Around the NHL - Episode XLV

[Sens of Anarchy]

Have to feel for these guys..
Pandemic uncertainty drives minor-league hockey pros to find new careers - Sportsnet.ca

 

[TheDebater]

Will we see players actually head back even with all the uncertainty surrounding the NHL season?

 

[Beech]

The problem is you need more than basic math to solve complicated equations. Bettman wants to press forward to avoid long term damages associated with an extended absence. The next tv contract is more important than this years revenues, so is making sure fans don't lose interest. They need to consider the implications of their actions today and project out 10+ years. You can be sure they wouldn't be pressing forward potentially putting peoples health at risk if they didn't think it would be more profitable than the alternative.

Playing is better than not playing to keep the already small interest level hockey has in the US.

yes, but I a looking at it from the view point of the near 2/3's of all teams in the league. If we assume from about team 15 downwards (financially) you loose anything from a few pennies to major dollars. All the while, there are fans and a full schedule. What must that number be at 48 games and no fans? I know information is unreliable, but we see loss numbers being bandied about of 10-20 million a year..what would 2020/2021 be 30-50 million if you had to honor the face value of a contract, with no deferral/limited escrow/no adjustment for 48 or less games? Can that 30-50 million really be recouped? In fact, if you consider fixed costs (staff, facilities, etc.) regardless of the 82 or less game schedule, you are shelling that dollar out at very close to 100%...or at best 75%. So a team at 130-140 million in net expenses, probably is shelling out 50-70 million in non player salary costs...That 50-70 million will most likely be no less than 35-55 million. How do you add 60-80 million in player salaries?

The Sens would have to shell out ~95 million if we assume them at the low end of all numbers...now what is their revenue? My quick math tells me...45-50 million. To lose 45-50 million..heck at 3%-4% cost of borrowing, you may be at 2-2.5 million in interest alone.

Will most owners still be around in 10 years to recoup?

Again, basic math, nothing really in-depth, but at any salary total of more than about 30-35 million for the Sens is near suicide. And even the 30 is probably high. I can see 25-28 as more realistic. It would probably limit the loses to ~ 5-10 million. It sort of explains the 48 game proportion and the 20% escrow. That number puts you at 28 million.

 

[Beech]

The issue is they had an agreement and the players coughed up salary and agreed to deferrals

Before that agreement even hits the ice, the owners want more concessions

It's more a debate about the violation of an agreement than the specifics of it. Salary for players is ultimately a 50 50 split and it'll take a long time to arrive at how that split gets properly accounted for this year

what happens then; if the losses associated with this year, exceed any one owner's ability to absorb? A reckless owner who's revenue is not all that high, but has opted to spend near the cap, could see his losses at near staggering numbers. Say 40-50 million if he has to shell out at anything more than about 35-40% of the contracts he issued.

Agreement or not, I see 5-10 owners saying; heck no!!!! The local guy here is probably one of them. Now if 5-10 teams hold out, or throw their keys on the table, or simply start waving players to get short term relief. And worse, if owners start making up the difference by cost cutting in all areas. How happy will an equipment manager, a soigneur, a physio person be, when their salary is only 50% and there is no money for equipment and supplies. I am not sure how comfortable I would feel, if I was a player being treated by a physio guy who had his salary cut, so that I can make most of mine....I make millions, he makes thousands.

 

[Micklebot]

yes, but I a looking at it from the view point of the near 2/3's of all teams in the league. If we assume from about team 15 downwards (financially) you loose anything from a few pennies to major dollars. All the while, there are fans and a full schedule. What must that number be at 48 games and no fans? I know information is unreliable, but we see loss numbers being bandied about of 10-20 million a year..what would 2020/2021 be 30-50 million if you had to honor the face value of a contract, with no deferral/limited escrow/no adjustment for 48 or less games? Can that 30-50 million really be recouped? In fact, if you consider fixed costs (staff, facilities, etc.) regardless of the 82 or less game schedule, you are shelling that dollar out at very close to 100%...or at best 75%. So a team at 130-140 million in net expenses, probably is shelling out 50-70 million in non player salary costs...That 50-70 million will most likely be no less than 35-55 million. How do you add 60-80 million in player salaries?

The Sens would have to shell out ~95 million if we assume them at the low end of all numbers...now what is their revenue? My quick math tells me...45-50 million. To lose 45-50 million..heck at 3%-4% cost of borrowing, you may be at 2-2.5 million in interest alone.

Will most owners still be around in 10 years to recoup?

Again, basic math, nothing really in-depth, but at any salary total of more than about 30-35 million for the Sens is near suicide. And even the 30 is probably high. I can see 25-28 as more realistic. It would probably limit the loses to ~ 5-10 million. It sort of explains the 48 game proportion and the 20% escrow. That number puts you at 28 million.

Well Melnyk suggested the sens are fine financially, mentioned owning the arena as a big reason why. The reality is their biggest expense by far in salary, is tied directly to revenue. So a giant drop in revenue is matched with a giant drop is expenses (albeit potentially dragged out over multiple seasons if Escrow doesn't capture the full extent).

In the end though if it was obvious that shutting down was the better option financially, owners would likely have already done so. One can only assume that those owners who have all the true numbers for expenses and projected revenue would act in their best interest.

 

[JD1]

Well Melnyk suggested the sens are fine financially, mentioned owning the arena as a big reason why. The reality is their biggest expense by far in salary, is tied directly to revenue. So a giant drop in revenue is matched with a giant drop is expenses (albeit potentially dragged out over multiple seasons if Escrow doesn't capture the full extent).

In the end though if it was obvious that shutting down was the better option financially, owners would likely have already done so. One can only assume that those owners who have all the true numbers for expenses and projected revenue would act in their best interest.

I think it's in their best immediate interest to shut down. Perhaps they would but for the looming American TV deal. Not a good look to be negotiating a deal for a league that's not playing

 

[Micklebot]

I think it's in their best immediate interest to shut down. Perhaps they would but for the looming American TV deal. Not a good look to be negotiating a deal for a league that's not playing

Right, but you can't really run a multi billion dollar business on short term interests alone, medium and long term interests matter,

 

[JD1]

Right, but you can't really run a multi billion dollar business on short term interests alone, medium and long term interests matter,

I agree. And i think it's the only reason they aren't shutting it down

 

[SensPerpetualRebuild]

The issue is they had an agreement and the players coughed up salary and agreed to deferrals

Before that agreement even hits the ice, the owners want more concessions

It's more a debate about the violation of an agreement than the specifics of it. Salary for players is ultimately a 50 50 split and it'll take a long time to arrive at how that split gets properly accounted for this year

Renegotiating contracts is not that unusual. Especially when one party’s circumstances have changed. I just had 6 months of ‘fun’ doing just that with some major long term deals. And we will push to renegotiate again a year from now if the company’s economic circumstances haven’t changed. Having a revised contract with a company that’s in business sure beats having the old one with a bankrupt company.

It’s pretty incompetent of Bettman. But if both the NHL and NHLPA, while negotiating, had an expectation that there’d be fans in the stands at some point then renegotiating isn’t inappropriate.

The players don’t seem to be living in reality. I’ve taken a pay cut so I don’t have much sympathy for them.

 

[Beech]

Renegotiating contracts is not that unusual. Especially when one party’s circumstances have changed. I just had 6 months of ‘fun’ doing just that with some major long term deals. And we will push to renegotiate again a year from now if the company’s economic circumstances haven’t changed. Having a revised contract with a company that’s in business sure beats having the old one with a bankrupt company.

It’s pretty incompetent of Bettman. But if both the NHL and NHLPA, while negotiating, had an expectation that there’d be fans in the stands at some point then renegotiating isn’t inappropriate.

The players don’t seem to be living in reality. I’ve taken a pay cut so I don’t have much sympathy for them.

it is less about sympathy for either side. It is about getting hockey back and the possibility or lack there of. Either the owners have to be willing to lose some serious coin this coming season, or the players have to deffer some serious coin. Accept a chunk in escrow and by the time taxes are paid, they will end up with about 1 in 7 dollars of the contracts face value.

either way, one or both (if they meet in the middle) have to take a hit. Which, I hope they do. I have had enough of Tuesday to Friday of the NFL network replaying 3 week old games, TSN showing old Grey Cups. Sportsnet showing Poker and CNN interviewing the same 20 or so guests, who have simply repeated the same answers to the same questions the last 4 weeks. I have found myself watching more and more old curling matches. It won't be long before I watch the 100th replay of the 1976 cup final, game 4 and actually hope Philie wins.

 

[Beech]

Well Melnyk suggested the sens are fine financially, mentioned owning the arena as a big reason why. The reality is their biggest expense by far in salary, is tied directly to revenue. So a giant drop in revenue is matched with a giant drop is expenses (albeit potentially dragged out over multiple seasons if Escrow doesn't capture the full extent).

In the end though if it was obvious that shutting down was the better option financially, owners would likely have already done so. One can only assume that those owners who have all the true numbers for expenses and projected revenue would act in their best interest.

In regards to the Sens and the arena ownership. That must be difficult as it is. No use. Other than rent from business who have space there, he cannot be getting a dime. All the while a portion of costs are still there. In an ironic sense, in the short term, arena ownership is bad, not good. Similarly for other Canadian markets. I was once told of the tax bill for the Bell center in MTL, It was something like $25 million..can you imagine services, upkeep, staff and so on. Heck, you probably drop a cool 5-6 grand a week in electricity alone. Man what NHL owners and other sports owners in general must be absorbing. NFL aside, and to a much smaller extent the NBA, they must be bleeding. I certainly hope that you are right and that the finances and long term motivation kicks in. If camps don't open in 2-3 weeks, I struggle to see an NHL season.

 

[Micklebot]

In regards to the Sens and the arena ownership. That must be difficult as it is. No use. Other than rent from business who have space there, he cannot be getting a dime. All the while a portion of costs are still there. In an ironic sense, in the short term, arena ownership is bad, not good. Similarly for other Canadian markets. I was once told of the tax bill for the Bell center in MTL, It was something like $25 million..can you imagine services, upkeep, staff and so on. Heck, you probably drop a cool 5-6 grand a week in electricity alone. Man what NHL owners and other sports owners in general must be absorbing. NFL aside, and to a much smaller extent the NBA, they must be bleeding. I certainly hope that you are right and that the finances and long term motivation kicks in. If camps don't open in 2-3 weeks, I struggle to see an NHL season.

Property tax on the ctc is in the 1.5 to 2 mil range, last figure is saw was 2016 at 1.5 ish. According to the MTL gazette, Bell center paid 7 mil in 2019 and was expected to pay less in 2020 due to the buildings valuation being reduced by about 13% but the assessors. 25 mil tax bill must have been on the business revenues not property tax specifically, so that would scale with profits, if the teams isn't making any due to covid then they aren't paying taxes on them either.

As for the other bills, they'd obviously come down with the venue closed up. It's not nothing but you're just making sure the pipes don't freeze and nobody breaks in.

It is true though that teams not paying those expenses because they don't own the arena might be less incentivised to start back up, though i guess that depends on how their lease is structured, does the stopage actually mean they can stop paying rent?

 

[Beech]

Property tax on the ctc is in the 1.5 to 2 mil range, last figure is saw was 2016 at 1.5 ish. According to the MTL gazette, Bell center paid 7 mil in 2019 and was expected to pay less in 2020 due to the buildings valuation being reduced by about 13% but the assessors. 25 mil tax bill must have been on the business revenues not property tax specifically, so that would scale with profits, if the teams isn't making any due to covid then they aren't paying taxes on them either.

As for the other bills, they'd obviously come down with the venue closed up. It's not nothing but you're just making sure the pipes don't freeze and nobody breaks in.

It is true though that teams not paying those expenses because they don't own the arena might be less incentivised to start back up, though i guess that depends on how their lease is structured, does the stoppage actually mean they can stop paying rent?

okay..so the numbers are way more reasonable. 4-5 million a year to keep the CTC going with no use. With tenants and say they pay ~ $50 a square foot..we are talking ~2 million in rent...Granted, those businesses are probably suffering and would most likely be asking for relief. So yea a chunk of the building is paid for..Okay..Eugene is not that concerned building wise.

It must be somewhat lucrative in normal times..1 game a week (52 week average)..1 other use a week (52 week average). $2 million from tenants..add parking...WOW, so who cares what the team does. Unless it loses an obscene amount, the building should compensate.

Okay..I am converted..no deferrals.

man what must the ACC or Bell or Vancouver's arena rake in?

 

[JD1]

Property tax on the ctc is in the 1.5 to 2 mil range, last figure is saw was 2016 at 1.5 ish. According to the MTL gazette, Bell center paid 7 mil in 2019 and was expected to pay less in 2020 due to the buildings valuation being reduced by about 13% but the assessors. 25 mil tax bill must have been on the business revenues not property tax specifically, so that would scale with profits, if the teams isn't making any due to covid then they aren't paying taxes on them either.

As for the other bills, they'd obviously come down with the venue closed up. It's not nothing but you're just making sure the pipes don't freeze and nobody breaks in.

It is true though that teams not paying those expenses because they don't own the arena might be less incentivised to start back up, though i guess that depends on how their lease is structured, does the stopage actually mean they can stop paying rent?

So in that podcast last with with Melnyk and Bob McCown, Melnyk was saying it was the owners that didn't own their buildings that had more issues with start up because they had rent without revenue

 

[BankStreetParade]

I don't think the fight the between the NHL & NHLPA is on behalf of the superstar-level players who have the $7+ million AAVs. There's about 900 players who suit up for at least a game in the NHL every year. A lot of those players are making somewhere in the range of league minimum (depending on experience). Also, a lot of those games played happen because of injuries over the course of an 82-game schedule. Compound that with the issue that a significant chunk of players in the NHL only play 2-4 seasons and you can start to understand the complexity of the issue.

The NHLPA isn't just there to represent the Crosbys and McDavids. Take the top 200 paid players off the top of the list and you're talking about a membership that's well over 1,000 players (includes any player with a contract that could pay them at the NHL level).

They're obviously still fighting for the guys with the big contracts but the guys down the totem pole are equally important when you account for how much of the majority of the NHLPA they represent.

 

[GCK]

The request from the league was for more deferral this season and additional escrow later in the contract. I would imagine that if the league dropped the escrow ask and asked the NHLPA for additional deferral this year on earnings over a set amount they might get more traction. Let’s say an additional 15 % deferral on earnings over 2M. That protects the “low earners” while helping cash flow.

 

[AchtzehnBaby]

MLSE cuts salaries for full-time staff, extends management and executive reductions

The company that owns Toronto professional sports teams including the Maple Leafs, the Raptors and the Argonauts as well as sports venues, says up to 25 per cent of full-time staff will be moved to temporary inactive status.

Temporary Layoff

https://www.ontario.ca/document/your-guide-employment-standards-act/termination-employment

 

[Sens of Anarchy]

If John Shannon is tweeting it, it could be a week old news

 

[Sens of Anarchy]

 

[GCK]

Which teams are most helped or hurt by a flat cap for 5 years. I would think teams like the leafs will struggle to keep players like Reilly and round out their team. Tampa will have to figure out how to deal with players currently on bridge deals.

Will players/agents need to re assess what long term contracts look like ? What happens to the Tkachuks/Petersons/Hughes type contracts coming up.

 

[Beech]

Which teams are most helped or hurt by a flat cap for 5 years. I would think teams like the leafs will struggle to keep players like Reilly and round out their team. Tampa will have to figure out how to deal with players currently on bridge deals.

Will players/agents need to re assess what long term contracts look like ? What happens to the Tkachuks/Petersons/Hughes type contracts coming up.

basic issues as I see them. The next 3 years will be a blood bath between both groups. Unchecked, present day players could get every dime they are owed, future contracts could be peanuts..Thus creating a scenario where a 3rd liner could be making more than a first liner.

In a Utopian scenario, all 3 sides (NHL, NHLPA and agents/players) will work on a simple plan to defer money for 5-10 years. Create some kind of a "salary cap supplement" that applies to contracts signed in 2017 to 22 whereby a player, who may be retired could still be getting some money. It will effectively mean future contracts/players will carry some of the burden for the cuts needed today.

Unless I am mistaken, that is what the NHL is proposing.

Tax lawyers may handle this better, but "flattening your revenue" over time will almost surely mean less taxes. Does that offset the reduction in immediate cash for investments? I am not a tax or investment lawyer. ...The Mario Lemieux fiasco scared players into moving away form deferred salary. Serge Savard would often preach, take your money, pay your taxes, invest and move on.

 

[JD1]

I think what they're discussing is it multi year 50 50 scenario


Without further cuts

This year could be say 70 30 players
Next year 65 35
60 40
50 50
45 55
40 60
35 65
30 70

All the while the salary cap remains flat to ensure owners get their 50 50 over the life of the cba

Edit ... those numbers are off top of my head for illustration....hopefully it's clearly understood

But new cba down the road, what would get weird is a massive jump in cap to sprnig from

30 70

Back to

50 50

 

[GCK]

I think what they're discussing is it multi year 50 50 scenario


Without further cuts

This year could be say 70 30 players
Next year 65 35
60 40
50 50
45 55
40 60
35 65
30 70

All the while the salary cap remains flat to ensure owners get their 50 50 over the life of the cba

Edit ... those numbers are off top of my head for illustration....hopefully it's clearly understood

But new cba down the road, what would get weird is a massive jump in cap to sprnig from

30 70

Back to

50 50

Excellent point. That happened in the NBA.

 

[TheDebater]

I have a feeling that the NHL already knows that the season is not happening due to Covid, but in order to save face, they are using this "disagreement" with the NHLPA as a smokescreen:

 

[DJB]

I always take the players side in these disputes.

Owners are damn greedy.