Percentage of League Wide Revenues

Discussion in 'The Business of Hockey' started by Blueshirts4me, Apr 5, 2005.

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  1. Blueshirts4me

    Blueshirts4me Registered User

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    I am writing a paper on the NHL Lockout. It consists of drafting a new CBA, and then ways to bring in new fans, and bring back the regulars. I have been looking at the numbers from a bunch of different proposals, but I do not understand how they get the players % of league revenue. When I just calculated the 2003-2004 payrolls and divided it by revenue, you get 63%, not 75% like the league is saying. Am I forgetting operating costs or some other number? Do you know where I can additional financial information from last season?

    Thanks
     
  2. Weary

    Weary Registered User

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    The league uses "total player costs," not salaries, in generating the 75% number. Although sometimes league representatives do slip and say that salaries were 75% of revenues.
     
  3. hockeytown9321

    hockeytown9321 Registered User

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    Ha! The league includes basically everything they can in its calculation of player costs. They've done an excellent job convincing the lazy masses the number represents player salaries. Kudos to you for actually questioning them.
     
    Last edited: Apr 5, 2005
  4. SuperUnknown

    SuperUnknown Registered User

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    There's a portion of the total revenues going to the NHL entity (which pays referees, commish, etc). There's also a portion of the merchandise sales that go to the NHLPA. As well, the player costs (insurance, per diem, etc) aren't included in the payrolls, as well as some bonuses.
     
  5. porrylogspop

    porrylogspop Registered User

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    insurance cost for top players is a player cost, medical insurance, players with nhl only contracts playing in the ahl or as asrtus irbe playing in the echl are paid by the nhl clubs. this is all included in player costs :teach:
     
  6. Blueshirts4me

    Blueshirts4me Registered User

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    I appreciate the feedback. I reversed engineered to see what number the NHL was using to get the 75%, by multiplying league revenue by .75 and then subtracting payrolls. The number comes out to about $243 million. It doesn't matter if the 75% is accurate or not, because I am doing all percentages compared to that figure. If I constitute the $243 million as a fixed cost, my compromise proposal gets % of player costs down to 61% based on 2003-2004 numbers, and 68% based on a 10% reduction in league wide revenues.

    If anyone is interested, the proposal includes a 40 million hard cap, 25 million floor, franchise player (1 per team, I counted 60 million in extra salary because of it), 28 free agency age, 80% qualifier, and 1 million max entry level salary (for first three years as pro).
     
  7. Jarqui

    Jarqui Registered User

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    http://www.nhlcbanews.com/ap_d.html

    MAJOR LEAGUE PLAYER COSTS
    Player Payroll
    Base Salary
    Signing Bonuses
    Performance Bonuses, Reporting Bonuses, etc.
    Present Value of Deferred Compensation
    Contract Buyouts
    Benefits and Other Payments

    Benefits and Other Payments
    Player Pension Benefits
    Medical and Dental Insurance Benefits
    Disability Insurance Benefits
    Player per diems and Training Camp Allowances
    Employer Payroll Taxes
    Other Miscellaneous Costs
    CBA Monies

    CBA Monies
    Player Finish and Other Monetary Awards (Article 28)
    Payments for Games 83-84 (Article 16)


    Funny how the PA apologists giggle over a definition that even the NHLPA had little issue with. Those are player payroll expense items that would fit within definitions of direct labor expense in most Accounting 101 text books.

    Here's how those numbers went into Levitt's report to determine % of Revenue:
    http://www.nhlcbanews.com/ap_i.html

    That ain't rocket science.
     
    Last edited: Apr 5, 2005
  8. Weary

    Weary Registered User

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    But those costs cannot be properly classified as salary costs. I think that's where the problem lies.

    When people bolster their argument by saying NBA only spends 58% of their revenue on salaries, they should compare that 58% to the 63-64% the NHL spends on salaries. The NBA's percentage of revenue spent on player costs is in the mid-60s.

    If the NHL weren't being compared and contrasted with other leagues, it wouldn't matter that much.
     
  9. Jarqui

    Jarqui Registered User

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    The approach that Levitt and the NHL have taken with their grouping of player payroll costs representing player salaries, bonuses, benefits, insurance, deferred compensation, employer tax contributions etc is classic in assessing what percentage of labor costs are of revenue. I've never seen a set of financials or a view of labor within a business that said "dump all the other labor expenses somewhere else and we'll look purely and exclusively at salaries to make our assessment". All companies know that employees cost them directly something roughly like 20-40% above the salaries they actually pay them due to the expenses mentioned above.

    One test for whether those numbers belong is if you get rid of an employee and do not replace them, what numbers disappear in the years going forward if all else remains the same. CBA monies might not only due to the wording of the CBA contract but those monies are going to the players as part of their compensation, so they do belong.

    If someone is trying to compare NBA salaries only to the above numbers, you are correct with your concern as that is an apples to oranges comparison.

    I can tell you that finding that the above numbers fall at 75% of revenues is a staggering result relative to looking at any other business of similar scale.

    I have never seen in the media where one has compared Levitt's/NHL total payroll costs to NBA salaries alone. Provide us with a link and I'll look at it. I have my doubts that it was put together by a very credible party.
     
  10. Weary

    Weary Registered User

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    Here's one example from TSN: CBA Glossary of Terms and Issues
    Currently, the league says player costs take up more than 75 per cent of league revenues, which leaves very little left to pay for other costs such as travel, advertising, building upkeep, et cetera. By comparison, the NFL spent 64 percent of its total revenues on player costs. Major League Baseball sits at 63 percent, while 58 percent of the NBA's revenues went to player salaries.

    But it appears that they and I fell into the trap. The NBA spends 58% on player salaries and benefits -- not just salaries. Although the NHL considers some things player costs, such as per-diems and on-site medical care, that the NBA doesn't, it's still a decent comparison.

    I should take my own advice next time and make sure I know the difference between salary and total player costs.
     
  11. nyrmessier011

    nyrmessier011 Registered User

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    yea they include all player costs -- insurance, food, air care, hotel etc etc--in a category which is often mistaken as solely salaries...the NHL again does a nice job in the PR rhetoric department
     
  12. Crazy_Ike

    Crazy_Ike Cookin' with fire.

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    Telling the truth is PR rhetoric?
     
  13. kerrly

    kerrly Registered User

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    I don't see many around use the 75% figure as total player salaries. We all know what that number is, so if they were trying to pull the wool over our eyes, it was about as effective as an NHLPA PR stunt.
     
  14. Jarqui

    Jarqui Registered User

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    It seems to me that the reason we know about all these players cost components is because the NHL and Levitt told us about them with more detail and depth in rather plain accounting terms with auditors backing them up than any other party.

    There has been a lot more "rhetoric" from those who have proven they don't understand the numbers, like Larry Brooks or those who have never actually looked at the books, like Forbes and try to inform us with inaccurate guesses presented as supposed fact.
     
  15. Crazy_Ike

    Crazy_Ike Cookin' with fire.

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    Hey - no mention of 'rhetoric' and 'inaccurate guesses presented as supposed fact' is allowed to go by without a reference to ole Al Strachan.

    :D
     
  16. me2

    me2 Calling out the crap

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    http://www.nhlcbanews.com/uro.html
    http://www.nhlcbanews.com/uro_results.html
    MAJOR LEAGUE PLAYER COSTS -- WHAT'S INCLUDED?

    * PLAYER PAYROLL
    o Base Salary
    o Signing bonuses
    o Performance bonuses, reporting bonuses, etc.
    o Present value of deferred compensation
    o Contract buyouts
    * BENEFITS AND OTHER PAYMENTS
    o Player pension benefits
    o Medical and dental insurance benefits
    o Disability insurance benefits
    o Player per diems and training camp allowances
    o Employer payroll taxes
    * CBA MONIES
    o Player Finish and Other Monetary Awards (Article 28)
    o Payments for Games 83-84 (Article 16)


    MAJOR LEAGUE PLAYER COSTS -- WHAT'S NOT INCLUDED?

    * MINOR LEAGUE PLAYER PAYROLL, BENEFITS, AND PAYROLL TAXES
    * ANY INSURANCE PREMIUMS PAID FOR COVERAGE WHERE THE CLUB IS THE BENEFICIARY (E.G., PLAYER CONTRACT INSURANCE)
    * TEAM OPERATING COSTS
    o Sticks and equipment
    o Trainers, medical support staff and other hockey personnel
    o Air charter
    o Lodging
    o Team paid meals
    o Other costs where player is not the direct beneficiary
    * COSTS ASSOCIATED WITH NHL INJURY ANALYSIS PANEL
    * COSTS ASSOCIATED WITH NHL/NHLPA SUBSTANCE ABUSE AND BEHAVIORAL HEALTH PROGRAM
    * COSTS ASSOCIATED WITH ENHANCEMENTS TO LEAGUE-WIDE VENUE SECURITY
     
  17. hockeytown9321

    hockeytown9321 Registered User

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    No, its not rocket science. But the league has not gone out of their way to make the difference between player cost and player salary clear. The original poster wasn't clear on it, and he got an answer. There's alot of people(including most reporters) who are too lazy or just don't care enough to ask and just take the NHL's word for it. I think its hard to make an informed decison when you don't know the facts.
     
  18. Jarqui

    Jarqui Registered User

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    The above links were provided by the NHL. That material was presented in a press conference called by the NHL. The NHL answered the media questions on the material presented and have ever since. The transcripts of those press conferences are also on their CBA site.

    I have to conclude that the NHL has made a pretty darn good effort "to make the difference between player cost and player salary clear". The presentation linked is simple, easy to comprehend and quite clear.

    The media's first duty is to present the truth and accurate, confirmed facts to it's consumers. I would agree with you that several in the media are derelict in that duty while some routinely avoid performing that duty with the diligence expected.

    Having said that, we also have a duty to ourselves to get informed of the facts that concern us. Garbage media makes that task tougher but it doesn’t entirely let us off the hook either.

    The NHL has not been flawless in their presentations to the media on the lockout. But in this particular case, as in many cases, I’d say they’ve been quite clear.
     
  19. hockeytown9321

    hockeytown9321 Registered User

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    Obviously they haven't been clear enough if there are still people confused.
     
  20. nyrmessier011

    nyrmessier011 Registered User

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    ok so me2 got me on some of the costs, thanks for clearing that up...my point, though, is that the masses don't pay close attention like we do at hfboards...the league has made no effort in clarifying how much of the revenues actually salaries are making up to the masses...like player salaries, there's no reason the NHL can't do something to reduce player costs by at least a little margin. I might get eaten up for that statement but it's true, when a business is under fire and in trouble, you cut all costs, you don't just tell you employees, your taking a huge cut in the next 6 years...again though, my main point was that most people think that actually salaries were taking up 76%, and in return people agree with the league even more about salaries that are out of control
     
  21. Jarqui

    Jarqui Registered User

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    I don't think remedial reading lessons would be approporiate for the NHL to conduct, do you ? Largely, the confusion on this particular issue either lies with the media who reported on it inaccurately or the people abdicating on getting themselves adequately informed.
     
  22. Jarqui

    Jarqui Registered User

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    Like nearly every organization, they are heavily reliant on the media getting the word out. Aside from their CBA site, their emails to their fans, press conferences or meetings with fans (which they have done to some degree), I'm not sure what else they could do. Relative to the NHLPA, they have done a substantially better job communicating their position.

    The salaries are out of control.

    There are two major ways to get it under control:
    - through negotiation of their CBA
    - and from that, they could reduce the number of players to maybe an ECHL level. 16 skaters and two goalies.

    The owners cannot be perceived as unilaterally agreeing to reduce players salaries because that is collusion. They have to do it with their union.

    Trying to reduce insurance and benefits costs, etc also has to be done with their union.

    The fact that player costs are so disproportionate to revenues is also an indicator that others costs are not gravely out of whack. We're not talking 75% of revenues for other costs. I'm sure the 19 teams who lost money in '02-03, did what they could to control the other costs.
     
  23. Mess

    Mess Global Moderator

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    In all fairness to confused people ... That does not matter in the CBA battle .. Fans do not need to know all the behind the scenes issues .. My pet peeve is often that Both sides are guilty of holding a press conference and only telling part or half the story IMO .. Its a PR battle thing ..

    The only relevance would be if one side or the other in this dispute are unsure as to the issue .. "TOTAL LEAGUE REVENUE" is such an example that has issues in its definition yet ..
     
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