In a recent issue of The Hockey News, Bill Daly defended the Arthur Levitt report by asking all critics to read it first. Perhaps Daly should've asked his boss Gary Bettman to read it first -- Bettman, in the news conference introducing the report, said, "Actually, we thought the percentage of gross revenue taken up by player salaries was 76%, he [Levitt] said 75%."
Actually, he said no such thing. Levitt said 75% of net revenue, not gross revenue, goes toward total player costs, not just salaries. These are significant differences. What the NHL calls net revenue (a measure it invented all for itself that comes closest to what everyone calls gross profit) is gross revenue net of direct costs -- except for player salaries, as direct a cost as there is for a hockey operation. Other costs, such as travel expenses, insurance, social security, and the like, make up part of the 75% Bettman incorrectly called "player salaries" -- Levitt even includes minor league salaries, which would be fine if minor league revenues were included, but they were not.
Actually, I take it back -- Levitt didn't write "gross revenue" but he did say it. When asked quite plainly during the press conference introducing his report, "Can you tell me what the gross revenues of the League actually equal," Levitt responded, "two billion". But he probably just misspoke in the heat of the Q and A.
And the very next question? "Can you tell me what comes under the universe of player costs? I assume that's more than just what they are paying in salary." Deferring to his lieutenant Lynn Turner, the response was, "salary and bonuses, benefits and other payments including pension benefits, CBA monies, those are the type of costs that are all included in the player costs." No mention of travel expenses, insurance payments for injured players, minor league salaries, NHL award payments (that's part of what he meant by "CBA monies") -- those might have prompted additional questions.
The truth is, the NHL doesn't want anyone to read the report, and doesn't expect anyone to. The whole world parrots their net revenue of $1.996 billion, player costs of $1.494 billion, and the 75% ratio between the two without understanding of what those terms mean. The NHL even created its own web site for CBA issues that quotes Daly's letter to THN challenging critics to read Levitt's report, the transcript of Bettman's introductory press conference with its misstatement about player cost ratio, the transcript of Levitt's introductory press conference with its misstatement about gross revenues, and the full report itself.
....
Look at any financial report for any company in the world, and you will not see anything resembling what the NHL calls net revenue (you'll find reports that show net revenue in the sense of net sales). Every other company in the world wants to maximize revenue, and then account for cost, not understate revenues and overstate a single expense category, as the NHL does for public consumption (their actual books have still not been scrutinized in full by anyone, including Levitt).
No surprise, despite his so-called independence, that Levitt came within $12 million of the league's own loss declaration and within 1% of its player cost ratio. But me, I'm a diehard skeptic, especially when nearly a hundred owners each worth hundreds of millions or billions of dollars cry poverty over less than $300 million -- less than the total amount they kicked in to help themselves weather a lockout. So I read the report, in detail (even before Daly exhorted me to -- my article originally started with the sixth paragraph, the others prepended in response to Daly). And I read other documents the report refers to, such as the NBA and NFL Collective Bargaining Agreements (CBAs).
And I hate to say it, but I come away believing Levitt has performed a conscious, if completely legitimate, sleight of hand, designed first, last, and always to support the NHL's claims, not test them.
