The Business of HockeyDiscuss the financial and business aspects of the NHL. Franchise sales, valuations, TV contracts, ratings, expansion, relocation, the CBA and work stoppage discussion goes here.
Meh. Claiming that the Forbes numbers are off is a yearly tradition for NHL franchises. The Leafs don't want their fans to know how much they're profiting from sky high prices.
It's a little bizarre. They acknowledge Crosby's getting paid $12M in actual dollars in each of the first three seasons of his newly signed deal, but then say he's the highest paid player at $12.7M, because his cap hit is $8.7M and his endorsements are $4M a year. His actual income per year is $16M including everything based on their figures.
It makes you think just how in-depth do the folks at Forbes really go.
These were 2011/2012 numbers. Crosby's new contract doesn't kick in until 2013.
Pierre LeBrun @Real_ESPNLeBrun
Quote from MLSE COO and prez Tom Anselmi on Forbes story listing Leafs as first billion-dollar hockey team: ``I'm intrigued by the
Pierre LeBrun @Real_ESPNLeBrun
evaluation and the recent MLSE acquisition clearly demonstrates the growing importance of all of our franchises to our fans...'' con't
Pierre LeBrun @Real_ESPNLeBrun
but I have no idea of how they came up with that number. '' end quote
Quote:
If the salary cap were lowered to, say, 50% of revenue and the subsidies from high-revenue teams to their low-revenue rivals were increased to $200 million from the current $150 million, which is essentially where the two sides seem to be headed, small-market team values would get a big boost (as was the case in the NBA when the New Orleans Hornets and Memphis Grizzles sold for $338 million and $330 million, respectively, after the league worked out a new labor pact last year). The league’s overall profitability would also increase. But teams like the Carolina Hurricanes, Phoenix Coyotes, Tampa Bay Lightning, Anaheim Ducks and Columbus Blue Jackets would still have trouble making money unless they went at least two rounds in the playoffs.
Drew Dorweiler, managing partner of Dartmouth Partners in Montreal, thinks the league needs to move some teams. “The Sun Belt has had plenty of time to prove that the viability doesn’t work.” Dorweiler thinks Quebec, where ground has already been broken for a new arena, will eventually get an NHL team, and he also thinks Portland, where minor league hockey is popular, and Seattle, where the city has approved a new arena, would be better cities to house teams than Arizona, North Carolina and Florida, where NHL teams are losing money.
And yet a storied franchise like the Canadiens in a hotbed of hockey have had to be saved 2 times from folding outright and once from moving by the NHL? I guess they didn't prove them selves over time and should have been allowed to die right??
And yet a storied franchise like the Canadiens in a hotbed of hockey have had to be saved 2 times from folding outright and once from moving by the NHL? I guess they didn't prove them selves over time and should have been allowed to die right??
People have a tendency to forget history and need to realize it isn't always black & white but has plenty of gray in it.
project 1 (relatively easy), how do forbes revenues match up to actual HRR?
For HRR.
1. James Mirtle has been using the value of 3.28B in his CBA proposal calculations.
2. The NHL set a preliminary cap under the old CBA of 70.2M. Working off the Cap formula (cap midpoint = 1/30 * 0.57 * (hrr*1.05 - benefits), one can deduce that the last term there is 3.274B. Assume something like 50M in benefits (caveat: neither I nor anyone else actually knows what the actual value of benefits is), and remove the 5% kicker, any you are left with a reasonable estimate 3.07B.
so we're off by ~210M here. Given that i have no idea where mirtle's number came from (improper rounding of that 3.274?), and that my calculations based on the official cap show that even when assuming benefits = 0, the max hrr could have been would be ~3.12B, i'm going to use 3.07B as the 2011-12 HRR estimate.
For Forbes Revenue.
1. this should be relatively simple. Add up all the revenue values you see in the forbes reports, and you have aggregate revenue. I got 3.374B. Feel free to check my math.
A couple of things to consider about the forbes numbers: It probably includes revenue sharing. This is demonstrated by the massive revenue gap (17M) between the islanders (who receive $0 in revenue sharing) and the coyotes (who received 13.5M at bankruptcy in 2008-09, and likely much more now, possibly in the 20M range). *edit* Forbes now includes the following disclaimer: "Revenue and operating income are for 2011-12 season and net of revenue sharing and arena debt service". Presumably this means that it is being knocked off the top teams as well (so while forbes says the leafs and rangers revenues were ~200M, they were actually around 220M before they kicked into revenue sharing). Also, the only thing forbes is removing from revenue is debt service, but not all debt service, just "stadium revenues used for debt payments". When calculating HRR, the NHL deducts far more.
conclusion:
Actual HRR is around 3.07B.
Forbes aggregate revenue is 3.374B, a 10% increase over actual hockey related revenue.
coming within 10% is not that bad of an estimate, especially considering that they dont deduct as much as the NHL does, and those deductions can easily account for this 300M difference. Based on this, i would conclude that forbes revenue estimates can be considered reasonably accurate.
Next episode: Taking a look at forbes non-player costs.
And yet a storied franchise like the Canadiens in a hotbed of hockey have had to be saved 2 times from folding outright and once from moving by the NHL? I guess they didn't prove them selves over time and should have been allowed to die right??
Are you really trying to make a comparison between the struggles of the Montreal Canadiens in the Great Depression and struggling US expansion teams today?
coming within 10% is not that bad of an estimate, especially considering that they dont deduct as much as the NHL does, and those deductions can easily account for this 300M difference. Based on this, i would conclude that forbes revenue estimates can be considered reasonably accurate.
Next episode: Taking a look at forbes non-player costs.
You can back out the HRR based on the cap, but what you can't do with the same degree of error is assign the revenue and operating income by team. When people like to cite Forbes for who's losing/making money, that's the figure upon which they rely.
That said, didn't Forbes match McGuire in this report and say 13 teams were losing money?
Are you really trying to make a comparison between the struggles of the Montreal Canadiens in the Great Depression and struggling US expansion teams today?
Are you really trying to blame the great depression for Montreals problems yet it didn't effect any of the other original 6?
I take issue with the idea that any team wouldn't be able to survive in their current markets if the NHL signed the NHLPA's proposal today.
With payrolls going down from 57% to 50%, that's an average saving of $8m per team. With revenue sharing increasing by at least $100m, that's about $10m each to be split amongst the bottom 10 teams.
How many teams on the Forbes list are losing more than $18m? According to Forbes, two teams. The Coyotes, which have been an absolute boondoggle, and the Blue Jackets, who spent to the cap last year despite having no business doing so.
With every other team, a profit is virtually guaranteed. And moving forward, if the payroll range is set at percentages and revenue sharing is increased with revenues, unless a team is particularly poorly run, they should be able to churn out profits year after year.
You can back out the HRR based on the cap, but what you can't do with the same degree of error is assign the revenue and operating income by team. When people like to cite Forbes for who's losing/making money, that's the figure upon which they rely.
That said, didn't Forbes match McGuire in this report and say 13 teams were losing money?
woah, woah, slow down.
This is exactly why i'm tackling this one issue at a time. I've started with revenue, and demonstrated that compared to actual facts, the forbes numbers do appear to be realistic. Next we take on the costs side of the equation, where things get a lot murkier.
But yes, 13 teams according to pierre, 13 teams according to forbes. That could be seen as corroborating evidence, unless of course mcguire got his numbers from inside forbes in the first place.
A Canadian team in any league being worth more than a NY or Dallas or LA franchise tells me the NHL never be a real league.
What is your definition of a "real" league?
One could argue that the NHL has a unique opportunity that the other "real" leagues do not; significant footprint in both United States and Canada. Obviously they have some work to do in the United States but I don't understand your logic.
The Coyotes numbers seem rather odd though. According to Forbes, their revenue numbers are within $10m of 8 other teams. If this is right, the market is not as hopeless as we've been lead to believe.
Ummm even if they were in the 20th spot, they're still losing 20M every year, without turn of profit. They averaged 76% last season (if im not mistaken) See Forbes NHL fan ranking. If you compare all that, Columbus is pretty much in a safe spot than the Coyotes.
Ummm even if they were in the 20th spot, they're still losing 20M every year, without turn of profit. They averaged 76% last season (if im not mistaken) See Forbes NHL fan ranking. If you compare all that, Columbus is pretty much in a safe spot than the Coyotes.
They're losing money, sure, but the size of their losses would seem to indicate that things might not be operating as efficiently as they should be. If the Hurricanes only lose $10m on revenues of $85m, why is Phoenix losing $20m on revenues of $83m? They have the highest operating expenses of every team in the bottom 10 of revenues aside from Columbus (who decided to spend to the cap).
I take issue with the idea that any team wouldn't be able to survive in their current markets if the NHL signed the NHLPA's proposal today.
With payrolls going down from 57% to 50%, that's an average saving of $8m per team. With revenue sharing increasing by at least $100m, that's about $10m each to be split amongst the bottom 10 teams.
How many teams on the Forbes list are losing more than $18m? According to Forbes, two teams. The Coyotes, which have been an absolute boondoggle, and the Blue Jackets, who spent to the cap last year despite having no business doing so.
With every other team, a profit is virtually guaranteed. And moving forward, if the payroll range is set at percentages and revenue sharing is increased with revenues, unless a team is particularly poorly run, they should be able to churn out profits year after year.
What other industry can say the same?
This is actually pretty persuasive, and I'm one of the staunchest pro-owner guys on this board. But let me nitpick.
Let's assume the NHL faces some backlash for this lockout. Now all of a sudden honoring current contracts, which is effectively accepting delinkage, puts them at an enormous disadvantage for at least two years, I'd say, in which the HRR split could easily go over 60%. How big of a loss could certain teams sustain for two years? Well, that's an open question.
I find it persuasive to suggest that for the NHL to grow into the kind of league that can earn a major TV contract, it has to follow through on its national expansion plans. And for that to work, these weaker teams in expansion markets (not just your Phoenix's, but your Carolina's, your Tamp Bay's, your Dallas') have to be able to maintain competitive equilibrium with your big market teams. I think many of the contracting issues on the table right now are geared directly at that, helping small payroll teams hang on to talent longer and build winners on smaller budgets. That's how you'll grow these markets. Furthermore, it doesn't really make sense to me why players would resist these measures, as all of them simply shift money around between players.
No kidding but its still pretty cool either way.
