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02-14-2013, 08:37 AM
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Originally Posted by XX View Post
Anyone want to tear that apart? Was Glendale not previously paying for the operating cost of the arena? If so, that would explain why the Coyotes were 15+ million in the hole every year, regardless of what they did.
Where's Evil Doctor's JPG of a rotary when we need it?

I can't believe anybody's still following this tack. My full analysis was somewhere in June when the Hocking and Pollack reports showed up on the COG website; that wasn't in a megathread (though I referred to it at least a few times after that, as in the post linked by CF).

Here's the jist of it. If you disagree with it you might as well disagree with everything that's ever been taught in a business school.

Scenario 1: arena sits empty all year
Revenues 0
Event costs 0
Fixed costs 4 million
Total operating costs = 0 + 4 = 4 million
Net loss = 4 million

Scenario 2: arena regularly holds events
Revenues 15 million
Event costs 10 million
Fixed costs 4 million
Total operating costs = 10 + 4 = 14 million
Net profit = 1 million

The actual numbers don't matter. The point is that the Hocking study (and especially those relaying it, such as Joyce "Beavis" Clark) is implicitly arguing that the AMF should cover total operating costs. That's only correct if the arena owner also keeps the operating revenue, but the arena manager always kept the operating revenue in any proposed lease.

In other words, Joyce "Beavis" Clark is currently suggesting the following for the arena manager:

Revenues 15 million
Event costs 10 million
Fixed costs 4 million
AMF 14 million
Total net operating costs = 10 + 4 - 14 = 0
Net profit = 15 million

Looks good to me..

barneyg is offline