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The Business of Hockey Discuss the financial and business aspects of the NHL. Topics may include the CBA, work stoppages, broadcast contracts, franchise sales, NHL revenues, relocation and expansion.

Good article from Darren Rovell

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02-11-2005, 06:38 AM
  #1
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Good article from Darren Rovell

ESPN's sports business writer

http://sports.espn.go.com/nhl/news/story?id=1981387

Even before the National Hockey League lockout began on Sept. 16, commissioner Gary Bettman and many team executives have maintained they will lose less money if they don't play at all in 2004-05 than they would playing under the old collective bargaining agreement.

But they'd still lose money.

Pile on the effects of the lockout -- a decline in season-ticket sales, the loss of advertising, not to mention fan apathy and potential attrition -- and the next question becomes: If the NHL doesn't play at all in 2004-05, and possibly into 2005-06, what will happen to those teams?

Ask sports industry bankers, economists and lawyers, and the answers can range greatly: From team bankruptcies to league-imposed contraction to perhaps nothing at all.

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02-11-2005, 07:00 AM
  #2
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Quote:
Originally Posted by John Flyers Fan
ESPN's sports business writer

http://sports.espn.go.com/nhl/news/story?id=1981387

Even before the National Hockey League lockout began on Sept. 16, commissioner Gary Bettman and many team executives have maintained they will lose less money if they don't play at all in 2004-05 than they would playing under the old collective bargaining agreement.

But they'd still lose money.

Pile on the effects of the lockout -- a decline in season-ticket sales, the loss of advertising, not to mention fan apathy and potential attrition -- and the next question becomes: If the NHL doesn't play at all in 2004-05, and possibly into 2005-06, what will happen to those teams?

Ask sports industry bankers, economists and lawyers, and the answers can range greatly: From team bankruptcies to league-imposed contraction to perhaps nothing at all.
I just don't see how any low market/cash straped team is going to make it if the season is canceled.
They all have overhead still to cover with little rev coming in, if at all.
I know there is a war chest set up for the teams, but that money has got to be running out.

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02-11-2005, 07:06 AM
  #3
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Quote:
Originally Posted by Brewleaguer
I just don't see how any low market/cash straped team is going to make it if the season is canceled.
They all have overhead still to cover with little rev coming in, if at all.
I know there is a war chest set up for the teams, but that money has got to be running out.
Each team has $10 million to draw from in the war chest. They need NHL permission before they can withdraw any or all of that money.

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02-11-2005, 07:07 AM
  #4
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Quote:
Originally Posted by Brewleaguer
I just don't see how any low market/cash straped team is going to make it if the season is canceled.

Well, I think the low market teams would rather take a chance on sitting out a season or two knowing that eventually they'll get a cap than playing under the old CBA and losing even more millions every season and eventually going backrupt. There are some teams that it's cap or bust.

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02-11-2005, 07:17 AM
  #5
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Quote:
Originally Posted by John Flyers Fan
Each team has $10 million to draw from in the war chest. They need NHL permission before they can withdraw any or all of that money.
Yes I know they have $10 mil each to use. That is not a whole lot really to be used. They do have overhead still to cover, Building leases, util, maintenance, salaries for their skeleton staff, taxes, etc...
And then have to go through the summer also.

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02-11-2005, 07:20 AM
  #6
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Quote:
Originally Posted by Reilly311
Well, I think the low market teams would rather take a chance on sitting out a season or two knowing that eventually they'll get a cap than playing under the old CBA and losing even more millions every season and eventually going backrupt. There are some teams that it's cap or bust.
Right, I understand that, and it's my bet that these low market teams that are in Bettmans ear, running the show so to speak.
But I just don't see how they could last another year with $10mil each without something in place.

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02-11-2005, 07:24 AM
  #7
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Quote:
Originally Posted by Brewleaguer
Right, I understand that, and it's my bet that these low market teams that are in Bettmans ear, running the show so to speak.
But I just don't see how they could last another year with $10mil each without something in place.
I don't think the NHL will take the chance of trying to wait out the players again next year. I think they will give the negotiation process until the Jul/Aug/Sept timeframe to work a deal with the Union and if there still isn't any traction by then - then they will take their chances with the courts.

Either way, there will be some form of NHL hockey next year IMO.

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02-11-2005, 07:28 AM
  #8
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So the jest of the article is that the owners will lose less money by not operating than they do actually engaging in their business, and that the owners (all of them successful businessmen in other industries) have made a conscious decision to try and right the ship to save all franchises through a more sound business model rather than allow teams to wither and die. They are rolling the dice that the negative effects of a work stoppage will affect their revenues even less than working under the existing model. So does that give you an indication just how broke the system is and how one sided it has been? No matter what the NHLPA has to say on the matter in regards to a free market (that is a real misnomer as the provisions in a CBA prevent a free market) they have to admit that it is better to have 30 healthy franchises, and 770 NHL players, rather than the current situation where twenty-something franchises are in poor to dire straits. I think the article says a lot about the unknown, and the fact that the league would rather deal with that unknown rather than continue down the road they were headed speaks volumes. The NHLPA needs to become cogniscient of the world around them and understand their relationship to the health of the league and the game itself.

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02-11-2005, 07:30 AM
  #9
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The teams that were financially troubled before the lockout obviously remain financially troubled. Between the the league's war chest and its willingness to bailout or relocate troubled franchises, I'd be surprised if the league knuckled under before the players. After all, the most vociferous supporters of a salary cap are the poorer teams. They can't afford to soldier on under the old CBA.

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02-11-2005, 07:40 AM
  #10
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Quote:
Originally Posted by Top Shelf
I don't think the NHL will take the chance of trying to wait out the players again next year. I think they will give the negotiation process until the Jul/Aug/Sept timeframe to work a deal with the Union and if there still isn't any traction by then - then they will take their chances with the courts.

Either way, there will be some form of NHL hockey next year IMO.
OH I almost totally agree (I don't think they will wait until Aug/Sept), they can't efford to do so. It's either except a counter from the PA (which I am sure will happen before Sunday) Or go to impasse, get threw the courts, sign replacement players and anyone willing to cross the line and start on time next season.

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02-11-2005, 07:50 AM
  #11
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Quote:
Originally Posted by Top Shelf
I don't think the NHL will take the chance of trying to wait out the players again next year. I think they will give the negotiation process until the Jul/Aug/Sept timeframe to work a deal with the Union and if there still isn't any traction by then - then they will take their chances with the courts.

Either way, there will be some form of NHL hockey next year IMO.
I think the league will wait because it's the safest strategy and it's a sure winner (eventually). Any other strategy is riskier.

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02-11-2005, 08:12 AM
  #12
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Quote:
Originally Posted by Brewleaguer
OH I almost totally agree (I don't think they will wait until Aug/Sept), they can't efford to do so. It's either except a counter from the PA (which I am sure will happen before Sunday) Or go to impasse, get threw the courts, sign replacement players and anyone willing to cross the line and start on time next season.
It will be interesting to see (barring some miracle deal this weekend) what the timeframe will be for the NHL to declare an impasse.

I have heard a few times throughout this process that they NHL would have to wait until a year after the lockout "officially" (Sept 15th I believe) began before they could legitimately declare an impasse. I have know idea if this is true or not and I would be the first to tell you that I don't know squat about the legalities surrounding the declaratioin of an impasse.

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02-11-2005, 08:25 AM
  #13
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The $300 M warchest is NOT the sole source of money for the owners.

If they feel they will make the money back long-term, then many will be willing to spend above and beyond their $10 M to achieve that goal.

Why do people assume that the owners won't be willing to lose more money to win the fight that they have been losing money for the past few years just to get to?

Why would Phoenix care if it costs them another $20 M to get a deal that will see them making it back and more instantly in the increase in franchise value once a cost certainty deal is in place?

This is a war of attrition the PA can't possibly win.

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02-11-2005, 08:33 AM
  #14
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Quote:
Originally Posted by Top Shelf
I don't think the NHL will take the chance of trying to wait out the players again next year. I think they will give the negotiation process until the Jul/Aug/Sept timeframe to work a deal with the Union and if there still isn't any traction by then - then they will take their chances with the courts.

Either way, there will be some form of NHL hockey next year IMO.
i think you are correct-and i hope they start the process of impasse and implementation by the middle of next week! the courts are not stupid, it will be easy to see the financial situation of the NHL and it is also Bush appointed so the members should be pro-business--the players really have their collective bargaining heads in the sand (or at least the top 15% do-i bet there is a pretty good chance that most of the other 85% breaks with goodenow-saskin-linden-pronger-alfeddson-etc and plays) no significant tv contract-excessive payrolls-arbitration results-individual team tax returns-they have plenty of ammo for the courts-and the levitt review and forbes opinion which is still over 120 million in losses too--heck, this fight might be more interesting than playing whats left of this season

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02-11-2005, 08:35 AM
  #15
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Quote:
Originally Posted by Thunderstruck

Why would Phoenix care if it costs them another $20 M
Because 20m doesnt grow on tree's. Where do you expect them to come up with the cash if the banks wont finance them ?

DR

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02-11-2005, 08:37 AM
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Quote:
Originally Posted by Thunderstruck
If they feel they will make the money back long-term, then many will be willing to spend above and beyond their $10 M to achieve that goal.

Why do people assume that the owners won't be willing to lose more money to win the fight that they have been losing money for the past few years just to get to?

Why would Phoenix care if it costs them another $20 M to get a deal that will see them making it back and more instantly in the increase in franchise value once a cost certainty deal is in place?
That is the question:

#1. How quick do the people come back ??? In some places they might not come back fast enough so that even if the owners get their "cost certainty" teams might still be losing money.

#2. Cost certainty doesn't necessarily mean franchise values will sky rocket. For some teams it will. For others they might go up, but if you look at what Buffalo, Ottawa and Atlanta recently sold for, sky rocket might mean $50 million.

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02-11-2005, 08:40 AM
  #17
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Quote:
Originally Posted by Reilly311
Well, I think the low market teams would rather take a chance on sitting out a season or two knowing that eventually they'll get a cap than playing under the old CBA and losing even more millions every season and eventually going backrupt. There are some teams that it's cap or bust.
Depending on how this goes, there could be some teams that go cap & bust.

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02-11-2005, 08:49 AM
  #18
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Quote:
Originally Posted by John Flyers Fan
Depending on how this goes, there could be some teams that go cap & bust.
The idea that small revenue teams will be in trouble even with a cap in place is what I have been saying for a long time. I don't see how small revenue teams are going to survive a salary floor when the floor is a percentage of total league revenue. Post lockout the stronger markets will undoubtedly get their "hardcore" fans back but in these new post 90's markets nobody knows how these fans will react post-lockout. Just my opinion but I feel they will have the biggest revenue drop off and increase the already large revenue disparity between big and small revenue clubs.

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02-11-2005, 08:51 AM
  #19
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Quote:
Originally Posted by shnagle
The idea that small revenue teams will be in trouble even with a cap in place is what I have been saying for a long time. I don't see how small revenue teams are going to survive a salary floor when the floor is a percentage of total league revenue. Post lockout the stronger markets will undoubtedly get their "hardcore" fans back but in these new post 90's markets nobody knows how these fans will react post-lockout. Just my opinion but I feel they will have the biggest revenue drop off and increase the already large revenue disparity between big and small revenue clubs.
They can just take Chris Chelios's solution and move their teams.

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02-11-2005, 09:03 AM
  #20
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Quote:
Originally Posted by eye
They can just take Chris Chelios's solution and move their teams.
Brilliant solution!! Anyone care to address the concern of the article and my post?

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02-11-2005, 09:08 AM
  #21
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Originally Posted by Brewleaguer
Right, I understand that, and it's my bet that these low market teams that are in Bettmans ear, running the show so to speak.
But I just don't see how they could last another year with $10mil each without something in place.
Look how long they lasted while losing millions and millions more than they lost this year. A lockout will delay their demise a lot longer than playing under the old CBA would have. Many teams aren't losing anything by locking the doors, they are saving money.

 
Old
02-11-2005, 09:08 AM
  #22
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Quote:
Originally Posted by DR
Because 20m doesnt grow on tree's. Where do you expect them to come up with the cash if the banks wont finance them ?

DR
Their are plenty of banks willing to finance these billionaires, even if it means writing a few high-risk loans.

There is also the fact that the owners have repeatedly shown their willingness to protect their investments by supporting the weaker franchises in times of need.

The NHL's pockets run VERY deep. Anyone expecting them to lose this fight due to money problems is dreaming in technicolour.

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02-11-2005, 09:10 AM
  #23
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Quote:
Originally Posted by shnagle
The idea that small revenue teams will be in trouble even with a cap in place is what I have been saying for a long time. I don't see how small revenue teams are going to survive a salary floor when the floor is a percentage of total league revenue. Post lockout the stronger markets will undoubtedly get their "hardcore" fans back but in these new post 90's markets nobody knows how these fans will react post-lockout. Just my opinion but I feel they will have the biggest revenue drop off and increase the already large revenue disparity between big and small revenue clubs.

small market teams will actually have a chance to compete for a playoff spot if run well. we all know if teams are winning it attracts fans but now if teams win they will not be a farm team to the larger markets therefore they will not put their fans on a roller coaster ride

by building and losing for a few years then winning then not being able to afford their players therefore trading them for prospects and trying to build and win again

its a cycle that fans hate and the majority of the league has been forced to do it

it is also unfair because the big market teams stopped giving top value to prime players because they knew the small markets had to trade them

look at the NFL, if 24 teams have a shot to get in the playoffs with 10 games l;eft, thats good for the game because 24 cities are excited...

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02-11-2005, 09:12 AM
  #24
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Originally Posted by shnagle
The idea that small revenue teams will be in trouble even with a cap in place is what I have been saying for a long time. I don't see how small revenue teams are going to survive a salary floor when the floor is a percentage of total league revenue. Post lockout the stronger markets will undoubtedly get their "hardcore" fans back but in these new post 90's markets nobody knows how these fans will react post-lockout. Just my opinion but I feel they will have the biggest revenue drop off and increase the already large revenue disparity between big and small revenue clubs.
Bettman has said that the NHL will insure that all teams get to the salary floor of 32 (probably a 22 million floor by this time next year) by revenue sharing. A team needs to meet the NHLs criteria, like have 75% attendance and they automatically get revenue sharing help to bring them to the floor. Too bad the 32 - 42 million range is dead in the water. We're looking at a range of 22-32 for next year. Way to go NHLPA!

 
Old
02-11-2005, 09:15 AM
  #25
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Quote:
Originally Posted by Crazy Lunatic
Look how long they lasted while losing millions and millions more than they lost this year. A lockout will delay their demise a lot longer than playing under the old CBA would have. Many teams aren't losing anything by locking the doors, they are saving money.
No team out there isn't losing money. Some teams may be losing less money, but they're still losing money.

The Flyers claimed that if no hockey was to be played this year they'd lose $15 million. I would have to think that most teams are in that ballpark of $10-20 million.

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