Why Should I Frakkin' Care?

[ruxpin]

@Vanflyer

I don't know the numbers, but I'm wondering what happens when you add in local TV deal, advertising, and merchandising. I'd be curious. I also didn't read your numbers to indicate Florida was fiscally more viable. (But I literally woke up only 5 minutes ago, so maybe I should re-read when the second eye opens).

[ruxpin]

Does anyone know how employment costs work with the NHL considering it's bi-national?

I ask, because I'm thinking that a $50M payroll would have fairly significant employment costs if it works like a "regular" company.

FICA ER: 6.2%

FICA MED: 1.45%

FUTA: .8%

SUTA: depending upon the state

Is a sports league exempt from workers' comp?

Are the players under contract W-4 or 1099? Anyone know?

Just bizarre things I was wondering about last night and am too lazy to look up.

[Vanflyer]

I don't know the numbers, but I'm wondering what happens when you add in local TV deal, advertising, and merchandising. I'd be curious. I also didn't read your numbers to indicate Florida was fiscally more viable. (But I literally woke up only 5 minutes ago, so maybe I should re-read when the second eye opens).

I would be curious to see what components make up the profit and loss statements. I would imagine that the league would say "here are the 5 things that we look at" and it has to be uniform. Otherwise, teams could hide revenue under subsidiary companies that slants their picture to look like their losses are greater than they actually are. In regards to Florida being more viable or not, perhaps "more viable" would not be a fair statement. Yet, when one team (st louis) generates 50M more in gate receipts, yet has less total revenue, it makes you scratch you head.

Edited November 28, 2012 by Vanflyer

[ruxpin]

It does make you scratch your head. It makes me wonder about their tax deals with the cities they play in, stadium leases, parking receipts, etc etc.

Because with the numbers presented and all else assumed equal, I'd fire my controller or CFO if I'm St. Louis.

[ruxpin]

@Vanflyer

P&L statements.

You would think that the GL accounts would need to be uniform, right? I mean the dollars would vary, but you would think all the P&L and balance sheets would be uniform so that somewhere, somehow, there's someone at the league comparing apples to apples, right?

[Vanflyer]

@Vanflyer

P&L statements.

You would think that the GL accounts would need to be uniform, right? I mean the dollars would vary, but you would think all the P&L and balance sheets would be uniform so that somewhere, somehow, there's someone at the league comparing apples to apples, right?

One would think. Did yous see this article in SI about the Panthers? Pretty interesting:

http://nhl-red-light.si.com/2012/11/16/nhls-money-loser-mirage-rangers-flyers-hurricane-relief-game-more/

[flyerrod]

One would think. Did yous see this article in SI about the Panthers? Pretty interesting:

http://nhl-red-light...lief-game-more/

you really need to stop attacking ruxpin............... (This comment was meant to be seen as sarcasm......something we seem to forget sometimes)

[Vanflyer]

you really need to stop attacking ruxpin............... (This comment was meant to be seen as sarcasm......something we seem to forget sometimes)

How can anyone attack a person that has a real dancing bear as their profile icon??? Two bad .gifs don't work on the main forum. But if you want a good laugh, click on his profile and check out his icon. It is pretty funny.

@ruxpin

This guy (backhand) always posts on the silly.com Flyers articles. This was his comment on the Forbes Flyers value article today. Interesting thought.

What's interesting about the chart Forbes assembled is that if you click on "Debt/Value (%)" it will sort the list in descending order of debt divided by equity. This is commonly referred to as "leverage".

Note that the order changes substantially with the Maple Leafs now in 8th spot. The first four teams show a "0" meaning they are not leveraged at all, meaning the owners truly own the franchise using their own money.

But look at the New Jersey Devils: Their percentage is 112%, meaning they used other peoples' money, and then some, to "own" the team. They owe more than the team is worth (at least using their accounting).

Click on "Debt/Value (%)" again and it will show the list in ascending order. What a shock! The first thirteen teams have a percentage greater than 50%. Meaning they don't actually own the team (franchise): Their creditors own it.

Now sort in ascending order by "Operating Income ($mil)" and note the corresponding "Revenue ($mil)" value. The first 13 teams spent more than they took in, according to their accounting (although SI.com thinks differently). It would seem that "debt service" (i.e., paying the investors interest on the debt they are owed) accounts for much of their operating revenue.

So they aren't losing money because of the players (note the teams with the lowest % of debt/value are making money), it's because they leveraged the purchase of the franchise.

— backhand

[idahophilly]

God, I hope who ever wrote that (the small type there) , that isn't the depth of their analysis. I mean wow! Amatuer hour ! LOL....

[hf101]

God, I hope who ever wrote that (the small type there) , that isn't the depth of their analysis. I mean wow! Amatuer hour ! LOL....

Fixed!

[Vanflyer]

God, I hope who ever wrote that (the small type there) , that isn't the depth of their analysis. I mean wow! Amatuer hour ! LOL....

Backhand from silly.com on the article.

I am not an accountant, nor pretend to be one. Why is that amateur hour? The holes I see in it are so what if an owner has borrowed money to buy a team. That is of little consequence to me and only really has impact on how much profit the owner gets when they sell (selling price offset by loans=net profit for the owner).

The operations side is what I have been preaching all along. Yet, until we actually see where the operations expenses are and the reason why teams operational expenses were greater than revenue, it is very hard for me to make an argument that it is due to player salaries. I mean maybe it was due to the 30 executive offices all getting mahogany furniture and gold plated lamps, or Sniders new lear jet with the cool cam on the bottom of the fuselage so you can watch take off and landings as if you were strapped to bottom of the plane to get your jollies.

[yave1964]

@Vanflyer. I'm not completely sure I get the Ohio thing either. But it seems like the land where pro-sports go to die.

Actually, they don't die. They just kind of live on and on but people rarely seem to care. In the case of the Blue Jackets, it really might help if ownership wasn't such a cluster.

I live a little less than an hour north of Columbus, the wife and I get to Nationwide whenever possible. Wherever we sit, nosebleeds, on the glass wherever we run into ignorant people who dont understand the game. I am not using ignorant as a put down or insult, they are ignorant to the most basic rules. The wife and I usually sit there dressed in our Red Wings garb explaining every little nuance about the game to those around us. And we are not boorish, people have questions and they hear us cheering and discussing the game and what not, so they ask us to explain the most basic things.

Everyone loves a winner, if the Seas parted and the Jackets were cup contenders they would fill the arena but the biggest problem is nobody after a decade of going to games understands the most basic rudimentary nuances, anything other than the score and how much time is left confuse them. Actually, I have had a couple of people ask me to explain the clock in hockey even while there.

Now we travel, we go the Joe, have seen the NHL in about fifteen cities. Way back when for our honeymoon we went to Buffalo, Montreal, back to Toronto, across to Winnipeg with the original Jets, Down to Chicago and finished in Detroit over around two weeks. I can truly say that less knowledgeable fans of the game do not exist. I hope they stay so I can continue to go see my beloved Wings so close to home, and go see Backes and the Blues and Weber, my favorite player in the game today also, but God are the fans there ignorant toward the game.

[idahophilly]

Ok... well, one could argue from now to doomesday about if numbers are accurate. Their filings and all. 1st thing is 1st... do you think you will ever know for sure?

I didn't think so.

Then we are left with our suspicions one way or another, whatever your leanings are right? I don't know for sure more than the next guy....

The next question to ask is if you or I or the guy at the street corner is open to new views or already made their mind up, which of coarse renders the rest of the discussion pointless... I'm sure we agree upon that.

Since the the only evidence we can use is that stated we must proceed, seperating suspicion and personal desires either way as to the outcome. Agreed still?

(pop)! That was the sound of opening the HRR debate. Who frickin's knowes! That has been one of my contentous things in this whole debate. But that's for the accountants...

One thing that is a fact, and agreed to by the players as signed in the last CBA is that the players cost the teams 57% of HRR as it stands now. ( I dare you to try and figure out what HRR really is since both sides have twisted it beyond belief).

My understanding of the analysis was that player costs don't really matter to much. If not said it was most certainly implied. I defy you to be ok with saying that if you owned your own business that 57% wasn't a serious, and VERY serious, consideration... Anything that takes up 57% is gonna have my full and undivided attention with an eye towards cutting it. Any business worth its salt is gonna do that... But, then again, few business spend 57% on labor, atleast not for very long anyway....

[ruxpin]

But, then again, few business spend 57% on labor, atleast not for very long anyway....

It's funny (ironic?). Until that line I was thinking 57% on labor might be low for most businesses. Depending upon what type of business, I suppose. Other businesses (I'm thinking manufacturing, in particular) would have supplies, etc., I suppose, but I suspect for many 57% would be low. I also suspect that 57% is lower than what it actually is for hockey owners when you add in other player/employment-related costs.

In any case, I have to agree that since this is by far their #1 cost and their argument is they are losing money, this is the cost that most needs to come down if they are going to be a healthy business.

[idahophilly]

I worked for a world wide corporation. IF 57% of our money was consumed in JUST labor costs (hell, throw in benefits also), then we would have been out of business so fast that they would have had to visit me in utero before birth to lay me off for the health care cost of my birth that had not happened yet...

(lol)

I won't and don't have the time to list out just an average business's expense list! But let us say it is 35-40 % of operating income. Can you tell me how a corp absorbs another 57% after that, unless you have the belief that an employer is a chartitable cause in which the owners and investors have no intention of making any money. I know you dont Rux... No arguement...

However, someplace tonight I heard that idea floated.

(lol)

One final note before this turns into a thesis, you mentioned this "I also suspect that 57% is lower than what it actually is for hockey owners when you add in other player/employment-related costs." You hit the nail right on the head!!! But backwards...

57% is not disputable. They are negotiating off that number right? The 57% is of HRR (yeah, fight that battle another time) and the costs you suspect are in ADDITION to that 57%. 57% labor costs??? Thats just the players. Some one with more energy and time will add up the following and even more : Coach, Asst Coaches, Goalie coach (we need one), GM, Scouts, trainers, medical staff, guy taking tickets, asst GM. lawyers, hot tub guy, equipment guys, front office, gal making hot dogs, sales reps, web site designers, planners, facility workers, the zamboni driver, the mascot, and finally , the gut who has to do (something) to Bettman... And I for got a whole bunch of people there, so excuse me....

But... here we are, with the players skiming off 57% before we even get started. It makes it sound like Bettman was over OV's house ripping the turkey leg out of his mouth. No one is going hungry. I suspect OV would have just bitten him anyway...

(lol)

[ruxpin]

@idahophilly

I think you and I are looking (lol) at things fairly similarly (lol). Again, I think it depends what type of business but many are well more than 57%. And as you point out, hockey is one of them. And it does need to come down.

If Bettman was over at OV's house (lol) ripping something out of his mouth (lol), it may have been a bird (lol) but it wasn't turkey.

(lol)

(I only have a guess as to what the "(lol)" was about, but I hope I did it justice.)

[ruxpin]

By the way, not to give you an aneurysm, but for a "regular" business, if you add in the ACA as labor costs (I think you should), the 57% is about to get much much worse.

(By the way, just to be sure we're not talking apples/oranges and because the interpretation *can* be different, by labor costs I'm including salary/wages, FICA, FUTA/SUTA, Workers' Comp, Benefits, PTO--unless already included in salary/wages--production lost to missed time in addition to PTO, Pensions, recruiting, advertising for recruiting purposes, etc. The portion gets fairly hefty. Although really labor should be 30-40% of total gross sales in a "healthy" situation, it can be much higher given the industry.

You're right, the 57% before you start out with most of the above is just an absurdity.

[flyerrod]

@ruxpin

The 57% percent is a hard figure but it only relates to numbers "defined" by the HRR. HRR is NOT all inclusive and they were still trying to redefine that removing yet more of that percentage.

[ruxpin]

@flyerrod

The point is taken. But it doesn't actually change any reality. Whether you randomly classify a cost as HRR or move it to some other column, it's still a cost of doing business and it is still attributable to labor. I mean, you can move it to "miscellaneous expenses" or "administrative expenses" or "deer hunting" or whatever, but it's still real money. And it is currently way too high.

[flyerrod]

@flyerrod

The point is taken. But it doesn't actually change any reality. Whether you randomly classify a cost as HRR or move it to some other column, it's still a cost of doing business and it is still attributable to labor. I mean, you can move it to "miscellaneous expenses" or "administrative expenses" or "deer hunting" or whatever, but it's still real money. And it is currently way too high.

The point is not everything is included in the HRR. The 57% is only based on the current definition of HRR and therefore 57% IS NOT a total picture of the money, only the portion that the owners/players defined that they are willing to share. That is the real point.

[ruxpin]

The point is not everything is included in the HRR. The 57% is only based on the current definition of HRR and therefore 57% IS NOT a total picture of the money, only the portion that the owners/players defined that they are willing to share. That is the real point.

Not exactly on the "real" point. Yes, it's the portion that the owners/players are willing to share. But how much of that (57%, 50%, or some other number) the owners are willing to share is dependant upon costs and P&L elsewhere. It cannot be taken by itself as if it's not affected by other pressures. That's the point. People are imagining that this sharing pool is the only thing effecting management's position. It is not.

I'm not trying to throw all in with the owners here. Just saying that what percentage the owners are willing to settle on within the HRR confines are affected by and dependent upon these other cost centers.

[JackStraw]

In any case, I have to agree that since this is by far their #1 cost and their argument is they are losing money, this is the cost that most needs to come down if they are going to be a healthy business.

Except that they are not losing money. The NHL is making money. It has been pointed out that if the owners split their current share of revenue evenly amongst them, every team would turn a profit. Additionally, an article in the Globe and Mail broke things down and found that in order to guarantee that Phoenix would make money, the players share of HRR would have to drop to around 27%. Which obviously is not going to happen.

Reducing the players share (which the players have already agreed to) is a band-aid at best. Eventually the league will have to address the shortcomings in their business model- either get rid of franchises in bad markets or increase revenue sharing among the teams (like the NFL does). Arguing over 57% vs 52% vs 50% is like arguing over the arrangement of the deck chairs on the Titanic.

[radoran]

The issue here is that the NHL is NOT a "normal company"

The NHL PRODUCT is the PLAYERS. They sell the PLAYERS.

Paying the money for the PRODUCT that you are PRODUCING and the concurrent expenses thereof is something different than "employee costs."

As has been said, take the best players in the game out of it ("oh, but they will stay!") and you've got the AHL.

There is a reasonable path to a resolution, but it's not by demonizing your own product. "Come, spend large sums of money to watch spoiled brats play for spoiled brats in publicly-financed stadiums so over-leveraged spoiled brats can artificially tilt the playing field in their favor" isn't a winning marketing plan.

[ruxpin]

Reducing the players share (which the players have already agreed to) is a band-aid at best. Eventually the league will have to address the shortcomings in their business model- either get rid of franchises in bad markets or increase revenue sharing among the teams (like the NFL does). Arguing over 57% vs 52% vs 50% is like arguing over the arrangement of the deck chairs on the Titanic.

Completely agree with this. The percentage of HRR is an after the fact argument that doesn't address the real problems of the business model.

[JackStraw]

The issue here is that the NHL is NOT a "normal company"

"Normal companies" are not legally sanctioned monopolies, which the NHL (along with the NBA, NFL, and MLB) is.