Forbes slams Levitt report

Discussion in 'The Business of Hockey' started by vanlady, Nov 11, 2004.

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  1. vanlady

    vanlady Registered User

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    Here ya go, according to Forbes Magazine the NHL only lost 93 million in 03/04. Have a read, according to them, most of the money losing teams are losing money for a reason, go figure. Now who looks like a liar?

    http://www.forbes.com/free_forbes/2004/1129/124.html
     
  2. Coffey77

    Coffey77 Registered User

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    An interesting read. The NHL hired Levitt to create the report, so it shouldn't be any surprise that he would say that they lost so much money. Still the NHL should be fixed from an entertainment and financial standpoint. Hockey isn't boring to me but to most of the American market it is.

    In any case, until both sides start to trust each other, the season is screwed. IMO, there's no hockey this year. I might as well go buy the 1972 Summit Series on DVD to get that hockey fix.
     
  3. Russian Fan

    Russian Fan Registered User

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    That's why you have A LOT of PUBLIC RELATIONS from the OWNERS & that why you have no public relation from the NHLPA because what you see is what you already know.
     
  4. me2

    me2 Calling out the crap

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    Those are still very big numbers. Note that that is before interest, taxes, depreciation and amortization. Those numbers get even bigger. On top of that there is the desire to earn a profit and not just break even.

    Wang's cable deal looks indeed rather dodgy. That is hockey revenue.

    Its interesting to compare Forbes version of the Kings finances with this version

    http://www.letsgokings.com/reportfinal.doc

    Though including real estate deals as hockey revenues are very tenuous. If the players want a share of that pie they should put in their own cash. If it goes bad they won't be paying, so they shouldn't be profiting.

    You'd think if these numbers were easy enough for Forbes to find then the NHLPA would be take up the call to investigate the books.
     
  5. vanlady

    vanlady Registered User

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    As anyone in accounting and finance will tell you the profit and loss statements are smoke screens. If you want to know the real truth about the financial health of any business you look at the asset valuation. In the case of the NHL they have increased 31% over 6 years. Do you realize that kind of increase puts the NHL at the same level of increases as Microsoft through the 90's. Anyone in finance will tell you that any league that has increased by 31% CANNOT
     
  6. vanlady

    vanlady Registered User

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    As anyone in accounting and finance will tell you the profit and loss statements are smoke screens. If you want to know the real truth about the financial health of any business you look at the asset valuation. In the case of the NHL they have increased 31% over 6 years. Do you realize that kind of increase puts the NHL at the same level of increases as Microsoft through the 90's. Anyone in finance will tell you that any league that has increased by 31% CANNOT be in the financial position that Bettman is telling you, sorry you have been fooled.

    Oh and the reason you always include the real estate is simply, owners DO NOT make their money while they own the franchise it is when they sell it. In most cases Like the Sharks owners make the money when they sell the team. Look at San Jose bought for 50 million sold for 147 million.
     
    Last edited: Nov 12, 2004
  7. me2

    me2 Calling out the crap

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    If they already know that why aren't they doing something about it?

    Looking at some of these number you can dig further

    "The arena's 212 suites pulled in $15 million last season, none of which is included in the league's numbers."


    Wirtz owns 1/2 the arena, that brings that number down to $7.5m straight away. On top of that there are non-hockey events, probably many more than hockey events. Bulls play there, that reduces the hockey revenue part from 100% of $7.5m to way less that 50%, probably closer to 33% at best. That $15m is now down to $2.5m. Add in running costs for the rink etc and its getting smaller and smaller not mention Wirtz is entitled to some profit as 1/2 owner.

    There is a heck of lot more going on at the United Centre than Hawks games (http://www.unitedcenter.com/). Why should it all count as Hawks revenue.
     
  8. me2

    me2 Calling out the crap

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    Sure include franchise value increases but it stupid to include hotels and theatres which is what Forbes was suggesting. If Microsoft Windows makes $1b in profit Microsoft SQL server division doesn't get to claim it.
     
  9. vanlady

    vanlady Registered User

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    The point is none of that revenue was included. Oh and that 15 million is after expences. The Blackhawks should receive what ever percentage they use. Oh and Why when the only reason Wirtz owns 50% of the arena is the Blackhawks should 100% go into the owners pocket?
     
  10. vanlady

    vanlady Registered User

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    The reason they count the arena is quite simply this, 60% of the owners in the US have been given the arena free of charge from the tax payers of the city. Why, to attract professional sport to the city. Do you not get that the owner of the Kings was handed the keys to his arena for FREE. Same thing in San Jose, Atlanta and Columbus. The whole reason the owner of the Kings got his arena was the KINGS.
     
  11. gr8haluschak

    gr8haluschak Registered User

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    Well too bad there is one knock on balance sheet valuation and that is it uses very subjective historical (aquistion costs) on what they believe their product is worth, onot what it is actually worth and costs can be detremined in various ways that could make the balance sheet look as good as possible or as bad as possible. As well you say that franchise worths have a 31% growth in 6 years, but is that constant ? or has it peaked at some time and decreased to 31%. So arguments can constantly be made, however, I am thinking that the NHLPA's accountants could not disprove Levitt's numbers because they would have done it already and provided counter numbers.
     
  12. me2

    me2 Calling out the crap

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    It is irrelevant why he owns 50%. He could see the Blackhawks to Portland and still keep 50% share. He is entitled to try and make some money off his 50% ownership of the rink, Hawks or no Hawks.

    Lets flip this around. If he makes $7.5m from his half of the $15m this year and there are ZERO hawks games, does that prove the Hawks contributed no net benefit to his rink earnings and therefore deserve 0% of that $7.5m. If on the other hand that $15m falls to $12m due lack of Hawks games, his half is $6m they you can argue the Hawks contribute $1.5m and deserve a share of that $1.5m.

    If own a chain of cinemas and then decide to make a movie, should I give all of the profits from the cinemas to the stars of the movie I made?
     
  13. vanlady

    vanlady Registered User

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    The NHLPA were allowed access to 4 franchises books and found 53 million in unreported revenue, the owners cut off any further audits.

    We were given access to the UROs for 30 clubs, but were only able to conduct a thorough review of four NHL clubs. On those four clubs alone we found just over $52 million in hockey related revenues and benefits not reported in the League's voluntary and unaudited URO process. If we are given similar access to all of the other individual teams' financial information, presumably used in the Levitt report, we will be in a position to provide further comment.

    Yes franchise growth has been steady, they have all been positive growth years, this years growth was only 3% but that was lower because of the lockout. What does that tell you?
     
  14. vanlady

    vanlady Registered User

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    OK let's flip it around again and use Sabbanne and Oxley accounting rules. Wirtz gets 50% of the arena revenue, the Blackhawks represent 50% of the arena use, should at least not 30% belong to the Hawks thus allowing for a profit for the owner? Sorry but ole Wirtzy boy doesn't get to pocket 100% of the arena revenue.

    By the way what is the difference between a bum in a seat in the stands, and a butt in a seat in a luxury box???? They both are watching the game, so why do the Blackhawks not get a single penny for it?
     
    Last edited: Nov 12, 2004
  15. So why would players trust a CBA that links Salaries to this BS revenue?

    The owners have been caught lieing.

    Plain and simple.
    Levitt was paid to lie. Bettman, a disgrace to hockey, lied.

    There are surely problems with hockey.

    But the owners don't have the decency to be honest with the players, media or the fans.


    It's the OWNERS that LOCKED OUT the players.
    And their pretext for doing so is fraudulent.

    There goes their PR advantage.
     
  16. kurt

    kurt the last emperor

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    Thank god!

    I've been sitting on my hands for a long time, waiting for a reputable 3rd party to put their reputation on the line to expose the Leavitt report to be inaccurate. Definitely good fodder for the NHLPA, although this situation may further polarize the groups, as there will be even less trust between the parties.

    My main problem with the hard-cap-tied-to-league-revenue concept is the fact that these guys CAN'T be trusted. They'll present the books in a way that protects their interests. Plain and simple.
     
  17. Cully9

    Cully9 Registered User

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    And how has that been a problem in the NBA, that has independent auditors set their cap every year, for example?
     
  18. vanlady

    vanlady Registered User

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    The NBA owners have been able to agree with thier union to define all revenue, and have a very strict set of checks and balances to control their owners. Something the NHL owners will never go for. Oh and before you use the NBA you might want to make sure that they are not talking about a strike to get rid of their cap next year.
     
  19. Cully9

    Cully9 Registered User

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    How do you know what the owners will go for in determining the value of the cap? Just as the PA looks bad when they refuse to stand behind their proposal, the owners would look just as bad if the PA agreed to a cap and then the owners weren't going to discuss the parameters.

    As for the NBA, they're not going to be locked out because the players are trying to get rid of the cap. The owners are talking about trying to reduce the maximum length of the contracts under the CBA -- that's been the primary issue -- and the reason that there could be a work stoppage.
     
  20. Buffaloed

    Buffaloed webmaster

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    According to the article Forbes published last year that isn't true.
    http://www.forbes.com/free_forbes/2003/1208/094a.html

    The only reason I can come up with for franchise values increasing this year after last year's decline is confidence that the new CBA will insure profitability.

    Forbe's also stated at that time:
    I'm sure NHL is over reporting losses. When entering negotiations try to make as strong as a case as possible. Likewise the NHLPA is going to look at the numbers and under report the losses counting everything tangentially related as revenues. The bottom line is there wouldn't be a lockout if everything was peachy.

    Acording to the article you cited the average franchise value has increased by 31% over the last 6 years to $163 million. The average value of a team 6 years ago was $112.5 million. The average appreciation was $50.5 million. Forbes reports that the league lost $96 million last season and $123 the season before making the average loss $109.5. In a 30 team league that's an average $3.65 million loss per team per year. Over the course of 6 years it's $21.9 million per team. An owner who bought a team at the average price of $112.5 million six years ago and sold it for $163 million today realizes a $50.5 million gross profit. After deducting the $21.9 million loss incurred over those 6 years, there's a $28.6 million net profit. Investing $112.5 million in a 72 month CD with a 3.75% APY, yields approximately $28 million in interest. That's really conservative too. There's much better deals than that available for the high rollers. Even if we use Forbes numbers, the return on investment isn't acceptable.
     
  21. me2

    me2 Calling out the crap

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    I doubt the Hawks make up 25% of the events held there. The United Centre is "among the busiest and most lucrative arena's in sports.". This then comes back to what percentage is hockey. Are the Bulls more popular? What other events are run (over 200 per year)?

    So what is a fair percentage for the arena ownership to take?

    What would be a fair rate to charge the Hawks on a per game basis for rink usage?

    Little but we don't know how that part works. We don't know what Wirtz charges/earns in other areas without looking at the books. We can assume he splits the $15m two-way. If so he obviously thinks its fair that amount should be for arena ownership because that is what he pays the other the other 1/2 owner. If he thought that was unfair he'd filter more through the Hawks. Mind you it doesn't hurt the other owner is the Bulls owner and they are splitting the revenue cancelling each other out to some degree.

    Again it prompts the question, what is a fair rate to charge if the Hawks were paying on a per game basis?

    According to Forbes the Hawks made $9m last year. So Wirtz must be a great manager. There should be more Wirtz running this league not less. Then again $9m operating income (according to Forbes) isn't much of a return on an enterprise supposedly worth $178m. Poor old Bill Wirtz, he runs his team like a business, makes a profit (at least according to Forbes) and slagged by the fans as a cheapskate.
     
  22. PecaFan

    PecaFan Registered User

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    Hardly. All we have is a third party who counts differently. They include everything, and a good case can be made that they over-include revenues. Yeah, the owners under-include a bit. So the real result is in the middle somewhere.

    But note the real story here is that even with the most optimistic financial reporting, the NHL is still losing hundreds of millions of dollars each year.

    Folks are running around here trying to paint this as positive news, when it's really just more bad news. This is like the private detective telling you "I'm sorry, I was wrong, you're wife didn't screw around with 200 other guys, it was only 100.". Woohoo! That's great! I knew she could be trusted!
     
  23. me2

    me2 Calling out the crap

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    And if the Kings owners want to put their money into a hotel and theatre that should remain their money. If he makes $1b from the new hotel complex, the NHL team shouldn't try and claim it. If it bombs and losses $1b you wouldn't expect the players to fork it over out their pockets. If they want in on these non-hockey deals I'm sure the Kings ownership would be looking for financial backers.
     
  24. me2

    me2 Calling out the crap

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    If there was to be revenues linked to salaries these things would have to be worked out in advance, in any CBA. The NHLPA would require much more transparency and access to the books. That much is a given.

    Some owners.

    Based on what? Even Forbes found they lost $98m and Forbes may be much more generous about what is hockey revenue than others. They pretty much implied that. Also note that $98m lost was before interest, taxes, depreciation and amortization. The players are going to have to account for those extras as well as the $98m. Loans don't just pay the interest on themselves.


    Not that much. Most of this stuff isn't that different from last years Forbes report (the one comparable to the Levitt report on time scale). I think Forbes had $124m last year in loses compared to this years $98m. Owners laughed that one off.

    According to Forbes 17 team lost money and 6 teams made $2.3m or less. 17 before interest, taxes, depreciation and amortization, how many after? At least 23 would be my guess based on Forbes numbers, probably more. But perhaps the NHLPA consider only 23 going backwards a success.

    Still at the least this should produce an interesting reply from the NHL. Been boringly quiet from both sides for the last little while.
     
    Last edited: Nov 12, 2004
  25. SENSible1*

    SENSible1* Guest

    The NHLPA could have full access to all teams books simply by agreeing to negotiate cost certainty. The owners put it on the table and the players have refused to look at it.

    Why?
     
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