News Article: Big changes coming in for next season

[Micklebot]

Interest payments on 135 million, I read a report saying sports teams often pay more than 10% so thats a big chunk of money. Then you have too look at tax breaks, property taxes how much is spent on building and property upkeep. Not all injury contracts are 100% covered.

NHL has a credit facility secured on the league earnings, it's available for any team to use, used to be up to 100 mil a team. Rate was 2% when they announced it. 10% is not what most sports teams pay when they have access to league wide facilities. We did reportedly have a terrible rate on the previous loan because it was signed at a bad time and the team had to go to non-traditional lenders (this was before the league credit facility opened up to Canadian teams).

No injury insurance on a player covers 100%, at least not using the league insurance. Teams have to pay a premium based on their top 5 salaries, and it covers up to 80% of 5 players salaries. Teams can opt to cover more players, but it would be at a reduced coverage, so for example they could cover 10 players at 40%. MacArthur, Gabourik and Callahan were all confirmed to have insured contracts.

 

[Leafmealone11]

so that’s a fascinating point of view, and also utterly and completely untrue.
Seriously, did you just fabricate that as you wrote it, or have you been delusional about this for years?

Your right he demanded 7 from Ottawa but then signed in detroit for 5 because he was so loyal and a lifelong sen.
Why when he signed did he say he needed a cup the sens were rebuilding and Detroit was that chance at a cup?
Funny how his story changed when he decided to look good to sens fans. Why did he sign a contract with no intention of honouring it?
Delusional is right

 

[Leafmealone11]

NHL has a credit facility secured on the league earnings, it's available for any team to use, used to be up to 100 mil a team. Rate was 2% when they announced it. 10% is not what most sports teams pay when they have access to league wide facilities. We did reportedly have a terrible rate on the previous loan because it was signed at a bad time and the team had to go to non-traditional lenders (this was before the league credit facility opened up to Canadian teams).

No injury insurance on a player covers 100%, at least not using the league insurance. Teams have to pay a premium based on their top 5 salaries, and it covers up to 80% of 5 players salaries. Teams can opt to cover more players, but it would be at a reduced coverage, so for example they could cover 10 players at 40%. MacArthur, Gabourik and Callahan were all confirmed to have insured contracts.

I am fairly sure he secured and refinanced his loan outside of the NHL program

 

[Micklebot]

This is so wrong. Hockey players have established mechanisms to pay “league market value” for things like ELC, arbitration, RFA Comps, UFA comps, and general comparisons. The Sens than have to capture revenue from their market to work within the price framework set by all teams. They absolutely are influenced by league wide markets.

The Toronto housing market is currently influencing the Ottawa housing market.

What I said is the NHL market for players is distinct from the market of hockey tickets. What other NHL teams pay for a UFA absolutely dictates market value for that player in Ottawa. What I disputed was the claim that the NHL Free agent market is the same thing as the hockey ticket market. Not all markets are global markets, some are defined in part geographically, like the price of hockey tickets. This isn't complicated stuff.

 

[Micklebot]

I am fairly sure he secured and refinanced his loan outside of the NHL program

Yes. He did. Ask yourself why he would pay 10% when 2% is available through the league?

Teams go outside the league for many reasons, if they need more than the league limit is set at, for example, to finance a new arena, or if they have sponsorships with a bank, or other existing relationships. They don't do it to pay 5 times as much interest just for kicks though.

 

[BonHoonLayneCornell]

Any chance you can dig up a post confirming this was your EK position ?

Was speaking in the context of what I would have done if I were in their position of already having decided not to sign him and the others and how to communicate that.

 

[GCK]

What I said is the NHL market for players is distinct from the market of hockey tickets. What other NHL teams pay for a UFA absolutely dictates market value for that player in Ottawa. What I disputed was the claim that the NHL Free agent market is the same thing as the hockey ticket market. Not all markets are global markets, some are defined in part geographically, like the price of hockey tickets. This isn't complicated stuff.

So you don’t see a correlation between the price of tickets in other markets. The way the league works right now dictates a minimum spend on player expenses based on average league revenues so the cost of tickets are influenced by other markets.

 

[BonHoonLayneCornell]

Your right he demanded 7 from Ottawa but then signed in detroit for 5 because he was so loyal and a lifelong sen.
Why when he signed did he say he needed a cup the sens were rebuilding and Detroit was that chance at a cup?
Funny how his story changed when he decided to look good to sens fans. Why did he sign a contract with no intention of honouring it?
Delusional is right

To help the team out. They got him at a lower cap hit with the understanding the last year wouldn't be played, as we have seen on numerous other contracts around the league. He outperformed, stayed healthy and ultimately made the agreement to play that final year provided he was compensated the following year.

 

[Micklebot]

So you don’t see a correlation between the price of tickets in other markets. The way the league works right now dictates a minimum spend on player expenses based on average league revenues so the cost of tickets are influenced by other markets.

Your arguing that the tail wag the dog.

Market value is set by the buyers. Other markets don't typically buy Sens tickets, so they don't set the market value. Market value is by definition the price the market will pay not the cost of providing the product.

 

[Leafmealone11]

Yes. He did. Ask yourself why he would pay 10% when 2% is available through the league?

Teams go outside the league for many reasons, if they need more than the league limit is set at, for example, to finance a new arena, or if they have sponsorships with a bank, or other existing relationships. They don't do it to pay 5 times as much interest just for kicks though.

Because if he goes bankrupt the NHL can assume control of the team halting sales and movement of the team seeing how they own a some of it once you owe money to them.

 

[Micklebot]

Because if he goes bankrupt the NHL can assume control of the team halting sales and movement of the team seeing how they own a some of it once you owe money to them.

The NHL already controls movement of the team. Teams can't just move without a vote by the BOG.

Besides, if he is worried about going bankrupt, he isn't signing a predatory loan for 135 mil when a low interest option is available. Give your head a shake...

 

[GCK]

Your arguing that the tail wag the dog.

Market value is set by the buyers. Other markets don't typically buy Sens tickets, so they don't set the market value. Market value is by definition the price the market will pay not the cost of providing the product.

Then why did you argue with me when I stated EK’s value in this market was about 8M. The team would be the buyer. The market dictates the value.

 

[Leafmealone11]

this is ridiculous. they already control the movement of teams.
Do you have any idea what you’re talking about, ever? You’ve been here what? A month and I’m not sure if you’ve made a coherent argument yet?
Are you here just to awkwardly troll?

Whats that? You dont understand the control gained by the NHL if they lend you 100 million? You need to back to explaining how money is pooped out of the sky and talk about how all the billionaires are lined up to lose millions to make you happy.

 

[GCK]

The NHL already controls movement of the team. Teams can't just move without a vote by the BOG.

Besides, if he is worried about going bankrupt, he isn't signing a predatory loan for 135 mil when a low interest option is available. Give your head a shake...

What predatory loan, the 2018 refinance or the addition 30M credit ?

 

[DaveMatthew]

Then why did you argue with me when I stated EK’s value in this market was about 8M. The team would be the buyer. The market dictates the value.

Wait what?

The market for Ottawa Senators tickets is people in Ottawa. The ticket price is, theoretically, the maximum amount people in this city are willing to pay to go to a game.

The market for Erik Karlsson is all NHL teams.

Karlsson’s market value is 11 million, because that is the maximum that an NHL team was willing to pay for his services.

Ottawa does not have a separate market for free-agents. They participate in the market that we call the NHL.

 

[GCK]

Wait what?

The market for Ottawa Senators tickets is people in Ottawa. The ticket price is, theoretically, the maximum amount people in this city are willing to pay to go to a game.

The market for Erik Karlsson is all NHL teams.

Karlsson’s market value is 11 million, because that is what an NHL team was willing to pay for his services.

Ottawa does not have a separate market for free-agents. They participate in the market that we call the NHL.

In this market his value is not the same as another market therefore we have fair market value for players which is different depending on each local markets parameters.

If a hockey fan in Ottawa chooses not to buy a product (NHL Hockey) because they find it too expensive then the seller (Senators) either adjusts the price or finds a different set of buyers. The same with Karlsson being the product, the buyer (Senators) found the product to expensive so he found another buyer.

 

[DaveMatthew]

In this market his value is not the same as another market therefore we have fair market value for players which is different depending on each local markets parameters.

If a hockey fan in Ottawa chooses not to buy a product (NHL Hockey) because they find it too expensive then the seller (Senators) either adjusts the price or finds a different set of buyers. The same with Karlsson being the product, the buyer (Senators) found the product to expensive so he found another buyer.

You don’t understand the concept. This post is wrong.

 

[Oriole]

Wait what?

The market for Ottawa Senators tickets is people in Ottawa. The ticket price is, theoretically, the maximum amount people in this city are willing to pay to go to a game.

The market for Erik Karlsson is all NHL teams.

Karlsson’s market value is 11 million, because that is the maximum that an NHL team was willing to pay for his services.

Ottawa does not have a separate market for free-agents. They participate in the market that we call the NHL.

I think that's where the argument is though. The league says EK's value is 11 million however if 18, ooo Sharks fans are willing to pay $200 a ticket to every game whereas 8,000 Ottawa fans are only willing to spend $80 bucks a ticket for all games then there is no possible way Ottawa can afford to sign Karlsson or other players getting those monster contracts.

So although the Ottawa market sets the value of the ticket to a Sens game, the league sets the value of player contracts through tax benefits and the price people are willing to pay to go to a game and owners wilingness to spend to the max. It really boils down to the fact that if the Sens are one of the cheapest ticket prices in the league then we as fans shouldn't expect to be near the top in player salaries.

I believe we need to adopt a Tampa Rays model here. Draft, develop and send guys out the door when the time comes for big contracts. It will suck but if done right we should always have a stable of great young talent. Once you find the right mix you add pending free agents at the deadline to make a run. Let them walk in the off season and start again

 

[BankStreetParade]

Obviously its a tougher situation in Ottawa, but Melnyk has been the one running the franchise and has obviously not done it well, so can we really believe they were capitalizing on the revenues available, or are those just the revenue numbers under Melnyk and thus restricted. There is an argument that he would have held back revenue possibilities with the same sort of shady, ruthless and disloyal behavior behind the scenes that we have seen in more clear view the last few years. Its not like he just turned in to a terrible person recently, its a trait.

You know that revenues for all teams are reviewed by the NHL and NHLPA? There’s no room for shady accounting because why the f*** would the players union allow it?

 

[Micklebot]

Then why did you argue with me when I stated EK’s value in this market was about 8M. The team would be the buyer. The market dictates the value.

Market is not one buyer its all potential buyers. In the case of nhl players that means 31 teams. In the case of hockey tickets to an ottawa game it means for the most part people within commuting distance.

In this market his value is not the same as another market therefore we have fair market value for players which is different depending on each local markets parameters.

If a hockey fan in Ottawa chooses not to buy a product (NHL Hockey) because they find it too expensive then the seller (Senators) either adjusts the price or finds a different set of buyers. The same with Karlsson being the product, the buyer (Senators) found the product to expensive so he found another buyer.

This is all sorts of nonsense...

The NHL is a closed market of 31 teams. One team deciding that other teams are willing to pay more for a player doesn't mean they have a different fair market value for that player because the whole idea of what market value is relates to what would be paid on the open market.

Similarly, hockey tickets market value is set by what ticket buyers are willing to pay. So if the team makes the SCF, more people want to buy tickets and market value goes up. The team sucks, people get disinterested and market value drops

Finding a different set of buyers wrt hockey tickets essentially equates to relocation but thats not changing the market value, its changing the market.

 

[ThreeOfAPerfectPair]

So we are going to use draft picks to plug holes for the short term? .. I know he says and long term but short term?

Adam Larsson, James Neal, Alex Chiasson.

 

[Micklebot]

What predatory loan, the 2018 refinance or the addition 30M credit ?

Huh? I don't think you were following the conversation. I was responding to someone claiming the 135 mil loan was likely at 10% interest rate. I said there is no way he would sign at that rate when he had an option at one 5th the rate, so neither? The previous loan signed with non traditional lenders was apparently at a pretty high rate though, so the one signed in 2014. Predatory is hyperbolic on my part, but the overall point remains

 

[JD1]

Man there's a lot of circling going on here

This is pretty simple really

The primary cost range of the product offering is set by conditions beyond the team's control

In response to the cost of providing the product the team has to set ticket prices that reflect the supply demand curve in this market

It's readily apparent, regardless of reason, that the price point of tickets results in low end revenues

Hopefully as the product improves it results in more revenue derived from ticket sales

And that's about it

The risk is that we arrive at the point where the cost range to provide the product exceeds the ability of the market to fund the product and the product's ownership is unable or unwilling to fund losses stemming from operating the team.

If that risk materializes, the options are limited: move the team to a different market or sell the team to a different ownership group willing to attempt to operate in this market.

 

[GCK]

You don’t understand the concept. This post is wrong.

I understand what you are trying to say but that is in a vacuum. Ticket market and player market are intertwined in a league where franchises compete and are bound by minimum and maximum spending. The NHL is not an open market it’s a closed market where your competitors are also your partners.

 

[Sweatred]

. This isn't complicated stuff.

I think @JDI has a perfect summary that clears this up.