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Edmonton Journal: Why do billionaires keep buying teams that lose money?
Edmonton Journal: Why do billionaires keep buying teams that lose money?
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There is a strange dichotomy in NHL ownership. The owners, whether as companies or individuals, are extremely wealthy. Yet many teams reportedly lose money every year, and with few exceptions even the profitable clubs don’t that make much money. Why would phenomenally successful men sink money into a black hole like that? Is it simply a case of viewing hockey teams as luxuries where they can afford to bleed red a little?
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Last year, Forbes estimated that the Panthers lost $7 million. Over the last nine seasons, they calculate the Panthers total losses at $68 million, an average deficit of $7.5 million per season.
Interestingly, the picture that Forbes paints is at odds with that presented by Broward County. Broward County was primarily responsible for the construction of the Panthers’ arena, and as a result gets to look at the books of the organization. According to the county auditor, the organization made $117.4 million in profit between 1998 and 2012.
How does a team losing $7.5 million per season rack up profits in excess of $100 million? There are a few reasons, and to find them we need to dig a little.
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Looking at the Panthers numbers, I think two things stand out:
1. NHL teams are gateways to favourable arena deals, and thus greater revenue. ...
2. Hockey-related revenue is defined in such a way so as to maximize the appearance of losses on the hockey side....
This is why the NHLPA is so adamant about considering 50/50 to be the only concession they should have to make this time around. The NHLPA believes the owners are being facetious about their profit margins. Many owners are willing to eat some losses from direct hockey operations because the team and/or arena is a gateway to revenues through other ventures.
They buy teams because despite their tremendous wealth and success in other fields, no one knows them outside of their field. They want people to ask for their autograph. Basically, they are buying fame.
It's a high stakes fantasy league for the owners. What would they get out of joining a regular fantasy league? A couple hundred bucks? A trip somewhere?
They get to compete with other businessmen. They get to draft real people. Buy real free agents. Make trades with real consequences. Win a real trophy.
They buy teams because despite their tremendous wealth and success in other fields, no one knows them outside of their field. They want people to ask for their autograph. Basically, they are buying fame.
That has to be one of the oddest theories I've heard on here in a while. The owners are buying fame? How often are the owners even acknowledged and talked about by anyone if there isn't a labour dispute going on?
According to the county auditor, the organization made $117.4 million in profit between 1998 and 2012.
From the actual article:
...since it opened in 1998. The Florida Panthers organization netted $117.4 million from the county arena over that time, according to the county auditor.
So the blog makes it seems like the team is making that as an overall profit, while the actual article says its profit from the arena (about 9 million a year – enough to cover 2 good players salaries).
Unless I’m missing something (I didn’t review this all that closely), it seems like the writer of the blog is confusing arena profit and team profit. He states that a profit is made every year, but if you look at the expenses used in the equation, it seems to be less than the salary of the team, and thus would indicate that players salaries aren’t being factored into the equation, which points towards an arena-only profit conversation.
But that’s just my 3 minutes review. He posts the links in his blog, so someone else can check his work who has a bit more time.
I think that its very remarkable that this is not the general opinion around the NHL. Because its like duh, of course that is true.
The NHL holds every tool to screw the players and objectively its impossible for the PA to stop it. You have the arena in one entity. The club in the other entity. One need to rent it from the other. If the club gets a good prize, 50% of that money goes to the owner. If the arena entity gets a good price, 100% of that money goes to the owner. Yii, I wonder who gets a good price. The owners only have some kind of shame limit on these issues, and on the right side of that limit the players are screwed.
Hence why its perfectly possible to say that a fair deal for the players is way north of 50%.
This is on the same level as you pick up a apple and release it, and then you go like "yeah it fell into the ground". Here at hfboards everyone would like what, does it? Now, that can't be true? TSN is supporting the NHL, how is that possible then?
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.
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.
If tax dollars fund the arena, the community and the players are both entitled to a piece of the pie.
If tax dollars fund the arena, the community and the players are both entitled to a piece of the pie.
If Players didn't make so much money maybe there wouldnt need to be so much tax dollars to build these arena's.
Why does the public in most cases have to absorb the investment risk hoping to make it back on tax dollars?
I know the public HAS to because the arena's don't make enough money to fund themselves in most cases. Especially when your main tenant(the hockey team) doesn't make you money.
Has a citizen of Edmonton I'd be happy as heck if Katz benefitted enough from the Oilers that he could tell the city to buzz of and build the arena himself. I know that's not possible.... The players just eat up too much of the revenue generated as primary tennants.
Like it or not the players are the benefactors in the end from public arena subsidies. They get a free ride.
Exactly. Not even in Fehr's most delusional dreams should NHL players get a cut of a Justin Beiber concert.
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.
I can see the argument for the citizens of the community, but why should the players get anything from the other revenue generated by an arena?
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Originally Posted by Valic
Why should the players get any benefit because of tax dollars?
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Originally Posted by BruinsBtn
Exactly. Not even in Fehr's most delusional dreams should NHL players get a cut of a Justin Beiber concert.
All true.
And are the top stars going to share the revenue from their endorsement deals with the owners? And lets a face it. those are far more hockey related than a Bruce Sringsteeen concert
As well the owners have all the costs of up keep to the stadiums-are the players going to share in that and other costs involved in keeping a stadium running?
If tax dollars fund the arena, the community and the players are both entitled to a piece of the pie.
The players do get a piece of the pie - they certainly benefit from taxpayer funded arenas.
If taxpayers aren't involved, there are two possibilities: 1) new arenas aren't built; or 2) owners need to finance the construction of a new arena.
If new arenas aren't built, then owners can't earn as much money (lack of luxury boxes, bad sightlines/lower ticket prices, poor concessions, parking, etc.). This means less money available for player salaries = Bad for players.
If owners need to pay to build an arena, they will likely finance the cost. For a $250,000,000 arena, the mortgage would be about $17,500,000 per year - money that wouldn't be available for player salaries = Bad for players.
I imagine if you added up all the money that taxpayers contribute to arenas it would come in around $500 million per year for the NHL. The financial impact would be even greater since you have many new arenas with their HRR-generating features. $1 billion in HRR per year between tax dollars and improved income maybe? So yeah, don't worry, the players are getting a piece of that pie...
The situation varies from one owner to the next. In the case of the MTS Center, it was was one of the busiest and most lucrative venues in North America, prior to the Jets.
You shouldn't consider non-hockey related arena revenues when negotiating a CBA; any more than you can take into account any other revenue streams an owner may have, or his/her overall wealth. In the same way you don't consider the non-hockey related revenue streams individual players may have (endorsements?), or their 'perks' of being a player such as fame or how many girls they have in each city.
That has to be one of the oddest theories I've heard on here in a while. The owners are buying fame? How often are the owners even acknowledged and talked about by anyone if there isn't a labour dispute going on?
It's the truth. I can recognize James Dolan, John Mara, Steve Tisch, The Wilpons because they own the teams. Not because of their other success. Could anyone pick out George Steinbrenner's photo if he just stayed in ship-building? Guys like Bill Gates, and Steve Jobs are the exceptions when it comes to guys who made it big in business and are well known to everyone. Not the rule.
This entire article is based on the author being unable to differentiate between arena profit and overall profit, despite the article he cites clearly noting profit "from the arena" twice and "at the arena" another time.
"The Florida Panthers organization netted $117.4 million from the county arena over that time, according to the county auditor."
"The loan was changed slightly from its terms going into the vote, at Lieberman's suggestion. But the end result is that the Panthers will have to make $13.25 million in profits from the arena before Broward would start earning 20 percent. The threshold had been $12 million."
"The Panthers made $10.4 million in profits at the county arena in 2011 and expect to make $21 million this year."
How could anyone read that and assume they are talking about overall profits?
