the "economic unhealthy" tag for franchises aren't exactly true. Look at the Dow Jones industrial average on the stock market -- the 30 companies listed have an average yield of 3%. This means for every 100 dollars in investment, the stock PAYS $3 a year. While that is nice, it is obviously the ownership from an investment standpoint where the strongest gains hope to come from. Taking the 3% average -- for the statistical mean NHL franchise (worth $240 million according to Forbes) - the equivalent of the dividend payouts would be about 7.6 million a year.
Now clearly most teams are still underneath this value -- but I think this shows it is unreasonable to expect a business to have returns the likes of what the Leafs (income of $82 million), Rangers ($41 million) and Montreal ($48 million) pull in. In this light, even Vancouver ($23M), Edmonton($17M), Detroit ($16M) and Chicacgo ($9M) range from very good to respectable. Other teams on the line such as Boston and Philly (making money) to Carolina and Washington (losing money) -- these team had all made operating decisions (in one way or another) to place a higher priority for on-ice performance instead on what the balance sheet says. Easily put - they didn't have to spend like they did if they were interested in profit. Are we really supposed to pity Minnesota and say they are broken when they go out and spend like they did this summer?
My feeling is the regular dollars and cents, at least as far as an investment goes, never would be there to begin with. If an investment that cost $240,000,000 had the only benefit of returning under $8 million a year (3% - remember) --- most financial analysts would put that as a poor investment. Sure - makes money but that would almost be the same as buying bonds.
The true value for an NHL franchise is the appreciation -- something that has continued to flourish post-lockout with the average franchise appraisal value (again, according to Forbes) increasing 47%.
This is where my disconnect with the owner's position and their unwillingnes to negotiate comes from
Well, its unfair to compare the NHL or any sports leagues to a regular business. The main commodity (players) is actually an expense you get zero tangible related dollars back. The revenue is not directly related to the return on the product. Its what makes it such a difficult business model to begin with. Also, add into it bylaws of a governing company (the league) and you have a product you can not compare.
You state yearly %'s to company value, but that does not relate to sports. Most companies worth $200 million in value are not running $125 million yearly revenues and balancing those to try to manage expenses that can grow to half of their company value. Sports does, its a huge difference.
That being said the reality still is 20 teams lose money, a handful make a bit and a handful make a lot so I am not really understanding the general comparison of %'s of return. But in your post you site only the examples that fit the % model, not the 22 or 23 that come in under your stated %'s.
That changes the thought process right there without even having to acknowledge that huge differences in sports business models.
I dont disagree to a point, however I think the NHLPA is aware of this, as are other leagues and like many are revenue generators (non HRR) its not a huge sticking point. Values that are listed do not point accurately to sales price especially in the NHL, teams like the Penguins who were bought at rock bottom prices, got two franchise players and a new building increased an average of about $10 million per year over 14 years (if you include how low they were bought) and that is not a huge number if you think about it and how high their losses were combined with how low they were running the franchise pre Crosby.
Franchise values seemed to increase a lot since the last lockout but remember, they were coming from a dark period financially for a lot of teams overall in the leagues. That is artificially showing increases based on the low original value and that will not sustain.
Anyways the point really is for me that the league is only asking for a 7% rollback in salaries to help most franchises become viable, along with some contract stipulations to avoid loopholes. Even with all of that a lot of teams will be struggling to compete. Too many teams carried losses that were more than their franchise value and too many teams do not see a large increase in their value as the numbers can be misleading based on some larger franchises. In the end it can be a revenue source but with 20 teams losing money and some a ton of money it is simply a way to recoup some losses but not nearly all
- while the 57% and HRR do not tell the entire story, non HRR and franchise value for most teams help but are not a saving grace. If they were they NHLPA and other leagues would make a huge deal of this.
by interstorm on Sun Nov 25, 2012 7:00 am
Massive deficit spending and printing money to sustain it cannot continue for many more years without a meltdown of some sort.
I fear going off topic here -- not what I intend and so I won't look to hold a separate discussion (at least in this thread) here. Just want to say that we, as a country, have encountered higher debt (as a percentage of GDP) than what we're dealing with now. Coming out of WW2 we were saddled with a great debt - with responsibility it was brought down. Only 10-15 years later was a period many people would reflect on as a "Golden Era" in this country. The pundits (both right and left wing) in the media are always stating otherwise -- for the most part, they should be tuned out as they aren't providing warning or solutions...they're just looking for followers, ratings and -- at the end of it all -- money for their own pockets. They're entertainment...nothing more. http://visual.ly/united-states-debt-per ... -1940-2012
Also CNN just had a decent story about the doom and gloom reporting in this country and how things are "shockingly" not that bad: http://www.cnn.com/2012/11/24/opinion/j ... ?hpt=hp_c2
That was a pretty political post on the economy, so related to just the NHL and franchise value - I think the point is the economy is not great and it could effect teams overall value eventually which is why you relate salaries to revenue and why it works. Just like any industry there is no way it can sustain an increase of that magnitude very long, it wont last.
In my opinion this is a solid reason to underscore the franchise value issue. Reason being the NHL wants players salaries (like the NFL and NBA) directly related to revenue, period. This is very fickle industry run on very fickle yearly budgets. Making a $7 million profit on a $110 million budget is nice but is tight enough that it can turn to a minus $7 million very quickly. I mean very quickly. Do the math on $100 tickets, $50 tickets, food and booze, parking and see how a downturn in attendance can hit a team very hard. Again, franchise value is nice but it cant be counted on and economy is one perfect example of why.