Question about the Oilers

Discussion in 'The Business of Hockey' started by fischer8, Feb 8, 2005.

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  1. fischer8

    fischer8 Registered User

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    This is not meant to upset anyone, but why is the Oilers franchise in such a bad financial situation? I guess for that matter, most of the Canadian franchises. It's the country where hockey is the most popular, but their franchises fail. I've never seen a good reason why they can't make money. Is it the whole Canadian dollar versus the US dollar, bad owners or what? Teams like Edmonton and Ottawa both have some exciting young players who score, but just can't seem to be succesful business wise. Thanks for any responses.
     
  2. Meanashell11

    Meanashell11 Registered User

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    Well the currency is one thing for sure but not nearly the issue it was a year or two ago. The biggest issue is costs, they have pretty much maxed out what they can get from the revenue side yet costs continue to skyrocket. It does not help that their travel costs are some of the highest in the league either.
     
  3. Jack Canuck

    Jack Canuck Registered User

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    Ottawa has a horrible arena location, I would imagine that that is part of their problem.

    The US/CAN dollar can't help much either.
     
  4. Oilers Ent

    Oilers Ent Registered User

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    The revenues they generate can't compete with American revenues from teams like Chicago, New York, Boston, and Philadelphia. Similarly, there isn't a high enough population to generate more revenue like the teams in Toronto and Montreal. The Canadian dollar factors in a little bit.

    As far as Edmonton goes - they are pretty much maxed out for revenues right now and were still able to squeeze a little profit after having a $30.8 Million payroll.

    If the league continues its disparity they won't be able to keep up and barely can now.
     
  5. AM

    AM Registered User

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    A couple of things

    Canadian dollar and travel costs.

    Also, they could play, but they couldnt be competative.
     
  6. mackdogs*

    mackdogs* Guest

    Paying players in US dollars while receiving canadian funds at the gate doesn't help. The dollar was bad over periods, more recently has been good. It's mostly location I think, they can't charge outrageous sums for tickets like the Leafs can and don't get much from TV/radio. It sure isn't bad owners.
     
  7. se7en*

    se7en* Guest

    Yeah but when the NHLPA wanted revenue sharing the Oilers would get nothing because they generate mid-market revenues. :dunno:
     
  8. Bohologo

    Bohologo Registered User

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    Can anyone provide a clear sense of US-Canada tax differential? Isn't Montreal subject to heinous taxes to the city for the Keg?
     
  9. grego

    grego Registered User

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    Even with the dollar being higher it is still a huge disadvantage to the Oilers and Canadian teams.

    If they can raise $80 million Canadian a year in revenue that it still just around $65 million US currently. Then they have a payroll of around $31 million US. Essentially most the major bills the Oilers have are in US funds but almost all money they collect is in Canadian.

    To be truly fair to Canadian teams they should increase the payment to the Oilers and Canadian franchies from that tiny 3 to 4 million a year to around a 10 to 15 million dollar bonus to put them on equal footing with a US team.

    Though most Canadians don't expect that US owners would be too elated to give that much money to help out teams in Canada, so the teams seem to be putting all their faith into believing that a salary cap could at least keep the costs down so they can be competitive and hit a payroll where they will break even or make a tiny profit.
     
  10. acr*

    acr* Guest

    I still don't understand how the US/CAN dollar difference is a big deal. Isn't it all the same money?
    Does the value of the dollar change that much between the time the fan buys the ticker and the time the owner writes the check?

    I'm no economics major, so this confuses me.
     
  11. dolfanar

    dolfanar Registered User

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    Keep in mind that attendance is great, and as stated by everyone else, revenue is pretty maxed out across the board.

    The canadian dollar is a factor, travel costs much less so, but the big one's are taxes and especially stadium arrangements. Canadian tax payers are not into subsidizing multi-million dollar stadiums for the most part.

    For example, if someone had *given* the Montreal Canadiens a stadium, then that would have been 200 million extra dollars to spend on players, plus interest. Add that to in some cases millions in property taxes, and you have significant differance makers.

    It's ironic, but the NHL is actually "healthiest" in Canada, and revenue streams couldn't be more developed, but it's where franchises, as a whole are more disadvantaged. It's the big reason, imo, the NHL is so hot to keep it's Canadian franchises, they don't want to see there biggest fan-base go away... it could be death to the league.
     
  12. AM

    AM Registered User

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    So what?

    If you have a payroll of $30million, and youre competing against $42 million dollar payrolls youre more competative then if youre competting against $70 million dollar payrolls.


    Without payroll escalation the Oilers could afford to keep their guys, which would lead to being comepative and longer runs in the playoffs.
     
  13. acr*

    acr* Guest

    Oh, it's a tax thing? That makes sense.
     
  14. dolfanar

    dolfanar Registered User

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    Ok, imagine this.

    1995
    Average Ticket Price: $50 CDN
    Average Salary: $25,000 CDN
    Average NHL Salary: 1 Million US
    CANADIAN Exchange Rate: .80

    Effectively you are charging $40 US per ticket

    Assume inflation at 20% over 5 years overall, and 50% for NHL Salaries

    2000
    Average Ticket Price: $60 CDN
    Average Salary: $30,000 CDN
    Average NHL Salary: 1.5 Million US
    CANADIAN Exchange Rate: .60

    Suddenly you are actually getting $36 US per ticket, despite higher player costs... ouch. Even had salaries stayed even you would be behind the 8-ball by 10% (36 vs. 40).

    As has been stated, the Canadian dollar rebounding has mitigated this ALOT in the last year or two, which is why a team like the Oilers can break even on an extremely tight budget (impossible just a couple years ago).
     
  15. Biggest Canuck Fan

    Biggest Canuck Fan BCF

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    Here are the reasons:
    • Can vs US $. mentioned but cannot be over looked
    • Incredibly high taxes on the business. I believe Montreal Alone pays more in taxes than all the US teams combined. Vancouver pays 28 Million a season
    • Ottawa signed a stupid deal with the city to pay for the highways and offramps to the Corel centre... basically they were so happy to get the team that the City of Ottawa fleeced them big time
    • Edmonton is a goverment city and thus only has a population of 750K. 900K with surrounding areas. It is much too small to support an NHL francise as they currently are

    All in all what worked in the 80's for an NHL francise like Edmonton clearly cannot now, andthat is why those teams need a different financial landscape.

    Persoanlly I cannot imagine an NHL without these small market teams.
     
  16. se7en*

    se7en* Guest

    The Oilers own northern Alberta, and there are mostly Oilers fans in this province. Ticket sales? They sellout games all the time. TV contracts? I thought they had a sweet deal with sportsnet. Advertising? The have ads on the zambonis for chrissake.

    What revenues have we maxed out? Edmonton is one of the fastest growing cities in Canada. They packed tens of thousands of people into a stadium in -25C weather. I think it's safe to say that the fans are buying all they can and there will new fans everyday.

    Where does all the money go?

    OK, if we make $80 Cdn which is $65 mil US in your average season, $32 mil of that goes to salaries so they have $28 mil left. Where does it go? And how much do you think it costs? (things like airfare and stuff)
     
  17. Bill McNeal

    Bill McNeal Registered User

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    For the poster who asked about the Canadiens and property taxes:

    Article Here
     
  18. se7en*

    se7en* Guest

    What does Edmonton being a government city have to do with it? And you're dead wrong on our population genius, we have over 1,000,000 now and growing fast.
     
  19. Biggest Canuck Fan

    Biggest Canuck Fan BCF

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    1 US dollar equals 1.20 Canadian.
    therefore
    5 Million US salary equals 6 million

    Now here is the interesting part: Why should a team operating in Canada, bringing in and generating Canadian funds pay US dollars?

    Because technically you make more money if it is in US dollars, which is what has happened.
     
  20. Egil

    Egil Registered User

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    Ottawa, Edmonton and Calgary are about half as big as the next smallest market in the NHL at 1 million people. This is the first problem.

    Calgary and Edmonton both have old arenas that lack many of the suites and stuff that the more modern facilities have. Ottawa had to pay for its arena, which led to their problems.
     
  21. Biggest Canuck Fan

    Biggest Canuck Fan BCF

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    I am a stats major my friend. but just to show you...

    http://www.epl.ca/Elections/info/EPLpopulation.cfm

    According to your own City Library you only have 665,599(forecast) for 2002

    You are telling me in 3 years the City has had an influx of over 300K?!?! :dunno:

    Here's another one my learned friend... 666 104 (2001 census)
    Source: http://www.thecanadianencyclopedia.com/index.cfm?PgNm=TCE&Params=J1ARTJ0002525

    Sorry but Edmonton is no where near 1,000,000

    You are thinking of this: http://www.edmonton.com/statistics/page.asp?page=84

    With a population of just under 938,000 at the time of the 2001 Census of Canada, the Edmonton CMA is the sixth largest metropolitan region in Canada.

    Current projections from the City of Edmonton Planning and Development Department are that the population of the Edmonton CMA will be just under 985, 000 at the end of 2003 and the City of Edmonton population will be just under 698, 000.
     
  22. Digger12

    Digger12 Gold Fever

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    One thing also to mention is the relative wealth of the collective ownership here...they're not so affluent that they can treat the team like a hobby. They pretty much have to run the team like a business.
     
  23. se7en*

    se7en* Guest

    Stats can

    Within city limits there are probably 720,000. You underestimate how fast Edmonton is growing. and St. Albert/Sherwood Park are practically touching our border. You're only kidding yourself if you think there are not enough people here to support the NHL.
     
  24. grego

    grego Registered User

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    The problem with government is an issue. In the Forbes listing the show lack of corporate sponshorship, and a small business community as an issue for the Oilers. Gov't businesses consider it a waste to spend excessive amounts of money on an NHL team. Where businesses think nothing of it.

    That puts Edmonton at a bit of a disadvantage.

    On the good side gov't employess make a decent middle class income so there is no shortage of fans that can go to games in the city.

    Unfortunately the NHL has gotten costs so high that if you don't have huge businesses paying insane amounts of money to the team you lose out on a huge form of revenue.
     
  25. Biggest Canuck Fan

    Biggest Canuck Fan BCF

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    I said the current NHL, not the NHL. Don't get your feathers all in a ruffle cause I never said Edmonton shouldn't be in the NHL.

    Again the way the NHL currently is, there is no way the city can support a francise.
     
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