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2012 CBA & Re-alignment: Lockout in Effect. Thanks Gary/Donald! PART II

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Old
11-27-2012, 04:23 PM
  #926
Gooch
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Originally Posted by Dupree13 View Post
I could be way off, admittedly, but it seems to me that the fundamental issue is that the owners are trying to force the players to bail out the struggling franchises. I don't blame the players at all for fighting that.
I don't get this line of thinking. The players apparently want a total % of the revenues yet don't want any sort of responsibility towards the overall health of the league? So the owners after already getting a smaller piece of the financial pie have to dip into their reduced share to pay for the overall health of the league while the players are off scott free?

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11-27-2012, 06:23 PM
  #927
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Originally Posted by Dupree13 View Post
I could be way off, admittedly, but it seems to me that the fundamental issue is that the owners are trying to force the players to bail out the struggling franchises. I don't blame the players at all for fighting that.
You are one of the few who isn't way off. That's exactly (part of) what's happening.

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11-27-2012, 06:57 PM
  #928
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Originally Posted by Mr Wu View Post
You are one of the few who isn't way off. That's exactly (part of) what's happening.
Then the salary cap should be at a fixed amount and not tied to revenue. If the players want to share in the benefits of a successful NHL then they should share some of the burden of ensuring it's successful.

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11-27-2012, 07:06 PM
  #929
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Originally Posted by Chancellor Vitale View Post
In my quick reading of it yesterday I more interpreted as "guys like Molson and other big money owners who have some sway need to get involved and push the extreme agendas of Jacobs, Leonsis et al more to the middle, instead of just saying 'i trust whatever Gary and that small group of owners is doing'." IOW, they don't care because they're going to make big bank either way, so they're not trying to use their influence (when necessary) to say "hey what we're demanding here and here is unreasonable, let's find a better way to manage that situation so we can get a deal done."

Basically the owners that constantly bleed money when they have no excuse for doing so (bad management practices), shouldn't put the onus on covering those contingencies or costs, on the players.
If you're in a good hockey market, selling lots of seats every year... you should be making money, period. If you're not, don't blame the players for your mismanagement (including stupid contracts, Liarpold).

Isn't that what people have said about the Penguins before?

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11-27-2012, 07:33 PM
  #930
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Maybe but it's a different time now. Teams like Washington and MN especially, have modern arenas with all the attendant money flows (luxury boxes, expensive tickets and concessions, full houses, big sponsorships) and they're still losing money. That can only happen through poor management.

Pittsburgh was never in that situation really AFAIK. They had an old arena with few boxes, probably fewer sponsors... in general lower revenue potential in every stream. These teams we're talking about here... they have no excuse. Put someone who knows how to manage a franchise in power there and they'll make money in the same situation they have today. And, the Penguins now have a new arena with all the important revenue streams and it's working. The Penguins are a class organization and run things smartly.

Only the Islanders and Rangers have really old buildings (the Oilers do too but they're making money), and they're not heavily involved in this AFAICT. I would think Wang especially would draw criticism if he were, because he's not well respected I don't believe.

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11-27-2012, 07:33 PM
  #931
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Meanwhile another good primer from TSN's legal guy, on Mediation.

http://www.tsn.ca/nhl/story/?id=410377

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11-27-2012, 08:15 PM
  #932
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It looks like some people in this thread would benefit from an accounting primer. I'll explain how owners can show a loss on their tax return and still finish the year with more cash in the bank. An Income Statement looks like this:

Revenue
-Cost of Goods Sold
Gross Profit
-Depreciation and Amortization
-Interest Costs
Pre-Tax Profit
-Taxes
Profit or Loss

Revenue is the sales made by a business. Things like tickets, sponsorships, concessions, parking, and TV rights show up here.

Costs of Goods Sold is everything you pay on a regular basis to make revenue happen. Think salaries, healthcare, office supplies, the electric bill, hockey equipment, travel for the team, etc.

Interest Costs are self explanatory. Interest on debt owed to creditors.

Taxes are taxes.

Depreciation and Amortization is where the financial magic happens. Because long lived assets will be used over many years (machinery, arenas, planes, cars, and so on) they are an expensed over their useful life. Pay $20k for a car with a useful life 5 years and the IRS requires you to record that on your Income Statement as a $4k depreciation and amortization expense each of those 5 years. (Quiet, accounts. This is just the theory...)

What's not widely know among the general public is that the IRS allows the purchase price of a sports team to be recorded as a depreciation and amortization expense over 15 years. This is cash not coming out of the owners pocket, but it does show as an "expense" on his Income Statement. It also delays paying taxes on what would otherwise be declared as income.

What does that mean in English? If a rich guy buys a hockey team for 150 million dollars he can show a loss of $10 million every year, sell the team 15 years later for $150 million and walk away with an extra ~$70-90 million more cash in his bank account. The exact amount depends on tedious tax calculations I'm not going to do for a message board.

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11-27-2012, 08:28 PM
  #933
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Correct me if I'm wrong, though, but the figure quoted for the Pens' net loss this year is based on a report from Forbes, right? And that report was an estimation and not anything official. So unless they reveal their methodology (which they may; I don't know), we don't have any way of knowing if these estimations are based on cash flow only; or if they include accounting trickery and/or tomfoolery too.

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11-27-2012, 08:38 PM
  #934
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Quote:
Originally Posted by IanMoranFanclub View Post
Correct me if I'm wrong, though, but the figure quoted for the Pens' net loss this year is based on a report from Forbes, right? And that report was an estimation and not anything official. So unless they reveal their methodology (which they may; I don't know), we don't have any way of knowing if these estimations are based on cash flow only; or if they include accounting trickery and/or tomfoolery too.
In accounting cash flow and profit an two distinct and well defined terms. A business and finance magazine like Forbes would not use them interchangeably. Net Profit(Loss) = Net Income(Loss) and is found on the Income Statement. Cash flow is recorded on a separate document called the Cash Flow Statement.

For the record my little breakdown is not trickery is even mildly creative. The guy at H&R Block would get the Penguins farther than I did.

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11-27-2012, 08:47 PM
  #935
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Originally Posted by Gooch View Post
I don't get this line of thinking. The players apparently want a total % of the revenues yet don't want any sort of responsibility towards the overall health of the league? So the owners after already getting a smaller piece of the financial pie have to dip into their reduced share to pay for the overall health of the league while the players are off scott free?
Well I really haven't done my homework so again I might be way off. But if I'm a player I'm thinking, why can't these 8 or 10 franchises that are wildly successful, who are the ones driving up player costs in the first place, why can't they subsidize the weaker franchises?

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11-27-2012, 10:53 PM
  #936
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Quote:
Originally Posted by Sideline View Post
It looks like some people in this thread would benefit from an accounting primer. I'll explain how owners can show a loss on their tax return and still finish the year with more cash in the bank. An Income Statement looks like this:

Revenue
-Cost of Goods Sold
Gross Profit
-Depreciation and Amortization
-Interest Costs
Pre-Tax Profit
-Taxes
Profit or Loss

Revenue is the sales made by a business. Things like tickets, sponsorships, concessions, parking, and TV rights show up here.

Costs of Goods Sold is everything you pay on a regular basis to make revenue happen. Think salaries, healthcare, office supplies, the electric bill, hockey equipment, travel for the team, etc.

Interest Costs are self explanatory. Interest on debt owed to creditors.

Taxes are taxes.

Depreciation and Amortization is where the financial magic happens. Because long lived assets will be used over many years (machinery, arenas, planes, cars, and so on) they are an expensed over their useful life. Pay $20k for a car with a useful life 5 years and the IRS requires you to record that on your Income Statement as a $4k depreciation and amortization expense each of those 5 years. (Quiet, accounts. This is just the theory...)

What's not widely know among the general public is that the IRS allows the purchase price of a sports team to be recorded as a depreciation and amortization expense over 15 years. This is cash not coming out of the owners pocket, but it does show as an "expense" on his Income Statement. It also delays paying taxes on what would otherwise be declared as income.

What does that mean in English? If a rich guy buys a hockey team for 150 million dollars he can show a loss of $10 million every year, sell the team 15 years later for $150 million and walk away with an extra ~$70-90 million more cash in his bank account. The exact amount depends on tedious tax calculations I'm not going to do for a message board.
I just came from my accounting class in grad school. **** you for making me read this **** again.

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11-28-2012, 10:30 AM
  #937
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That's quite a broad definition of cost of goods sold, but I suppose you can argue that most expenses are tied directly to the production of goods sold (ie the game of hockey). I'm not sure I agree but your main points are correct.

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11-28-2012, 11:07 AM
  #938
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Quote:
Originally Posted by Dupree13 View Post
Well I really haven't done my homework so again I might be way off. But if I'm a player I'm thinking, why can't these 8 or 10 franchises that are wildly successful, who are the ones driving up player costs in the first place, why can't they subsidize the weaker franchises?
And if you're the owners, you're thinking "Why won't these players chip in to save their own jobs in the long run? Where do they think those 100 NHL jobs go if we contract the four weakest markets?" And voila, here we are.

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11-28-2012, 12:29 PM
  #939
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Originally Posted by Burgs View Post
And if you're the owners, you're thinking "Why won't these players chip in to save their own jobs in the long run? Where do they think those 100 NHL jobs go if we contract the four weakest markets?" And voila, here we are.
The owners simply lie about how much money they make. It`s what rich guys do, the players don`t believe owner BS for a second. These owners probably all have highly paid accountants just to hide profit.

Owners put the teams in the wrong locations, not the players fault. Move them to good markets, there are plently available, no need to contract and lose jobs (Unless you want to improve the on ice product).

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11-28-2012, 12:45 PM
  #940
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Originally Posted by Mr Wu View Post
The owners simply lie about how much money they make. It`s what rich guys do, the players don`t believe owner BS for a second. These owners probably all have highly paid accountants just to hide profit.

Owners put the teams in the wrong locations, not the players fault. Move them to good markets, there are plently available, no need to contract and lose jobs (Unless you want to improve the on ice product).
The markets that the NHL are trying to develop will lead to much much more money for everyone involved down the road. Turning a blind eye to huge US markets to just over saturate a smaller Canadian market is extremely short sighted and downright stupid.

If Players want the fruits of a successful NHL then they need to assume some of the risk along with it. Otherwise they can have their salaries locked down to a fixed number and have it not flex with the growth of the league. They obviously don't want to do it but unlike a business owner who actually assumes the risk these "partners" as the players like to refer to themselves as want nothing to do with it. Some partners.

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11-28-2012, 04:36 PM
  #941
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Originally Posted by Shady Machine View Post
That's quite a broad definition of cost of goods sold, but I suppose you can argue that most expenses are tied directly to the production of goods sold (ie the game of hockey). I'm not sure I agree but your main points are correct.
Yeah, I played fast and loose with some of those definitions because I'm not an accountant. I do quant finance so I know the basics just from University coursework a thousand years ago and sitting next to fundamental guys, but I don't even do my own taxes...

I was just trying to illustration the general difference between cashflow and PnL.

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11-28-2012, 05:57 PM
  #942
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Originally Posted by Sideline View Post
Yeah, I played fast and loose with some of those definitions because I'm not an accountant. I do quant finance so I know the basics just from University coursework a thousand years ago and sitting next to fundamental guys, but I don't even do my own taxes...

I was just trying to illustration the general difference between cashflow and PnL.
So now Forbes is reporting the Penguins' 2011-2012 "Operating Income" was $9.1M. Can we assume that's probably a more accurate depiction of the team's actual profit in lay people terms?

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11-28-2012, 09:27 PM
  #943
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Originally Posted by IanMoranFanclub View Post
So now Forbes is reporting the Penguins' 2011-2012 "Operating Income" was $9.1M. Can we assume that's probably a more accurate depiction of the team's actual profit in lay people terms?
To get cashflow from Operating income you subtract interest and taxes then add back depreciation. Assuming the reports that the Penguins break even on an accounting profit basis are true then cash flow would be very close to the depreciation expense.

In that case cash flow would be ~(Whatever Mario paid to buy the team)/15. If I had to guess I'd put the number around $6 or 7 million.

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11-29-2012, 05:36 AM
  #944
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Originally Posted by Chancellor Vitale View Post
Maybe but it's a different time now. Teams like Washington and MN especially, have modern arenas with all the attendant money flows (luxury boxes, expensive tickets and concessions, full houses, big sponsorships) and they're still losing money. That can only happen through poor management.

Pittsburgh was never in that situation really AFAIK. They had an old arena with few boxes, probably fewer sponsors... in general lower revenue potential in every stream. These teams we're talking about here... they have no excuse. Put someone who knows how to manage a franchise in power there and they'll make money in the same situation they have today. And, the Penguins now have a new arena with all the important revenue streams and it's working. The Penguins are a class organization and run things smartly.

Only the Islanders and Rangers have really old buildings (the Oilers do too but they're making money), and they're not heavily involved in this AFAICT. I would think Wang especially would draw criticism if he were, because he's not well respected I don't believe.
Yes but the Pens had a payroll of around 20 M, now the FLOOR isover 50 M.

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11-29-2012, 12:00 PM
  #945
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We're never gonna have NHL hockey again are we?

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11-29-2012, 12:53 PM
  #946
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Quote:
Originally Posted by Gooch View Post
The markets that the NHL are trying to develop will lead to much much more money for everyone involved down the road. Turning a blind eye to huge US markets to just over saturate a smaller Canadian market is extremely short sighted and downright stupid.

If Players want the fruits of a successful NHL then they need to assume some of the risk along with it. Otherwise they can have their salaries locked down to a fixed number and have it not flex with the growth of the league. They obviously don't want to do it but unlike a business owner who actually assumes the risk these "partners" as the players like to refer to themselves as want nothing to do with it. Some partners.
Those Southern markets will not lead to more revenue, just more lost games. That would be the downright stupid road, the road we are currently on, which has cost us what appears likely to be 2 of the past 9 seasons.

Hockey is a winter sport, see: globe. It will never grow in those markets to the extent required in order to give star players the ridiculous contracts needed to keep (or acquire) them. Ridiculous contracts being required thanks to the GMs and owners consistent inability to control themselves.

The market sets the player value, not player greed. The Southern franchises have been pushed out of that market, and with $25 tickets and free parking, there is no way back. Except to blame everything on the players and make them pay for it all. Brilliant.

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11-29-2012, 05:55 PM
  #947
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Originally Posted by SkullSplitter View Post
We're never gonna have NHL hockey again are we?
Certainly looks like we won't have any in the next 10-12 months.

Mediation failed and daly "is disappointed mediation didn't work".

Yah, I'm sure you tried REAL hard. This is just another trick to say "we tried everything; it's their fault".

Next up: Decertification and lawsuits.

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11-29-2012, 06:21 PM
  #948
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The only thing worse than this would be to be a Philadelphia Fan.

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11-29-2012, 06:33 PM
  #949
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11-29-2012, 06:54 PM
  #950
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Originally Posted by Mr Wu View Post
Those Southern markets will not lead to more revenue, just more lost games. That would be the downright stupid road, the road we are currently on, which has cost us what appears likely to be 2 of the past 9 seasons.

Hockey is a winter sport, see: globe. It will never grow in those markets to the extent required in order to give star players the ridiculous contracts needed to keep (or acquire) them. Ridiculous contracts being required thanks to the GMs and owners consistent inability to control themselves.

The market sets the player value, not player greed. The Southern franchises have been pushed out of that market, and with $25 tickets and free parking, there is no way back. Except to blame everything on the players and make them pay for it all. Brilliant.


Yes, Dallas had such trouble before the cap overpaying players and struggling in their market, why they'll probably never overpay a few FAs again...

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