Re: CBC: NHL to Cancel All November Games
posted at 10/27/2012 7:24 AM EDT
In response to 49-North's comment:
In response to stevegm's comment:
In response to 49-North's comment:
I'm not siding with the league or the PA -- I'm just exploring some numbers.
According to Forbes, the Winnipeg Jets generated $71.0m of revenues in 2011-12. According to nhlnumbers.com, their salary cap hit was $51.9m. Also from Forbes, their net income was -$5.2m, so (through simple arithmetic) their other non-salary expenses were $24.3m. All this, for a franchise that True North paid $170m for (including a $60m relocation fee to the NHL).
So, the investors of True North paid $170m for the privilege of losing $5.2m in their first full year of NHL operations. This in a market where they sold out the building every night, and the fans pay the second highest average ticket price in the league (http://www.torontosun.com/2011/10/26/nhl-prices-hit-canadians-hardest).
It seems to me that the NHL is in an economically unsustainable situation right now, when a team like the Jets can't break even.
This is a great example of corporate smoke and mirrors. Those numbers mislead. If we consider a few things, it's easy to see there is much more to this.
No arguing the numbers presented, and not suggesting anything shady, but there are dozens of "deductions" out there to minimize profit, and all good businesses exploit them. Virtually no business records "net profit" in the first year,(or several years thereafter) and sound businesses have spin off companies and real estate companies to "avoid" profit, thus avoiding unneccessary taxes. A business can be swimming in cash, yet showing little to no profit. Lending institutions don't even pay that much attention to profit(positive cash flow is as big)
Anyway, if anyone doesn't buy the above...consider this.
It's only been about a year since a bunch of "businessmen" paid 170 mil for the Jets. A grade 7 economics student could figure out their "income potential" in year one(41 times a sold out rink @x dollars). His baby brother could do expenses. Might need his 15 year old cousin to project tertiary income, and then it's all laid out.
How could a group of rich people be that stupid?
So.. the Jets were about 12 mil under the cap last year. Had they spent to the cap, and still missed the playoffs, the deficit would be about -17.2 mil for 11/12
Does anybody think rich business people would pay 170 million for something that pi$$ed away that kind of money, while "Sold Out" for the entire schedule? Especially when a gaggle of accountants and laywers poured over financials just months earlier, and obviously suggested..Buy it.
Suppose there's more to the story?
And finally...based on the above numbers, keeping around 13% more of HHR(which the league wants immediately) still makes the team a finacial dud if we use the above numbers.
Of course there's more to the story. But because TNSE is a private company, we're not going to see everything. They own MTS Centre, so presumably they profit from concessions, parking, sponsorship, signage, suites, etc. How much of this is included in HRR? If the answer is "not much", then the overall enterprise makes money, even if the hockey operations doesn't. The situation may be more grave for teams which don't own their facilities, and thus dont' make much beyond HRR.
Not looking to argue North, but you stated the league may be "economically unstable". The logic for that opinion was the Jets accounting stuff above. We know there are have nots in the league. Always will be. The Jets, however, aren't in that category, and we know the league overall is "very" stable. The owners can't begin to hide that truth, so it's admitted.
And in any business, we never, ever base it's overall health on the strength of it's weakest franchise/product. Subway is currently ranked the #2 franchise in America right behind Hampton Inns. Point is, there are also huge disparities in how much these businesses make, some do really well, some just squeak by, and some don't make it. Shouldn't that work for the NHL too?
Seems odd to me, that, especially in something as unimportant as the entertainment business, a guaranteed profit seems reasonable to so many people.