Bettman comments 1/8

[Killion]

On narrow issues, maybe. On big-scale issues, no. The owners should be able to present a united front against any effort to lift or undermine the cap. The tough questions are going to revolve around revenue sharing and the like, where there are conflicts of interest within the BoG.

I dont know about that tarheel. For sure they'll present a unified front, no one will likely be speaking out of school under Bettman, however, my read on the situation is that their are a minimum of 10-14 teams seriously seriously challenged, recipients of revenue sharing, no hope of coming close to breaking even with the cap beimg what it is at the bottom-end. The middle & upper rung teams that are just breaking even or showing some profit & certainly the 1/2 a dozen wealthy franchises either cant afford to increase revenue sharing transfers or may no longer be amenable to propping up itheir poor relations while being handcuffed to the ceilings fixtures. I think were' going to be witnessing some rather surprising & dramatic sea changes leading up to the next CBA negotiations in terms of the face & size of the NHL.

 

[mouser]

Going into the next CBA do you think there may be a divide between some of the rich owners, middle class owners, and weaker ownership regarding the salary cap?

Probably some squabbles about the appropriate % of revenue sharing and cap floor/ceiling.

Zero divide over whether the cap should exist or not. The rich teams have been much more profitable with the cap than they were without.

 

[LadyStanley]

Bettman comments 1/9

http://www.theglobeandmail.com/spor...on-gives-leafs-win/article1865069/?cmpid=rss1

More quotes from California swing. (There might even be more tomorrow from San Jose.)

Toronto may host outdoor game - Heritage Classic, not Winter Classic. Winter Classic games "will continue to be played by two U.S. teams in a traditional hockey climate."

Winter Classic may be moved from Sunday, 1/1/12, to avoid NFL.

Bettman needs to talk with Fehr and have a plan within the next couple of weeks to figure out European Premiere participation for the 2011-2012 openers.

Bettman encourages player inputs on rules, such as the recent comments from Crosby WRT headshots.

 

[CC Chiefs*]

I love how the small market fans like that the NHL tells big teams what they can spend and out of the other side of their mouths they say they shouldn't have to spend to a higher floor. Got to love hypocrisy at its finest.

 

[LadyStanley]

Bettman in SJ today. He'll be doing a segment on Chronicle Live (5pm CSN Bay Area; 6pm CSN California; plus repeats).

So those that have those channels may want to tune in. (I won't be watching it until probably tomorrow as I'm at the game.)

 

[Bear of Bad News]

I love how the small market fans like that the NHL tells big teams what they can spend and out of the other side of their mouths they say they shouldn't have to spend to a higher floor. Got to love hypocrisy at its finest.

And large market fans are just as hypocritical on the other side of the coin. What's your point?

If fans magically weren't hypocritical about this, it'd be the first thing in the league that we're not hypocritical about.

 

[cheswick]

Well, yes.

The raw number may be higher, but teams used to pay upwards of 70% of the revenue on player salaries. They now pay around 57%. They are thus paying less of their income in salaries than before.

What is the problem??

The problem is that on a league wide basis 57% or revenue is being spent on salary but on a team by team basis it widely vaires. The Maple Leafs could spend to teh cap and its only spenind 30% on salaries while the Coyotes spend to the floor and are spending 70% on salaries. If the cap was team by team 57% then it would not be a problem but when a team's revenues are declining but over all league revenues increase they are forced to spend more but aren't making more

 

[Fugu]

The whole reason why some teams have a hard time reaching the cap floor is because it is close to the ceiling, so that there isn't as big of a variance between individual teams.

The reason some teams have trouble reaching the cap floor is because they have insufficient revenues. Player costs are global, one market for all 30 teams. Revenues for the majority are local, or when the NHL only contributes 10-15% of total HRR, but the rest comes from local markets. That]s always been the problem. Revenue sharing is insufficient to ever get the smaller teams out of their welfare state, and in fact if they happen to get out of the bottom 15 in revenue rank, they won't get anything.

The fact that players are getting salaries that are as big as in 2004 simply means that the league and its teams have much higher income than they used to. As a percentage of income, they are paying a lot less.

As a percentage of whose income? Remember that the NHL is not-for-profit at the league level. Atlanta, as a percentage of its own revenues, may be paying more today. In fact, I'll do a quick check:

Payroll 03/04 = $33m
Revenues (est) = $59
Player cost as % = 55%

http://www.forbes.com/lists/2010/31/hockey-valuations-10_Atlanta-Thrashers_317422.html
In fact, Atlanta's revenues have stayed about the same, revenue transfers have moved their total estimated revenues up about $8-10m since the lockout, but look at player costs:

2006 - $64m, $42m -- 65%
2007 - $67m, $44m -- 66%
2008 - $70m, $47m -- 67%
2009 - $68m, $39m -- 57%
2010 - $71m, $46m -- 65%

From 2001- 2010, player costs for Atlanta have ranged from $24m a the lowest, to $47m, or 88% more.

In the same period, revenues (inclusive of revenue transfer) have ranged from $58m to $71m, or 22%.

Sure, some poor teams are having a hard time being profitable by reaching the salary floor, but there is revenue sharing in order to compensate that. And, also, the higher revenue is not simply due to Montreal and Toronto, the league as a whole is doing very well (at least, according to them). Attendance is up, revenues are up, where is the problem? Yes, some teams like Florida, Atlanta and Phoenix are having problems, but a lot of the other teams aren't.

There are several....

Who are the other teams that have vastly improved their cost:revenue equation due to the cap? Chicago has improved, for obvious reasons. Washington and Pittsburgh, but I guess some generational talent can help that along a bit. It's funny too because Pittsburgh wasn't supposed to make money due to Mellon, yet this is their first year in their new arena. Interesting, n'est pas?

In fact, Pittsburgh is a great side by side comparison. They started LOWER than Atlanta in revenue ($52m in 2004), lagged behind them for the first three years in salary and revenues, then in 2008, they started making money. Before they had a new arena. Odd.

Also, one can argue that those teams who are struggling at the gate are in this situation due to bad on ice performance and management. If Florida wasn't always a bottom-feeder, if Columbus hadn't been run by an idiot, etc., they might be making money. Why should they be entitled to profits no matter their performance? If I run a restaurant, but I make crap food and nobody comes to eat here, why should I automatically be entitled to profits?

This was true before the cap, and apparently is still true.

Revenue sharing exists in order to get a competitive balance, to somehow even out the large markets and the small markets. But it shouldn't and isn't a free ride that lets even the most badly run franchises get guaranteed profits. You want a team in Nashville that sells out it's games to be able to compete with Detroit. But you don't want a team with 9,000 fans in attendance, selling $9 tickets, to be guaranteed profits and have no incentive to grow.

I agree with the conclusion but not with the premise. Revenue sharing exists because the players insisted on it. They didn't want the teams just pocketing the money they saved due to a cap, and the owners wanted a league wide certainty. I've said it numerous times here, but... league-wide cost certainty doesn't insure any kind of certainty at the local level. Atlanta's situation shows that this is more costly to them than the old system.

I will never understand why people get angry every time the salary cap goes up. It is GOOD news about the league, it means that revenues are up, that teams are doing good. Yet, every time news like that comes out, you always hear people going "oh no, salaries are once again much too high, another lockout is looming, teams can't make money with such a high cap"... Even the media, in place like Montreal where the team is drowning in cash, are being apocalyptic because revenues are up. What the...

The problem is that the same teams are always doing well, and the ones who aren't part of the 'always doing well group' happened to get some great players or management to turn things around. This system has not made it easier on the teams that had the biggest revenue problems in the first place. While there may be certain benefits to a capped system, these aren't the ones that were predicted by the league when they went after it.

 

[AllByDesign]

The cap has provided a system for spreading the talent around. In turn, I believe, has made for better hockey. Its intent of 'market stability' was never acheivable given the angle they were taking. Some markets have stabilized while others have come unglued. The revenue charing and cap combo cannot be credited for either.

 

[Tommy Hawk]

Who are the other teams that have vastly improved their cost:revenue equation due to the cap? Chicago has improved, for obvious reasons.

I would argue that Chicago's has not improved and is significantly worse today than it was before yet, to the bottom line, they are making more money. The reason I think their percentages are worse is that, even though they have significantly more revenue, they increased their costs more than the same percentage needed to have in revenue increase in order to keep the percentage (ratio) the same.

Ratios are great and fun but so very misleading. I would rather make 10% on $100,000,000 than 30% on $1,000,000.

For example, using fictious numbers from no particular team.

Revenues - $30 mil
Player cost - $15 mil
player cost as percent of rev - 50%
Other costs (front office, arena, etc.) - $10 mil
Profit - $5 million about 16.7%

Revenues - $75 mil
Player Costs - $50 mil
player cost as % of revenues 66%
Other costs (front office, arena, etc.) - $15 mil
profit - $10 mil about 13.3%


If I am an owner, I would rather have the second scenario. I made more money even though it was a lower % of revenue.

 

[Fugu]

Agreed, TH. Don't forget to factor in that Chicago is probably on the giving end of the revenue transfer equation. While the Forbes numbers are basically estimates, they do take revenue transfer into account for the lower HRR teams. I don't think they subtract the contributions the big teams make into the pool to reflect their revenues.

Thus Chicago indeed may be worse off. Detroit, on the other hand had decreased player costs, so the first 3-4 yrs of the cap system, they probably did save more money. Now that the cap has grown to close to $60m, they're definitely getting close to Detroit's peak spending (other than the one year where they were close to $80m, an anomaly in the overall time period). Funny thing is that they seem to have had greater success in a shorter time under this system.

 

[Tommy Hawk]

Unfortunately the NHL teams will never open their real books to any of us so we will never really know the true picture of any of the team's financial condition unless there is a bankruptcy, like in Phoenix, where they had to submit all their books to the court.

 

[Jeffrey93]

Unfortunately the NHL teams will never open their real books to any of us so we will never really know the true picture of any of the team's financial condition unless there is a bankruptcy, like in Phoenix, where they had to submit all their books to the court.

Legal issues like in Phoenix and Atlanta give us an insight into those teams though...and then you can look at how the NHL commented on them just prior. This allows us to make judgments on what they say in the future based on what they have said in the past.

For example....according to Bettman the Coyotes were "fine" and reports of them being in any financial peril was 'irresponsible reporting'.

So therefore we can conclude that if a team is 'fine' by the NHL's definition they could be losing up to $40M a year.

So if Bettman was to say tomorrow that the Panthers are 'doing just fine'....we must therefore conclude that the Panthers could possibly be losing $40M a year.

Try....just TRY...to argue that logic!

 

[CC Chiefs*]

Legal issues like in Phoenix and Atlanta give us an insight into those teams though...and then you can look at how the NHL commented on them just prior. This allows us to make judgments on what they say in the future based on what they have said in the past.

For example....according to Bettman the Coyotes were "fine" and reports of them being in any financial peril was 'irresponsible reporting'.

So therefore we can conclude that if a team is 'fine' by the NHL's definition they could be losing up to $40M a year.

So if Bettman was to say tomorrow that the Panthers are 'doing just fine'....we must therefore conclude that the Panthers could possibly be losing $40M a year.

Try....just TRY...to argue that logic!

Not forgetting the "30 healthy franchises" statement.

 

[MountainHawk]

Legal issues like in Phoenix and Atlanta give us an insight into those teams though...and then you can look at how the NHL commented on them just prior. This allows us to make judgments on what they say in the future based on what they have said in the past.

For example....according to Bettman the Coyotes were "fine" and reports of them being in any financial peril was 'irresponsible reporting'.

So therefore we can conclude that if a team is 'fine' by the NHL's definition they could be losing up to $40M a year.

So if Bettman was to say tomorrow that the Panthers are 'doing just fine'....we must therefore conclude that the Panthers could possibly be losing $40M a year.

Try....just TRY...to argue that logic!

Isn't it possible that the real condition of the finances of the Coyotes were being hidden even from Bettman to stave off a league takeover?

 

[CC Chiefs*]

Isn't it possible that the real condition of the finances of the Coyotes were being hidden even from Bettman to stave off a league takeover?

No! Because GB talked about giving RS $$$$ early to help them.

 

[LadyStanley]

http://blogs.mercurynews.com/sharks/2011/01/11/gary-bettman-holds-court-on-that-hbo-series-winter-classics-cba-three-point-games-and-more/

A few more points/clarifications from sj. Cba, tv negotiations (complicated by nbc merger),etc.

 

[Killion]

Not forgetting the "30 healthy franchises" statement.

I would like to know how many & which franchises are recipients of revenue sharing, how many are in-play (for sale in whole or in part), who is covering the losses in Florida & Dallas (while the teams in limbo under the gavel) & how much, whats the status of negotiations pursuant to the expiration of the broadcasting contracts as in "how does it look, a panacea for the league or same old same old"?.....etc etc etc with the opportunity for follow-up. These statements & soundbites read more like decree's which does the league no favors IMO.

Isn't it possible that the real condition of the finances of the Coyotes were being hidden even from Bettman to stave off a league takeover?

No! Because GB talked about giving RS $$$$ early to help them.

Thats not exactly accurate CC. Moyes was less than candid, open & transparent in asking for advances on RS funds, cashing the NHL's cheques while surreptitiously plotting to sell an asset he didnt own, namely the "portability" of a "stationary" franchise Additionally, he agreed to & signed off on a clause not to put the team into BK, which as you know is part & parcel of the leagues $60M+ suit against the Moyes' & their family trust. Im certain Bettman & the league were aware that things were dire in Glendale, though not to the full extent that came out through the BK, as clearly they were both behind the 8 ball & embarrassed by many of the revelations that came out in court & prompted the subsequent lawsuit. The large dollars involved, human nature being what it is, I rather doubt any single owner or ownership group within the NHL would or could be awarded any "Honesty & Integrity" badges in its dealings with the league.,,,,sittin around the fire, singing Kumbaya n'all...

 

[macavoy]

Wouldn't the NHLPA be against lowering the floor? It would basically make the real dollar value that their players are paid in a given year less. Having a high floor forces the poor teams to spend more dollars on players salaries which benefit the players.

The NHL I think would have to give up something substantial to get that.

 

[La Grosse Tendresse]

Wouldn't the NHLPA be against lowering the floor? It would basically make the real dollar value that their players are paid in a given year less. Having a high floor forces the poor teams to spend more dollars on players salaries which benefit the players.

The NHL I think would have to give up something substantial to get that.

Obviously, the NHLPA won't accept for their guaranteed percentage of revenues to go down, but they could accept a lower floor and a higher ceiling.

The way I understand it, the players are guaranteed a certain percentage of revenues. A portion of the players salary is held in escrow in case the actual spending is superior than that level, and they would also get some extra money is the actual spending is inferior to that level.

So, if the floor is lowered, the NHLPA will demand that the cap be increased to compensate (with the midpoint remaining where it is). Thus, although some poor teams may spend less, richer teams will have the possibility of spending more. And in the end, even if the teams would spend less, it will be adjusted to the percentage of revenue that the player's have a right to (through less escrow, for example).

 

[tarheelhockey]

One thing we have consistently seen in pro sports unions is they look out for the higher-paid players first and lower-paid players second. I wouldnt be surprised if the NHLPA agreed to raise the cap and lower the floor simultaneously.

Still, I think a better approach would be adding to non-payroll compensation. Widening the cap gap leads to disparity, whereas the owners might have other ways of paying them and maintaining cap parity.

 

[Fugu]

One thing we have consistently seen in pro sports unions is they look out for the higher-paid players first and lower-paid players second. I wouldnt be surprised if the NHLPA agreed to raise the cap and lower the floor simultaneously.

Still, I think a better approach would be adding to non-payroll compensation. Widening the cap gap leads to disparity, whereas the owners might have other ways of paying them and maintaining cap parity.

This wouldn't be enough of an incentive, would it?

We've been around this block a few times, but there is no way of lessening the revenue gap unless the smaller teams can have several years of double digit growth and catch up. Yet even so, something called market potential will always work against some of these teams. The NFL gets so much more money from league-wide contributions that it's easier to work out different sharing schemes.

The NHL realistically only has the option of trying to take money made at the local level in the big markets and redistribute, however they really don't have the "right" to just take that money. In fact, a franchise's value is the sum of all these parts, so if you had a system that all of sudden didn't lower costs but taxed revenues at a higher rate, that franchise's value would decrease, while the recipient franchise's values would increase. Tell me how that is fair when an owner pays $500m+ for the Habs and another one paid $170m for a smaller team?

 

[MountainHawk]

I disagree. The NHL absolutely has the right to take any locally generated revenue they need to for the good of the NHL brand. If they go to far, they might lessen the value of their franchises, which they don't want to do, but the teams are franchises, so the franchiser (the NHL) has the final call on how revenues are distributed.

 

[Fugu]

I disagree. The NHL absolutely has the right to take any locally generated revenue they need to for the good of the NHL brand. If they go to far, they might lessen the value of their franchises, which they don't want to do, but the teams are franchises, so the franchiser (the NHL) has the final call on how revenues are distributed.

No, they don't. They sell a franchise in a market. The owner then pays the bills and generates revenue.

I suppose it's possible that a cartel mentality could take over and re-write the constitution.

How do you even out the franchise valuations then? You purchased a team on the basis of its costs, HRR, and potential. Why should some owners pay a third of the highest valuated franchise's price, but have a right to their revenues-- unless the way the league is run is significantly altered?

Furthermore, if it were that easy to appropriate your fellow owners' monies, why hasn't Bettman done it yet? He didn't need to shut the league down for a year.

 

[MountainHawk]

No, they don't. They sell a franchise in a market. The owner then pays the bills and generates revenue.

I suppose it's possible that a cartel mentality could take over and re-write the constitution.

How do you even out the franchise valuations then? You purchased a team on the basis of its costs, HRR, and potential. Why should some owners pay a third of the highest valuated franchise's price, but have a right to their revenues-- unless the way the league is run is significantly altered?

Furthermore, if it were that easy to appropriate your fellow owners' monies, why hasn't Bettman done it yet? He didn't need to shut the league down for a year.

NHL gives up some of that right by virtue of having a CBA, so the NHLPA gets a say.

The Montreal Canadiens are just a franchise of the NHL. That's all they are. Just like the independently owned and operated McDonald's down the street from you, they have to follow the franchiser's rules to remain a franchise.

Bettman's job is to maximize the franchise values and revenues of the league. Period. If he and the BOG thought that was best done by taking 100% of local revenue and redistributing, they would, but that's not the right answer. So they have to figure out what the right balance is, but don't mistake what they have the power to do and what makes sense to do.

The only thing that makes the NHL model different than McDonalds is the limited # of franchises give each franchise owner substantial power in the decision making of the franchiser, so decisions end up being slightly suboptimal for the franchiser to keep the top producing franchises happy.