraised value. An NHL franchise is a lot more complicated with other parts to the purchase. It isn't just a house and land. It usually involves one or more of an arena deal, a cable deal, a minor league franchise, a stadium, etc.
And as for the owners actual out of pocket expense to purchase a team: These owners don't usually come in and pay out of pocket. Its stupid to do so. They finance it to protect their own personal property. The team has to be self sustaining, without constantly putting in personal wealth. Obviously as fans we want them to. But it's not how business works.
Again with a personal example: Several years ago I purchased 3 businesses with total annual sales of $10 million. Under the advice of lawyers and accountants, I formed two legal corporations (separate entities under the law from myself). My own personal investment was $8000.00 and under the law, if those business failed, none of my personal cash, property, my wife, son, parents - you name it, couldn't have legal action brought up against them in a civil suit. NHL owners operate the same way - the team has to sustain itself without personal wealth/property being effected.
Could Rogers/Bell Media have afforded to pay $1.1 Billion in cash to buy MLSE and the Leafs? Darn right they could have. 10 times. Did they? No, because if the disastrous happened, they'd be out their personal wealth. Sometimes they'll pay a little more interest (actually - all the time ) in order to protect themselves, but it still boils down to one thing, MLSE has to make enough money to cover all the expenses.
I don't care if they purchase with cash or debt. I want them to do what makes them money. Did you purchase with more debt than the business could sustain? That is what these owners are doing. The NFL has an average debt of about 19% of franchise value. The NHL is at about 48%. NJ is at 144%, Dallas at 126%. Rogers/Bell & Toronto can afford that debt and support it. NJ can't. If you put NJ through BK and wiped out the debt, they are worth a heck of a lot more. They would still generate the same revenue. They actually showed a large operating profit over the life of the CBA. What the heck was the owner doing with the money? What happened that has put them in so much trouble. It isn't a 3% increase in salary percentage.
And I've seen a main argument from people that the owners take all the financial risk. Based on the debt value they don't. The banks are taking the risk. And banks have access to the financials. They wouldn't be lending the money if these businesses weren't profitable. Is every one going to pay off? Probably not, but the majority do. When they don't it is the owner's fault. Usually for mismanaging the NHL team and from operations outside of hockey that makes them not be able to afford the team. (See Hicks & Dallas). Also hugely profitable until recently as he wracked up the debt.
And finally, speaking of endorsements, some players make a ton of money because the NHL exists. Would Crosby get a Gatorade endorsement if he was playing in the KHL instead of the NHL ? probably, but nowhere near the value it is now because the NHL gives him the exposure he couldn't get any place else.
Okay, so Crosby is a big name, but not exclusive to him. See the thread with the Lucic commercial? Would Lucic be a part of that commercial if not for the NHL? How about Shawn Thornton? The list goes on and on. The NHL not only allows them to make money from playing hockey, but allows them to make money from other ventures, not because they play hockey, but because they play NHL hockey - NHL hockey made possible by NHL owners.
Players do make a lot and have other income because the NHL exists. But what do the owners make on hockey without the NHL players? What would revenue be? There are actually double the billionaires in the world than players I want to watch play NHL hockey. Swap out 30 owners while keeping the NHL players and what happens? Swap out the players and keep the same 30 owners and what happens? I know which league I want to watch and it isn't the same owners.
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