MONEYPUCK: RICH MAN, POOR MAN

Robin Brownlee
November 28 2012 02:28PM

If you’ve had difficulty getting your head around the numbers being tossed around during the NHL lockout regarding the financial situations the league’s 30 teams find themselves in, there’s good reason – at least if you look at the numbers published in Forbes Magazine today.

In its latest item on NHL team values, which you can find here, the numbers Forbes is using shows a huge disparity in the values, revenues and operating incomes of the 30 franchises.

While the Edmonton Oilers are ranked a reasonably healthy 14thin value at $225 million, that number leaves Daryl Katz’s outfit a mere $775 million behind the Toronto Maple Leafs, who hold down top spot with a value listed at a cool $1 billion. At the other end of the scale, the St. Louis Blues sit 30th with a Forbes value of $130 million – some $870 million behind Toronto.

Forbes lists Edmonton at $225 million in value with a 2011-12 revenues of $106 million and an operating income of $16.2 million. The Calgary Flames, meanwhile, are listed at a value of $245 million, with 2011-12 revenues of $117 million and an operating income of $11 million, well back of the Oilers.

NOT ALL TEAMS CREATED EQUAL

There’s plenty in the article that jumps out at you. Some of the excerpts that caught my eye:

"But the spread between the rich and poor teams is dramatic. The five most valuable teams–the Maple Leafs ($1 billion), New York Rangers ($750 million), Montreal Canadiens ($575 million), Chicago Blackhawks ($350 million) and Boston Bruins ($348 million)–are worth $605 million, on average. The five least valuable–the Carolina Hurricanes ($162 million), New York Islanders ($155 million), Columbus Blue Jackets ($145 million), Phoenix Coyotes ($134 million) and St. Louis Blues ($130 million)–are worth just $145 million, on average."

"There is also an incredible bifurcation of cash flow. Overall operating income (earnings before interest, taxes, depreciation and amortization) almost doubled during the 2011-12 season, to $250 million. But the sport’s three most profitable teams–the Maple Leafs ($81.9 million), Rangers ($74 million), Canadians ($51.6 million)–accounted for 83% of the league’s income, while 13 of 30 teams lost money, before non-cash expenses and interest payments."

If Forbes is accurate about 13 teams operating in the red – if they’re even in the ballpark for that matter – it’s little wonder commissioner Gary Bettman is playing hardball with Donald Fehr and the NHLPA on behalf of the owners to re-set the NHL’s financial framework.

From where I sit, it’s chilling, or should be, that a franchise like the San Jose Sharks (rated 15th by Forbes with a value of $223 million) lost about $900,000 in 2011-12 despite having sell-outs in 110 consecutive games. If you click through the thumbnails of teams in the item you’ll find other examples.

While business is booming at the top of the Forbes list, and is pretty good in many markets like Edmonton, even with the Oilers operating out of dated Rexall Place, there’s trouble, and plenty of it, at the other end of the scale.

Listen to Robin Brownlee Wednesdays and Thursdays from 3 p.m. to 5 p.m. on the Jason Gregor Show on TEAM 1260.

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A sports writer since 1983, including stints at The Edmonton Journal and The Sun 1989-2007, I happily co-host the Jason Gregor Show on TSN 1260 twice a week and write when so inclined. Have the best damn lawn on the internet. Most important, I am Sam's dad. Follow me on Twitter at Robin_Brownlee. Or don't.
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#1 yawto
November 28 2012, 02:30PM
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This wouldn't be the first time RB changed my comment and made me look like a goof on this blog, why stop now?

Edit: Stop wasting time.

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#2 yawto
November 28 2012, 02:37PM
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Deal, RB. You left up one fist, I will now no longer fist your posts. Good read. Great explanation. I work for a huge corporation that makes billions and I go to work for a year to make less than what most players get on a paycheck. I think that both sides are dumb but the simple math says that if the owners cannot afford the salaries, then eventually something is going to give. Ask the people at hostess how their negotiations went? And they weren't complaining about taking a 10% hit on a multi million dollar salary.

Players are being spoiled brats. The other thing I don't get is how they won't take a paycut here but will play in Europe for a portion of their salary (far less than the reduction in the deals they have been offered) to make a point. Lame. Funny thing is other than Horcoff, I think most of our Oiler players have been fairly solid in not posting childish comments on twitter or in the media to insite the fans.

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#3 Captain Obvious
November 28 2012, 02:39PM
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And yet as every columnist worth his salt will tell you the owners are fighting for a CBA that won't address any of the problems for teams at the lower end of the scale.

If the NHL had a soft cap/luxury tax and a reduced salary floor, every team that was run competently would be able to make money. Instead they are destroying their business in an attempt to get a CBA that won't solve any of their problems.

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#4 Sanaa Montana
November 28 2012, 02:41PM
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NHLPA and Fehr are a bunch of clowns. The lock-out is an embarassment on the game of hockey and the NHL, an embarassment brought forth by spoiled players and greedy agents with agendas.

This lock-out is deeper than the numbers. This is battle between Hockey Canada and Corporate America.

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#5 They're $hittie
November 28 2012, 02:51PM
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@Captain Obvious

soft caps dont work in the nhl. This is not an established league like baseball or a league that is more individual based than team, like baseball.

The small market teams need star players and a good teams to attract fans and growth. A soft cap just allows the out of control spending that the leafs and rangers have always done. It also allows teams like detroit to make them look like Micky Mouse Clubs.

I like the idea of a lower cap floor but a soft cap would mean the end of 5-6 teams.

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#6 dcsj
November 28 2012, 02:58PM
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The last two articles on ON prompt a question. Some have advocated contraction for the NHL, reduce it to the Canadian teams and a few of the more profitable American teams. I wonder if the league would be as profitable with fewer teams? Or, at least, would the remaining teams be as profitable after contraction as they were before contraction? If the answer is yes, then contraction is probably a good idea. If the answer is no, then more robust gate-sharing is critical for the future.

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#7 Captain Obvious
November 28 2012, 03:01PM
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They're $hittie wrote:

soft caps dont work in the nhl. This is not an established league like baseball or a league that is more individual based than team, like baseball.

The small market teams need star players and a good teams to attract fans and growth. A soft cap just allows the out of control spending that the leafs and rangers have always done. It also allows teams like detroit to make them look like Micky Mouse Clubs.

I like the idea of a lower cap floor but a soft cap would mean the end of 5-6 teams.

Why would a soft cap mean the end of teams? Only teams that are losing money are in danger, and lowering their costs would mean they wouldn't lose money anymore.

If anything the team aspect of hockey means that you can win without stars. Moreover, if this offer were combined with contractual restrictions that pushed back free agency and limited salaries for the first six or seven years of a career through defined arbitration, then teams would be able to compete with a lower payroll while retaining their star players. The Tampa Bay Rays just signed Evan Longoria to a team friendly contract that will keep him in Tampa for his entire career. The system in baseball works. It simply isn't true that the Yankees get all the good players or that it is possible to compete.

Baseball's system is win-win. The players get more money while the owners get a salary structure that allows all teams to compete.

That's what is so maddening about the owners. Even if they get everything that they want it won't solve their problems. How asinine is it that it took the players to suggest making the salary floor a percentage rather than a fixed rate and that this is one of the issues the owners won't budge on (see Larry Brooks' latest article). Simply put, so long as the owners aren't able to arrange their business in a mutually profitable way these problems won't go away. Reducing the % of HRR is a bandaid that does nothing to address the structural problems of the NHL.

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#8 Quicksilver ballet
November 28 2012, 03:07PM
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yawto wrote:

Deal, RB. You left up one fist, I will now no longer fist your posts. Good read. Great explanation. I work for a huge corporation that makes billions and I go to work for a year to make less than what most players get on a paycheck. I think that both sides are dumb but the simple math says that if the owners cannot afford the salaries, then eventually something is going to give. Ask the people at hostess how their negotiations went? And they weren't complaining about taking a 10% hit on a multi million dollar salary.

Players are being spoiled brats. The other thing I don't get is how they won't take a paycut here but will play in Europe for a portion of their salary (far less than the reduction in the deals they have been offered) to make a point. Lame. Funny thing is other than Horcoff, I think most of our Oiler players have been fairly solid in not posting childish comments on twitter or in the media to insite the fans.

Your efforts are making progress, keep hammering away on him. Robin is softening a great deal in regards to fisting here. Oilersnation members have gone to great lengths to transform Mr. Brownlee into a much kinder friendlier gentle giant. He labours now it seems to keep the status quo on this fisting topic. The fist battle will soon near it's end for the famed Rueben Bronte.

Oh look, fresh salad rolls with peanut sauce.

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#9 StHenriOilBomb
November 28 2012, 03:29PM
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The owners of the top earning teams immensely benefit from having a few losers at the bottom. Imagine how much more they would have to pay if the bottom 6 teams' revenue was taken out of the salary cap equation...

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#10 They're $hittie
November 28 2012, 04:04PM
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@Captain Obvious

they have trouble with attendance as it is. When the team is underperforming and cant keep star players because they are going to the rangers for gross overpayments how are they suppose to keep a fan base.

A soft cap may limit labour costs but it is going to greatly decrease their revenue also.

Baseball works because it is a financial sound league.

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#11 Robin Brownlee
November 28 2012, 05:03PM
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@Quicksilver ballet

Think again, fist-for-brains.

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#12 vetinari
November 28 2012, 05:46PM
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Fists down fellas, and hug it out... As for the economics of the NHL, it appears that at least 1/3 of the league are vanity projects for corporate owners rather than money making enterprises... It also diffuses Katz's threat to move the team in all likelihood.

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#13 DieHard
November 28 2012, 06:15PM
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dcsj wrote:

The last two articles on ON prompt a question. Some have advocated contraction for the NHL, reduce it to the Canadian teams and a few of the more profitable American teams. I wonder if the league would be as profitable with fewer teams? Or, at least, would the remaining teams be as profitable after contraction as they were before contraction? If the answer is yes, then contraction is probably a good idea. If the answer is no, then more robust gate-sharing is critical for the future.

So an Edmonton ticket buyer subsidizing a coyotes or Blues ticket buyer. NO THANKS.

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#14 Wax Man Riley
November 28 2012, 06:18PM
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vetinari wrote:

Fists down fellas, and hug it out... As for the economics of the NHL, it appears that at least 1/3 of the league are vanity projects for corporate owners rather than money making enterprises... It also diffuses Katz's threat to move the team in all likelihood.

I don't at all see the NHL allowing relocation of one of the only franchises making money with a fanbase this size.

Especially not to move them to an unknown market. No way. No how.

As for the lockout, the players need to STFU! Stay off the twitterz you dummies, and look at the game from the outside. Without a structure that allows teams to be profitable, there won't be any teams, and the million dollar babies (and unfortunately the AHL plugs) will have nowhere to cry about how much they pay in escrow.

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#15 Cheap Shot Charlie
November 28 2012, 06:56PM
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Captain Obvious wrote:

And yet as every columnist worth his salt will tell you the owners are fighting for a CBA that won't address any of the problems for teams at the lower end of the scale.

If the NHL had a soft cap/luxury tax and a reduced salary floor, every team that was run competently would be able to make money. Instead they are destroying their business in an attempt to get a CBA that won't solve any of their problems.

The problem is are more than 16 teams run competently now? I think 30 teams is too many but 30 is better than 16. Soft cap means the NHL will join the ranks of 3rd tier sports like the CFL and MLS. I'd rather for compete for viewership against the Raptor's than against the Argos.

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#16 Hair bag
November 28 2012, 08:03PM
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Captain Obvious wrote:

Why would a soft cap mean the end of teams? Only teams that are losing money are in danger, and lowering their costs would mean they wouldn't lose money anymore.

If anything the team aspect of hockey means that you can win without stars. Moreover, if this offer were combined with contractual restrictions that pushed back free agency and limited salaries for the first six or seven years of a career through defined arbitration, then teams would be able to compete with a lower payroll while retaining their star players. The Tampa Bay Rays just signed Evan Longoria to a team friendly contract that will keep him in Tampa for his entire career. The system in baseball works. It simply isn't true that the Yankees get all the good players or that it is possible to compete.

Baseball's system is win-win. The players get more money while the owners get a salary structure that allows all teams to compete.

That's what is so maddening about the owners. Even if they get everything that they want it won't solve their problems. How asinine is it that it took the players to suggest making the salary floor a percentage rather than a fixed rate and that this is one of the issues the owners won't budge on (see Larry Brooks' latest article). Simply put, so long as the owners aren't able to arrange their business in a mutually profitable way these problems won't go away. Reducing the % of HRR is a bandaid that does nothing to address the structural problems of the NHL.

Two things:

1) There is no competitive balance in MLB - there are maybe 10 teams at most that have a chance every year. The other 20 are feeder teams developing talent for the big spenders - even though these teams aren't losing money they will never make a run at a World Series. I don't want to ever have the NHL be about the same 6 teams contending for the Stanley Cup every year.

2) The reason MLB can do what it does is major dollars from huge tv deals. The NHL will never have a major US Television Contract so the league can never be run in the same way as MLB or the NFL or NBA for that matter.

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#17 book¡e
November 28 2012, 08:21PM
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$200 million NHL deal says that contraction is not in the cards. The NHL is just gaining that traction in the USA and if you erode the limited value in the weak markets, the whole thing tumbles back down to a regional league.

The team could add a team in the Toronto area and another in Quebec which would probably add to the overall financial strength of the league.

Maintaining league competitiveness is good for the game. Whatever they do, that is critical.

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#18 Captain Obvious
November 28 2012, 09:13PM
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@Hair bag

What gives you the idea that there is no competitive balance in MLB. The difference between MLB and the NHL is how many teams make the playoffs, not competitive balance. If 16 teams made the playoffs in MLB then since 2005 every single team would have made the playoffs multiple times except for Pittsburg and Kansas City, two teams which are famous for inept management.

By any empirical measurement you can invent, MLB has good competitive balance. If you don't believe go look for yourself at baseballreference.com. Every single team except for the Royals and Pirates has had periods of reasonably good teams in the last eight years.

It's a thirty team league, and not every one can be good at the same time, but every can be good some of the time. That's the definition of competitive balance.

Second, suggesting contraction as a solution is ridiculous. The league should be expanding. The economic fundamentals of the league on the whole are stable, there is lots of room for growth in the mid and lower markets, the start up costs in those markets have already been paid, and there is excellent room for growth in expansion markets, and there are more than enough good players to go around.

When thinking about the lockout you have to recognize that nothing the owners say about their financial situation is true. The players, on the other hand, have access to the owners accounting books. They know what is true and what is not. It is very much not in their interest for the league to go bankrupt or for teams to contract. The fact that they aren't willing to make an agreement tells you everything you need to know about the owners claims that they are losing money.

Here's a quick and dirty summary of how absurd the owner's position is.

http://www.insidethebook.com/ee/index.php/site/article/support_the_nhl_owners/

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#19 Mike
November 29 2012, 12:22AM
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I think a soft cap might be workable, if it was set up so that the penalty amount was funneled entirely into revenue sharing.

The more the big markets spend, the more of a helping hand the small teams get to stay competitive.

But at the end of the day the NHL needs to actually ask itself, is having 30 (or 32) teams a benefit to the league as a whole? If yes, revenue sharing, because it benefits the league as a whole.

If not, contract the weakest teams.

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#20 dcsj
November 29 2012, 12:43AM
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DieHard wrote:

So an Edmonton ticket buyer subsidizing a coyotes or Blues ticket buyer. NO THANKS.

I see your point. But are you really subsidizing the ticket buyer? When the Blues come into town, aren't you buying their 'entertainment value' as well as the Oilers? You wouldn't pay the same money to just watch the Oilers practice, would you? As it is now, the visiting team gets nothing out of the gate it helped create (at least as I understand it). So it would seem more equitable to divvy up the pot. And it might get the "have" teams interested in helping to build up the weaker teams attendance so there was a bigger pot to split up each night.

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#21 Lebowski
November 29 2012, 01:08AM
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Mario Lemieux made so much money that his owners went broke and he wound up owning the team for salary owed. Simplistic? Yes I know.

Most of the owners have money problems. That's why there's still a lockout. The cattle shouldn't want the ranch to go tits up. There's just not enough grass to go around.

Grist for the mill.

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#22 gcw_rocks
November 29 2012, 08:11AM
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The problem could easily be solved if they went to a NHL style revenue sharing model, where, as I understand it, the visiting team gets 40% of the direct revenue from away games.

it is abolsutely crazy that an away team gets no financial compensation for helping fill the arena when they are on the road. No one would pay Leaf's ticket prices to watch the Leafs play an intersquad game.

I am not saying the number needs to be 40%, but I would have thought 25-30% would be good, focusing on ticket revenue, TV, and radio. Whether you throw in consessions is debatable.

but if you did that, you still have a major incentive for all teams to do well, since in most arenas the revenue is higher when playing good teams, and yet you even out the revenue line somewhat. I bet that kind of model would push half of those money losing teams into the black.

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#23 gcw_rocks
November 29 2012, 08:12AM
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Whoops, meant "NFL-style" model

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#24 Benhur
November 29 2012, 10:18AM
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One thing that keeps me focused on who deserves the biggest piece of pie in these contract talks is the fact that: -any business needs to make enough money to pay all their expenses which includes building costs.Look at any successful corporation and they cover the cost of their bricks and mortar. -building costs are not being covered by most NHL teams because they require tax dollars as a subsidy to cover operating and borrowing costs. -ergo they need to make more money to cover operating costs. That means either more revenue (higher seat prices, additional TV, community tax support and sports related revenue) or less cost (paycuts, lower building costs, etc.).

The red flag of 13 teams operating in the red really drives home the poor economics that the league is operating under. The NHL will have to stick to their guns and develop a CBA which will ensure the viability of all the teams. Unfortunately we will miss out on a lot of hockey and some players will miss out on a lot of dollars and maybe the ends of their careers.

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#25 Rama Lama
November 29 2012, 12:42PM
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This lockout has nothing to do with hockey! It has everything to do with payback. Yes the players feel like they got burned last time, and this time they are going for broke!

Unions never ever do the right thing, even if it means cutting off their collective noses to spite their face.

They would rather lose their jobs than do the right thing for the league, the fans, and their own livelihoods.

They don't care if they are some of the best paid athletes in the world, playing a game they love.........none of this matters to them. So sad.

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#26 nunyour
November 29 2012, 01:45PM
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How can edmonton's multi-million dollar players honestly feel they deserve more money? khabby 3.8mil,whitney 4mil,hemsky 5 mil,horcoff 5.5mil,give me a break! all 4 of you should be thanking your lucky stars.

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