interstorm wrote:Froggy - I edited my post (directly above) for more clarifications, but i agree with what you say to a point. my questions are these:
1) what is a "reasonable" profit?
2) what makes teams lose money?
to point 1, i would again state that there is a difference between regular paid money and asset appreciation. looking at the stocks on the dow, the average dividend is 3%. at $240,000,000, the equivalent is just under $8 million dollars. so based on this, i would say while it would be great to make 40-50-100 million per franchise, a precedent is set by the stock market on what a 'reasonable' business can make (again - discussing dividends). beyond that, there is the value of the franchise as a whole (equate this to ownership of the stock). in that aspect, Forbes states the average team has appreciated since the lockout by 43%. it is important to note that over the same time period with the Dow, the average appreciation is under 20% -- so NHL teams far outpace the market there.
to point 2, teams are obligated to spend a certain amount of money (cap floor) but not go beyond a certain threshold (cap ceiling). many teams are on the bubble -- in the +/- 5 million range. if you look at many of their operating decisions, however, it is clear they place a higher priority on winning instead of profit. this is america -- they're totally capable of doing this. i'd even go far enough to commend the owners for it. what doesn't make sense, though, is to recklessly spend yet claim a business cannot turn a profit. at +/- 5 million, it wouldn't be hard have made some decisions to get the finances to fall in line with the $8 million profit i mention above. don't read what i say -- look yourself. go research what the washington capitals say they have made and look at the players they signed. now i am sure it would have been hard to mcphee, but he could have easily held back signing certain guys because the budget didn't allow for it. leonsis gave him the green light though. great -- but again, it's nobody's fault but his as to why the team didn't make more money.
the NHL needs to get out of this lockout mode that bettman has produced. they need to focus on growing the sport. the winter classic was great. even shootouts (for the casual fan) were awesome. just the guys in charge appear more inclined to fighting for crumbs instead of gunning for a seat at the table.
You keep posting this and while there is some truth to it, it is immensely flawed.
1. You can not average all of the teams in the league together and site 3% profit. This only shows that you are ignoring a huge point that 20 + teams lost money. Life isnt always fair, some teams make quite a bit of money but a 30 team league can not expect to be viable on the books of 5 teams. Its not possible.
2. You can not compare individual NHL teams net value to those on the stock exchange, the league has anti trust exemptions to start showing immediately the difference. However, your comparison is flawed generally as most businesses carrying a value of $200 million are not running expenses of $120 million while trying to make $5 million, with their number asset being people on short contracts - but also doubling as your number one expense. They would cease to exist. Most companies carry those values not just for profits coming in but for tangible assets. Small banks have holdings, other companies have buildings and products.
NHL teams have no tangible assets. You are simply buying the right run up expenses but bring in enough to make a profit. They make money in a variety of ways but you are simply buying ownership on a piece of paper.
If it was as clean cut as you are making it, it wouldnt take billionaires to buy these teams. the risk is simply to great. The expenses are enormous and these are complex businesses that need run.
3. the 43% is highly inflated due to the fact that the league was a mess prior to the lockout. While owning a team can sometimes help towards the bottom line the 43% means nothing, I mean the Penguins were bought on the cheap in 2000 well below value. Burkle and Mario got lucky with a few things, good for them.
The reality is if you take out the top 5 teams, most teams are not increasing in the amount to cover their losses. Period. Selling the team helps, but is not a huge issue or the NHLPA would be crying foul. They are not. And for good reason.
4. I do not know what the correct amount of profit is, but I do know 20 teams losing money sucks. Yes, I agree that we need more revenue sharing but I also agree that you cant look at one season at a time. The league is trying to get the finances right for the long term viability of the sport.
