Where's the Money Coming From?

Discussion in 'The Business of Hockey' started by Zopust, Aug 5, 2005.

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  1. Zopust

    Zopust Registered User

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    The fairly widely held assumption that players would be taking massive pay cuts to stay where they were was neatly destroyed when around ten teams with formerly low payrolls starting racking up free agent signings for fair to high market value.

    So my question is, with the expectation of potentially less revenue this season than usual, given the potential backlash against the sport, lower ticket prices in many occasions, and a lack of a universal TV deal in the US, where is the money coming from to support such inflated payrolls among the league's low spenders?

    I'm asking about:

    -Edmonton
    -Calgary
    -Pittsburgh
    -Colombus
    -Chicago
    -Boston
    -Columbus
    -Florida
    etc.
     
  2. octopi

    octopi Registered User

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    These owners all have money. The issue was not that they had no money, it was that they continued to lose money.They now all figure that the playing field is leveled and there is a limit to what any team can spend, they might as well drop an extra 5 -10 mill because right now, fan interest is at an all time high. We're talking selling out the buildings every night here. :eek:
     
  3. Columbus had a payroll in the $31-33 million range prior to the lockout, and was one of the few teams to turn a profit each of the last 4 seasons. I doubt bumping that salary up another $2-3 mil is going to create a financial crisis.

    Not sure about Colombus ... how do they draw?
     
  4. davemess

    davemess Registered User

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    For the Penguins there are a couple of reasons that spending more money now is they way they have choosen to go.

    1) New investment : Although the deal hasnt been completed the Penguins are close to having a new owner.

    2) The Arena Issue : The Penguins feel that one of the ways to help generate more public support for the new arena is to put a winning team back on the ice. Playing exciting hockey and getting into the playoffs could seriously help the Penguins case. Even more so if there are signs that the team could be close to the Stanley Cup in 3 or 4 years when the young stars settle in.

    The revenue sharing should help to some extent but the Penguins are prepared to take a bit of a loss this year and maybe next if it means getting that all important new arena..... its a controlled gamble, they arent going to take huge losses doing this.

    Besides unless they add another premier talent the Penguins could be struggling to get to that $30 mill mark.
     
  5. discostu

    discostu Registered User

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    Well, I'm not sure how high it is in all markets. People are buzzing about it in hockey circles, and attendance may be up in some markets, but they've also cut ticket prices drastically. Many of the smaller markets are trying to go out and create a buzz by landing free agents, but, big markets like Toronto and Detroit have been losing talent, and will likely be less competitive this year, meaning, less interest in the team.

    Corporate support is harder to gauge as well. By missing a full year, you've disrupted spending patterns of businesses. The promotional budget may now be allocated to something else, and if the business saw higher returns with that new venture, they will need some heavy convincing to come back and spend their money with the NHL.

    I think for many teams, they're getting excited at the prospect of acquiring players without all the hard work of developing the talent, or giving up valuable young players or picks via trades. They're figuratively, the kid in the candy store, picking up goodies that were once off-limits to them.

    My guess is, if you polled the GMs right now, about 12 or 13 would probably tell you that they are banking on getting to the second round of the playoffs, and their budget is designed to reflect that. Obviously, only 8 are going to get there though, meaning that there are a number of teams that are over-rating the impact that their big budget spending is going to have.
     
  6. Revenue Sharing
     
  7. Simple.. 24% rollback. And Edmonton was one of the few teams to make a profit in the last NHL season.
     
  8. Resolute

    Resolute Registered User

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    In the case of Calgary, the Flames are actually going to end up spending less than they did in 03-04.

    One of the most important things to note is the lack of signing and performance bonusses in this deal, save for certian situations (rookies, injuries, pensioners). I've read once that including playoff bonusses, the Flames ended up spending $40 million on player costs in 2003-04, though the official payroll ended up around $36 million.

    This year, the payroll will start at $34-35 million. Barring any big additions during the year, Calgary is actually spending up to $6 million less.


    As for the rest of them, it goes to the logic of the cap magnet thread. Low budget teams realize that adding a couple million to the payroll will now make a significant difference on the calibre of the team, and it is hoped that it will translate into better attendance and better revenue to both support the extra costs, as well as turn losses into profits.

    The "spend money to make money" theory in action, but at a level that is reasonable for all teams to try to follow.
     
  9. Hemsky4PM

    Hemsky4PM Registered User

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    One word: escrow.

    If the clubs overspend the players collectively pay them back. The deals are still too high because they set unrealistic salary levels for comparables. It will be hard 3 years from now for a UFA to expect the same kind of money that is being thrown around now unless revenues increase.
     
  10. GSC2k2*

    GSC2k2* Guest

    They sell out. Frequently.
     
  11. GSC2k2*

    GSC2k2* Guest

    The real question is why people held that fairly widely held assumption.

    The real answer: most hockey fans don't have a clue what is actually going on (which is that money is not more than it was or would have been, in spite of more such widely held assumptions) and didn't have a clue what would happen or how it would happen, and most hockey fans are rather routinely wrong about the business of hockey (present company excluded, of course ...).
     
  12. nomorekids

    nomorekids The original, baby

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    I just heard that Poile said season ticket sales are going better than they had even hoped, and that they got a quite a few calls after the Kariya announcement alone. That's not even considering partial packages and "11 game ice packs"
     
  13. ScottyBowman

    ScottyBowman Registered User

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    You guys bought all the talk of all this money being lost by the bottom feeders.

    Nashville claimed to have lost $10 mil on a 22 mil payroll HA! Now they have all this money for Kariya.

    Carolina made the most ridiculous claim of all time that they lost 22 mil on a 39 mil payroll
    http://sportsillustrated.cnn.com/2004/hockey/nhl/09/16/bc.hkn.hurricanes.lockout.ap/

    Yeah I know a few people will come to the aid of the billionaires and defend their lies but where is this money coming from as op said? It can't be revenue sharing because it won't be much and Carolina is going to have to be under $17 mil payroll to make a profit according to Karmanos LOL.
     
  14. Skroob*

    Skroob* Guest

    which means the money i pay to see the rangers play goes to pay for other teams to load up. wonderful system.

    I'm all for a level playing field, but not for handouts.
     
  15. nomorekids

    nomorekids The original, baby

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    To quote the great Descendents:

    Sour Grapes!
    You leave such a bad taste!
    Sour Grapes!
    I don't need you, anyway!
     
  16. ScottyBowman

    ScottyBowman Registered User

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    Is it fair for the rest of the NHL clubs to give handouts to small market teams with a total of 4 hockey fans like Nashville and Carolina? Nashville in this article

    http://www.tennessean.com/sports/columnists/climer/archives/05/03/65703724.shtml?Element_ID=65703724

    claims they lost $10 mil on a $22 mil payroll. I don't know what is going on there but this seems like an extreme case. Carolina is claiming that they can't make a profit unless the payroll is under $17 mil. This surely doesn't sound like big league clubs to me. Maybe these teams move and they get AHL teams.
     
  17. nomorekids

    nomorekids The original, baby

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    You know, posting the same thing twice in one thread may make you sound more bitter...but not necessarily any more intelligent. It's okay. You had a nice run at the top, throwing money at any and every available big name for years...now suck it up, re-build, and accept a few years of being a marginal team. It's going to be nice for teams like Columbus and Nashville to look at their schedules and consider Detroit "feisty underdogs, but mostly likely a W" :yo:
     
  18. X8oD

    X8oD Registered User

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    we'll see in two years when yer still paying for guys who dont deserve the money, getting ousted in the first round, all while playing to fair weather fans. While Detroit, Toronto, Colorado and the other top teams over the last Decade +, are in a much better market, and have 30 mil in cap space.

    most likely scenerio to come of this? When the teams in this marginal cities start losing, the fans stop showing up, and they get moved.

    im willign to bet more money in my scenerio, than yours of "The wings are just fiest underdogs"
     
  19. ScottyBowman

    ScottyBowman Registered User

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    I'll ask this again

    How can the Predators afford to stay in Nashville when they are losing $10 mil on a $22 mil payroll?

    http://www.tennessean.com/sports/columnists/climer/archives/05/03/65703724.shtml?Element_ID=65703724
     
  20. GSC2k2*

    GSC2k2* Guest

    Typical skin-deep response.

    Without other teams, the rangers are playing with themselves.

    Of course, Glen Sather seems to have been doing that for years ...
     
  21. GSC2k2*

    GSC2k2* Guest

    I think the RedWings should move. For no other reason except to piss you off.

    Your count of useful, informative, cogent and accurate posts remians at zero.
     
  22. ScottyBowman

    ScottyBowman Registered User

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    I suggest you read the rules of this message board.

    1) Flaming: Do not post any messages that harrass, insult, belittle, threaten or flame another member or guest. Debates are fine, but argue with the point, not the person.

    If nobody wants to answer my question then its fine. I just want to have a civil conversation.
     
  23. nomorekids

    nomorekids The original, baby

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  24. Skroob*

    Skroob* Guest

    well, the Rangers seemed to do quite well finding opponents for about 75 years or so. Seems like something else has become a problem since then.
     
  25. thinkwild

    thinkwild Veni Vidi Toga

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    Well I dont know about massive paycuts. The target was set to drop from a $1.8mil avg salary to a $1.3mil avg salary. How massive would we expect these to be?

    I dont get all this talk about revenues dropping going forward. There seems not an iota of evidence to support such a theory. And what would have been the point of all this if that were true? They have already lowered projections 25% by half a billion dollars. It has nowhere to go but up. If it returns where it was before the lockout, and why not, in a year, the cap will be back at $49mil some, and all the contracts currently being bemoaned, will suddenly look very reasonable again. $49mil, in the context of the last seasons revenues, was enough to win a cup with. All the crazy contracts in the league notwithstanding.



    Especially if all the markets highlighted in the original post, get the marketing related buzz they so needed. And that's where the revenue growth has to come from. Free agent signings are done during season ticket selling season. Unfortunately, they are often only a temporary buzz. And like a crack addict, big market teams wanted more and more, until they eventually hit rock bottom. Now that will be dead cap space.


    I think all the clubs noted in the orig post actually were reported to have made money, except Florida, which has startup costs still. It was 6 of the biggest spending clubs that allegedly accounted for 75% of the losses. Now they finally have the excuse to give to their fans. Look we didnt want to do cut. The devil cap made us do it. And it will probably work out the best for them that they do.

    I wonder how much Pittsburghs revenues will increase this year over the last. More than Toronto's could go down?
     
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