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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.

Phoenix Bankruptcy Part XX: There Will Be Baum

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Old
09-21-2009, 07:04 PM
  #26
no13matssundin
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Just listened to the Bill Daly Fan590 clip regarding Melnyk's statements about Vetoes... and here's my take and I'll tell you straight, they don't have a leg to stand on: the NHL is screwed.

Nearly 5 1/2 mins into this interview, after a clear clip of Melnyk's statements about veto, and basically alluding to the idea that Melnyk doesn't understand the intricacies of the NHL constitution, Daly weakly argues that the NHL still has no single team veto saying "It's really not up to a single club to interpret league rules, is it?" to which Steven Brunt aptly replies:
"I'm counting two of thirty (holding a dissenting view) and I havent heard from the other 28, so I'm not sure."
...to which Daly sheepishly replied "Ok...well, maybe you should follow-up with the other 28".. leading McCown to astutely quip "They don't talk because they're afraid to talk".

Frankly, he's not stupid: He KNOWS this "there's no Veto" garbage is just that and that it will not stand up any serious legal scrutiny (ESPECIALLY with the Leafs 2006 veto letter). The ridiculous thing is that the NHL OBVIOUSLY didn't plan for that contingency. I think it's pretty clear by this point they never planned on ever having to seriously defend their working/entry practices in a court of law. And that tells me two things: 1) They're oblivious to the obvious and therefore, 2) are going to LOSE any Anti-trust case put before the courts.

The Long and the short of this is, as I've stated before, the Balsillie camp end goal was and is a winnable Anti-trust case against. If they get the Coyotes team, so be it, but I think it's clear, especially now with today's filling regarding Melnyk's comments, that they're looking at the Anti-trust route as the goal.

And, after hearing Daly, its also pretty obvious the NHL "braintrust" had NO CLUE who they we're dealing with in Balsillie. They had NEVER planned for this contingency and, ultimately, he is gonna spank them because of it; Phoenix or no Phoenix.

My last comment on this is the following: If the NHL we're smart, they would cut a deal with JB and rightly soon. But, as has been evidenced by the NHL moves at this point, I don't think "smart" has ever really come into play in this situation.

If you haven't heard it, take a listen for yourself, the first 6mins say it all:

http://fan590.com/media/media.jsp?co...21_181755_7944


Last edited by no13matssundin: 09-21-2009 at 07:11 PM.
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Old
09-21-2009, 07:26 PM
  #27
billy blaze
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and why is it that the two teams in the same province as the city in which Balsillie wishes to move, are pretty adamant that the veto exists, even in the depositions of Jacobs and Leipold both seem a little confused as to how the process works, the NHL at the beginning stated there was no veto, now they say it involves only relocation, Daly and Bettman espouse that they alone are they only ones that interpret what the rules are. I'm racking my brains (won't take long) but I can't recall a league where the rules are causing the owners to look so foolish as not even knowing how to interpret the rules which they are to govern themselves with.

If it doesn't exist, why not have the Leafs and Senators disavow the veto- would put an end to it once and for all.

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09-21-2009, 08:05 PM
  #28
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Number-crunching fun time, subtitled "Why the problem with the Coyotes' finances isn't attendance."

When you work out the percentages, the Coyotes would not be a profitable franchise even if they sold out every game. According to the numbers Moyes submitted, the Coyotes would lose approximately $18 million a season if they sold out all 41 home games. Bonus fun with potential playoff revenue at the bottom.

I got the Coyotes revenue and expense numbers from this filing :http://docs.bmcgroup.com/phoenixcoyo...k-9488_472.pdf

From other filings, I got that the Coyotes had 13,075 average paid attendance per game and 10,900 average actual attendance per game. Jobing.com Arena seats 17,799 for hockey. Therefore, the Coyotes sold 73.46 percent of available tickets and had 61.24 percent of the available bodies for concessions and merchandise purchases.

For suites, I assumed that they were sold at the same rates as the regular ticket sales. It could easily be more (most venues I know of have sold all their suites regardless of one tenant's attendance issues) and it could easily be less, but it's something to work with.

Now, what would happen if the Coyotes sold out every game?

Ticket revenues would increase from $13,328,609 at 73.46 percent -> $18,144,036
Concession and merchandise revenues would increase from $1,490,863 at 61.24 percent -> $2,434,495
"Box office" revenues would increase from $363,863 at 73.46 percent -> $495,396
Suite revenues would increase from $8,438,792 at 73.46 percent -> $11,487,601
Overall attendance-based revenue would increase from $23,623,182 -> $32,561,492

Add the completely sold out figure to the rest of the revenue ($34,740,961) and you have $67,302,453. That's still well short of the $85,451,812 in expenses. It would cover the team's "hockey expenses" of $59,103,192.

So even selling out every single game, the Coyotes would still lose in the neighborhood of $18 million a year. That indicates a huge drain in money somewhere.

Obviously, the analysis isn't perfect. It doesn't account for the potential for unsold tickets being more or less expensive than the average, it has to play around a little with suite revenue, and I'm not really sure what "box office" revenue really is. But it shows that this team is bleeding money somewhere and that it would be in trouble with a completely sold-out season. That, to me, indicates there is an issue in the structure of the team and that many of the current losses could have been prevented with better business decisions.

As for playoffs, they are money-makers for teams because there is no player salary, so let's figure out how many playoff home games the Coyotes would need to break even if there were no expenses at all (which is not the case, but it's easiest because I don't know which expenses to pro-rate).

First, you have to take suite revenue out of the equation because suites are sold on yearly contracts. With that gone, the average attendance-related revenue per game is $513,997 ($21,073,891/41).

The maximum number of home playoff games is 16 if the Yotes won the President's Trophy and took every series to seven games. That's an extra $8,223,952, and they're still a little less than $10 million short of breaking even.

In order to break even at their current expense/other income rate and assuming no playoffs, they'd have to bring in approximately $18,149,359 more than they are now. Assuming the best way to make more money is to raise ticket prices, that would essentially double the price of every ticket.

I have so many sticky notes all over my desk with numbers and fractions on them, it's not even funny.

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09-21-2009, 08:12 PM
  #29
billy blaze
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Quote:
Originally Posted by Kritter471 View Post
Number-crunching fun time, subtitled "Why the problem with the Coyotes' finances isn't attendance."

When you work out the percentages, the Coyotes would not be a profitable franchise even if they sold out every game. According to the numbers Moyes submitted, the Coyotes would lose approximately $18 million a season if they sold out all 41 home games. Bonus fun with potential playoff revenue at the bottom.

I got the Coyotes revenue and expense numbers from this filing :http://docs.bmcgroup.com/phoenixcoyo...k-9488_472.pdf

From other filings, I got that the Coyotes had 13,075 average paid attendance per game and 10,900 average actual attendance per game. Jobing.com Arena seats 17,799 for hockey. Therefore, the Coyotes sold 73.46 percent of available tickets and had 61.24 percent of the available bodies for concessions and merchandise purchases.

For suites, I assumed that they were sold at the same rates as the regular ticket sales. It could easily be more (most venues I know of have sold all their suites regardless of one tenant's attendance issues) and it could easily be less, but it's something to work with.

Now, what would happen if the Coyotes sold out every game?

Ticket revenues would increase from $13,328,609 at 73.46 percent -> $18,144,036
Concession and merchandise revenues would increase from $1,490,863 at 61.24 percent -> $2,434,495
"Box office" revenues would increase from $363,863 at 73.46 percent -> $495,396
Suite revenues would increase from $8,438,792 at 73.46 percent -> $11,487,601
Overall attendance-based revenue would increase from $23,623,182 -> $32,561,492

Add the completely sold out figure to the rest of the revenue ($34,740,961) and you have $67,302,453. That's still well short of the $85,451,812 in expenses. It would cover the team's "hockey expenses" of $59,103,192.

So even selling out every single game, the Coyotes would still lose in the neighborhood of $18 million a year. That indicates a huge drain in money somewhere.

Obviously, the analysis isn't perfect. It doesn't account for the potential for unsold tickets being more or less expensive than the average, it has to play around a little with suite revenue, and I'm not really sure what "box office" revenue really is. But it shows that this team is bleeding money somewhere and that it would be in trouble with a completely sold-out season. That, to me, indicates there is an issue in the structure of the team and that many of the current losses could have been prevented with better business decisions.

As for playoffs, they are money-makers for teams because there is no player salary, so let's figure out how many playoff home games the Coyotes would need to break even if there were no expenses at all (which is not the case, but it's easiest because I don't know which expenses to pro-rate).

First, you have to take suite revenue out of the equation because suites are sold on yearly contracts. With that gone, the average attendance-related revenue per game is $513,997 ($21,073,891/41).

The maximum number of home playoff games is 16 if the Yotes won the President's Trophy and took every series to seven games. That's an extra $8,223,952, and they're still a little less than $10 million short of breaking even.

In order to break even at their current expense/other income rate and assuming no playoffs, they'd have to bring in approximately $18,149,359 more than they are now. Assuming the best way to make more money is to raise ticket prices, that would essentially double the price of every ticket.

I have so many sticky notes all over my desk with numbers and fractions on them, it's not even funny.
so I guess we should move them somewhere they will make a profit? am I wrong ?

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Old
09-21-2009, 08:22 PM
  #30
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I have to admit that submitting documents with Eugene Melnyk's radio comments seems a bit weak and it does not seem to me that such submissions carry much weight with the judge.

On the plus side for the Balsillie camp, it seems that the judge is pretty interested in seeing some form of mediated resolution.

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09-21-2009, 08:27 PM
  #31
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Quote:
Originally Posted by billy blaze View Post
so I guess we should move them somewhere they will make a profit? am I wrong ?
The business as it is set up won't be profitable anywhere, that's part of the issue.

The Coyotes average ticket price was $37.45 last season (http://74.6.239.67/search/cache?ei=U...iHPSdptevxMw-- ). The league average price is $49.66.

To break even last year, the Yotes would have had to have an average price of $74.90 a ticket. That's a higher average than any team but the Leafs ($76.15). http://www.philly.com/philly/sports/...html?results=y

We won't know how well a team can financially perform in Phoenix until there are some major changes to the business side of the venture.

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09-21-2009, 08:28 PM
  #32
LadyStanley
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Originally Posted by berklon View Post
I recommended this title a few threads ago.

It's because I'm Canadian, isn't it?
More a matter of timeliness. (Suggestions for future thread titles? PM 'em to Fugu when thread hits about 850 posts.)

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Originally Posted by RR View Post
Coyotes have hired Sean Burke as their new goaltending coach and former Flames and Jackets Head Coach Dave King as Assistant Coach. Not sure if Fuhr quit or was fired. Burke and King are on the ice at practice today.

Burke was already in-house but King has been coaching in Europe. Good to see the team doing some new business while waiting for the Judge.
As I posted yesterday, Fuhr now has the title "director of goalie development" or similar.

http://coyotes.nhl.com/club/news.htm...id=phx-home-dl
Coyotes announcement of King hiring, clarification Fuhr's role

Just listening to Dreger during Pit-Mtl intermission. Gretzky is paid through this month; he may not get anything if he's not in the organization starting October 1. (Related story on TGO/WG being paid: http://www.azcentral.com/sports/heat...incoyotes.html)


http://www.bloomberg.com/apps/news?p...d=aCkZ9MaBiSG0
Bloomberg looks at JBs response to Melnyk's comments


http://www.azcentral.com/sports/coyo...es0921-ON.html
Arizona Republic on Wednesday hearing

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09-21-2009, 08:38 PM
  #33
XX
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Originally Posted by Kritter471 View Post
N

So even selling out every single game, the Coyotes would still lose in the neighborhood of $18 million a year. That indicates a huge drain in money somewhere.
Something.... nefarious? Ya don't say! The Coyotes have, reportedly, some of the highest expenses in the league for some odd reason. We have court documentation of the Coyotes being used in Moye's money shell game via questionable leasing practices, for example.

Kritter; can you cut down the Coyotes expenses to say the median or mean in the league, and then calculate potential loss/profit? This number has been floated out there, as hockey expenses (and therefore the majority of expenses) are mostly inline across all franchises.

It would be interesting to see how the numbers play out without all the special tweaking Uncle Moyes has done.

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09-21-2009, 08:46 PM
  #34
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Originally Posted by XavierX View Post
Something.... nefarious? Ya don't say! The Coyotes have, reportedly, some of the highest expenses in the league for some odd reason. We have court documentation of the Coyotes being used in Moye's money shell game via questionable leasing practices, for example.

Kritter; can you cut down the Coyotes expenses to say the median or mean in the league, and then calculate potential loss/profit? This number has been floated out there, as hockey expenses (and therefore the majority of expenses) are mostly inline across all franchises.

It would be interesting to see how the numbers play out without all the special tweaking Uncle Moyes has done.
If you give me some place to find average loss, I will be happy to. I know GSC has posted some Nashville numbers around on this board, and those may be good comparables as well.

Here's GSC's thread on Nashville vs. Phoenix: http://hfboards.com/showthread.php?t...hville+Phoenix

Using Nashville's 2008-2009 projected expenses ($68.1 million), the Coyotes would have been a little less than $1 million in the red with 41 sellouts and about $10 million shy with their given attendance revenues. With all sellouts, the Coyotes would have needed two playoff games to break even and make a little profit. That indicates that ticket prices need to be slightly higher to be profitable, but it's a much more workable model than the current expense structure.

Assuming 90 percent tickets sold, Phoenix would need to raise ticket prices by 18 percent to break even without any playoff games and assuming Nashville's expenses. That would be an average of $47.13 a ticket, just below the league average of $49.66.

Nashville's average ticket price last season was $47.22, and reports indicate the Preds turned a slight profit without making the playoffs. That indicates to me the non-ticket revenues are similar.

I am ignoring the debt service/amortization/deprecation issue in all of this, btw, and looking strictly at operating expenses because it is the best comparable. Both teams numbers are operating costs.


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09-21-2009, 08:53 PM
  #35
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Originally Posted by LadyStanley View Post
More a matter of timeliness. (Suggestions for future thread titles? PM 'em to Fugu when thread hits about 850 posts.)
Just kidding around anyways.

I did think the last thread title (How I Learned to Stop Worrying and Love the Baum) was sheer brilliance.

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09-21-2009, 08:57 PM
  #36
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Originally Posted by billy blaze View Post
video from game on September 15, 2009, maybe some of the phoenix people can spot themselves - shouldn't be too hard

http://www.youtube.com/watch?v=ECYkh-Aqfgc
And this is the market that the NHL wants to save? - sheesh

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09-21-2009, 09:04 PM
  #37
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I have a question for the legal experts. From the discussion it seems crystal clear that a veto of a relocation by the Leafs would constitute a violation of some anti-trust law. I presume this is transparently true. Correct me if its not.

A few posters here have suggested that the Leafs or Buffalo have sneakily used their persuasive powers to convince the other owners to vote against such a relocation. The implication being that this is merely a way of hiding their veto power. My question is, is it a violation of anti-trust law for the leafs to convince the other owners to vote against the transfer? Here I presume that the leafs are merely using reasoned arguments to convince the other owners that relocation would be bad for the league. Is this illegal?
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This very question has come before the Seventh Circuit in the past and there is a precedent to support this.

In Fishman v. Estate of Wirtz 807 F.2d 520, 543-45 (7th Cir.,1986), the Seventh Circuit Court of Appeals held that it was not an antitrust violation for the league to vote "no" to a prospective owner of the Chicago Bulls, holding:

"The NBA does effectively have the power to pick its members since it can reject everyone selected by the incumbent until the right new owner comes along....It is clear that the second step-the act of voting the rejection-cannot by itself give rise to an antitrust violation.....While it is true that the antitrust laws apply to a professional athletic league, and that joint action by members of a league can have antitrust implications this is not such a case. Here the plaintiffs wanted to join with those unwilling to accept them, not to compete with them, but to be partners in the operation of a sports league for plaintiffs' profit."

The situation in the Fishman v. Wirtz case did not involve a move to a new city but two competing bidders for the Bulls to remain and play in Chicago Stadium - then the only acceptable arena in Chicago. The winning bidder made a deal with the arena for exclusive rights and may even have had the lower bid dollar wise. The winning bidder, however, lobbied the other NBA team to vote 'yes' for him and 'no' for the other party (Fishman). Essentially a boycott of the Fishman group occured where the winning bidders, contacted each team and "invited" them to boycott the Fishman group and refuse to vote 'yes' on the franchise transfer to them despite them having entered into a contract to purchase with the existing owner. So the situation was somewhat similar to here where the BOG rejected making Balsilie their "partner" by voting no to his ownership application.
It's also apparent that the NHL is using this case as a precedent and has focused all its efforts on proving that a partner they don't want-- for whatever reason -- cannot be forced on them.

One could argue that this case shouldn't be used as a precedent because there was never a question of relocation. One could also argue that the Leafs would never even have to exercise a veto. If this indeed were a cartel, and one which might behave illegally with regard to territory assignment, it then is in the interest of each cartel member to protect what has been assigned to them. Whether or not this can be proven as a motivator in the decisions that are made-- that's the tougher item. Is a result alone that perpetuates this type of status quo potentially proof of an illegal cartel?

Perhaps the better question is: Can a cartel use legal methods to achieve an illegal result (stifling of competition, territory veto, etc.)?

 
Old
09-21-2009, 09:13 PM
  #38
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If you give me some place to find average loss, I will be happy to. I know GSC has posted some Nashville numbers around on this board, and those may be good comparables as well.

Here's GSC's thread on Nashville vs. Phoenix: http://hfboards.com/showthread.php?t...hville+Phoenix

Using Nashville's 2008-2009 projected expenses ($68.1 million), the Coyotes would have been a little less than $1 million in the red with 41 sellouts and about $10 million shy with their given attendance revenues. With all sellouts, the Coyotes would have needed two playoff games to break even and make a little profit. That indicates that ticket prices need to be slightly higher to be profitable, but it's a much more workable model than the current expense structure.

Assuming 90 percent tickets sold, Phoenix would need to raise ticket prices by 18 percent to break even without any playoff games and assuming Nashville's expenses. That would be an average of $47.13 a ticket, just below the league average of $49.66.

I am ignoring the debt service/amortization/deprecation issue in all of this, btw, and looking strictly at operating expenses because it is the best comparable. Both teams numbers are operating costs.
There's a reason some of us keep referring to the revenue gap between the richer teams and those that are barely keeping up. Do you believe that any team that could charge $100 per game, avg, would not do it? I don't. I also think any team that could sign a $50 MM TV deal for local rights would do so. They'd have 100 suites and charge $500K per suite. And so on...

Also, throw in Gretzky's contract. There's $8 MM for you.

Another item to throw onto your number crunching bonfire, the cost of player personnel, where a midpoint cap level of $48 MM constitutes 81% of a $59 MM revenue base. As you know, if a team cannot keep up with league growth averages, they also don't get to keep receiving 100% of revenue sharing dollars otherwise due to them.

Well, if there isn't enough revenue to cover expenses, what does an owner need to do to keep the team operational? Borrow money, or throw more of his own in, assuming he's go the liquidity.

Keep in mind that NHL execs have said it takes at least $80-90 MM to run an NHL team. Hopefully, most of that comes in from revenues. The question is what happens when it does not. You can cut expenses, but that doesn't mean there's enough money left regardless.

 
Old
09-21-2009, 09:27 PM
  #39
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It's also apparent that the NHL is using this case as a precedent and has focused all its efforts on proving that a partner they don't want-- for whatever reason -- cannot be forced on them.

One could argue that this case shouldn't be used as a precedent because there was never a question of relocation.
As far as the NHL is concerned this case doesn't include relocation either. They've never even voted on it and the process that could have led to it hit a fatal roadblock before it ever came up.

Part of the reason "antitrust" is going to have so much trouble getting any traction in the upcoming months. Quite a few things are going to have to go against the league at once for it to ever be a viable argument, and considering they've been ahead of Balsillie, with an answer to everything he's tried to fling, ever since basically the day after Moyes sprung bankruptcy on them, I wouldn't hold out hope in that regard.

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Keep in mind that NHL execs have said it takes at least $80-90 MM to run an NHL team. Hopefully, most of that comes in from revenues. The question is what happens when it does not. You can cut expenses, but that doesn't mean there's enough money left regardless.
Don't get too hung up on profits and losses. Many of the NHL owners are fine with taking on some losses if the franchise value increases enough to offset it, which it mostly does.

If neither profits nor franchise value growth are coming close to offsetting losses, though, then it becomes time to consider whether the market is capable of supporting NHL hockey.

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09-21-2009, 09:42 PM
  #40
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Don't get too hung up on profits and losses. Many of the NHL owners are fine with taking on some losses if the franchise value increases enough to offset it, which it mostly does.

If neither profits nor franchise value growth are coming close to offsetting losses, though, then it becomes time to consider whether the market is capable of supporting NHL hockey.
I agree. The concern going into the lockout was franchise value stagnation. Lack of cost certainty was fingered prominently as the cause. The increase in franchise values immediately following the lockout without necessarily a commensurate increase in team revenues kind of proves that point. I also think that's why some owners decided that was the time for them to cash out.

 
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09-21-2009, 09:43 PM
  #41
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Fugu - I agree there are a lot more issues in the nitty-gritty, but I'm simply dealing with operating losses which seem to be a bit out of whack with another, similar, franchise, and I wanted to double-check my assumption that there is no way for the business as it is organized right now to turn a profit even before you start bringing in the paper losses of depreciation and the rate-variable losses of debt service. Gretzky's contract is one of the really obvious differences in operating costs, and GSC did a good job outlining other differences in expenses in his thread.

As far as raising ticket/suite/broadcast right prices, there is obviously that point of diminishing returns, especially with teams that have had the sort of on-ice success that helps bring bigger crowds. Ticket prices going up 18 percent would be a large jump, but the point I was more trying to make was it's a lot more realistic than the 100 percent jump that would be needed with the current business model.

Revenue does need to come up there, be it through selling more tickets at the current price point (max of $67 million using last year's numbers) or raising prices with a more modest gain in attendance. But the operating cost also has to come down, and the extra operating costs that Phoenix appears to have to support is what makes the losses so much more staggering than a franchise like Nashville.

Where have you seen that $80-$90 million figure before? It's something I hadn't heard.

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09-21-2009, 09:44 PM
  #42
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Originally Posted by Kritter471 View Post
Number-crunching fun time, subtitled "Why the problem with the Coyotes' finances isn't attendance."

When you work out the percentages, the Coyotes would not be a profitable franchise even if they sold out every game. According to the numbers Moyes submitted, the Coyotes would lose approximately $18 million a season if they sold out all 41 home games. Bonus fun with potential playoff revenue at the bottom.

I got the Coyotes revenue and expense numbers from this filing :http://docs.bmcgroup.com/phoenixcoyo...k-9488_472.pdf
You are only looking at half the problem - revenues.

As big a problem is expenses - which are out of line compared to other teams - partly due to non-arms length transactions between Moyes owned entities (renting office space from Moyes rather than using available space in the arena, paying Moyes' companies for transportation, paying Moyes on loans that are really equity, overpaying Gretzky for what effectively is an ownership stake, etc). IIRC, consultants had pointed out ~$15M/yr in potential savings.

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09-21-2009, 09:47 PM
  #43
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80-100m is about what most teams run for operating costs according to Forbes, with a few barely above and below that range.

In Phoenix, their operating costs were pegged at about 78m in 2008 (still waiting on 2009 numbers, should be in a month or so). A bit low but more or less typical for a smaller NHL market.

Money "lost" above and beyond that came from somewhere else. Probably Moyes left hand - right hand accounting tricks.

(lowest operating cost? Amazingly, it was Edmonton at around 73m. Probably because of their being debt free, no interest payments at all, while still being very frugal.)

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09-21-2009, 09:49 PM
  #44
XX
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The NHL is already saving ~10 million a year by dropping Gretzky and using US Airways. Good start.

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Old
09-21-2009, 09:51 PM
  #45
kdb209
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Quote:
Originally Posted by Kritter471 View Post
The business as it is set up won't be profitable anywhere, that's part of the issue.

The Coyotes average ticket price was $37.45 last season (http://74.6.239.67/search/cache?ei=U...iHPSdptevxMw-- ). The league average price is $49.66.

To break even last year, the Yotes would have had to have an average price of $74.90 a ticket. That's a higher average than any team but the Leafs ($76.15). http://www.philly.com/philly/sports/...html?results=y

We won't know how well a team can financially perform in Phoenix until there are some major changes to the business side of the venture.
Note that both those sets of numbers are from Team Marketing Report - the shortcomings of which have been noted here numerous times.

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Old
09-21-2009, 10:45 PM
  #46
TaketheCannoli
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Quote:
Originally Posted by Kritter471 View Post
If you give me some place to find average loss, I will be happy to. I know GSC has posted some Nashville numbers around on this board, and those may be good comparables as well.

Here's GSC's thread on Nashville vs. Phoenix: http://hfboards.com/showthread.php?t...hville+Phoenix

Using Nashville's 2008-2009 projected expenses ($68.1 million), the Coyotes would have been a little less than $1 million in the red with 41 sellouts and about $10 million shy with their given attendance revenues. With all sellouts, the Coyotes would have needed two playoff games to break even and make a little profit. That indicates that ticket prices need to be slightly higher to be profitable, but it's a much more workable model than the current expense structure.

Assuming 90 percent tickets sold, Phoenix would need to raise ticket prices by 18 percent to break even without any playoff games and assuming Nashville's expenses. That would be an average of $47.13 a ticket, just below the league average of $49.66.

Nashville's average ticket price last season was $47.22, and reports indicate the Preds turned a slight profit without making the playoffs. That indicates to me the non-ticket revenues are similar.

I am ignoring the debt service/amortization/deprecation issue in all of this, btw, and looking strictly at operating expenses because it is the best comparable. Both teams numbers are operating costs.
IIRC, when I looked at the Coyotes P&L's expenses were over $95 million annually, and interest was a ridiculous number, bordering on obscene, perhaps 300% of what Nashville pays. I understand you want to keep interest out of it, but I don't believe that's reasonable. As an example, interest is included in those Predator numbers GSC put together. Additionally, IIRC their expenses were similar to the Rangers who were right at the cap maximum. The Coyotes were close to the Cap floor, close to a $14 million payroll difference. If they spent on players at the rate the Rangers did, I think it would have taken MLSE's revenues to break even or make money. Something definitely is rotten in Denmark (Glendale).

As kdb pointed out, you may not want to use TMR ticket numbers. They are flawed in a number of ways.

Quote:
Originally Posted by Fugu View Post
It's also apparent that the NHL is using this case as a precedent and has focused all its efforts on proving that a partner they don't want-- for whatever reason -- cannot be forced on them.

One could argue that this case shouldn't be used as a precedent because there was never a question of relocation. One could also argue that the Leafs would never even have to exercise a veto. If this indeed were a cartel, and one which might behave illegally with regard to territory assignment, it then is in the interest of each cartel member to protect what has been assigned to them. Whether or not this can be proven as a motivator in the decisions that are made-- that's the tougher item. Is a result alone that perpetuates this type of status quo potentially proof of an illegal cartel?

Perhaps the better question is: Can a cartel use legal methods to achieve an illegal result (stifling of competition, territory veto, etc.)?
Fugu, the NHL has referenced a number of precedents in their filings. Some refer to team movement, some to locating a team in a "demanded territory", some regarding forcing a partnership to accept an unwanted partner when a partner is in bankruptcy, and many more. I referenced that specific case, because it was one that responded directly to the poster's question, "Can teams use their persuasive influence to convince the Board to vote against an applicant, and if so is that legal?"
In Fishman v. Estate of Wirtz the Court gives a resounding yes.

Additionally, I think you may be using a different view of what the product may be at hand. It sounds as if you subscribe to the theory the product is NHL Hockey. By that very narrow definition, all major leagues would have a monopoly. I think a common opinion is that the NHL provides "major league hockey" or even generic sports entertainment.

If the product is "major league hockey" then anti-competitive acts would be those illegal acts that keep any competitor from bringing major league hockey to the market. If as an example, Balsillie wanted to start the Major Hockey League in Hamilton, Quebec City, Winnipeg, Hartford and 10 other cities (take your pick where), compete for the same players as the NHL etc. and the NHL moved to keep them from gaining access to facilities, or gaining broadcast access, you'd better believe the approriate governments would be on them like white on rice.


Quote:
Originally Posted by kdb209 View Post
You are only looking at half the problem - revenues.

As big a problem is expenses - which are out of line compared to other teams - partly due to non-arms length transactions between Moyes owned entities (renting office space from Moyes rather than using available space in the arena, paying Moyes' companies for transportation, paying Moyes on loans that are really equity, overpaying Gretzky for what effectively is an ownership stake, etc). IIRC, consultants had pointed out ~$15M/yr in potential savings.
Good point. IIRC, with the Coyotes expenses, they would have needed to be the Rangers to break even. That doesn't seem reasonable at all.

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09-21-2009, 11:01 PM
  #47
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Originally Posted by kdb209 View Post
You are only looking at half the problem - revenues.

As big a problem is expenses - which are out of line compared to other teams - partly due to non-arms length transactions between Moyes owned entities (renting office space from Moyes rather than using available space in the arena, paying Moyes' companies for transportation, paying Moyes on loans that are really equity, overpaying Gretzky for what effectively is an ownership stake, etc). IIRC, consultants had pointed out ~$15M/yr in potential savings.
Are their revenues out of line compared to other teams?

The thing is both are problems, and having a dearth of revenues may be the exacerbating feature to the other half of their problems-- costs. The owner has to pay those bills somehow, and it's definitely not going to be with the team's revenues.

Again-- you can cut costs, but if your revenues are too low for an NHL team, you're still up the proverbial creek.

 
Old
09-21-2009, 11:05 PM
  #48
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Quote:
Originally Posted by Fugu View Post
I agree. The concern going into the lockout was franchise value stagnation. Lack of cost certainty was fingered prominently as the cause. The increase in franchise values immediately following the lockout without necessarily a commensurate increase in team revenues kind of proves that point. I also think that's why some owners decided that was the time for them to cash out.
I'd think more of them who "cashed out" were really "cashing in." The value of the team was higher once the lockout ended.

They gained cost-certainty by tying salaries to revenues. The salary cap basically lowered the risk of a lot of franchises to would-be owners. They saw the exact dollar amount needed to compete in the NHL, and for a lot of franchises, it appeared to level the playing field.

A smart business man would see that as an opportunity to cash in, get the boost in franchise value cost-certainty brings before finding out if interest in the sport fell off.

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09-21-2009, 11:06 PM
  #49
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Originally Posted by leek View Post
IIRC, when I looked at the Coyotes P&L's expenses were over $95 million annually, and interest was a ridiculous number, bordering on obscene, perhaps 300% of what Nashville pays. I understand you want to keep interest out of it, but I don't believe that's reasonable. As an example, interest is included in those Predator numbers GSC put together. Additionally, IIRC their expenses were similar to the Rangers who were right at the cap maximum. The Coyotes were close to the Cap floor, close to a $14 million payroll difference. If they spent on players at the rate the Rangers did, I think it would have taken MLSE's revenues to break even or make money. Something definitely is rotten in Denmark (Glendale).
Leek, add the rest of the numbers here if you're going to post the expenses figures. Gotta keep everyone honest.


Quote:
Fugu, the NHL has referenced a number of precedents in their filings. Some refer to team movement, some to locating a team in a "demanded territory", some regarding forcing a partnership to accept an unwanted partner when a partner is in bankruptcy, and many more. I referenced that specific case, because it was one that responded directly to the poster's question, "Can teams use their persuasive influence to convince the Board to vote against an applicant, and if so is that legal?"
In Fishman v. Estate of Wirtz the Court gives a resounding yes.

Additionally, I think you may be using a different view of what the product may be at hand. It sounds as if you subscribe to the theory the product is NHL Hockey. By that very narrow definition, all major leagues would have a monopoly. I think a common opinion is that the NHL provides "major league hockey" or even generic sports entertainment.

If the product is "major league hockey" then anti-competitive acts would be those illegal acts that keep any competitor from bringing major league hockey to the market. If as an example, Balsillie wanted to start the Major Hockey League in Hamilton, Quebec City, Winnipeg, Hartford and 10 other cities (take your pick where), compete for the same players as the NHL etc. and the NHL moved to keep them from gaining access to facilities, or gaining broadcast access, you'd better believe the approriate governments would be on them like white on rice.
Here's my question: Can a cartel use legal methods to achieve an illegal result (stifling of competition, territory veto, etc.)?

And no, I'm definitely referring to NHL hockey and things like the MLSE letter and Melnyck's comment about veto rights within their territory for relocation, as per Article 4.3.

 
Old
09-21-2009, 11:09 PM
  #50
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Originally Posted by KevFu View Post
I'd think more of them who "cashed out" were really "cashing in." The value of the team was higher once the lockout ended.

They gained cost-certainty by tying salaries to revenues. The salary cap basically lowered the risk of a lot of franchises to would-be owners. They saw the exact dollar amount needed to compete in the NHL, and for a lot of franchises, it appeared to level the playing field.

A smart business man would see that as an opportunity to cash in, get the boost in franchise value cost-certainty brings before finding out if interest in the sport fell off.
No, I do mean cash out for the previous set of owners who had the teams during the 1990's and up to the lockout. With the resetting of wages, addition of revenue sharing, and their cost certainty, the existing owners had to ask themselves the following. Will the franchise value ever be higher as compared to what I have already put in, a diminishing returns type of thing.

I think the ones who decided to sell said, "No."

 
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