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Edmonton Journal: Why do billionaires keep buying teams that lose money?

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Old
11-19-2012, 11:58 AM
  #101
crazyforhockey
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Originally Posted by Neatman View Post
I completely agree with him, why should players get a cut of NON-Hockey revenue? Now that also depends on if owneres are shuffling money from hockey events to other areas to avoid having it count as "hockey related revenue". However, if the players think that's happening, it's their own fault for not auditing the **** out of teams.

dont think they have much avenue to find out those true results unless your the owner or the govt...

you can clearly tell that from all the diffrent sources who state they are only going by the leagues numbers because there is no other


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Originally Posted by Ogopogo View Post
That's the thing - the profits come from things other than hockey in places like Florida. Concerts and other events generate profit when hockey doesn't.

That is why new arenas get built - to have the ability to control all revenue streams. If a team is simply a tenant in a building owned by someone else, they are a money-losing venture. But, give them total control over all revenues then, there is cash to be made.

Look at what Katz wants from a new arena in Edmonton. Control over all revenues for all events - he originally wanted Rexall Place shut down so it couldn't compete for non-hockey events.

Profitability in the hockey business is, many times, not from hockey. Should players really be entitled to a cut of the Madonna concert revenue? No. They should only get 50% of hockey money - they have nothing to do with concert money.


I do agree to no on HRR for non hockey items....but where that falls into issue/problems is that where do expenses fall on???? companies have shown they will transfer expenses to bump up a divison's profit in one area or to gain a favorable tax write off in another.......case in point when MLB showed their books(in their labour relations) the auditor came in and found that profit was way understated and expenses overstated......ie basically they were doctoring the books in a sense to get their best deal.

example if you are having staff clean and transform an arena from a rink to a concert or NBA game or back to a rink... a owner could for his benefit put the expenses for all that under the hockey team.....with little transparicy with most teams its hard to discern where the truth is........hence why all revenue is under the umbrella...

just like having an unwritten rule(the past) about front loaded contracts....teams will find a way to circumvent the process for their own intrests.

so then you put a blanket clause on all revnue from arenas.....is my thinking

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11-19-2012, 12:00 PM
  #102
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Quoting a friend of a friend, when he opened a new gym in his municipality (I aint friend with no millionaire, but know at least one)

Quote:
I hope that gym go bamkrupt so I can get a hit on my income tax report
dont ask me how the whole thing work, but apparently losing money when you are making a lot more elsewhere can be benificial else where in the long run... :\

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11-19-2012, 12:04 PM
  #103
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Getting to the original question:

Because the losses (especially after used to offset income elsewhere on taxes) in proportion to their income is about the same as normal people spend on sports. Think about the money you spend going to games, getting the cable packages to watch games, buying gear, going to sports bars for the games etc. Then figure out what the percentage of your income that is. Now think if you were a billionaire how much that percentage would amount to

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11-19-2012, 02:53 PM
  #104
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Originally Posted by cbcwpg View Post
The Thrashers were losing money, ASG was not. So if ASG came out and said the team is / was not profitable they would be correct. Has nothing to do with ASG being profitable.
Oh, but the reason the Thrashers were losing money is because nobody in the market liked hockey. The logic from those articles would reveal that any hockey team losing money doesn't have enough fan support and either needs to move or fold. Not that I agree with that, because I do not, but that was what the wisdom of the crowd stated at the time.

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11-19-2012, 03:02 PM
  #105
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This was discussed today on HNIC with author (SXM). (So check the CBC website as there may be a podcast available.)

Summary I got: there are few NHL "teams" that make a profit, but if you include the ancillary business of arena management, the combined business can have a good chance of at least breaking even (if not turning a profit). Also mentioned that Edmonton currently paying $1.00/year in rent and help in paying some of the building costs (electricity?) for hockey games.

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11-19-2012, 03:06 PM
  #106
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Originally Posted by hockeydoug View Post
The article focused on hockey clubs being profitable (and he screwed that up).
Actually, most of the article focused on the ownership being profitable. The fact that you seem to have missed that is exactly my point.

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11-19-2012, 03:20 PM
  #107
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Originally Posted by Plan The Parade View Post
The only reason SSE makes money is because of the Panthers.

The lease that SSE has with Broward is contingent on the Panthers being the anchor tenant in the newly rechristened BB&T Arena. No Panthers, and SSE gets no money from the other events in the stadium.
No, the reason SSE makes money is because of the whole package AND because they negotiated favorable contracts with the county. The Panthers, AOC, and the business operations are what allowed for profit. All three are vital to the success of SSE. One cannot be singled out as the reason for profit. All are dependent on each other, and none of them are the "only" reason.

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11-19-2012, 04:26 PM
  #108
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Originally Posted by Tawnos View Post
Actually, most of the article focused on the ownership being profitable. The fact that you seem to have missed that is exactly my point.
When he fails to explain that AOC is separate from the Panthers, he isn't making any point at all. He dives from discussing owners and ownership into individual franchises right away, so he never really makes an accurate point about ownership being profitable. He never substantiated a claim about ownership, either the information isn't there and/or he used the information he had incorrectly.

If he focused on ownership, I would only pick apart his poor analysis and oversimplified and inaccurate conclusions as they apply to most franchises. When he fails to explain that AOC is separate from the Panthers, he isn't making any point at all. He dives from owners and ownership into individual franchises right away by saying teams and clubs, so he never really makes an accurate point about ownership being profitable.

He also never distinguishes how SSE fits into any other holdings of ownership and how a franchise is more of a gateway compared to AOC, established contracts with local government, or anything else. It's a point that never should have been made or implied.

You're making a point that is a separate argument the author never articulated. In his story, he's taking about SSE which existed as a package before the sale. He, like many writers want to take put the franchise and the center and project revenue generating arrows from it, but since it was already tied to other assets, it's a really tough leap to make, it's a much much tougher point to project onto other small or struggling NHL franchise ownership.

Not everything is about the NHL franchises when it comes to ownership making money.

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11-19-2012, 04:38 PM
  #109
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Originally Posted by Strik_IX View Post
Because a really expensive sandbox is cool?

I mean seriously, if I were THAT rich I'd try to buy a team and wouldn't mind losing a certain percentage of my wealth on it, but that's just me.
You'd never be that rich with that philosophy.

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11-19-2012, 05:53 PM
  #110
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Originally Posted by Ola View Post
I am not sure I follow, but I'll take your word for it and I appolgoise.
Here, I’ll even take the time to explain it to you. Take this quite, directly from the article:

“The bottom line is that the Panthers’ current ownership did not get into hockey to lose money, and according to the county auditor they haven’t lost money”

Now, based on the article, which shows a revenue from the arena only, can one conclude that the Panthers havent lost money? Do you not see how he’s twisting around words to inflluence people’s opinions.

Plus, this quote:

“How does a team losing $7.5 million per season rack up profits in excess of $100 million?”

Once again, the “team” isnt racking up profits, but he’s stating it as such. But the funny thing is that 100 million is over 14 years, so that’s about 7.5 million a year profit from only the arena, which includes non-hockey events. Now, the costs of the team salary is, what, about half a billion over that same time period. But that’s not involved in his calculations, which he’s presenting as overall profit.

The writer is taking arena profit, dressing it up as overall profit in more than a few occasions in the article, and presenting it to show how owners fudge their numbers. These are the things that the players latch on to, thinking that this proves that the teams are actually making money when they say they arent. Do you not see how disingenuous that is for the writer to present his info as such?

And here, SI is now latching on to this bs as well:

http://nhl-red-light.si.com/2012/11/...sct=nhl_t11_a0

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11-19-2012, 06:10 PM
  #111
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Originally Posted by Cawz View Post
Here, I’ll even take the time to explain it to you. Take this quite, directly from the article:

“The bottom line is that the Panthers’ current ownership did not get into hockey to lose money, and according to the county auditor they haven’t lost money”

Now, based on the article, which shows a revenue from the arena only, can one conclude that the Panthers havent lost money? Do you not see how he’s twisting around words to inflluence people’s opinions.

Plus, this quote:

“How does a team losing $7.5 million per season rack up profits in excess of $100 million?”

Once again, the “team” isnt racking up profits, but he’s stating it as such. But the funny thing is that 100 million is over 14 years, so that’s about 7.5 million a year profit from only the arena, which includes non-hockey events. Now, the costs of the team salary is, what, about half a billion over that same time period. But that’s not involved in his calculations, which he’s presenting as overall profit.

The writer is taking arena profit, dressing it up as overall profit in more than a few occasions in the article, and presenting it to show how owners fudge their numbers. These are the things that the players latch on to, thinking that this proves that the teams are actually making money when they say they arent. Do you not see how disingenuous that is for the writer to present his info as such?

And here, SI is now latching on to this bs as well:

http://nhl-red-light.si.com/2012/11/...sct=nhl_t11_a0
The article should have been deleted as soon as the writer realized that he misread the audit and thus completely misrepresented the facts. But no, it stays up word-for-word and we get a lame "update" at the end that basically says "50% of this article is utter nonsense, but my point still stands!"

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11-19-2012, 06:20 PM
  #112
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Originally Posted by Summer Ruutu View Post
The article should have been deleted as soon as the writer realized that he misread the audit and thus completely misrepresented the facts. But no, it stays up word-for-word and we get a lame "update" at the end that basically says "50% of this article is utter nonsense, but my point still stands!"
Ha, thats funny. I didnt notice that he added that "update" -

the above piece at times confuses the financial data for the arena operating company with the financial data for Sunrise Sports and Entertainment, due to my misreading portions of the audit. That’s an important distinction to make, and one that I failed to make in my reading of the audit

So a couple pages ago I said he was either an idiot or a liar (in which I got attacked by few posters). I guess his update confirmed he's an idiot. It took me about 30 seconds of reading his article to conclude he was out to lunch.

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11-19-2012, 06:39 PM
  #113
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Originally Posted by cbcwpg View Post
IMO....

10 teams make money
10 teams are around the break-even mark ( some above some below )
10 teams lose money

The NHL wants all the teams making money, hence the CBA talks to do just that. How the NHL is going to accomplish that, well, that's debatable.

What isn't debatable is that by most published reports, 50% of the teams are either just breaking even or are losing money. The problem is that a lot of teams are owned by larger entities that are in fact profitable when you look at the whole picture. So it can be said that team XYZ is losing money, but owner ABC is actually profitable when you add up everything ABC owns.
It's more like 7 making money, 11 "losing money" based on HRR; and 12 teams fluctuation between small profits/small losses.

Relatively speaking, the bulk of franchises are/could be "stable" (year-to-year operating losses offset by team sale) now that CBJ, NASH, NYI have arena leases under control... as long as they get a decent CBA, and take care of the PHX situation.

The situation for teams is never as dire as we make it out to be on BOH, because most of us are searching for reasons for teams to relocate.

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11-19-2012, 06:57 PM
  #114
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Originally Posted by Cawz View Post
Here, I’ll even take the time to explain it to you. Take this quite, directly from the article:

“The bottom line is that the Panthers’ current ownership did not get into hockey to lose money, and according to the county auditor they haven’t lost money”

Now, based on the article, which shows a revenue from the arena only, can one conclude that the Panthers havent lost money? Do you not see how he’s twisting around words to inflluence people’s opinions.

Plus, this quote:

“How does a team losing $7.5 million per season rack up profits in excess of $100 million?”

Once again, the “team” isnt racking up profits, but he’s stating it as such. But the funny thing is that 100 million is over 14 years, so that’s about 7.5 million a year profit from only the arena, which includes non-hockey events. Now, the costs of the team salary is, what, about half a billion over that same time period. But that’s not involved in his calculations, which he’s presenting as overall profit.

The writer is taking arena profit, dressing it up as overall profit in more than a few occasions in the article, and presenting it to show how owners fudge their numbers. These are the things that the players latch on to, thinking that this proves that the teams are actually making money when they say they arent. Do you not see how disingenuous that is for the writer to present his info as such?

And here, SI is now latching on to this bs as well:

http://nhl-red-light.si.com/2012/11/...sct=nhl_t11_a0
Wow, I thought SI would be a little more responsible. What a joke.

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11-19-2012, 07:47 PM
  #115
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Instead of taking his mistake and using it to negate the guys credibility, why don't you guys try applying reason to the facts that we do know.

1) SSE consists of two branches, the Panthers and the AOC.
2) The AOC pulled in $89m in profit over 10 years.
3) Forbes estimates* that the Panthers lost on average $7m per season for the same 10 years, meaning they lost $70m.
4) SSE made a profit of $19m over those 10 years.

Variables: 1.) SSE transferred $98m from AOC to the Panthers over 10 years for what could be any number of a myriad of reasons. 2.) The accuracy of Forbes' numbers. (edit: an more specifically, any potential overlap between what Forbes allocates to the Panthers and the audit recognizes as AOC money)

Given that SSE would not have the rights to operate the arena without operating the Panthers, the ownership makes money from owning the Panthers. Take the factual integrity of the article, which I agree is awful, out of the equation and you still come up with the same conclusion.

*I'm actually the first one to jump on Forbes' numbers, but that's because I believe they miss revenue and overestimate costs. From my point of view, that would make SSE more profitable than these estimates suggest.


Last edited by Tawnos: 11-19-2012 at 08:23 PM.
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11-19-2012, 08:37 PM
  #116
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Originally Posted by Tawnos View Post
Instead of taking his mistake and using it to negate the guys credibility, why don't you guys try applying reason to the facts that we do know.

1) SSE consists of two branches, the Panthers and the AOC.
2) The AOC pulled in $89m in profit over 10 years.
3) Forbes estimates* that the Panthers lost on average $7m per season for the same 10 years, meaning they lost $70m.
4) SSE made a profit of $19m over those 10 years.

Variables: 1.) SSE transferred $98m from AOC to the Panthers over 10 years for what could be any number of a myriad of reasons. 2.) The accuracy of Forbes' numbers.

Given that SSE would not have the rights to operate the arena without operating the Panthers, the ownership makes money from owning the Panthers. Take the factual integrity of the article, which I agree is awful, out of the equation and you still come up with the same conclusion.

*I'm actually the first one to jump on Forbes' numbers, but that's because I believe they miss revenue and overestimate costs. From my point of view, that would make SSE more profitable than these estimates suggest.
You can only add the AOC's profit and the Panthers' losses if Forbes is consistent with how the county/SSE have defined the AOC's profits. As Forbes doesn't mention the corporate structure of each ownership, which would give the values needed context if that is how they are calculated, I think Forbes isn't trying to be consistent with the corporate structure. There numbers are supposed to allow comparison between teams (the don't want corporate structure to have a 10M+ effect on revenue without noting such) and give a general depiction of the health of the team as a business and the hockey market in which it operates.

The AOC's revenue include all suites and concessions during Panthers games. That is probably around $7-10M that should be included when calculating the Panthers' profits/losses. If Forbes includes those in their calculation for the Panthers it is being counted twice when adding AOC to Panthers. If they don't then the Panther's move way up in the league and are making money themselves.

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11-19-2012, 09:11 PM
  #117
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Yeah, I meant to say that the first time but blanked on what I meant with my second variable there. Although, I did edit my post to say that sometime within the time frame of when you were writing yours.

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11-19-2012, 09:52 PM
  #118
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Originally Posted by Tawnos View Post
Instead of taking his mistake and using it to negate the guys credibility, why don't you guys try applying reason to the facts that we do know.
Sorry, I'm unable to look past mistakes. The media unfortunatly has an all-to-large part in how people shape their opinions. They have to be taken to task to keep them honest.

But even if you look at the info presented, its shows that gross revenues dipped from 27-28 million from 2002-2004, to 21 million the year of the lockout. So looking at the years up to the lockout, the revenues decreased by 25% with no hockey. So can it not be concluded that 75% of the gross arena revenue up to the lockout is non-hockey related? After the lockout, the revenues and expenses both increase significantly, so its more difficult to compare.

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11-19-2012, 10:06 PM
  #119
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Originally Posted by Cawz View Post
Sorry, I'm unable to look past mistakes. The media unfortunatly has an all-to-large part in how people shape their opinions. They have to be taken to task to keep them honest.

But even if you look at the info presented, its shows that gross revenues dipped from 27-28 million from 2002-2004, to 21 million the year of the lockout. So looking at the years up to the lockout, the revenues decreased by 25% with no hockey. So can it not be concluded that 75% of the gross arena revenue up to the lockout is non-hockey related? After the lockout, the revenues and expenses both increase significantly, so its more difficult to compare.
I have no problem with taking him to task, but when one person is trying to talk about what he was actually trying to say (being me) and another responds with how badly he laid out the facts to support his argument, it's very frustrating. In my mind, those are two separate topics.

Agreed on those numbers you laid out, but one of my points is, "so what?" If the existence of the hockey team gives the owner access to a revenue stream 3 times as large and hugely profitable, then an owner might look at that and say that it's worth operating the team at a loss if necessary.

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11-19-2012, 10:23 PM
  #120
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Originally Posted by Tawnos View Post
I have no problem with taking him to task, but when one person is trying to talk about what he was actually trying to say (being me) and another responds with how badly he laid out the facts to support his argument, it's very frustrating. In my mind, those are two separate topics.

Agreed on those numbers you laid out, but one of my points is, "so what?" If the existence of the hockey team gives the owner access to a revenue stream 3 times as large and hugely profitable, then an owner might look at that and say that it's worth operating the team at a loss if necessary.
Yes, they are 2 seperate topics, both worth discussing. Dishonest reporting is a pet peeve of mine.

On your 2nd point, I dont see why its ever necessary to operate at a loss. There should be no reason why a part of a multi-billion dollar industry should lose money aside from extenuating circumstances.

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11-19-2012, 10:41 PM
  #121
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Originally Posted by Tawnos View Post

Given that SSE would not have the rights to operate the arena without operating the Panthers, the ownership makes money from owning the Panthers. .
They also wouldn't have the Panthers without buying the arena. Either point is misleading because it's inaccurate.

This is a bad example of the point you're suggesting the author might have considered making because assets are tied together. They already exist together. The Panthers didn't lead to another revenue generating cash cow for Viner, it was there for him already. The authors suggestion of a "gateway" was never addressed because one does/did not exist in Florida as he implies.

It's too big of a leap to conclude that NHL franchises are gateways. Franchises can be part of a profitable core, but they are seldom, if ever the core all by itself of a profitable parent operation. The revenue is too indirect of the franchise to assume NHL franchise ownership (parent companies) is more significant in turning a profit compared to how the rest of the parent company runs the businesses together and individually.

The hockey teams still lose money.

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11-19-2012, 10:59 PM
  #122
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Like I stated earlier, its tax planning. For those who doubt, you've never been on the inside of international corporate structures.

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