Leavitt interview transcript

[Tom_Benjamin]

Probably because they don't think the NHLPA's offer will fix the problems. In the last lockout, they agreed to some things that they thought may have worked, but as we have seen, those changes didn't. I think the owners learned from that and will stick together for something they feel will work much better than the last CBA.

This has nothing to do with the question. You are explaining why the owners rejected the player offer. I did not ask that. The point to be taken from the NHLPA offer of concessions is that they accept that the owners are not getting enough of the pie. They think the market is correcting itself but they are prepared to give to hurry it along. If the players accept that much from the data Levitt based his report on, why won't they accept it as the basis of a system?

Read the question again and try again.

Tom

 

[mr gib]

hey tom - be nice - some guys don't get it

 

[Tom_Benjamin]

Sounds to me like a partnership of some kind where the players have just as much incentive as the owners in increasing the revenues would profit both in the future. (and to some point, that's what the CBA in 199x achieved, however at this point it has reached a bottleneck and needs to be reviewed to further develop the revenue streams).

Man, this sounds really good for the fan. According to Bettman we are now paying three times what we paid for hockey a decade ago. Jebus, how much more do the owners and players want from us? Is the product were three times as much?

More revenue! That's what the NHL needs - the players and owners agree on that - and everything would be just great for us fans.

Tom

 

[SuperUnknown]

Man, this sounds really good for the fan. According to Bettman we are now paying three times what we paid for hockey a decade ago. Jebus, how much more do the owners and players want from us? Is the product were three times as much?

More revenue! That's what the NHL needs - the players and owners agree on that - and everything would be just great for us fans.

Tom

Like it or not, that's how business works. Now in regards to hockey revenue, the next step is TV revenue, which hopefully won't take too much more money out of our pockets.

Btw, from your posts I deducted you might be happier watching and encouraging the AHL.

 

[thinkwild]

It could have been a 20% give back in salaries, but without something to prevent teams from overspending, we would be right back in this situation eventually. A salary give back without some kind of strong control on salaries is nothing but a speed bump.

Isnt it amazing that we ask this question? What can we do to prevent teams from overspending? Hmmmm. Tough one. If the only predicament from overspending is that they lose money, what can we do to give them an incentive not to lose money?

Do you often go flying over speed bumps? It will only ruin their car anyway.

In a few years, some of the current losses will be gone and new revenues will rise and take care of the $300mil loss on its own. In the meantime, fans are trying to find ways to raise more revenues for the owners now.

 

[ceber]

They think the market is correcting itself but they are prepared to give to hurry it along. If the players accept that much from the data Levitt based his report on, why won't they accept it as the basis of a system?

Maybe because they disagree that the market is correcting itself (salaries were still going up at the time of the lockout) and the players' plan just pushes back the inevitable one or two years? I dunno. I'm not at the table. But if i had to guess, that's what I'd throw out there.

 

[Tom_Benjamin]

Maybe because they disagree that the market is correcting itself (salaries were still going up at the time of the lockout) and the players' plan just pushes back the inevitable one or two years? I dunno. I'm not at the table. But if i had to guess, that's what I'd throw out there.

This is the third reply that ignores the question I asked and answers a question that I did not ask. I don't care why you think the owners rejected the player offer. Can apologists for the owners even read? Is the question that hard? I don't want to hear about what the owners think about the player's case. I want to hear whether any of you even understand the player's case.

I don't think any of you do understand why the players object to Levitt. Isn't that an admission of ignorance? I think so. I'm asking why the players will not accept Levitt's conclusions or a system based on Levitt's plan.

Explain the player's case against Levitt.

Tom

 

[djhn579]

This is the third reply that ignores the question I asked and answers a question that I did not ask. I don't care why you think the owners rejected the player offer. Can apologists for the owners even read? Is the question that hard? I don't want to hear about what the owners think about the player's case. I want to hear whether any of you even understand the player's case.

I don't think any of you do understand why the players object to Levitt. Isn't that an admission of ignorance? I think so. I'm asking why the players will not accept Levitt's conclusions or a system based on Levitt's plan.

Explain the player's case against Levitt.

Tom

Maybe we just don't care what th players case is, or maybe your just being argumentetive. You asked...

You did not answer the question. Why does the NHLPA object to the Levitt report? Show us that you understand their position or admit that you don't have a clue.

Tom

I gave you all the standard answers from the players that I have read in the news and from other posters on this board. How is this not answering your question?

And if you want to talk about how people can't answer your question, at least we gave you a reasonable responce. That's more than you gave my question...

Just out of curiosity, where does Forbes get their numbers? Do they have access to the teams books or do they do some general analysis and make estimations on what they think each teams finances should be?

And your responce...

They make them up out of thin air. Or they are fed to them by the owners. They do not cite any sources.
Tom

I think this is a very important question since many people here are using Forbes' numbers to show that the owners are not being truthful. I think it deserved much better than the answer you provided.

But hey, we don't share your point of view, so we are all ignorant and don't understand anything at all. To think that we would have an opinion that you did not give to us...

 

[Cawz]

Explain the player's case against Levitt.

Enlighten us. I saw the poster above explain the players case in a previous post. Obviously that wasnt enough. Apparently you have some insight that we are all lacking, so win us over.

 

[ceber]

This is the third reply that ignores the question I asked and answers a question that I did not ask. I don't care why you think the owners rejected the player offer. Can apologists for the owners even read? Is the question that hard? I don't want to hear about what the owners think about the player's case. I want to hear whether any of you even understand the player's case.

I don't think any of you do understand why the players object to Levitt. Isn't that an admission of ignorance? I think so. I'm asking why the players will not accept Levitt's conclusions or a system based on Levitt's plan.

Explain the player's case against Levitt.

Tom

Sorry, I misread your question and mistook the "they" for owners. Forgive me for not giving your post my full attention. Btw, I'm not an apologist for the owners. I'm a happy fan of a team that was doing fine under the existing system. As far as I'm concerned, the owners are taking advantage of the situation in a pretty nasty way.

BUT, I can't explain the player's case against the Levitt report. As far as I'm concerned, they have none. The players just don't want a salary cap. I don't know what their reasons are, because they haven't given any.

 

[Tom_Benjamin]

BUT, I can't explain the player's case against the Levitt report. As far as I'm concerned, they have none. The players just don't want a salary cap. I don't know what their reasons are, because they haven't given any.

Sure they have:

"We have consistently stated that one critical issue of disagreement between the NHLPA and the League on finances is how to define the complete business of owning an NHL franchise, and how to address the significant inconsistencies contained in the NHL's voluntary and unaudited URO reporting process. At the outset it is clear the Levitt report, commissioned by the League, is fundamentally flawed when the author "elects" to define hockey revenues on the same basis as used in the NBA and NFL for defining revenues in their salary cap systems."

That was from the NHLPA press release, but Goodenow has elaborated on this theme in many interviews. What do you think he means?

Tom

 

[iagreewithidiots]

This is the third reply that ignores the question I asked and answers a question that I did not ask. I don't care why you think the owners rejected the player offer. Can apologists for the owners even read? Is the question that hard? I don't want to hear about what the owners think about the player's case. I want to hear whether any of you even understand the player's case.

I don't think any of you do understand why the players object to Levitt. Isn't that an admission of ignorance? I think so. I'm asking why the players will not accept Levitt's conclusions or a system based on Levitt's plan.

Explain the player's case against Levitt.

My arent our panties in a bunch.

Do you want to hear the truth or just what you want to hear?

Truth is the players will not accept Levitt's conclusions or a system based on Levitt's plan because his report was paid for by the owners and it doesnt benefit them as much as they would like.

Levitt didnt say what the players wanted to hear. So now they want to stamp their feet, accuse people of not being able to read, not understanding anything, and being ignorant. I guess now I see why you agree with the players. You have so much in common.

 

[mr gib]

My arent our panties in a bunch.

Do you want to hear the truth or just what you want to hear?

Truth is the players will not accept Levitt's conclusions or a system based on Levitt's plan because his report was paid for by the owners and it doesnt benefit them as much as they would like.

Levitt didnt say what the players wanted to hear. So now they want to stamp their feet, accuse people of not being able to read, not understanding anything, and being ignorant. I guess now I see why you agree with the players. You have so much in common.

round and round and round and round and round - it's about the cap - round and round and round -

 

[thinkwild]

And your responce...

Originally Posted by Tom_Benjamin
They make them up out of thin air. Or they are fed to them by the owners. They do not cite any sources.
Tom

I think this is a very important question since many people here are using Forbes' numbers to show that the owners are not being truthful. I think it deserved much better than the answer you provided.

I dont think Forbes numbers are necesarily truthful, i dont know how exactly they would know, but still theres a huge difference there, where does it come from?

I dont think this is a flippant answer. The owners themselves have said they dont know where Forbes gets its numbers from.

 

[thinkwild]

Andrews page had a good summary of the problems defining revenues in the Levitt fashion. Its a good read. Heres a snippet

One of the main disagreements between the two sides is the distinction between hockey related revenue and non-hockey related revenue. The point of the URO, according to the league, is to determine the amount of revenues and expenses related to doing business within the National Hockey League

The report stated, "As a result, these arenas and teams often generate revenues and incur expenses that relate to both hockey and non-hockey activities. In these instances and for URO purposes, teams must determine the amount of revenues and expenses that are associated with operating a professional hockey franchise in the NHL and those amounts of revenues and expenses that are derived from non- hockey activities."

In other words, teams need to determine how to divide up revenues for items such as licensing of suites and club seats, sponsorships, naming rights, fixed advertisements within the arena and distinguish what share goes to NHL related business and what goes elsewhere

After the Levitt Report came out, Philadelphia Flyers chairman Ed Snider revealed his team was one of the 19 NHL teams the report said lost money in 2002-03. Team president Ron Ryan said the Flyers weren't among the teams whose bottom line was colored in red ink. So how does that work?

"Where it becomes confusing," Ryan told the Philadelphia Inquirer, "is that it sounds like there are two sets of books. The difference is that the report we make to the league, as directed by the players' association, is different from our own internal audited statement, which we view as the more accurate statement. So we were talking about two different reports."

The Flyers, if you include just revenues and expenses that fall just within the framework of doing business in the NHL, lost money. If you take everything into account, including activities that fall outside of the NHL, the Flyers weren't among the losers. At least, that's what Ryan indicated

"We've always said it's not an accounting issue of making sure the numbers add up," Saskin said, "but a much more complex task of how one defines the revenues in a business with many related parts and complicated corporate structures. There's no way to tell because they continue to refuse to give you individual team financial information."

That's why the union has little faith in the URO process. The NHLPA doesn't believe it accurately reflects the financial state of the teams

The key phrase here is "complete business of owning an NHL franchise." In the union's eyes, the UROs and the Levitt Report paint most of the financial picture, but not all it.

And it probably didn't help that one of key purposes of the Levitt Report was to determine whether the NHL's URO defines revenues comparable to the NFL and NBA, both of which employ salary cap systems.

Defining revenues is a key issue, especially as the NHL tries to convince players to accept the idea of cost certainty. A concept that basically tries to set player salaries as a percentage of league revenues. That may be tough to do when the two sides can't even agree on what exactly what those revenues entail.

 

[Tom_Benjamin]

Andrews page had a good summary of the problems defining revenues in the Levitt fashion. Its a good read. Heres a snippet

Exactly. Everyone surely agrees that the players deserve a percentage of the revenues they generate. Nobody knows what that percentage should be and nobody knows exactly what is meant by hockey revenues. That is why the NHL phrase is "designated" hockey revenues. Levitt took the NBA formula for defining revenues and applied it to hockey. The NHLPA (and MLBPA) reject the idea that a formula could possibly capture the revenues that teams actually generate.

The problem is that a formula doesn't reflect reality for any team. There are 30 different businesses in the NHL with several different models. Levitt invented a composite that is supposed to present a proxy for the real revenues. He invented an imaginary team, one that splits revenues with affiliated entities in defined ways.

There are thirty different businesses involved can all report very exact numbers set out by the Levitt formula and many will still be wildly under-reporting the revenues the players actually generate.

One business model involves real estate deals. The Phoenix Coyotes are at the centre of a $750 million real estate deal, one that is designed to turn a very large capital gain for the developer and team owner. Isn't part of that capital gain generated by hockey players?

Another business model structures the team as a tax shelter. The Ottawa Senators started out as a real estate deal, but if Rod Bryden had not run out of time and he had successfully skinnied his partnership past the banks, he would have converted it to a very profitable tax shelter. The hockey team would have generated $60 million a year in tax savings for the partnership. Why shouldn't those savings count as hockey revenues?

Madison Square Gardens is a television network as well as an arena. The Rangers don't make money? How often do television networks get content for nothing? If the Rangers make money it is a huge bonus for MSG. How many cable subscribers does Comcast sign up because of the Flyers? The Anaheim Mighty Ducks were a key marketing element in three Disney movies. How does Levitt count that money?

In some arenas - like GM Place - the hockey team is probably responsible for 95% of the advertising revenues and luxury box rentals. In other arenas - like the Staple Centre - the Kings might generate a third. Levitt sets out a formula that will almost surely be wrong for both places.

There are three things the players can be sure about:

1) The only individual who knows exactly how much revenue the players are generating - including value added to all the affiliated companies - is the owner. The players can never really know given their level of expertise and resources. Left to his own devices, an owner will count all the revenues and benefits when setting his payroll.

2) Any cookie cutter formula that forces 30 different business models into one mold is sure to be wrong. "Designated hockey revenues" does not equal "real hockey revenues".

3) The owners would not negotiate a formula that set "designated hockey revenues" higher than the real hockey revenues. No matter what is negotiated into the package it will be less than what the players actually generate.

Not only does the Levitt report expect players to accept that the "official" NHL revenues are the only revenues that should count, they are expected to accept that there is a fair fixed percentage of those "designated" revenues. Obviously this is incorrect. The player share should not be fixed. It should fluctuate according to how well the business is doing. It should be increasing as long as revenues are increasing.

Tom

 

[Seachd]

The hockey team would have generated $60 million a year in tax savings for the partnership. Why shouldn't those savings count as hockey revenues?

Why shouldn't the pay of the guy that makes my hot dog at the game count as player salary?

So why exactly won't the NHLPA hire their own auditor to look at the numbers? They've been invited to do so for years now, but they've always refused to. Goodenow's response: "We don't need to." Why's that, Bob? Afraid of what you'll find out?

 

[djhn579]

Andrews page had a good summary of the problems defining revenues in the Levitt fashion. Its a good read. Heres a snippet

One paragraph in that really jumps out at me...


"Where it becomes confusing," Ryan told the Philadelphia Inquirer, "is that it sounds like there are two sets of books. The difference is that the report we make to the league, as directed by the players' association, is different from our own internal audited statement, which we view as the more accurate statement. So we were talking about two different reports."

Does anyone have more information on this? Just wondering if it means "the players insisted that the owners report hockey revenue (generally, at the owners discretion) to the league" or if it means "the players insisted that the owners report specific income which the players consider hockey revenue, to the league"

 

[ceber]

Sure they have:

"We have consistently stated that one critical issue of disagreement between the NHLPA and the League on finances is how to define the complete business of owning an NHL franchise, and how to address the significant inconsistencies contained in the NHL's voluntary and unaudited URO reporting process. At the outset it is clear the Levitt report, commissioned by the League, is fundamentally flawed when the author "elects" to define hockey revenues on the same basis as used in the NBA and NFL for defining revenues in their salary cap systems."

That was from the NHLPA press release, but Goodenow has elaborated on this theme in many interviews. What do you think he means?

Tom

Sounds to me like he's saying "I don't like the way you chose to count revenues, choose another way." Well, that's fine. Levitt's repeatedly offered to meet with the NHLPA to discuss things, and the NHLPA doesn't want to. Why don't they want to? I don't know, but I suspect it's because they don't want to answer the question "what defines hockey revenues?" Once that question is defined, then they're stuck bargaining. As long as they keep saying "I don't like it" without giving any alternatives, they can stick to their story as long as they want. At some point, a decision needs to be made about defining revenues. Levitt made what he considered to be a valid decision. If it's not valid, the NHLPA should put forth a method they think is.

It's obvious the catch has been defining revenues from the get-go.. it was before. The thing this time is that the league said "fine, let's define revenues." The NHLPA realized they were about to get stuck, so no matter what the report says they will disagree with it now.

Personally, I think hockey revenues should be TV, tickets, concessions on game nights, and merchandise. The ancillary revenue is just that, ancillary. Maybe it wouldn't be there if the players weren't there, but they aren't the primary cause of it. If the players want a chunk of any of the ancillary money they should invest in the team. Owners should set up a system that allows this.

 

[quat]

If we are to take some of the examples as cash the NHLPA wants to consider as hockey generated, then wouldn't the owners be equally allowed to apply Naslunds endorsment earnings as income against his wages owed? After all, if he wasn't playing hockey in their league, Naslund certainly wouldn't be able to generate the kind of exposure of his talents that would interest companies looking for brand endorsments.

The players have every opportunity to negotiate the criteria for assessing NHL driven income. The fact they are not doing so leads one to believe they have no interest in arriving at that destination. My reasoned guess would be that they have seen ownership cave in in the past and it's no real loss for them (to date)to see if it might happen again.

 

[thinkwild]

So then not like partners.

 

[me2]

If we are to take some of the examples as cash the NHLPA wants to consider as hockey generated, then wouldn't the owners be equally allowed to apply Naslunds endorsment earnings as income against his wages owed? After all, if he wasn't playing hockey in their league, Naslund certainly wouldn't be able to generate the kind of exposure of his talents that would interest companies looking for brand endorsments.

And if the Phoenix Coyotes' land deal goes belly up and they lose the $750m will every player in the NHL turn up at Gretzky's door and hand him $1,000,000 or would we hear "Its not our fault the owners made a mistake and lost money. They should get better management. We shouldn't be held responsible. Where are our cheques?"


At the end of all of this I'm still the hear the players put forward a percentage they are happy with, be it a percentage of the owners version of "hockey revenue" or a percentage of the NHLPA's version of "hockey revenue". Nor do I suspect they have any intention to, since they can use "market value" and "we don't trust the NHL" excuses indefinitely.

 

[Tom_Benjamin]

So why exactly won't the NHLPA hire their own auditor to look at the numbers? They've been invited to do so for years now, but they've always refused to. Goodenow's response: "We don't need to." Why's that, Bob? Afraid of what you'll find out?

1) Because they don't need to see the revenues as long as they reject a link between revenues and salaries. The owner sees the complete revenue picture - defined any way he wants - and plans accordingly. That is what owners get paid to do.

2) Because any auditor hired would have exactly the same problem as Levitt. There is no single right way to split up the revenues between affiliates. He could invent a formula for splitting the revenues, but his formula would be just as wrong as Levitt's. No single formula can fit the circumstances of 30 separate "complicated and dynamic" businesses.

This is the story behind the Flyers mixup. The Flyers keep a set of books based on the way the complicated and dynamic organization sees fit, and according to those books, the Flyers make money. When it comes time to complete their form for the official NHL numbers, revenue is allocated between the affiliates based on a different formula - the standardised one - and they lose money. The Flyers think hockey players generate more revenues than Arthur Levitt does.

The same thing is true for all of the teams although the errors are not all in the same direction. Everyone keeps their books differently than the numbers reported in the URO. All of them have a set of books that are set up to maximise the return to the owner. Sometimes that means they are set up to maximise the team as a tax shelter. In that case, the internal books probably show a much greater loss than Levitt would produce.

The players want the owners to make their decisions based on what the owner sees as the team revenues, rather than trying to negotiate an arbitrary number that surely does not reflect the reality of each team.

What would Goodenow be afraid of finding out? Why would the players want to try to figure out how MSG works, how MLSE works, or how the arena in Nashville subsidises the team? They want a system where they don't have to worry about any of those things. That's the owner's business. They are employees, not partners. They don't want to be partners.

Tom

 

[Tom_Benjamin]

Sounds to me like he's saying "I don't like the way you chose to count revenues, choose another way."

No, he's not. He's saying "We are not defining revenues. Define them any way you want. We don't care."

Well, that's fine. Levitt's repeatedly offered to meet with the NHLPA to discuss things, and the NHLPA doesn't want to. Why don't they want to? I don't know, but I suspect it's because they don't want to answer the question "what defines hockey revenues?"

Exactly. Their answer is easy. "It can be anything the owners want it to be. We don't care."

Once that question is defined, then they're stuck bargaining.

Why? They can accept the revenue numbers in the Levitt report. They don't buy them because they are an artifice, but so what? As long as they refuse to link salaries to revenues, it doesn't matter. The word "revenues" does not have to be in the CBA.

It's obvious the catch has been defining revenues from the get-go.. it was before. The thing this time is that the league said "fine, let's define revenues."

The league has always said that. The players have always said "Nuts to that." The catch is not the way revenues are defined, but whether they are defined at all. The catch is that the players know that they can't be defined in a way that reflects the reality of 30 different businesses. The NHL does not have significant revenues. Thirty individual businesses have the revenues. They all define them differently.

Tom

 

[Spezza]

BTW, I mentioned this last time Levitt was discussed - just because the guy was/is the head of the SEC doesn't make him beyond reproach. Or mean that he'll make mistakes.

As before I really recommend having a peak at Michael Lewis' book "Next" (of Moneyball fame).

It's the story of Lebed that leads Lewis to interview Arthur Levitt in what is probably the highpoint -- or lowpoint -- of the book. With a sort of deadpan humor, Lewis exposes Levitt's empty pomposity and self-satisfied platitudes in a scene that might have made Mark Twain proud.

http://www.bookpage.com/0108bp/michael_lewis.html