8/14 NHLPA proposal presented

[Blue Shakehead]

Can't for one second believe the NHLPA would only want the expense figures to decide profitability/loss.

People need to understand (HRR x 43%) - expenses not= operating profit/loss. Reason is simple, HRR isn't likely total revenue.

If the players think the losses are BS and that owners are secretly making profits, the best thing they could do is buy or invest in the Coyotes, Islanders, Devils, Stars and Panthers.

There's a good reason why Warren Buffet and Apple aren't lining up to buy into the NHL.

 

[SJeasy]

Can't for one second believe the NHLPA would only want the expense figures to decide profitability/loss.

People need to understand (HRR x 43%) - expenses not= operating profit/loss. Reason is simple, HRR isn't likely total revenue.

My point was that the CBA only mandated the audited revelation of HRR, not expenses. The PA was never mandated by agreement to be privy to the expense side of the equation. It is probably behind the little tiff between Fehr and Bettman on disclosure. It also syncs up with Fehr's statement about distribution being the problem rather than overall profitability of the league and only after receiving the paperwork from the league.

I have been fairly attentive when the expense side comes out for individual teams to get a handle on what it takes. Fugu has a pretty good grip as well. My take on the best indicators for real profitability or loss are the presence or absence of cash calls, and any loans for ongoing operations. The loans are the events most likely to be publicized.

Other than the benefit of having an anchor tenant for the arena, I don't see any other significant revenue stream that was omitted from HRR. If you are aware of any, I am more than willing to listen.

Depreciation on player contracts is the biggest item where a team can claim a loss on paper without suffering a real cash loss.

 

[cobra427]

If the players think the losses are BS and that owners are secretly making profits, the best thing they could do is buy or invest in the Coyotes, Islanders, Devils, Stars and Panthers.

There's a good reason why Warren Buffet and Apple aren't lining up to buy into the NHL.

If the losses are BS, then the owners will cave in to player demands at some point because it would be too expensive to miss a season. I think the owners have done the math, again, and would be willing to miss a season versus signing a bad deal. The sign that the owners are secretly making more money will be if they compromise on the money issues: salary rollback, HRR anywhere north of 50%, and more revenue sharing. I don't see the owners caving, but if they truly are making secret profits, we will know soon enough by the way they play there hand.

 

[ottawah]

If the losses are BS, then the owners will cave in to player demands at some point because it would be too expensive to miss a season. I think the owners have done the math, again, and would be willing to miss a season versus signing a bad deal. The sign that the owners are secretly making more money will be if they compromise on the money issues: salary rollback, HRR anywhere north of 50%, and more revenue sharing. I don't see the owners caving, but if they truly are making secret profits, we will know soon enough by the way they play there hand.

Exactly my thinking. Dangerous game of chicken for the players. I remember when season got cancelled last time, players were in disbelief, trying t salvage something only then.

I still believe there is enough wiggle room in the NHL offer to get something done though.

 

[Beukeboom Fan]

Can't for one second believe the NHLPA would only want the expense figures to decide profitability/loss.

People need to understand (HRR x 43%) - expenses not= operating profit/loss. Reason is simple, HRR isn't likely total revenue.

People always talk about all this "other" revenue that isn't included in HRR. Can anyone list what this could be? It just seems like people always fall back on that, but can never provide even examples of what it could be.

 

[PaPaDee]

People always talk about all this "other" revenue that isn't included in HRR. Can anyone list what this could be? It just seems like people always fall back on that, but can never provide even examples of what it could be.

Any expanding or relocating clubs are often hit with a large sum, which isn't including in the HRR.

 

[Beukeboom Fan]

My point was that the CBA only mandated the audited revelation of HRR, not expenses. The PA was never mandated by agreement to be privy to the expense side of the equation. It is probably behind the little tiff between Fehr and Bettman on disclosure. It also syncs up with Fehr's statement about distribution being the problem rather than overall profitability of the league and only after receiving the paperwork from the league.

I have been fairly attentive when the expense side comes out for individual teams to get a handle on what it takes. Fugu has a pretty good grip as well. My take on the best indicators for real profitability or loss are the presence or absence of cash calls, and any loans for ongoing operations. The loans are the events most likely to be publicized.

Other than the benefit of having an anchor tenant for the arena, I don't see any other significant revenue stream that was omitted from HRR. If you are aware of any, I am more than willing to listen.

Depreciation on player contracts is the biggest item where a team can claim a loss on paper without suffering a real cash loss.

Maybe I use different verbiage, but depreciation is typically for items where the team has invested in a "fixed asset" that will be used for a period of time (typcially to exceed one year). How can a player contract create depreciation?

I also see people remove depreciation from team profitablity, like it isn't a "real" expense, which is total crap. Maybe cash didn't go out the door that year, but the organization need to recover the costs for investments required for the business if the NHL is going to be sustainable.

 

[Beukeboom Fan]

Any expanding or relocating clubs are often hit with a large sum, which isn't including in the HRR.

And over the last 6 years of the CBA - that happened one time. You're talking about $60M out of the total HRR base of probably $15B for that point in time. IMO, you don't build a sustainable model counting on one time activity like that that only happens rarely, or not at all if the league is healthy.

 

[SJeasy]

Any expanding or relocating clubs are often hit with a large sum, which isn't including in the HRR.

Thank you, I forgot about those.

It's large, but they are one time windfalls for the clubs. Beyond that, they only amount to ~$3mil/team/occurence when they occur. The vast benefit in that was seen between 1990 and 2000. Only Atlanta->Winnipeg in the last decade. I doubt there is much in Phoenix moving at this point as they will probably take a hit on what the league has already poured into the club that offsets any relo fee.

 

[SJeasy]

Maybe I use different verbiage, but depreciation is typically for items where the team has invested in a "fixed asset" that will be used for a period of time (typcially to exceed one year). How can a player contract create depreciation?

I also see people remove depreciation from team profitablity, like it isn't a "real" expense, which is total crap. Maybe cash didn't go out the door that year, but the organization need to recover the costs for investments required for the business if the NHL is going to be sustainable.

I understand regular depreciation and the reality thereof. However, tax law allows depreciation on player contracts which don't fit the reality of what are ordinarily depreciation items (fixed assets).

 

[thinkwild]

It's hard to believe that not only do owners get benefit from the large non-cash expenses of depreciation of buildings and land, but they have also apparently somehow managed to get the ability depreciate the player contracts themselves. After all, Crosby is not a renewable resource, he will be depleted in a decade or so.

Revenues can be difficult. What about tax subsidies. What about leafs tv. What about sponsorships to be the official toilet paper of leafs tv. What about discounting ad rates to beat out the competition? What about subscriber fee increases to their parent company that happened when the team started being shown more on that cable channel? What about all the internet revenues, overseas sponsorships. What about the $100 mil appreciation in franchise value Forbes claims Melnyk has made? At the very least, its not black and white, and two equally legitimate accounting firms could come up with slightly different numbers for what is hockey related revenue, and what percentage of it.


The rules all 3 leagues use to define their version of "revenues to be shared with players" have all been shown to be slightly different. And all operate within different business contexts of rev sharing etc. And all 3 come to a higher number than the one league that doesnt have that linkage. Go figure.

But this idea of an industry pay standard doesnt really make sense to me. A Chrysler worker can go work at Ford if they offer more money. If Burger King and Wendy's are side by side, and burger kings burger is 99 cents while Wendy's is $4.99, well i might buy burger king. But hockey players cant usually become basketball players if they pay more. I dont choose which game to go to, raptors or leafs, based on which ticket is cheaper. In fact very little of the price point hockey fans are willing to pay for hockey tickets or other such hockey related revenue generators is based on how much competition they are facing from the other leagues for these tickets/jerseys/internet revenues/ppv streams.

And nor would i logically think they all should be the same since they operate in such different environments.

Also, the argument that they could be wrong in either direction is lame. Unless every NHL owner, Gary Bettman and every lawyer working for the NHL is an utter and complete moron, they are not overestimating profitability.

 

[Holdurbreathe]

People always talk about all this "other" revenue that isn't included in HRR. Can anyone list what this could be? It just seems like people always fall back on that, but can never provide even examples of what it could be.

CBA Section 50.1 b) Non-exhaustive list of revenues not included in HRR.

 

[cobra427]

Exactly my thinking. Dangerous game of chicken for the players. I remember when season got cancelled last time, players were in disbelief, trying t salvage something only then.

I still believe there is enough wiggle room in the NHL offer to get something done though.

Fehr could be very dangerous, but I doubt the players have the nerves. An average player with 5 years left in their career at say 2 mill, so 10 mill total. The player can (A) give up a year of income for an unknown result, but the result will be no better then 8 million (he lost 2 mill in year 1), but more likely, the rollback (20%ish if they negotiate) sticks and he now gets 6.4 million total . (B) The player can accept the roll back, play this year, and he is assured 8 million over 5 years. Then when he is done playing, he can make 50-100k a year doing whatever.

Which one would you choose if you are a player? Players leave teams all the time for more money elsewhere, the highest bidder gets the player 90% of the time, nothing wrong with that. Players rarely take 20% less money to stay with their current team. Who could blame them for doing the math and taking the better more secure financial option.

 

[Holdurbreathe]

I understand regular depreciation and the reality thereof. However, tax law allows depreciation on player contracts which don't fit the reality of what are ordinarily depreciation items (fixed assets).

Roster Depreciation Allowance - Invented by then-Chicago White Sox owner Bill Veeck, the "roster depreciation allowance" is an obscure section of tax law that allows professional sports teams to "write off" the declining value of player contracts.

 

[SJeasy]

CBA Section 50.1 b) Non-exhaustive list of revenues not included in HRR.

I just went through the list and other than relo/expansion fees and the benefit of anchor tenant, I didn't see any substantial revenue streams. I did see some disallowable items which prevented the PA from effectively counting one stream twice. (eg Rev share payments and insurance proceeds from things such as their injury insurance.) Most of it was related to non-hockey issues regarding the arena.

 

[Beukeboom Fan]

CBA Section 50.1 b) Non-exhaustive list of revenues not included in HRR.

Call me crazy - but if it's NON hockey related revenue - not sure why the NHLPA would deserve a cut.

The revenue that isn’t hockey related is laid out in 50.1(b) and consists mostly of financial actions. Things like interest payments from loans, sale of club property that is not hockey related (furniture, equipment), revenue from non-NHL teams, real estate deals, investments, insurance recoveries, revenues raised for charitable purposes that do not use current player names or likenesses, and other financing related deals. The basic concept is if the revenue came from a source that isn’t related in any way to NHL operations, then it cannot be construed as hockey related. So, if the New York Rangers lease out the use of Madison Square Garden for a boxing match and none of the fees go toward the cost of operating the Rangers then the revenue generated from that event is not considered hockey related. If any of the fees from that arrangement go toward converting MSG back into a hockey rink or any other hockey operating costs, that percentage is counted toward hockey related revenue while the remainder is considered non-hockey related.

From this article: http://fehrtheewell.com/2012/08/18/understanding-the-cba-hrr-vs-non-hrr/

 

[thinkwild]

Obviously the players arent attempting to get non-hockey related revenues designated as HRR. They are trying to ensure that all revenues related to hockey are designated as HRR. It is the owners that are attempting to say not all revenues that are related to hockey should count in our definition of Hockey Related Revenues that we share with the players.

 

[kdb209]

Any expanding or relocating clubs are often hit with a large sum, which isn't including in the HRR.

Nor should it be. That's not hockey generated revenue, it's investment capital - prospective owners buying an expansion franchise and/or territorial rights which are owned by the League. The Players have no more claim to that money than the proceeds of a franchise sale from one owner to another.

 

[kdb209]

Maybe I use different verbiage, but depreciation is typically for items where the team has invested in a "fixed asset" that will be used for a period of time (typcially to exceed one year). How can a player contract create depreciation?

C&P from the last time this question was brought up:

The biggest tax advantage of pro-sports ownership is the ability of a new owner to depreciate player contracts. When an owner buys a team, he may allocate a all or part of the purchase price to the value of existing player contracts, which then can be depreciated over 15 years - giving a loss for taxes with no impact on operations or cash flow. This was discussed in nauseating detail back in Phoenix Bankruptcy Part XX: There Will Be Baum.

Example of New Rules: Assume that Owner purchases sports franchise for $100 million after October 22, 2004. Under new rules, Owner may allocate any percentage of this purchase price to player contracts, if allocation is supported by relative economic value (50% ceiling is repealed). Owner allocates $70 million to player contracts, and $30 million to franchise and media rights. The entire $100 million is depreciable over 15 years - including the cost of franchise and media rights which IRS contended were not depreciable under prior law. Upon the sale of the franchise 10 years later, Owner is not subject to depreciation recapture on original player contracts that have been depreciated or written-off if those contracts no longer have real economic value to the new Buyer because the players are gone or retired. Only the normal depreciation recapture rules apply for existing player contracts that still have economic value to the new Buyer.

 

[Dado]

I just went through the list and other than relo/expansion fees and the benefit of anchor tenant, I didn't see any substantial revenue streams.

Someone had earlier brought up the Philly/Comcast arrangement, where there is a direct link between the team owner and the company that buys the broadcast rights. In the Flyers case, those broadcast rights are sold for well under market value, decreasing HRR and moving profits into the parent company.

IMO, that sort of thing should be reflected in HRR.

 

[kdb209]

Someone had earlier brought up the Philly/Comcast arrangement, where there is a direct link between the team owner and the company that buys the broadcast rights. In the Flyers case, those broadcast rights are sold for well under market value, decreasing HRR and moving profits into the parent company.

IMO, that sort of thing should be reflected in HRR.

This is covered in the CBA - albeit only for new local broadcast contracts.

(2) In the event that, following the execution of this
Agreement, a Club enters into a local broadcasting
agreement with a Club Affiliated Entity for the right
to broadcast or exhibit NHL pre-season games,
NHL Regular Season games, Playoff games, special
games, highlights, game portions or any other
game- and non-game programming over a local or
regional cable network, the NHL and NHLPA agree
that they shall confer in good faith regarding a
method for determining the fair market value of
such agreement for purposes of including revenues
attributable to such agreement in HRR for such
Club, and, failing agreement, shall submit the
matter to arbitration;

 

[LadyStanley]

http://starsblog.dallasnews.com/201...-prepared-to-outwait-owners.html/#commentzone

Heika: If players strategy is small changes to current system, they have to be prepared to outwait owners.

 

[ottawah]

http://starsblog.dallasnews.com/201...-prepared-to-outwait-owners.html/#commentzone

Heika: If players strategy is small changes to current system, they have to be prepared to outwait owners.

Well written article for the most part. It really gets to the gist that little else matters as much as the resolve of the owners.

Should be required reading for the players. They need to understand the risks.

 

[LadyStanley]

http://www.forbes.com/sites/prishe/...-if-new-revenue-split-mirrors-nfl-nba-models/

Forbes: NHLPA will be lucky if revenue split mirrors NFL/NBA



http://www.thestar.com/business/art...-owners-learn-to-share-revenue-economist-says

Economist Hodgson: no need for lockout if team owners learn to share revenue

 

[Lacaar]

This is covered in the CBA - albeit only for new local broadcast contracts.

So the Comcast deal was made before the CBA or is it one that was agreed upon by the players Union? If so is there just a bunch of fibbers on the forum claiming the deal is cheap?