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Report: some owners favor NHL shutdown if fans aren't allowed


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I can see their point and I don't doubt many feel that way.

2 options for how this might go...whatever total revenues the NHL generates (much lower), the owners will present that to the players and say they have to take a similar hit to their salaries.  The players will obviously say no.

The owners may hold their ground...and if the players give in, we may have a season...but with empty arenas if the players don't give in, there might be no hockey.

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2 hours ago, mjd1001 said:

I can see their point and I don't doubt many feel that way.

2 options for how this might go...whatever total revenues the NHL generates (much lower), the owners will present that to the players and say they have to take a similar hit to their salaries.  The players will obviously say no.

The owners may hold their ground...and if the players give in, we may have a season...but with empty arenas if the players don't give in, there might be no hockey.

But the owners and the players just agreed a few months ago to a CBA extension that specifies the cap and escrow levels for the next few years -- and those numbers factored in the expected economic hit from the virus.

(FTR, I continue to be surprised that the NHL agreed to an $81.5MM cap and only 1 year of increased escrow at 20%, with escrow then declining over time to 6% -- I think there is a high likelihood that revenues are going to take a huge hit that will not be adequately addressed from the owners' perspective at that level of cap and escrow.  However, I haven't read the full 71-page CBA extension document, so it's likely that there are other measures in there that will protect the owners.)

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3 hours ago, nfreeman said:

But the owners and the players just agreed a few months ago to a CBA extension that specifies the cap and escrow levels for the next few years -- and those numbers factored in the expected economic hit from the virus.

(FTR, I continue to be surprised that the NHL agreed to an $81.5MM cap and only 1 year of increased escrow at 20%, with escrow then declining over time to 6% -- I think there is a high likelihood that revenues are going to take a huge hit that will not be adequately addressed from the owners' perspective at that level of cap and escrow.  However, I haven't read the full 71-page CBA extension document, so it's likely that there are other measures in there that will protect the owners.)

The owners are fine. They are getting their share of the expansion fees plus TV revenues are expected to increase. 

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10 hours ago, tom webster said:

I’m going to make my retirement project to convince fans like yourself that the business model of sports franchises works. 

Don’t bother.  The NFL makes money.  The NBA makes money.  I think MLB makes money. I’m really uncertain about the NHL.   

What are their operating costs?  Maybe $200 million a season?  So how do they cover. Math tells me at least half that comes from ticket revenue.  So the other $100 million comes from TV contracts and merchandise.  I guess I can see it working.  It just seems like NHL owners have been crying poor forever.   Maybe it’s just rich people complaining they aren’t getting more rich quickly enough.  

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38 minutes ago, inkman said:

Don’t bother.  The NFL makes money.  The NBA makes money.  I think MLB makes money. I’m really uncertain about the NHL.   

What are their operating costs?  Maybe $200 million a season?  So how do they cover. Math tells me at least half that comes from ticket revenue.  So the other $100 million comes from TV contracts and merchandise.  I guess I can see it working.  It just seems like NHL owners have been crying poor forever.   Maybe it’s just rich people complaining they aren’t getting more rich quickly enough.  

The Pegulas were hemorrhaging money on the Sabres before the virus started circulating. The prospects for profitability this season are miniscule to nil. Right now the strategy is to maintain solvency in order to survive for the long term with better prospects. The financial stress is real for the Sabres and the league in general. 

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1 hour ago, JohnC said:

The Pegulas were hemorrhaging money on the Sabres before the virus started circulating. The prospects for profitability this season are miniscule to nil. Right now the strategy is to maintain solvency in order to survive for the long term with better prospects. The financial stress is real for the Sabres and the league in general. 

You’ve seen the books?

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19 minutes ago, tom webster said:

You’ve seen the books?

I don't need to see the specific details of the books. What is well known is that hockey revenue is more predicated on attendance than the other pro sports. And it was reported that the Pegulas lost a lot of money before the virus hit the sports world. The national TV and local team TV deals are certainly not going to be as lucrative as before the plague. Last year was a shortened season with less revenue and it is not guaranteed that this is going to be a full schedule. 

Staff has been dramatically cut and expenses tightened up to adjust to the severe economic climate. The coaching staff was asked to take a salary cut and then asked to take another cut in which they refused. You don't have to be a business guru to recognize that the financial stresses of the hockey business are evident as it is with a lot of businesses. 

Edited by JohnC
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NHL cap was $69 million in 2015 and $81 million five years later. The cap went up 17 per cent because the revenues went up 17 per cent.

The bulk of the overhead (players) is directly tied to revenues.

Pre-COVID, the NHL makes money.

Edited by dudacek
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13 hours ago, tom webster said:

The owners are fine. They are getting their share of the expansion fees plus TV revenues are expected to increase. 

This is a good point -- those 2 items will likely be pretty impactful.

As a related point -- does anyone know whether the expansion fee is included in the pie that is split with the players?

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2 hours ago, JohnC said:

I don't need to see the specific details of the books. What is well known is that hockey revenue is more predicated on attendance than the other pro sports. And it was reported that the Pegulas lost a lot of money before the virus hit the sports world. The national TV and local team TV deals are certainly not going to be as lucrative as before the plague. Last year was a shortened season with less revenue and it is not guaranteed that this is going to be a full schedule. 

Staff has been dramatically cut and expenses tightened up to adjust to the severe economic climate. The coaching staff was asked to take a salary cut and then asked to take another cut in which they refused. You don't have to be a business guru to recognize that the financial stresses of the hockey business are evident as it is with a lot of businesses. 

Businesses use events like this all the time to re-calibrate. 
There are several well written articles discussing why TV and digital revenue will go up, and up substantially despite the Pandemic.

Until it’s in their benefit to show operating revenue, it is in their best interest to show paper losses.

Its all a game. No one pays $500 million to join a club if 33% of the club is really “hemorrhaging” money.

While the NHL is more behoven to ticket revenue, Buffalo still got $20M national TV money, $20 million MSG fees, at least $10M expansion fee.

As for the shortened season, they kept most of the season ticket money and didn’t have the gist associated with putting on the games.

Finally, a major part of their business model is generating “non hockey related” revenue in order to keep the money from the salary cap.

As an example of the shell game that is professional sports, when the entity that ran the Sabre’s was forced into bankruptcy, their were actually over 40 businesses associated with running that business.

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1 hour ago, nfreeman said:

As a related point -- does anyone know whether the expansion fee is included in the pie that is split with the players?

What I'm reading (here, here) says an expansion fee is not considered Hockey Related Revenue under the CBA, and therefore does not contribute to the players' escrow.  NHLPA didn't bargain this into the CBA last go-around and missed an opportunity; the owners will make out. Between Vegas and Seattle, the expansion fee was $1.15B, which will be split among 30 teams (Vegas is excluded from the Seattle expansion fee).  Compare that to the total league revenue last year of $5.09B.  If both of the entire expansion amount is given to the owners (I'm sure it's not) and splt evenly, that's $38.3M each.

The TV contracts are currently $600M (Canada) and $200M (US), which totals as $800M, split 50/50 with the players as HRR, giving the owners each $12.9M last year.  This pales in comparison to NHL ticket and gameday merchandise/concession income, no matter how it's calculated:

Quote

According to Statista, NHL gate receipts from the 2017-18 season accounted for 37% of total revenue, compared to 27% in MLB, 22% in the NBA and 16% in the NFL. Forbes reviewed the same 2017-18 season and estimated 75% of NHL revenue came from tickets and affiliated gameday sales of merchandise and concessions.

It's not clear which teams would want to shut down without gate sales: high-spending teams (TOR, NYR, etc) with high overhead, high salaries, and disproportionately small share of TV money (but large merchandise and other revenue) or small-spending teams with small coffers, low merchandise revenue, and disproportionately high salaries (but higher relative TV money/revenue sharing).  If I had to guess, it's the latter.

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8 minutes ago, tom webster said:

Businesses use events like this all the time to re-calibrate. 
There are several well written articles discussing why TV and digital revenue will go up, and up substantially despite the Pandemic.

Until it’s in their benefit to show operating revenue, it is in their best interest to show paper losses.

Its all a game. No one pays $500 million to join a club if 33% of the club is really “hemorrhaging” money.

While the NHL is more behoven to ticket revenue, Buffalo still got $20M national TV money, $20 million MSG fees, at least $10M expansion fee.

As for the shortened season, they kept most of the season ticket money and didn’t have the gist associated with putting on the games.

Finally, a major part of their business model is generating “non hockey related” revenue in order to keep the money from the salary cap.

As an example of the shell game that is professional sports, when the entity that ran the Sabre’s was forced into bankruptcy, their were actually over 40 businesses associated with running that business.

Few people could have foreseen the disastrous affects of the pandemic. Ask the airline companies if this virus era was actually an opportunity in disguise in order to re-calibrate their business model? Ask the hotel and hospitality industry if this Covid era is a blessing in disguise? Ask the energy industry if this period of time is a hidden golden opportunity? 

The Pegula panoply of businesses associated with their hockey team and hospitality business very much linked with his hockey operation are not showing paper losses, they are showing actual dollar losses. Right now the dramatic decline in business has resulted in revenue losses that don't come close to matching expenses resulting in actual hard currency ($$$$$) losses. This is not your typical paper loss which business use to camouflage their profits. It is actually losses that put your business in jeopardy unless drastic action is taken to buy yourself some time through this repressive business climate until better times which could be more than a year away. 

Terry Pegula paid $500 M to join the hockey business. Do you think that he knew at the time that all his varied businesses would be swimming in stupendous losses because he would contending with a world-wide pandemic? 

You bring up the issue of non-hockey money. What you don't bring up is that much of that money is predicated on people being in the arena. There is no concession money, no parking revenue, the in-house store that sells products associated with the team is closed. There is no or minimal advertising money coming in. 

The prior Rigas operation was a criminal enterprise where the family was intermingling their cable business and other business finances with the team finances. Members of the family went to jail because the manner in which they handled the finances for the team and other businesses was a scam. The first thing that the new owner did, Golasano, is clean up the books and established a hard and tight budget . That corrupt era has nothing to do with the Pegula era.   

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I suspect a lot of owners are fine with break even on operations. The are making their big money on the increased value of the asset over time, ie Golisano style. Owning a franchise checks the diversification box too.  Rich get richer which helps to drive up the value.  And no doubt if I was rich with billions I would definitely buy the Sabres, live w/ b/e, and meddle just for fun. 

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1 hour ago, JohnC said:

Few people could have foreseen the disastrous affects of the pandemic. Ask the airline companies if this virus era was actually an opportunity in disguise in order to re-calibrate their business model? Ask the hotel and hospitality industry if this Covid era is a blessing in disguise? Ask the energy industry if this period of time is a hidden golden opportunity? 

The Pegula panoply of businesses associated with their hockey team and hospitality business very much linked with his hockey operation are not showing paper losses, they are showing actual dollar losses. Right now the dramatic decline in business has resulted in revenue losses that don't come close to matching expenses resulting in actual hard currency ($$$$$) losses. This is not your typical paper loss which business use to camouflage their profits. It is actually losses that put your business in jeopardy unless drastic action is taken to buy yourself some time through this repressive business climate until better times which could be more than a year away. 

Terry Pegula paid $500 M to join the hockey business. Do you think that he knew at the time that all his varied businesses would be swimming in stupendous losses because he would contending with a world-wide pandemic? 

You bring up the issue of non-hockey money. What you don't bring up is that much of that money is predicated on people being in the arena. There is no concession money, no parking revenue, the in-house store that sells products associated with the team is closed. There is no or minimal advertising money coming in. 

The prior Rigas operation was a criminal enterprise where the family was intermingling their cable business and other business finances with the team finances. Members of the family went to jail because the manner in which they handled the finances for the team and other businesses was a scam. The first thing that the new owner did, Golasano, is clean up the books and established a hard and tight budget . That corrupt era has nothing to do with the Pegula era.   

TPEGS did not pay $500M and unless you can prove via first hand knowledge, I can find you as many articles showing the Sabre’s are not among those showing an operating loss as I can find listing them with some absurd number. 
I also never intended to imply that some businesses have been hit hard by the pandemic.

It’s also amusing that the concessions and add on revenue never amounts to much until someone needs it to amount to much to fortify their argument.

Additionally, while the Rigases was a corrupt enterprise, it wasn’t run much differently then any other organization. There is a reason ownership is hesitant to open their books and why labor negotiations usually hinge on what outside revenues owners bring in that they want classified as non-hockey revenue. 
 

In conclusion, while there is no doubt that the NHL operation pales in comparison to the big three sports, billionaires don’t pay a half a billion dollars to join a club that isn’t to their satisfactory return on investment, whether that ROI is classified as monetary profit or not. You all need to watch that episode of WKRP where Dr. Fever understands why Mrs Carlson would want to blow up a business that was finally about to turn a profit.

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Let me be clear for those who haven’t been paying attention. I like the Pegulas. I have been thrashed for defending them and their right to make money. I understand the games that are played to secure their share of revenue sharing. I understood the infamous “maintain our lifestyle” slide and I’ve even defended their attempts at turning this franchise around.

However, I won’t let any cries of poverty or eight figure actual losses go without a rebuttal and I’m 100% confident that I can prove my point given the necessary time and motivation to do so.

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50 minutes ago, tom webster said:

TPEGS did not pay $500M and unless you can prove via first hand knowledge, I can find you as many articles showing the Sabre’s are not among those showing an operating loss as I can find listing them with some absurd number. 
I also never intended to imply that some businesses have been hit hard by the pandemic.

It’s also amusing that the concessions and add on revenue never amounts to much until someone needs it to amount to much to fortify their argument.

Additionally, while the Rigases was a corrupt enterprise, it wasn’t run much differently then any other organization. There is a reason ownership is hesitant to open their books and why labor negotiations usually hinge on what outside revenues owners bring in that they want classified as non-hockey revenue. 
 

In conclusion, while there is no doubt that the NHL operation pales in comparison to the big three sports, billionaires don’t pay a half a billion dollars to join a club that isn’t to their satisfactory return on investment, whether that ROI is classified as monetary profit or not. You all need to watch that episode of WKRP where Dr. Fever understands why Mrs Carlson would want to blow up a business that was finally about to turn a profit.

You are right that the $500 M is not accurate. I thought I was quoting you but obviously not.  I'm not sure where I got that figure from but it is clear that it is way off the mark. So for that large mistake I apologize. The Pegulas paid $165 M for the franchise and they also took over managing the arena, bought two lacrosse teams (Buffalo and Rochester) and the Rochester AHL team and control of that arena. All those enterprises are currently closed down and not generating income. They also put money into upgrading the locker room and training facilities in Buffalo. So it wouldn't surprise me if the added costs brought the figure to somewhere around $200 M plus. 

With respect to the manner in which the Rigas' ran their business it was clearly run much differently than most operations. Their hockey books were grossly intermingled with their other businesses and funds were used for personal reasons. There is nothing unusual that expense accounts and business accounts are tapped into for personal expenses but it was at such an extreme level that it resulted in criminal charges and convictions for papa Rigas and one of his sons. Their hockey ledger sheet was indecipherable leaving a trail of a lot of unpaid contractors. To Golisano's credit when he bought the team out of bankruptcy he cleaned up the books and ran the operation as a professional business operation. And although he didn't have to because of the organization's bankruptcy status he paid off contractors he was not obligated to do because it was the right thing to do.   

With respect to the highlighted segment my point is that the Sabre franchise has been financially hard hit as many franchises are because of the virus, and this financial stress is going to last beyond this upcoming season and entering the next season. Where you and I diverge is that I believe that it is greater than you believe it to be. 

 

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5 hours ago, nfreeman said:

This is a good point -- those 2 items will likely be pretty impactful.

As a related point -- does anyone know whether the expansion fee is included in the pie that is split with the players?

As had been already mentioned, the expansion fees go entirely to the 30 franchises that were playing prior to Vegas joining.

The reason given by the owners for why those fees aren't split with the players is that that money covers the other 30 dropping from a 1/30th of national TV & online revenues down to a 1/32nd share of the same.

 

Also, by adding the 2 additional teams, there are now 46-50 new NHL job openings & that many more new AHL jobs as well. 

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Billionaires, especially those who attempt to acquire tax payer dollars for their projects, are not going to go out and publicly say that they are making tons of money.  They are going to point to all of their expenditures and paper losses, in order to justify the public funds they receive.

Its possible that the Pegulas really have lost money on the Sabres, but I can’t see why I should believe them when they say so.

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