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.
How is it different if you have a owner who wants to build a 10,000 seat arena or a owner who wants to build a 10,000 seat concert hall in both cases the owner makes profits yet the arena is a no no yet the concert hall get support how would that make sense?
If the owner would build it himself, we wouldn't be having this discussion. Nobody has a problem with Katz putting up an arena. Katz wants government to build the arena, and then hand it over to him, debt free, so he can collect the profits. In plain English, Katz is asking for a multi-hundred million dollar gift from the city.
This issue with the Oilers arena will be resolved soon. They'll get the money from the public sector in some shape or form. As it is, the Oilers could stay in Rexall and with the amount they generate in ticket revenue they would be better off there than any current city without a hockey team in North America.
The reason is simple:
Those other cities could not get away with charging the ticket prices the Oilers do. The lack of passion(compared to Edmonton) for the game wouldn't allow for it.
1. It's not necessarily a private business. There are publicly owned facilities ran by publicly appointed groups that can make the public profits if it is organized properly.
2. You can't seriously sit there and moan about public costs like that when a private business that owns that beloved team is paying millions in player contracts, millions in lease agreements or whatever, and millions in maintenance. If that is the argument, I think it negates fan ownership of the team since those costs dwarf your meager ticket, merchandise, and parking prices.
I said it's a two-way street. What you asked is a one-way street. If a public group is dumb enough to give them the land, pay for the arena, and give over the keys, then you have every right to complain about that. My point has been sharing the cost should go hand in hand with sharing the ownership and the revenue. If more cities pushed for that instead of giving it away, there would be a lot more healthy stadium deals around.
3. Is answered in two. Anybody that thinks pro teams is really a full-fledged private entity doesn't get the big picture.
1. That statement makes no sense. A private business is owned by a private individual or individuals. In this case the Oilers are owned by Katz. It is a private company.
2. How do you think the million-dollar salaries are paid? Where do you think the millions come from to pay for all of those team expenses. The money comes from the fans. The team generates revenue from fans who pay for tickets, merch, concessions, and everything in between.
If an owner isn't paying salaries with that money, that's up to them, but the general idea is revenue generated is then used to operate the business. We pay, and then the owner pays his/her employees. Simple. Paying ticket prices is in essence paying for the building, maintenance, etc...asking for taxpayers money on top of that is double and triple dipping, and that's wrong.
Sharing revenue? Funny, I haven't received a cheque. And no, charging me $30 for tickets instead of what the Oiler might say is a $40 seat is not my idea of "public revenue".
Katz wants a new building, make him pay for it. As fans of the team, we give enough money to the Oilers. Imagine all the years prior to Katz even being on the scene, people who have been going to games, buying merch, hot dogs, beer...parking...for years and years...are they exempt? Where is the line drawn? Are we supposed to give till it hurts?
We build the Wal-Mart store a brick at a time by buying the items they sell. It's immoral for them to then turn around and expect taxpayers to front them some dough to further build their infrastructure. They get our chip in when we shop there...that's enough.
3. The big picture? How hard is it to understand that Oilers ownership is selling you a product? If you want to inject emotion it you can, but that doesn't make the previous sentence any less true. NHL hockey is a business, when you go to a game you help them pay their bills.
If the team's bills become massive because they have some crazy huge project they want to take on like a new arena, that's on them.
Will you the fan benefit from a nicer building? Of course. But the point is, you'll be paying for said new building anyway with the increase that will come on ticket prices, the increase in the price of concessions, the increase in price for programs, or parking, the lounge, the merch shop, etc.
Your share of the shiny new stuff is built into the price of admission. For the ownership to ask you to also pay to build all the new stuff, while also asking you to pay to use it is asking you to pay twice for one item.
That is just plain wrong, and I don't know how you cannot see that.
Thats fine if you apply it to all but what i have a issue with is some are aginst public money going to build a arena or stadium yet these same type of people have no issue with pubic money going to a concert hall.
I certainly have an issue with public money going to a concert hall. Let the operators of the concert hall pay their own bills. We do our part paying them to allow us to view concerts in their hall.
The question that does not get asked enough (if at all) anymore is why cannot teams just build something that they can personally and privately afford? If costs of your plan are beyond your capabilities to cover them then get other private investors involved. If you can't too bad, buld something smaller.
Yes. Many communities build small arenas for hockey
Of course not. If Katz uses his own money, no one can tell him what to do.
Communities don't build anything. People build things by paying for it. When a community says it's going to build something, it's basically saying the people in that community are going to build it, either by paying for it or swinging a hammer.
You are the community. States don't exist inside a vacuum. If the state says it's going to build something get ready to be pick-pocketed.
The question that does not get asked enough (if at all) anymore is why cannot teams just build something that they can personally and privately afford? If costs of your plan are beyond your capabilities to cover them then get other private investors involved. If you can't too bad, buld something smaller.
Why would other private investors make a difference in this respect. If the building and the team does not generate enough revenue for a decent ROI then the whole thing make little sense from a purely business perspective.
Teachers just went through a very lengthy process to determine if MLSE is still a solid place for their plan to keeps its money. Does this not provide evidence that in a market like Edmonton that private funding for an arena and hockey team makes no sense for the bottomline?
Why should the public foot the bill for the facility while the private enterprise gets to reap the profits?
I don't think the people of Edmonton have a problem paying for a new arena but if they do they expect the financial arrangements to be similar to the current arrangement at Rexall Place, whereby Northlands (and by extension the City) owns and operates the facility and gets all the profits from it (concessions, parking, concerts, trade shows, etc.).
The Oilers' problems with Rexall are twofold:
- the building is old
- the Oilers pay rent and Northlands keeps all the operating revenue from the facility itself
The age of the building isn't particularly pertinent. The Oilers mostly want a new building because they don't want to operate under the thumb of Northlands. They want to operate the facility. They want all the profits from the building. NHL teams alone don't make a whole hell of a lot of money, on average. Where the juicy profits lie are in operating the arena.
The problem in Edmonton is that Darryl Katz wants the City to build the arena for the Oilers and then hand the proverbial keys over to him, so that the Oilers can make money off of it. In the eyes of the public, and the provincial government, that's a raw deal. If Darryl Katz wants all the profits from this arena he should fund it himself.
The situation in Calgary is similar, although so far the Flames haven't been ballsy enough to try to extort the City to build their new arena like the Oilers have in Edmonton.
You do realise that the Saddledome was 100% publicly funded, and that the Flames actually have a deal that is very similar to what the Oilers are asking for in their new building don't you?
I certainly have an issue with public money going to a concert hall. Let the operators of the concert hall pay their own bills. We do our part paying them to allow us to view concerts in their hall.
Unfortunately, if you followed this reasoning to its logical conclussion there would be almost no major public facilities in a city like Edmonton. In Edmonton there would be no Rexall or Commonwealth Stadium. There would be no Jubilee Auditorium, or Windspear Center, or Citadale Theatre.
Unfortunately, if you followed this reasoning to its logical conclussion there would be almost no major public facilities in a city like Edmonton. In Edmonton there would be no Rexall or Commonwealth Stadium. There would be no Jubilee Auditorium, or Windspear Center, or Citadale Theatre.
Now hang on, are you suggesting that auditoriums, centres, and theatres wouldn't exist if cities didn't pay for them with taxpayers money?
If indeed those buildings you've mentioned exist only on the public dime, then yes they should be bulldozed immediately.
Does that mean there will no longer ever be places to see performances of concerts, plays, films, etc?
Of course not. Why? Because the public demand for entertainment isn't ever going to go away, therefore as long as there's a market for something, there will be a business person out there looking to fill that void.
Take away those publicly funded venues, and privately owned venues will take their place, and they can handle the bills themselves, and stop governments from robbing us to pay for venues we use once a year or never.
Why would other private investors make a difference in this respect. If the building and the team does not generate enough revenue for a decent ROI then the whole thing make little sense from a purely business perspective.
Teachers just went through a very lengthy process to determine if MLSE is still a solid place for their plan to keeps its money. Does this not provide evidence that in a market like Edmonton that private funding for an arena and hockey team makes no sense for the bottomline?
MLSE paid for their own arena though, so I am not sure why you are making this comparable. Maybe I am misunderstanding you here.
As far as Edmonton goes, private investors would presumably pick up part of the tab that the general public is being asked to now. What would be considered a 'decent' ROI? Can it be clearly defined or measured? What are the parameters? Are we talking the generic 7-10% per year range here?
You are right IMO that the thing makes little sense from a business perspective, not that you were trying to make that point With that being said, if the business plan makes little sense, should not the team go back to the drawing board and think of one that does? The constant during this thing is that the team wants a $450 million arena, and that funds seem to be fairly short to pay for it. Should not the discussion then be centered around bulding something a little more affordable?
I know some people will respond by saying 'well, that is just the way the business of the NHL is and it is the only way for 'small' market Edmonton to compete. So what was the lockout about again then? Living in Edmonton during the lockout I heard nothing but diatribe from Nichols Inc. about how a salary cap was necessary to keep the team there and it would be gone with anything but a hard cap CBA. Now the goalposts have been moved to a new arena is necessary for the team to compete and remain in the city. What next?
Now hang on, are you suggesting that auditoriums, centres, and theatres wouldn't exist if cities didn't pay for them with taxpayers money?
If indeed those buildings you've mentioned exist only on the public dime, then yes they should be bulldozed immediately.
Does that mean there will no longer ever be places to see performances of concerts, plays, films, etc?
Of course not. Why? Because the public demand for entertainment isn't ever going to go away, therefore as long as there's a market for something, there will be a business person out there looking to fill that void.
Take away those publicly funded venues, and privately owned venues will take their place, and they can handle the bills themselves, and stop governments from robbing us to pay for venues we use once a year or never.
You have missed one key part in the post above. The market has to be able to sustain itself. The cost of these venues needs to be recouped, in addition to a return of capital equal to the opportunity costs of the development in order for private investment to make sense.
There are lost of people in my city that would love to have a major arena and perhaps even an NHL team. Why has some private company not taken up the cause and brought one here?
MLSE paid for their own arena though, so I am not sure why you are making this comparable. Maybe I am misunderstanding you here.
In fact, MLSE did not actually build the ACC without public money. They got the land for free. But that is a minor point.
The reason I am using MLSE as a comparable, is because Teachers is an example of an entity that would only be interested in MLSE from a pure business point of view. And despite the fact that TO is a market that dwarfs many as far as hockey is concerned, it was not even 100% clear to Teachers that ownership was justified from a return point of view. (And yes I am more than willing to admit that there is more to MLSE than just the Leafs so my argumet is somewhat muted).
NOw if it is not obvious that MLSE provides returns that would justify Teachers investment, why would anyone argue that an arena and an NHL team in a market like Edmonton would make sense for a private investor. In fact, forget the Oilers. Let them leave and simply ask, would the arena alone make any sense as a private investment in a city like Edmonton.
The point being that I do not see NHL franchise as being typical business investments, neither from the prospective of their owners or from the perspective of the general public. Similarly, with multi-use arenas. To me such projects have a significant infrastructure component that benefits the community as a whole.
Quote:
Originally Posted by Fehr Time
As far as Edmonton goes, private investors would presumably pick up part of the tab that the general public is being asked to now. What would be considered a 'decent' ROI? Can it be clearly defined or measured? What are the parameters? Are we talking the generic 7-10% per year range here?
What would entice other private investors to spend their money on an arena any more than it would for Katz?
Quote:
Originally Posted by Fehr Time
You are right IMO that the thing makes little sense from a business perspective, not that you were trying to make that point
In fact, this is exactly the point is was trying to make.
Quote:
Originally Posted by Fehr Time
With that being said, if the business plan makes little sense, should not the team go back to the drawing board and think of one that does? The constant during this thing is that the team wants a $450 million arena, and that funds seem to be fairly short to pay for it. Should not the discussion then be centered around bulding something a little more affordable?
There is no question that the total cost of the building is an issue for discussion. BUt I don't see many people even in the public sector arguing that this is a big factor in the discussions in Edmonton. After all one possible alternative would be a fully public investment of $250-300M to upgrade Rexall. No one is suggesting that an adequate building could be built in downtown Edmonton for substantially less than the quoted amount.
Quote:
Originally Posted by Fehr Time
I know some people will respond by saying 'well, that is just the way the business of the NHL is and it is the only way for 'small' market Edmonton to compete. So what was the lockout about again then? Living in Edmonton during the lockout I heard nothing but diatribe from Nichols Inc. about how a salary cap was necessary to keep the team there and it would be gone with anything but a hard cap CBA. Now the goalposts have been moved to a new arena is necessary for the team to compete and remain in the city. What next?
The need for a salary cap does not preclude the need for an arena. Bruce Savile, one of EIG's main investors has made it quite clear that EIG recognized the need for a new arena if the Oilers were to remain viable. In fact, it is exactly this realization that triggered many in the EIG to want to sell to Katz. Unlike Katz, there was little or no desire on the part of EIG to put any of their own money into a new arena.
You have missed one key part in the post above. The market has to be able to sustain itself. The cost of these venues needs to be recouped, in addition to a return of capital equal to the opportunity costs of the development in order for private investment to make sense.
There are lost of people in my City that would love to have a major arena and perhaps even an NHL team. Why has some private company not taken up the cause and brought one here?
The market dictates what the cost of sustainability is. Yes, a private owner would LIKE to recoup the cost of building a venue, which is why they must practice good management to see a return on their initial investment.
Opportunity costs? Private investment? Private investment in this case means buying a business and incurring the expenses that go with it. If the business sees fit to expand or improve its infrastructure, good...go ahead. But don't expect the public to chip in when you'll be charging that same public to use that new infrastructure once its in place.
The reason your city has no NHL team is because the NHL is too closed off in allowing new members to join the club. They stipulate that you have to have a building with 'x' specifications, and they are specifications that do not make financial sense for many markets, including probably, yours. If it did make financial sense under the current NHL regime to bring a team to your town, one would be there.
Every willing town and city could have an NHL team if the egotists running the league stopped pricing everyone out of the club because they have some pie in the sky notion that they're automatically entitled to millions in every market.
Pro hockey can exist anywhere if you price it right. And the NHL could be all over it if they'd just get out of their own way.
The market dictates what the cost of sustainability is. Yes, a private owner would LIKE to recoup the cost of building a venue, which is why they must practice good management to see a return on their initial investment.
Opportunity costs? Private investment? Private investment in this case means buying a business and incurring the expenses that go with it. If the business sees fit to expand or improve its infrastructure, good...go ahead. But don't expect the public to chip in when you'll be charging that same public to use that new infrastructure once its in place.
The reason your city has no NHL team is because the NHL is too closed off in allowing new members to join the club. They stipulate that you have to have a building with 'x' specifications, and they are specifications that do not make financial sense for many markets, including probably, yours. If it did make financial sense under the current NHL regime to bring a team to your town, one would be there.
Every willing town and city could have an NHL team if the egotists running the league stopped pricing everyone out of the club because they have some pie in the sky notion that they're automatically entitled to millions in every market.
Pro hockey can exist anywhere if you price it right. And the NHL could be all over it if they'd just get out of their own way.
I am sorry but this is extremely naive. If you really believe what you wrote then it is clear that there is no reasoned argument that would change your mind.
If the owner would build it himself, we wouldn't be having this discussion. Nobody has a problem with Katz putting up an arena. Katz wants government to build the arena, and then hand it over to him, debt free, so he can collect the profits. In plain English, Katz is asking for a multi-hundred million dollar gift from the city.
I don't think i woudl call it a gift citys doe benfit from arenas and stadiums.
I am sorry but this is extremely naive. If you really believe what you wrote then it is clear that there is no reasoned argument that would change your mind.
I have made a reasoned argument. It's quite reasonable to expect a business to take care of its own expenses out of its own revenue. What is unreasonable about that?
What makes a belief in basic economics "extremely naive"? Do tell.
Im still not seeing where Katz is getting City money for this Arena.
100 Coming out of Katz through an Loan that the city can secure at low rates as well as lock them in for the entirety of the loan.
125 CRL
125 Ticket Tax which is Katz money..
So where again is the city tripping all over themselves giving this billionaire all this money for the arena?
I have made a reasoned argument. It's quite reasonable to expect a business to take care of its own expenses out of its own revenue. What is unreasonable about that?
What makes a belief in basic economics "extremely naive"? Do tell.
Except of course when it comes to players' salaries. There it should be a free market and not a business handling its own expenses.
Im still not seeing where Katz is getting City money for this Arena.
100 Coming out of Katz through an Loan that the city can secure at low rates as well as lock them in for the entirety of the loan.
125 CRL
125 Ticket Tax which is Katz money..
So where again is the city tripping all over themselves giving this billionaire all this money for the arena?
I know my math is alittle rusty, but arena cost estimate $450 million your total $350 million where's the other $100 million coming from?
I am sorry but this is extremely naive. If you really believe what you wrote then it is clear that there is no reasoned argument that would change your mind.
Do the Leafs not want a large expansion fee? Then the market is closed off.
I have made a reasoned argument. It's quite reasonable to expect a business to take care of its own expenses out of its own revenue. What is unreasonable about that?
What makes a belief in basic economics "extremely naive"? Do tell.
You wrote:
Quote:
The reason your city has no NHL team is because the NHL is too closed off in allowing new members to join the club. They stipulate that you have to have a building with 'x' specifications, and they are specifications that do not make financial sense for many markets, including probably, yours. If it did make financial sense under the current NHL regime to bring a team to your town, one would be there.
Every willing town and city could have an NHL team if the egotists running the league stopped pricing everyone out of the club because they have some pie in the sky notion that they're automatically entitled to millions in every market.
Pro hockey can exist anywhere if you price it right. And the NHL could be all over it if they'd just get out of their own way.
I don't see how this involves any application of even the most basic economic principles. It seems to assume that if people simply want something someone will provide them with it regardless of the cost.
Except of course when it comes to players' salaries. There it should be a free market and not a business handling its own expenses.
A free market means the business owner pays all the expenses including salaries. If any part of the operation becomes too expensive, you cut spending somewhere, be it on salaries, or whatever.
With that being said, if the business plan makes little sense, should not the team go back to the drawing board and think of one that does? The constant during this thing is that the team wants a $450 million arena, and that funds seem to be fairly short to pay for it. Should not the discussion then be centered around bulding something a little more affordable? 
