80% Linkage ? Duhatchek

[thinkwild]

As we all know, there is a lotof mistrust on the isssue of defining revenues. A lotof the revenues the PA woul elect to define are not done so bythe owners. Eric Duhatchek just had an interesting take on the PT sports. Instead of linking a low number to the revenues that you cantagree on, link a high number tothe revenues you do agree on.

We all know the owners play tricks with a lot of their integrated revenue streams. So instead of 54% of all Hockey related revenue, the NHL could offer 80% of a smaller set of revenues they can easily count, like ticket sales and tv contracts.

An interesting compromise? Its still a huge win for the owners, as they get their predicatability, but it would be a way to get around the trust issue.

Click to read more...

 

[GSC2k2*]

As we all know, there is a lotof mistrust on the isssue of defining revenues. A lotof the revenues the PA woul elect to define are not done so bythe owners. Eric Duhatchek just had an interesting take on the PT sports. Instead of linking a low number to the revenues that you cantagree on, link a high number tothe revenues you do agree on.

We all know the owners play tricks with a lot of their integrated revenue streams. So instead of 54% of all Hockey related revenue, the NHL could offer 80% of a smaller set of revenues they can easily count, like ticket sales and tv contracts.

An interesting compromise? Its still a huge win for the owners, as they get their predicatability, but it would be a way to get around the trust issue.

Well, first of all, regarding the "tricks" that owners play with their revenue streams, "we" know no such thing.

Secondly, the "trust" issue is illusory. As Bob Goodenow has stated on WFAN just after the cancellation, the NHL is comfortable with their knowledge of the numbers. They understand the economics of the game perfectly. There is no issue of "hiding" revenue. THere are some issues with interpretation of data, but that is an accounting issue. There is NO trust issue.

Thirdly, that would be a bad deal for the players. By excluding certain sources of revenue, they would be excluding growth opportunities. Just to take a wild example, let's say they decided to exclude media revenue (TV, etc). If the NHL signed a big fat sattelite radio contract in the future, the PA is out to lunch. Or let's say the NHL revenue-sharing deal with NBC works like gangbusters (can't get any worse, says many). The list of examples is endless, and no one is smart enough to identify with precision where the revenue growth will come from.

Furtehrmore, it would be a bad deal for the owners, since the excluded revenue streams could tank, thereby leaving them with the exposure while insulating the players from the realities of the situation.

In any event, the solution addresses a problem that does not exist.

 

[thinkwild]

If you are saying Goodenow does know the revenues, and that is why he is proposing a $50mil cap, i would agree. Healso has some pretty good ideas of the well known fact that learning the books of a pro sports team is very difficult. Economists have tried to study it in baseball without the books, but they all conclude its too complex.

Duhatchek is maintaining that this is an actual proposal on the table now. So it obviously is more than just illusory.

 

[GKJ]

does he have this published somewhere?

 

[Lanny MacDonald*]

That is not a half bad idea. I think that would be fair. Give the players 80% of the gate, since they are supposedly the ones "packing 'em in", give them 100% of their sponsorship deals, and then give the rest to the owners. TV and broadcast revenues are a result of the team (normally signed as a long term deal with the team), and not individual players so that revenue should go to the teams. All sponsorship and mechandising generated by the player goes to the players. Anythig by the team goes to the team. That actually makes a lot of sense. I like the idea.

 

[Weary]

Furtehrmore, it would be a bad deal for the owners, since the excluded revenue streams could tank, thereby leaving them with the exposure while insulating the players from the realities of the situation.

What if the exact opposite happened? I think you've grown so accustomed to empathizing with the owners, that you believe even the Fates will conspire against them.

 

[I in the Eye]

That is not a half bad idea. I think that would be fair. Give the players 80% of the gate, since they are supposedly the ones "packing 'em in", give them 100% of their sponsorship deals, and then give the rest to the owners. TV and broadcast revenues are a result of the team (normally signed as a long term deal with the team), and not individual players so that revenue should go to the teams. All sponsorship and mechandising generated by the player goes to the players. Anythig by the team goes to the team. That actually makes a lot of sense. I like the idea.

I like it too...

 

[nyrmessier011]

Just compromise with what's on the table and give the players 56%.

 

[puck57]

I agree with GSCarpenter- I don't care for the idea- it would end up too risky for both sides for a lot of the reasons that were stated. There would be big unknowns like how tv will pan out and just how the ticket sales will go- especially not knowing how many of the fans will come back and how quickly. I think it has to be a general split by whatever percentage is finally agreed to- I think that is the only way to have stability for the clubs and players from year to year.

 

[GSC2k2*]

What if the exact opposite happened? I think you've grown so accustomed to empathizing with the owners, that you believe even the Fates will conspire against them.

No, no, fair point. I actually thought I was addressing the other side of the checkerboard with this observation:

Thirdly, that would be a bad deal for the players. By excluding certain sources of revenue, they would be excluding growth opportunities. Just to take a wild example, let's say they decided to exclude media revenue (TV, etc). If the NHL signed a big fat sattelite radio contract in the future, the PA is out to lunch. Or let's say the NHL revenue-sharing deal with NBC works like gangbusters (can't get any worse, says many). The list of examples is endless, and no one is smart enough to identify with precision where the revenue growth will come from.

I just think that a linkage deal is essentially a partnership. If you are not going to be a partner all the way, it can lend itself to a failure of the objective, which is sharing the risk and rewards of the league going forward. THe only way a partnership works is when the goals of the parties are aligned. If one side is focused on ticket revenue while the other is focused on somethng else (i.e., broadcat revenue), there is an increased risk of failure of the partnership. Both sides should be focused on increasing revenue in all areas.

Now, please undeerstand. In laying out the above position, I am not suggesting that anyone would tank any one revenue stream to maximize another. It has to do with the alignment of objectives, and the direction of the energies of the parties.

 

[Lanny MacDonald*]

I just think that a linkage deal is essentially a partnership. If you are not going to be a partner all the way, it can lend itself to a failure of the objective, which is sharing the risk and rewards of the league going forward. THe only way a partnership works is when the goals of the parties are aligned. If one side is focused on ticket revenue while the other is focused on somethng else (i.e., broadcat revenue), there is an increased risk of failure of the partnership. Both sides should be focused on increasing revenue in all areas.

Now, please undeerstand. In laying out the above position, I am not suggesting that anyone would tank any one revenue stream to maximize another. It has to do with the alignment of objectives, and the direction of the energies of the parties.

I agree with what you are saying, but the system does have some advantages. Especially if you want to extract a few poinds of flesh. Consider for a second that the players salaries are tied to ticket revenues and who comes into the buildings. You want to put the screws to the players you drop ticket prices. More people will come and increase your concessions sales and making you more money. Or you can lift blackouts in the local markets to generate more advertizing dollars. There are all sorts of ways to pull an NHLPA and use the loopholes to your advantage. I'm kidding, but you get the idea of the potential loophole advantages that are there.

 

[thinkwild]

TV and broadcast revenues are a result of the team (normally signed as a long term deal with the team), and not individual players so that revenue should go to the teams.

Well, if by team, you mean the 23 players on the team, we agree

All sponsorship and mechandising generated by the player goes to the players. Anythig by the team goes to the team.

Its possible, this battle for corporate rights is a big one. With the advent of video games becoming a larger industry than the 4 sports combined, sponsorship rights here couldbe a key revenue stream.

I would think the owners would obviously go for this concept, as they would clean up in everything else. For the players though, this is big concession from a marketplace. But maybe they have determined this is a fair way to allocate revenues to the 2 corporations in their current corporate battle. It does seem fair to me too. Maybe this is a good way for hockey to get around the problem that unlike NFL owners, NHL owners are allowed affiliated ownership structures to share revenues with.

 

[Weary]

I just think that a linkage deal is essentially a partnership. If you are not going to be a partner all the way, it can lend itself to a failure of the objective, which is sharing the risk and rewards of the league going forward. THe only way a partnership works is when the goals of the parties are aligned. If one side is focused on ticket revenue while the other is focused on somethng else (i.e., broadcat revenue), there is an increased risk of failure of the partnership. Both sides should be focused on increasing revenue in all areas.

Now, please undeerstand. In laying out the above position, I am not suggesting that anyone would tank any one revenue stream to maximize another. It has to do with the alignment of objectives, and the direction of the energies of the parties.

Well as much as we disagree, I agree with what you said here. But having both sides so focused on revenue bothers me. They should at least create some sort of ombudsman for the fans. If the players and owners align, it will be the fans who will play the role of the third wheel.

 

[GSC2k2*]

I agree with what you are saying, but the system does have some advantages. Especially if you want to extract a few poinds of flesh. Consider for a second that the players salaries are tied to ticket revenues and who comes into the buildings. You want to put the screws to the players you drop ticket prices. More people will come and increase your concessions sales and making you more money. Or you can lift blackouts in the local markets to generate more advertizing dollars. There are all sorts of ways to pull an NHLPA and use the loopholes to your advantage. I'm kidding, but you get the idea of the potential loophole advantages that are there.

Yes, exactly. I thought of the blackout one as well.

In any event, trust is not a problem, and has not been for a long time (if it ever was). Accounting treatments are at issue.

 

[GSC2k2*]

Well as much as we disagree, I agree with what you said here.

Next thing you know, there will be peace in the middle east.

But having both sides so focused on revenue bothers me. They should at least create some sort of ombudsman for the fans. If the players and owners align, it will be the fans who will play the role of the third wheel

I think there would be unanimous agreement on this issue from players and owners alike. Just not in the way you and I might like.

 

[Timmy]

If the players and owners align, it will be the fans who will play the role of the third wheel.

Well, if it brings back hockey, hardcore fans won't care what deal was struck as long as it is one that enables the league to survive in the medium to long term.

As for an ombudsman for the fans, that is only going to happen from governmental intervention, which isn't likely outside the steroid issue.

Fans can be their own worst enemy of course, buying seasons tickets the moment the phone lines are open again.

As I've said before, I cancelled mine, and I'll watch in the comfort of my living room for the next couple of years.

My son's only one, so he's a ways away from needing any 'Nucks paraphanelia, by which time my anger at both sides will have subsided enough to buy him a pair of NHL socks.

 

[nyr7andcounting]

Well, first of all, regarding the "tricks" that owners play with their revenue streams, "we" know no such thing.

Secondly, the "trust" issue is illusory. As Bob Goodenow has stated on WFAN just after the cancellation, the NHL is comfortable with their knowledge of the numbers. They understand the economics of the game perfectly. There is no issue of "hiding" revenue. THere are some issues with interpretation of data, but that is an accounting issue. There is NO trust issue.

Thirdly, that would be a bad deal for the players. By excluding certain sources of revenue, they would be excluding growth opportunities. Just to take a wild example, let's say they decided to exclude media revenue (TV, etc). If the NHL signed a big fat sattelite radio contract in the future, the PA is out to lunch. Or let's say the NHL revenue-sharing deal with NBC works like gangbusters (can't get any worse, says many). The list of examples is endless, and no one is smart enough to identify with precision where the revenue growth will come from.

Furtehrmore, it would be a bad deal for the owners, since the excluded revenue streams could tank, thereby leaving them with the exposure while insulating the players from the realities of the situation.

In any event, the solution addresses a problem that does not exist.

It is a bad idea if you interpret it as you did here. If the linkage these revenues are determining is the straight up amount of cash that's going to either the players or owners, than it's not a very good idea. It's way too uncertain for the owners and it's extremely unfair for the players in terms of growth. Ticket sales aren't going to grow, they are maxed out as they are.

It is a good idea if it comes with the PA version of linkage, where revenues determine the floor and ceiling. If your going to do that, you don't need the exact revenues because the % that you determine is not exactly what's going to the players. An easier way to do it would be to measure certain revenues, mostly the bigger ones, that really tell you how well the league is doing and how much revenue they get. It would kind of be like measuring the price level in an economy, you add up certain things and that will tell you where everything else falls.

If it's only the floor and cap that are linked to revenues, as the PA proposed with that 30-50 range, than this is an easy way to avoid having to settle all the little things that owners may or may not include in their "revenues". But, if the deal is going to be 'players get x% of revenues, nothing more nothing less', than I don't like it. In that case defined revenues have to be exact.

 

[Bruwinz37]

This sounds more like a gimmick than a real fix.

I still think the NHL & the game would be better off with a set hard cap ~38m with certain escalations each year that is pre-negotiated rather than a set 54% number that could vary year to year up AND down.

The owners would never go for this proposed deal without a real TV deal in place.

 

[WC Handy*]

I still think the NHL & the game would be better off with a set hard cap ~38m with certain escalations each year that is pre-negotiated rather than a set 54% number that could vary year to year up AND down.

No, the league wouldn't be better off with that because the cap won't go down. Barring something extreme like a lockout, revenues always have gone up. Even when the sky was falling in 2003-04, revenues increased by over $100M.

 

[Jarqui]

The NFL did something like this. People were posting about this type of solution, including me, last October. 54% of 100% of the hockey revenues = 60% of 90% of the hockey revenues.

As Forbes was within 5% of Levitt on revenues, given the above is a traditional business solution for these types of problems that businesses face in M&A deals every day, it is why I've have felt that much of the PA whinning about the financial accuracy of revenues has largely been smokey nonsense.

 

[me2]

Beauty. Tie it very heavily to gate, the drop ticket price 50% to get the fans back and make the owners money on other non-player sterams.

Seriously, who is going to get the gate price? The owners who get 20% or the players who get 80%?