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Hockey in The Desert (Phoenix franchise and finance/business matters)

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Old
12-08-2008, 10:46 AM
  #1
TheSchwab
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Hockey in The Desert (Phoenix franchise and finance/business matters)

Ever since Toronto visited Phoenix last Thursday, there has been an increase in the talk about the Coyotes and their financial situation, along with their attendance. Two aritcles over the past week really caught my eye...

First from Puck Daddy (Yahoo): http://sports.yahoo.com/nhl/blog/puc...urn=nhl,127243

Then from James Mirtle (From the Rink): http://www.fromtherink.com/2008/12/8...se-for-concern

I'm easily siding with Mirtle as I was never a proponent of southern expansion to begin with. Now obviously, its real easy for me to sit here and say; Yep! Just move 'em! But honestly folks, within 3-5 years, what other options do they have with the trend the Coyotes are on?

What do you think?

Mod Edit: The links you provided talk about Phoenix, and whether there is cause for longterm concern. Let's stick to one team, or it will be a free-for-all.

No "X deserves a team" arguments will be tolerated. It's the Business forum, make your points based on 'business' matters.
Title changed.

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12-08-2008, 11:06 AM
  #2
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I think

1-
2- You should look at the demographics in Phoenix before you suggest they should go. If you take away that team, they'd be getting another within 10-20 years IMO.
3- I love Puck Daddy, don't always agree with him but that's a very entertaining blog. He's right on with the one you linked.


Last edited by Fugu: 06-28-2011 at 11:46 AM.
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Old
12-08-2008, 11:12 AM
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low ticket prices + no interest = disaster

That about sums it up doesnt it?

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12-08-2008, 11:19 AM
  #4
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Quote:
Originally Posted by TheSchwab View Post
Ever since Toronto visited Phoenix last Thursday, there has been an increase in the talk about the Coyotes and their financial situation, along with their attendance. Two aritcles over the past week really caught my eye...

First from Puck Daddy (Yahoo): http://sports.yahoo.com/nhl/blog/puc...urn=nhl,127243

Then from James Mirtle (From the Rink): http://www.fromtherink.com/2008/12/8...se-for-concern

I'm easily siding with Mirtle as I was never a proponent of southern expansion to begin with. Now obviously, its real easy for me to sit here and say; Yep! Just move 'em! But honestly folks, within 3-5 years, what other options do they have with the trend the Coyotes are on?

What do you think?
Winning a cup means very little in terms if a team can be moved or not.


Last edited by Fugu: 12-08-2008 at 11:23 AM. Reason: quoted section
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12-08-2008, 11:45 AM
  #5
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Some Actual Hard Data About Phoenix

I thought about posting in the other recent thread started on Phoenix, but frankly I thought that the title of that thread would not do justice to the point that I wanted to share, which is that we now have a data point from which to intelligently speculate on the team's actual financial performance.

Per this article:

http://www.azcentral.com/arizonarepu...112-ON-CP.html

The team's CEO stated that:

Quote:
The arena isn't filled to 17,000 plus 'Yotes fans, but the organization reports ticket sales are 55,000 ahead of this time a year ago.

Quote:
Those sales make up about 30 percent of the team's revenue.
Cash flow from corporate sponsorships, which is tough during a weak economy, is holding steady, Shumway said.
From the per-game gate figures from last year, Phoenix gate revenue was $450,000 per game. Multiplied by 41, this means that Phoenix's gate revenue was $18,450,000 last year, give or take a little. As an aside, I would suggest that this is a minimum level, as the leaked gate revenues came from a report that came out before the end of the season and presumably did not fully reflect the usual second-half bump that most US markets experience. Either way, though, this is good enough for estimating purposes.

Using the 30 percent figure posted above, this would mean that Phoenix's revenue base was $18,450,000 divided by 30%, or $61,500,000.

With "tickets sold" up by a large amount, one would conclude that revenue is higher than that this year, but that is more speculation than we need to engage in at this time. For example, who knows how the average ticket price has been affected? Either way, let's see if we can reach a conclusion for last year first, since people seem to be focusing on allegedly historical losses from previous years.

From my understanding, Phoenix's salary obligations last year were in the $37-38 million range. I couldn't find the 2007-08 figures on nhlscap.com, so I checked nhlnumbers.com.

As for other expenditures, historically the figure of $25 million has been cited as a reasonable estimate of non-player costs for average NHL teams. It was in this range in the Levitt Report, although that is a few years old by now. Given that Phoenix is a little more removed geographically, arguably their costs might be a bit higher than the average, so let's use $30 million as a figure (20% above the average).

Based on this, we have costs of $67-68 million and revenues of $61.5 million.

What is unstated is whether the revenue figure above is inclusive of or net of revenue sharing.

Either way, I would be interested in getting feedback as to how this can add up to $25-30 million in losses.

Of course, one could say Phoenix CEO Jeff Shumway is simply lying. If one uses that approach, however, I would suggest that is more indicative of a rationale that is purely based on a made-up mind before one even considers the math.

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12-08-2008, 11:54 AM
  #6
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Could debt payments factor in? I know the arena is owned by the city of glendale, but has the franchise payed off its obligations yet? also, wern't there outstanding debts when the team was sold to the current ownership group before they moved to the new arena?

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12-08-2008, 12:01 PM
  #7
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Quote:
Originally Posted by gscarpenter2002 View Post
I thought about posting in the other recent thread started on Phoenix, but frankly I thought that the title of that thread would not do justice to the point that I wanted to share, which is that we now have a data point from which to intelligently speculate on the team's actual financial performance.

Per this article:

http://www.azcentral.com/arizonarepu...112-ON-CP.html

The team's CEO stated that:



From the per-game gate figures from last year, Phoenix gate revenue was $450,000 per game. Multiplied by 41, this means that Phoenix's gate revenue was $18,450,000 last year, give or take a little. As an aside, I would suggest that this is a minimum level, as the leaked gate revenues came from a report that came out before the end of the season and presumably did not fully reflect the usual second-half bump that most US markets experience. Either way, though, this is good enough for estimating purposes.

Using the 30 percent figure posted above, this would mean that Phoenix's revenue base was $18,450,000 divided by 30%, or $61,500,000.

With "tickets sold" up by a large amount, one would conclude that revenue is higher than that this year, but that is more speculation than we need to engage in at this time. For example, who knows how the average ticket price has been affected? Either way, let's see if we can reach a conclusion for last year first, since people seem to be focusing on allegedly historical losses from previous years.

From my understanding, Phoenix's salary obligations last year were in the $37-38 million range. I couldn't find the 2007-08 figures on nhlscap.com, so I checked nhlnumbers.com.

As for other expenditures, historically the figure of $25 million has been cited as a reasonable estimate of non-player costs for average NHL teams. It was in this range in the Levitt Report, although that is a few years old by now. Given that Phoenix is a little more removed geographically, arguably their costs might be a bit higher than the average, so let's use $30 million as a figure (20% above the average).

Based on this, we have costs of $67-68 million and revenues of $61.5 million.

What is unstated is whether the revenue figure above is inclusive of or net of revenue sharing.

Either way, I would be interested in getting feedback as to how this can add up to $25-30 million in losses.

Of course, one could say Phoenix CEO Jeff Shumway is simply lying. If one uses that approach, however, I would suggest that is more indicative of a rationale that is purely based on a made-up mind before one even considers the math.
Tickets
There 3 cheapest are $20/$15/$9 so some of this could because of the low ticket price.More tickets sales does not alwas mean greater revenue.

Ticket Giveaways
They could be aslo be giving alot of tickets away.This could be why there lossing money as well.

Prompting
It could be there spending to much on trying to promote the team and getting not much back.

Arena
I am not sure what there arena deal is.This could be part of how they could lose $30 this year.

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Old
12-08-2008, 12:28 PM
  #8
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I dont think they would have costs of around 68 million. Their payroll right now is 46 million and you can add 30 million to that for non-player costs as previously said, it would come up to 76 million this season. Their average ticket price is $37.45 according to this PDF.
http://www.teammarketing.com.ismmedi...L/NHL08-09.pdf
Using their current attendance number of 14,632 would translate into $547,968 per game or around $22.5 million in gate receipts. Which could go up or go down depending on where the team is in the standings.

Income
$22.5 million gate receipts, using the 30% figure for revenue, they would have around $75million in revenue this season, give or take a few million depending on revenue sharing and playoffs.

Expenses
$46 million in player salary, maybe another 25-30 million in other costs like transportation, hotels, equipment, concessions etc.

Comes to around even in terms of operating income. They definately will not lose $30 million, not sure where these people get these alledged figures from. Every team/organization goes through tough times. The Red Wings had serious problems in the 80's. The Canadian teams were dying in the 90's and early 2000's.

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12-08-2008, 12:36 PM
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Originally Posted by gscarpenter2002 View Post
Using the 30 percent figure posted above, this would mean that Phoenix's revenue base was $18,450,000 divided by 30%, or $61,500,000.
Where would the other 70 percent of revenues come from? I thought the majority of revenues for NHL teams were from ticket sales. Especially somewhere like Phoenix where regional tv and radio broadcast deals would be pretty small.

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12-08-2008, 12:48 PM
  #10
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Quote:
Originally Posted by gscarpenter2002 View Post
Either way, I would be interested in getting feedback as to how this can add up to $25-30 million in losses.

Of course, one could say Phoenix CEO Jeff Shumway is simply lying. If one uses that approach, however, I would suggest that is more indicative of a rationale that is purely based on a made-up mind before one even considers the math.
As I've noted in other threads, I suspect there are some non-hockey operations costs being included in the published number. Also I'm confident it includes servicing of debt, which Forbes estimates at about $90m for the team.

I don't think the team is outright lying, but I do think they're deliberately painting a worse picture than we might come away with if we had access to the books.

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12-08-2008, 12:51 PM
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I'm guessing the other 70 percent which would equal about $52 million comes from national and regional tv rights deals, radio rights deals, merchandise, parking, concessions, revenue sharing. There's alot of revenue sources for sports teams.

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12-08-2008, 12:54 PM
  #12
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Originally Posted by YellHockey View Post
Where would the other 70 percent of revenues come from? I thought the majority of revenues for NHL teams were from ticket sales. Especially somewhere like Phoenix where regional tv and radio broadcast deals would be pretty small.
For what it's worth, Forbes has about the same estimates for the Coyotes: 28% of team revenue from gate receipts.

Some various other teams from Forbes:
Toronto: 49%
NY Rangers: 45%
Montreal: 53%
Edmonton: 58%
NY Islanders: 36%
Atlanta: 34%
Buffalo: 37%

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12-08-2008, 01:37 PM
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in terms of debt, Forbes has the Yotes in the middle of the pack.

irc, Blackhawks and Ducks have none on the books. and the Habs have the most (the new rink?).

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12-08-2008, 01:52 PM
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Quote:
Originally Posted by Jonas1235 View Post
I'm guessing the other 70 percent which would equal about $52 million comes from national and regional tv rights deals, radio rights deals, merchandise, parking, concessions, revenue sharing. There's alot of revenue sources for sports teams.
In the US, most teams don't make any real money off of radio. I know that the Capitals essentially buy the time from the local radio station and that the Caps recoup a little of that money from the advertizing, but that radio on the whole is a loss, just something the organization does because they feel they have to.

Also, don't be surprised if Glendale owns the arena that the Coyotes make a ton of money off of concessions and parking. Those types of things usually go to the owner of the arena, but different teams have different deals with the building in place. Some teams get virtually nothing from concessions and parking.

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12-08-2008, 01:56 PM
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What are the ticket prices like at Jobing?

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12-08-2008, 01:59 PM
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Quote:
Originally Posted by mouser View Post
As I've noted in other threads, I suspect there are some non-hockey operations costs being included in the published number. Also I'm confident it includes servicing of debt, which Forbes estimates at about $90m for the team.

I don't think the team is outright lying, but I do think they're deliberately painting a worse picture than we might come away with if we had access to the books.
That's the problem with looking at all the "Team X lost Y million dollars this year" claims - they can easily be spun to whatever the intentions are of the person making the claim. In these kinds of statements for public consumption there are no objective standards as to just what is revenue and expenses attributable to the team and any other affiliated entity (unlike , say the definitions of HRR in the CBA). A team may include costs from non-hockey operations (while also excluding revenues from those operations) in those claims - which really amount to nothing more than a PR exercise.

That is why the SVSE/SJSEE can claim that the Sharks lose money (or barely break even) each year - conveniently ignoring the profits made on other arena operations.
Quote:
Originally Posted by YellHockey
Where would the other 70 percent of revenues come from? I thought the majority of revenues for NHL teams were from ticket sales. Especially somewhere like Phoenix where regional tv and radio broadcast deals would be pretty small.
The Levitt Report numbers from before the lockout show that "Gate receipts" accounted for ~50% of league revenues, with broadcasting and in-arena revenues (concessions, advertising, sponsorships, etc) each contributing ~25% each.

I believe that that 50% gate number includes Luxury Boxes. The 30% of revenues from "ticket sales" quoted by Shumway likely excludes Luxury Boxes - which could account for part of the difference.

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12-08-2008, 02:02 PM
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Quote:
Originally Posted by mouser View Post
As I've noted in other threads, I suspect there are some non-hockey operations costs being included in the published number. Also I'm confident it includes servicing of debt, which Forbes estimates at about $90m for the team.

I don't think the team is outright lying, but I do think they're deliberately painting a worse picture than we might come away with if we had access to the books.
I was thinking more lying in the sense that he would be understating the percentage of revenue from tickets to make their circumstances less dire - i.e., that REALLY Phoenix gets 40% or more from tickets, which would make their circumstances more dire. You are correct, in that most sports franchises overstate their losses in order to blunt customer criticism of high ticket prices. I was just pointing out that, if one assumes that Shumway is lying to tryo to dress up the finances more favourably, then there would be nothing else to say.

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12-08-2008, 10:12 PM
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"Attendance at Jobing.com Arena was announced at 13,377, but many of those customers must have come disguised as empty seats." -- Kevin McGran, Toronto Star, Dec. 5

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12-08-2008, 10:15 PM
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Quote:
Originally Posted by TheSchwab View Post
Then from James Mirtle (From the Rink): http://www.fromtherink.com/2008/12/8...se-for-concern

I'm easily siding with Mirtle as I was never a proponent of southern expansion to begin with. Now obviously, its real easy for me to sit here and say; Yep! Just move 'em! But honestly folks, within 3-5 years, what other options do they have with the trend the Coyotes are on?
I believe bankruptcy is the only way to get out of the lease.

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12-08-2008, 10:28 PM
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Quote:
Originally Posted by Rob View Post
"Attendance at Jobing.com Arena was announced at 13,377, but many of those customers must have come disguised as empty seats." -- Kevin McGran, Toronto Star, Dec. 5
Hmm, sounds like sour grapes to me after a 6-3 pasting from the Coyotes.

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12-08-2008, 10:51 PM
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link to Globe and Mail article.

I think this team is done.... (no offense to the Coyotes fans )

http://www.theglobeandmail.com/servl...TPStory/Sports

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12-08-2008, 11:52 PM
  #22
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link to Globe and Mail article.

I think this team is done.... (no offense to the Coyotes fans) )

http://www.theglobeandmail.com/servl...TPStory/Sports
Old article already covered in another thread in the forum.

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12-09-2008, 03:26 AM
  #23
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I believe bankruptcy is the only way to get out of the lease.
I cannot remember where I heard this (maybe the radio). But they can pay there way out of the lease. Something else that the people were talking about was that this was one of the only reasons that Phoenix still has a team. The amount they would have to pay to get out of their lease is so high that it just does not make sense to do it. They rather stay and suck up the sucking.

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12-09-2008, 09:35 AM
  #24
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low ticket prices + no interest = disaster

That about sums it up doesnt it?
I would say.

Anyone who doesn't think 'hockey in the desert' has been a complete disaster has eyes full of sand.
I have a friend that lives in Arizona and he said that on some nights it looks like there's less than 5000 people at the games.
Considering the cheap prices and a few talented players to watch, that's horrendous.

What I'm tired of hearing is how 'winning' always fixes everything. Sure it does. But there's 30 teams in the league. You can't expect them all to win all the time.
It's in those downtimes that you have to have franchises that will weather the storm. Every team (outside of Toronto) will take a bath when they're not winning consistently, but some drown more than others.

I agree that Winnipeg is not the answer. I love that city and I'm still disappointed when they lost it's team, but it can't support it. I lived there for a time and most nights when I went to catch a game, there were plenty of empty seats. And you could have a seat along the glass for as little as $35CDN.

The new arena simply doesn't have enough luxury boxes or seats to support an NHL team. And while the city is growing lately, I don't know if it has the corporate support.

Like the 2nd author suggested, the best solution to relocating any team would be into Toronto. It could easily support two pro teams.

It's time to cut the fat from the league. The 'Yotes have been struggling for years. It's not like it just started to happen a couple of seasons ago.
Move the team to a city that actually wants hockey and can support it.

Off the top of my head, I believe that Wisconsin, Maine, and southern Ontario would all give the Coyotes a better home.

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12-09-2008, 11:10 AM
  #25
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If the Coyotes relocate it surely won't be in the east. They need more teams in the west. I would look into putting them in Portlant or Seattle. Hockey in the northwest has grown tremendously recently and the American teams in the WHL have done very well recently with attendance. If they can rebuild the Key Arena in Seattle they could have a team in there, or they can put a team in Portland where they already have a newer arena.

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