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.
New Sharks Owner - You cannot make money with a hockey team!
It wasn't all the CAD, though. The arenas in Winnipeg and QC were awful, and Edmonton's arena continues to be awful. When you have an acceptable arena (and preferably a team that gets some coin off of events scheduled at their home arena), a salary cap and revenue sharing make surviving bad times easier. It's not like the MTS Centre, the future QC Amphitheatre, or Scotiabank are suddenly going to fall apart in twenty years. They're acceptable now and will largely remain so for the lion's share of our lifetimes.
A Panthers fan should be well aware of the value of a diversified ownership group and well-visited arena, considering the high status of the BB&T Center is not an insignificant reason why the Panthers are a stable franchise which no educated person legitimately considers to be a relocation candidate.
The CAD could drop again, though. To 65 cents I doubt, but 80 or 85 perhaps if something bad happens. Who knows.
The Whalers had an awful arena, an owner losing a ton of money, a poorly organized league, and a municipality unwilling to give it enough money to stay.
so what youre saying is that there are a myriad of macro and micro economic factors that explain why even a traditional market could fail as well? Hmm sounds a lot like the point I was trying to make.
Whether a team fails because of poor attendance or because it fails because of monetary exchange rate. The point is the same any business can fail.
It wasn't all the CAD, though. The arenas in Winnipeg and QC were awful, and Edmonton's arena continues to be awful. When you have an acceptable arena (and preferably a team that gets some coin off of events scheduled at their home arena), a salary cap and revenue sharing make surviving bad times easier. It's not like the MTS Centre, the future QC Amphitheatre, or Scotiabank are suddenly going to fall apart in twenty years. They're acceptable now and will largely remain so for the lion's share of our lifetimes.
A Panthers fan should be well aware of the value of a diversified ownership group and well-visited arena, considering the high status of the BB&T Center is not an insignificant reason why the Panthers are a stable franchise which no educated person legitimately considers to be a relocation candidate.
The CAD could drop again, though. To 65 cents I doubt, but 80 or 85 perhaps if something bad happens. Who knows.
The Whalers had an awful arena, an owner losing a ton of money, a poorly organized league, and a municipality unwilling to give it enough money to stay.
The arena pretty much killed the franchise. I've heard stories, seen pictures, but never been to the Winnipeg Arena but MTS Centre is 100x better than the Old barn. And the MTSC is only 8 years old now.
Knowing this, economies might change, but the arena in a market is the consistent predictor of who moves or who stays, even now with the revenue sharing, arena location, condition, and everything in between is important, and always will be.
BTW, the Canadian dollar has dropped to 80 during this recession and went above the USD by the time Chipman bought the Jets. Unless there's another recession that singularly affects Canada, we won't see another dip. Canada and Australia are the up and coming.
like some haven mentionned earlier, there's plenty of ways for owners to make money with thei team from other revenues, tax breaks they can get for their other businesses etc. Not to mention owners make their money on re-selling their team. For example, even though Gillett didn't make a whole lot of money running the Canadiens, he made a ton re-selling the team.
IIRC, Winnipeg is in a situation where the best they can do is break even from the hockey club. I'm sure they can make money in other aspects, but with their small arena and very limited population it's very, very unlikely they can generate enough revenue to create a profit.
Well they just did.
Plus, the only team competing for people's money is the Blue Bombers.. and I don't wanna remember what happened to them last year.
The key is, are you number one in the city? If you are, you're gonna make money regardless of the ice product.
The NHL team has to be profitable regardless of what the arena does. If the NHL team loses money every year and the owner makes it back from the arena, there's nothing stopping the owner from simply selling the team to another market and just running the arena at a profit.
Remember, the premise of this thread is "you cant make money on a hockey team", not "you cant make money on a hockey team and ancillary revenues".
Actually there is. For most publicly financed arena, the terms of the Master Lease or arena bond agreements prevent an owner from selling a team and retaing control of and revenues from the arena. In addition, many cities have non-relocation agreements or other mandatory use covenants which prevent relocations short of a team declaring bankruptcy.
The Sharks/SSE master lease on the HP Pavilion (and AIUI the Panthers in Sunrise) is dependent on the existence of the pro-team. The Sharks go, the lease goes, and control of the arena and all revenues reverts back to the city of San Jose - plus damages for breaking the Lease.
hmm, that seems rather out of context. The article discusses how the Sharks' ownership feel that they have a sustainable business model with the Sharks...
It's a poor investment if you're looking to generate cash. Even the big market teams - their values are so high that any new owner is going to spending a lot of money on financing, etc.
But in most cases, it's not a money pit. It's a decent enough place to park some money and there are obviously other benefits.
The weak Canadian dollar in the 90's was a double whammy - less money coming in through gate revenues, and then having to pay salaries in American dollars.
Plus, it didn't help that the old Winnipeg Jets in their final seasons were a decidedly mediocre team (but no one ever remembers that part).
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IIRC, Winnipeg is in a situation where the best they can do is break even from the hockey club. I'm sure they can make money in other aspects, but with their small arena and very limited population it's very, very unlikely they can generate enough revenue to create a profit.
Between the revenue sharing, the merchandising, ad sales and all the rest I would expect them to turn a profit regularly.
Not only was Winnipeg Arena old, and had some terrible upper deck seating because the seats were crammed in after the fact (to expand the capacity from 9000s to 15,000 to accommodate a pro team) but, the building was owned by the city. The team did not receive any money for concessions, parking, and not even all of ticket revenue, thanks to a "bailout" arrangement with the city created by this lack of revenue streams.
Today, the Jets are part of a business model similar to that of the San Jose Sharks. Jets ownership controls the arena (money from non-hockey events), concession revenue (or concession contract) including a couple of sitdown restaurants and 2 fast food outlets accessible when events are not happening. An exhibition hall (think Bodies, Titanic) was built for those shows by converting an empty downtown building (former A&B Sound), and has since been demolished to make way for a luxury hotel (which was always ownership's plan). Ownership also built their own practice facility, which has 4 rinks and is rented by all sorts of hockey teams and leagues year round. Our ownership also holds big-ticket concerts in the city's pro football stadium, and, although it doesn't own that building, they are the group bringing these concerts in, and profiting from it. Both men also have their own other lucrative businesses: the Chipman family have dozens of car dealerships, construction firm(s), an investment firm, all in Winnipeg. Thomson has a media empire and is (one of?) the richest men in Canada.
This goes to show what (I think) the article was trying to say... Own a hockey team in someone else's building, and try to turn a profit and make your living off ticket sales, and it's not likely to happen. Having that same hockey team as part of a bigger family of business can add more stability to your plans.
Actually there is. For most publicly financed arena, the terms of the Master Lease or arena bond agreements prevent an owner from selling a team and retaing control of and revenues from the arena. In addition, many cities have non-relocation agreements or other mandatory use covenants which prevent relocations short of a team declaring bankruptcy.
The Sharks/SSE master lease on the HP Pavilion (and AIUI the Panthers in Sunrise) is dependent on the existence of the pro-team. The Sharks go, the lease goes, and control of the arena and all revenues reverts back to the city of San Jose - plus damages for breaking the Lease.
short-term, in current cities, yes, but i'm talking about long-term, in every city. If NHL teams are losing money on the hockey side of things, what's preventing another Atlanta, where the owners of both teams kick the NHL out? What's preventing cities like winnipeg (who subsidize their team significantly) from saying this doesnt make sense, we want to run our arena like kansas city instead. At some point, if NHL teams dont make money, this whole thing comes crashing down, and 10+ markets wake up and say this doesnt work.
I do think that this new CBA, getting rid of atlanta, fixing the islanders with brooklyn, and fixing the coyotes either though subsidy or relocation will make the majority of teams profitable. That said, making the teams profitable has to be the goal. We can no longer say "yeah, but they make money on the backend off the arena" and expect that to be enough to keep the NHL sustainable.
Yes, and I'm sure that 3 to 6 teams represent the true reality for most of the League.
The reality? The reality is that the article/thread uses a quote that is factually incorrect and that is what my response was in reference to. No need to read into my comment any further than that.
Plattner also wants to make sure the Sharks, who claimed a loss of $15 million last season, have a sustainable business model. He has no fantasies of turning a major profit, though.
Sustainable business model means that the organization as a whole isn't losing money.
Quote:
At the same time, “You cannot make money with a hockey team. You cannot make money with a hotel, either, and you cannot make money with a golf club. I have all three of them (laughs).”
The comment was definitely tongue-in-cheek and should be taken that way. Using a segment of an article out of context is unfair to the meaning
It's not news that American franchises generally can't stay healthy without a sweetheart deal from its home municipality and/or a billionaire with more love for the game/the team than his net worth. It's nice to hear it publicly, though.
There's no CBA fix to this, either. Unless you'd like to turn the league into the MLS and watch all the talented players flee to the KHL. The NHL needs to shed some bad markets.
Completely false. There's multiple different CBA models that could solve this issue. The issue is getting both sides to agree to it.
Massive RS sharing (not the wealth transfer we currently have). Depending on how massive you go (75% of gate, 100% of TV/merchandize) that will help a lot of clubs.
Much lower player percentage. Even 30% (instead of 50%) still puts the average NHL salary a lot higher than the KHL.
Use the median % instead of average %. And lower the player share, and increase RS.
Have teams pay the % of their HRR into a pot. So Phoenix pays 50% of their HRR (say 35m) into the pot, while Toronto pays 50% of their HRR (100m) into the pot, and that pot pays all the player salaries.
These are just a few idea's that I've come across over the lockout. I'm sure there's others.
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