Forbes slams Levitt report

[Pepper]

This is only about how much money teams lose, not whether they lose it or not.

How come Forbes gets better info than Levitt who has seen all the books unlike Forbes??

Sounds like a NHLPA PR-trick to me.

 

[triggrman]

Using this line of reasoning players should be billed each month for use of exercise equipment, doctors, trainers, misc equipment and ice time.

If you figure all these perks in the average players salary probably increases by more than 10%.

 

[BM67]

Forbes says the NYR lost $3.3 mil before interest etc. Forbes also lists the NYR as having a debt load of 92% of their value of $272 mil in 2003. So what is the interest on a $250 mil debt?

He gives two good examples of unclaimed hockey revenue, but most of his other claims are terrible. A concert or hotel development are not hockey revenue. If the arena wasn't owned by the teams owner they wouldn't be hockey revenue, so they shouldn't be HR just because you own the team and arena.

 

[YellHockey*]

How come Forbes gets better info than Levitt who has seen all the books unlike Forbes??

Sounds like a NHLPA PR-trick to me.

Not better info more like more impartial info.

Unlike Levitt, Forbes isn't on one side's payroll.

 

[ceber]

Sounds to me like the article is saying the teams should basically be run as loss-leaders in order for the owners to get all the business that comes from the arena.

I worry that an owner would decide to stop running the team after a while, though. Especially if the popularity of the game continues to drop. The owners have the sweet arena deals and the revenue from all the ancillary stuff. At some point, the balance sheet will look better without the team on it. What happens then?

Whether it's right or not, I don't know, but if the owners are going to insist on profitable hockey teams with a very conservative definition of hockey revenues, what can I do about? Not a damned thing, that's what. I can decide not to give them any money, but then I don't get to see any NHL hockey. I can try to pressure them (not sure how, though) to abandon their plans for profitable teams, but if they then decide to fold the team, I don't get to see any NHL hockey. Either way, I get no NHL hockey. The owners stay rich in any case. They get no sympathy from me, but they've got me by the short hairs.

 

[ceber]

Not better info more like more impartial info.

Unlike Levitt, Forbes isn't on one side's payroll.

The accounting firms that do impartial audits get paid, too. There are rules and practices put in place to make sure things are accurate. Forbes can only make educated (we hope) guesses at revenues and costs.

I seriously doubt that either the Forbes reporter or Levitt has any conflicting interest whatsoever in the CBA negotiations. Levitt got his money up front and could say whatever he wanted to. Forbes makes money selling magazines. Neither of them gives a rat's patootie about the NHL or the NHLPA.

 

[rwilson99]

It is irrelevant why he owns 50%. He could see the Blackhawks to Portland and still keep 50% share. He is entitled to try and make some money off his 50% ownership of the rink, Hawks or no Hawks.

Lets flip this around. If he makes $7.5m from his half of the $15m this year and there are ZERO hawks games, does that prove the Hawks contributed no net benefit to his rink earnings and therefore deserve 0% of that $7.5m. If on the other hand that $15m falls to $12m due lack of Hawks games, his half is $6m they you can argue the Hawks contribute $1.5m and deserve a share of that $1.5m.

If own a chain of cinemas and then decide to make a movie, should I give all of the profits from the cinemas to the stars of the movie I made?

You've actually stumbled across something here.

If suite revenue was $15M with the Hawks and now $12M without, holding additional events constant with 03-04, it is clear that $3 Million is hockey revenue.

Any share of that revenue paid to other arena owners is RENT, and should not factor in hockey revenue calculations.

 

[Russian Fan]

If there was to be revenues linked to salaries these things would have to be worked out in advance, in any CBA. The NHLPA would require much more transparency and access to the books. That much is a given.

I just understand the ''Transparency'' problem of the NHLPA ? What more would you want ? Every salary is expose to the public while the owners can hide their money anywhere, anytime because it's not public.

Stop thinking that I'm a pro NHLPA because I always thought the OWNERS are the liars who tried to make GUARANTEED profit & they are telling the fans it's for the love of the game.

Based on what? Even Forbes found they lost $98m and Forbes may be much more generous about what is hockey revenue than others. They pretty much implied that. Also note that $98m lost was before interest, taxes, depreciation and amortization. The players are going to have to account for those extras as well as the $98m. Loans don't just pay the interest on themselves.

Again if you do some credit as an owner, you can't blame that you pay your employees too much. It's just his own responsabilities.

Stop thinking that I'm a pro NHLPA because I always thought the OWNERS are the liars who tried to make GUARANTEED profit & they are telling the fans it's for the love of the game.

Not that much. Most of this stuff isn't that different from last years Forbes report (the one comparable to the Levitt report on time scale). I think Forbes had $124m last year in loses compared to this years $98m. Owners laughed that one off.

It's still a mystery to me of what do you have to gain about protecting owners that no one here knows the REAL TRUTH. What we do know as FACTS is

- Chicago owner's is described as mr.scrooge even by their own fans. So if he does not report the luxury suites into the hockey department is not a real surprise don't you think ?

- 2 Owners are to blame by the exchange commission for commiting false report over their other businesses. Does that make you a bit suspicious that they can do that also in their hockey franchise.

- Forbes is one of the MOST PRESTIGIOUS financial magazine there is. Do you think they got paid 250,000$ to say those things like Mr.Levitt did. The NHL OWNERS claim that Levitt is as INDEPENDANT as you can ask but he GOT PAID by THEM !!!

While Forbes was not PAID BY ANYONE TO SAY THIS !!!

If you can't see the difference, you can understand why the NHL owners did a lot of public relations to make you believe them whatever they want you believe.

Stop thinking that I'm a pro NHLPA because I always thought the OWNERS are the liars who tried to make GUARANTEED profit & they are telling the fans it's for the love of the game.

According to Forbes 17 team lost money and 6 teams made $2.3m or less. 17 before interest, taxes, depreciation and amortization, how many after? At least 23 would be my guess based on Forbes numbers, probably more. But perhaps the NHLPA consider only 23 going backwards a success.

Again you failed to recongnize that the NHLPA acknowledge some losses just like Forbes but they don't believe a HARD CAP is necessary to fix the problem when most of the FINANCIAL PROBLEMS are related to

- weak arena leases
- poor market viability
- poor management decision

94,000,000$ is enormous but when you consider that it's a 2,2 BILLIONS$ enterprise it's not that ENORMOUR. Also they succeed to cut 25% of those losses in 1 YEAR with the OLD CBA !!! Why can'T they do another 25% this year & another 25% the other year.

I'm not saying the OLD CBA is a success story but it prooves that this lockout is killing hockey & it's not the players salaries at fault.

Sure we can envy that a guy not that smart is being paid 10,000,000$ for pushing a puck on a stick but that's just plain envy & Jaleaousy. It's irrelevant to blame the hockey RED BLOOD because of the salaries.

Just think a 5% rollback = 100M$
Better control on rookie incentive
Better control on spending with a soft luxury tax

total = 200M$

Is it the perfect solution ? probably not

But you can't expect the players the fall for everything the owners have done in the last 10 years. NHLPA acknowledge the losses but not as large as the NHL Owners said.

Also don't forget 1 thing, as much PR the NHL owners can do, it's a fact & not an opinion that it takes 2 to make a deal & the owners are not willing to do so.

Example :

Banana's companies are in the RED, Mr.Goodenow is the buyer & Mr.Bettman is the seller.

Bettman : I can't sell my 100 banana's for 29$ anymore, I'm losing money every week at this price.

Goodenow : well maybe we can go at 32$ ?

Bettman : Bob, I really need more than that. I talked to my accountant & under 60$ for 100 bananas, I can't sell bananas to you anymore.

Goodenow : Gary you're asking too much, let's try 10% increase at 32$ & we'll see next year.

Bettman : Bob, I can't do partial fix anymore i'm in the deep red. It's 60$ or I don't sell.

Goodenow : Gary , I can't expect to buy your bananas 110% more than last year. It doesn't make sense.

Bettman : it's 60$ or nothing BOB !

Goodenow : Ok then , I'll be there if you want to negotiate.

Bettman : it's 60$ Bob & nothing else, get back to me when you will understand my position.

The point just in case you didn't notice is that Gary Bettman want a hard cap & nothing else so there's no point to discuss when 1 side are trying to dictate the negotiations !

LAST THING :

Stop thinking that WE ARE ALL PRO NHLPA because I always thought the OWNERS are the liars who tried to make GUARANTEED profit & they are telling the fans it's for the love of the game.

 

[Pepper]

Not better info more like more impartial info.

Unlike Levitt, Forbes isn't on one side's payroll.

I don't think Levitt is willing to sacrifice his credibility by making misleading conclusions about teams' finances.

Anyway, Forbes hasn't seen the books so their info is more like educated guessing.

 

[Russian Fan]

This is only about how much money teams lose, not whether they lose it or not.

How come Forbes gets better info than Levitt who has seen all the books unlike Forbes??

Sounds like a NHLPA PR-trick to me.

Are you for real ?

Levitt was paid by the NHL OWNERS 250,000$ & for you it's the truth.

But Forbes is NOT being paid by anyone & it's a NHLPA PR move ?

remove the blinds out of your eye.

I'm not a PRO NHLPA but what you say is just non-sense.

 

[Pepper]

Are you for real ?

Levitt was paid by the NHL OWNERS 250,000$ & for you it's the truth.

But Forbes is NOT being paid by anyone & it's a NHLPA PR move ?

remove the blinds out of your eye.

I'm not a PRO NHLPA but what you say is just non-sense.

Yes, he was paid well for his job.

But the FACT is that LEvitt has seen the books, Forbes has not. Levitt has a very good reputation and any doubts about him being impartial & objective means he can kiss goodbye to all those lucrative auditing deals in the future. Reputation is his bread & butter, any experienced auditor can analyze the books and reach the same conclusions but Levitt has the credibility & reputation which makes him more lucrative choice. If he loses that he doesn't have anything special.

Think before you post.

 

[dawgbone]

The whole reason the owner of the Kings got his arena was the KINGS.

WHAT?

I'm sorry, but I'd think the Lakers or the Clippers may argue with you about that.

 

[Digger12]

Levitt got his money up front and could say whatever he wanted to.

This is a point that often gets overlooked. Levitt had stated on numerous occasions that he insisted that the NHL pay his fee in full, and up front regardless of his findings.

The guy's retired, what the hell does he care whether he paints a rosy picture for the NHL or not? He had his money from them either way.

While I agree that perhaps the NHL could've handled this better and an auditor that both the NHL and NHLPA agreed upon would've been a better solution, the truth of the matter is that the NHLPA has shown zero interest in being part of any process that involves sitting down and hashing out what should define hockey revenue, so that this stupid argument can be put to rest once and for all. If they don't want to get their nose dirty, where the bloody heck do they get off beaking off that "they don't trust the numbers"? IMO this is an indefensible stance by them.

If they've got it in their heads that they're not going to trust the owners no matter what's said and done, than they may as well fold the NHL now because it'll be on a one way ticket to oblivion anyway...may as well put a bullet in its head and lessen its suffering.

That being said, the owners also collectively need to to realize that for them to be anything more than a regional sport, they've got to get their accounting practices out of the 60's and 70's, and into the 21st century. Bending the players over a log is only going to accomplish a nasty strike in the not too distant future, the NHL HAS to get into a partnership with the NHLPA and stop looking at them as a slave revolt.

 

[vanlady]

According to the article Forbes published last year that isn't true.
http://www.forbes.com/free_forbes/2003/1208/094a.html



The only reason I can come up with for franchise values increasing this year after last year's decline is confidence that the new CBA will insure profitability.

Forbe's also stated at that time:


I'm sure NHL is over reporting losses. When entering negotiations try to make as strong as a case as possible. Likewise the NHLPA is going to look at the numbers and under report the losses counting everything tangentially related as revenues. The bottom line is there wouldn't be a lockout if everything was peachy.

Acording to the article you cited the average franchise value has increased by 31% over the last 6 years to $163 million. The average value of a team 6 years ago was $112.5 million. The average appreciation was $50.5 million. Forbes reports that the league lost $96 million last season and $123 the season before making the average loss $109.5. In a 30 team league that's an average $3.65 million loss per team per year. Over the course of 6 years it's $21.9 million per team. An owner who bought a team at the average price of $112.5 million six years ago and sold it for $163 million today realizes a $50.5 million gross profit. After deducting the $21.9 million loss incurred over those 6 years, there's a $28.6 million net profit. Investing $112.5 million in a 72 month CD with a 3.75% APY, yields approximately $28 million in interest. That's really conservative too. There's much better deals than that available for the high rollers. Even if we use Forbes numbers, the return on investment isn't acceptable.

First read again 2002/2003 increase was 5%, yes less tham the previous 4 years but who gets a 5% increase asset valuation? That is keeping pace with Vancouver real estate and we have one of the strongest real estate markets in North America.

Second, the impact of the lockout, which the owners have started, is going to heavily impact asset valuations. Why the NHL is a fan based business, will the NHL be able maintain it's fan base and income when this is all over??

Third, let's look at a real world example of return of investment. The Gund brothers sold the Sharks for 147 million they bought the team for 50 million, that is a a 97 million dollar profit, minus what you see as a loss, 28.5 million, the return would be 68.5 million, that is a solid return on investment in the corportate world. It aslo with the current 6 year trend is a safe investment.

 

[tantalum]

My goodness people. That article says virtually NOTHING about the NHL franchises. What it says is that holdings that have connections with the teams can make money. THe owners aren't going to deny this. HOWEVER, these things are not that relevant when it comes to profitability of the NHL entity....which is what the LEvitt report and URO's are about.

Let's go point by point:
Before the union folks go all crazy the first thing it says is over half the teams lost money. That's 17 teams before taxes and depriciation. With taxes added you are going to bump that number up a few more I think. so somewhere in between 55-70% of the teams are indeed losing money even according to Forbes.

Appreciation of a franchise means nothing until it is sold. THEN AND ONLY then can it be considered profit. I guarantee you that for most teams there are not buyers lining up.

Chicago - those suites are not just for Blackhawk games. As the arena is not just for Blackhawk games. Not all arena revenues can be justified to go to the Blackhawks in the first place. Secondly unless Forbes has a copy of the URO's (which they do not from anything I've ever heard...the NHLPA, NHL and LEvitt have received those. Not outside sources) they DO NOT KNOW if the blackhawks reported this as revenue to the NHLPA. It may not show up on the blackhawks balance sheet and instead as part of the arena affiliate but those affiliates are to be included in teh URO. Unless there is proff that those numbers were not reported I'm going with the guy whose reputation is beyond reproach and has seen the numbers in the URO. Also btw Levitt accounted for things he thought might have been amiss and estimated numbers that perhaps should have been included.

Islanders cable deal - there might be a point here but again it depends how it was reported in the URO.

Kings - Staples center is a separate entity. Just because it is owned by the same guy means nothing. Clipper rent etc. SHOULD not and DOES not go the Kings as operating revenue. Further development again doesn't have anything to do with the Kings operating revenue.

Ditto for the Coyotes stuff.

Yes Comcast used the Flyers to build Sportsnet. So what? Why would anything other than the cable rights, which are substantial at $8 mil, go on the Flyers URO? Sportsnet is a separate entity. Just because The flYers may be the main draw oin the channele doesn't mean the FLYERS get any of the TV revenue from the other programs. They just get a substantial cable deal for their rights.

IN the end all this article says is that a hockey team can be an important part of a conglomerates and large scale developments. I don't think any of the owners would argue anything different. What it also says is that on their own a hockey team doesn't make money. And that last little bit is the whole issue. Things like revenues from the arena on non-NHL nights don't really have any business on the NHL teams balance sheet or URO (btw many teams do include such things as concerts revenue junior hockey games in the URO...such as the flames and Oilers). NHL teams should be able to make money on their own without these other things instead of merely being a big name tenant of the commercisl district.

And as the last point about transparency. The players don't have the right negotiate what should or should not be included in those numbers until they agree to tie themselves to those numbers. That is the only time they have the right to discuss these other sources of income talked about in the article...and then I don;t think you;ll find that they get very far as you really have to make a stretch to even think about those things as being part of the NHL team business entity and as such revenues/expenses.

 

[vanlady]

I doubt the Hawks make up 25% of the events held there. The United Centre is "among the busiest and most lucrative arena's in sports.". This then comes back to what percentage is hockey. Are the Bulls more popular? What other events are run (over 200 per year)?

So what is a fair percentage for the arena ownership to take?

What would be a fair rate to charge the Hawks on a per game basis for rink usage?



Little but we don't know how that part works. We don't know what Wirtz charges/earns in other areas without looking at the books. We can assume he splits the $15m two-way. If so he obviously thinks its fair that amount should be for arena ownership because that is what he pays the other the other 1/2 owner. If he thought that was unfair he'd filter more through the Hawks. Mind you it doesn't hurt the other owner is the Bulls owner and they are splitting the revenue cancelling each other out to some degree.

Again it prompts the question, what is a fair rate to charge if the Hawks were paying on a per game basis?

According to Forbes the Hawks made $9m last year. So Wirtz must be a great manager. There should be more Wirtz running this league not less. Then again $9m operating income (according to Forbes) isn't much of a return on an enterprise supposedly worth $178m. Poor old Bill Wirtz, he runs his team like a business, makes a profit (at least according to Forbes) and slagged by the fans as a cheapskate.

OK we agree that no income for the boxes on the URO's is fishy? I don't care what the percentage is, it is the fact there was 0 reported.

 

[SENSible1*]

While I agree that perhaps the NHL could've handled this better and an auditor that both the NHL and NHLPA agreed upon would've been a better solution, the truth of the matter is that the NHLPA has shown zero interest in being part of any process that involves sitting down and hashing out what should define hockey revenue, so that this stupid argument can be put to rest once and for all.

This is the key point which is continually overlooked by the PA apologists.

The PA has no desire to examine the real scope of the problem and make a meaningful contribution to a solution. Until they do, they will get no sympathy from anyone who has given the situation an impartial examination.

 

[degroat*]

The NBA owners have been able to agree with thier union to define all revenue, and have a very strict set of checks and balances to control their owners. Something the NHL owners will never go for.

Yet another fabrication courtesy of vanlady.

First of all, You have absolutely no clue what the owners will go for.

Secondly, to suggest that there would be a cap or even a luxury tax without revenue definitions is laughable.

Oh and before you use the NBA you might want to make sure that they are not talking about a strike to get rid of their cap next year.

I'm not sure you could have posted something more irrelevent. There is not a union in existance that wouldn't like to increase their salaries. Suggesting that the NBA players wanting to remove their cap means anything says a ton about you.

 

[vanlady]

Hardly. All we have is a third party who counts differently. They include everything, and a good case can be made that they over-include revenues. Yeah, the owners under-include a bit. So the real result is in the middle somewhere.

But note the real story here is that even with the most optimistic financial reporting, the NHL is still losing hundreds of millions of dollars each year.

Folks are running around here trying to paint this as positive news, when it's really just more bad news. This is like the private detective telling you "I'm sorry, I was wrong, you're wife didn't screw around with 200 other guys, it was only 100.". Woohoo! That's great! I knew she could be trusted!

According to Forbes the NHL is losing 93 million, not hundreds of millions. Now lets look at the money losing teams

NY Rangers
Philidelphia Flyers
Detroit Red Wings
Colorado Avelanche
LA Kings
NY Islanders
St Louis Blues
Pheonix Coyotes
New Jersey Devils
Washinton Capitols
Mighty Ducks of Anaheim
Buffalo Sabres
Carolina Hurricanes

Do the Sabres loses include the debt incured from the Rigas family fraud? Most of the rest of these clubs are in the top half of the league in attendance, have the biggest regional TV audience, and merchandising is in the top half of the league. So how are they not making money? Easy, in the Flyers case they are making on the back of SportsNet, which Comcast owns, the Flyers have made it the largest sports channel in the region, know what that means, huge advertising revenue. What I am getting at here is, they sacrafice a little money on their hockey team to make huge money from other related assets.

 

[dawgbone]

I was under the impression that it was the NBA owners who would be locking out the players...

The owners want a decrease in the maximum length of a contract, because that has been their biggest challenge under the cap.

 

[vanlady]

And if the Kings owners want to put their money into a hotel and theatre that should remain their money. If he makes $1b from the new hotel complex, the NHL team shouldn't try and claim it. If it bombs and losses $1b you wouldn't expect the players to fork it over out their pockets. If they want in on these non-hockey deals I'm sure the Kings ownership would be looking for financial backers.

Who said anything about hotels and theaters, I simply said arenas.

 

[vanlady]

If there was to be revenues linked to salaries these things would have to be worked out in advance, in any CBA. The NHLPA would require much more transparency and access to the books. That much is a given.



Some owners.



Based on what? Even Forbes found they lost $98m and Forbes may be much more generous about what is hockey revenue than others. They pretty much implied that. Also note that $98m lost was before interest, taxes, depreciation and amortization. The players are going to have to account for those extras as well as the $98m. Loans don't just pay the interest on themselves.




Not that much. Most of this stuff isn't that different from last years Forbes report (the one comparable to the Levitt report on time scale). I think Forbes had $124m last year in loses compared to this years $98m. Owners laughed that one off.

According to Forbes 17 team lost money and 6 teams made $2.3m or less. 17 before interest, taxes, depreciation and amortization, how many after? At least 23 would be my guess based on Forbes numbers, probably more. But perhaps the NHLPA consider only 23 going backwards a success.

Still at the least this should produce an interesting reply from the NHL. Been boringly quiet from both sides for the last little while.

One of the things that these do not include is the money these teams are making on the Bond and money markets, Dave Cobb here in Vancouver made a killing on these markets and is widely respected in the Finance industry because of it. You think that Vancouver is the only one using this stratagy? I bet if you include these sources of revenue the number of teams losing money actually drops.

Speaking of intrest did you know that the Flyers are paying 100% of the 100 million dollar debt servicing on the Wachovia Center, the 76's don't pay a dime of that.

I agree with you though, are the NHL going waste time on the media spin or get back to the table, guess it depends on the media and how much attention this gets.

 

[vanlady]

The NHLPA could have full access to all teams books simply by agreeing to negotiate cost certainty. The owners put it on the table and the players have refused to look at it.

Why?

Would you trust someone that has already stolen from you? The owners have already stolen from the players.

 

[vanlady]

This is only about how much money teams lose, not whether they lose it or not.

How come Forbes gets better info than Levitt who has seen all the books unlike Forbes??

Sounds like a NHLPA PR-trick to me.

Forbes has been doing these reports on all pro sports for 6 years this is nothing new. Read the article, it will explain why large chunks of revenue where never used in the Levitt report.

 

[vanlady]

Forbes says the NYR lost $3.3 mil before interest etc. Forbes also lists the NYR as having a debt load of 92% of their value of $272 mil in 2003. So what is the interest on a $250 mil debt?

He gives two good examples of unclaimed hockey revenue, but most of his other claims are terrible. A concert or hotel development are not hockey revenue. If the arena wasn't owned by the teams owner they wouldn't be hockey revenue, so they shouldn't be HR just because you own the team and arena.

Unless the owner aquired the arena soley because of his hockey franchise, remember these owners in the US are not paying for arenas, they get given them.