Ottawa has a (financial) conundrum
- Thread starter LadyStanley
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TheLegend
Megathread Gadfly
Mightygoose
Registered User
Apparently their ST base was around 8k last year. So a 4K drop in one year suggests this Melnyk Out camping has gained some traction.
So yes having likely a franchise low ST base while he waits for the completion of a major real estate development in the works which includes a new downtown arena to boost the franchise value so he can sell on a high....a big conundrum this is...
So yes having likely a franchise low ST base while he waits for the completion of a major real estate development in the works which includes a new downtown arena to boost the franchise value so he can sell on a high....a big conundrum this is...
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Spirit of 67
Registered User
Mightygoose
Registered User
I see the conundrum as a) he hangs on to the team that will likely have an 8 figure loss while he waits for the Lebreton deal to finish which will boost the franchise value
Or b) he cuts his losses now. There was an offer for the team back in June which would have kept the team in Ottawa and complete Lebreton
I think it will be somewhere in the middle. Taking on a local investor(s) to get him to the finish line...and continue to run the team on the cheap in the meantime.
Or b) he cuts his losses now. There was an offer for the team back in June which would have kept the team in Ottawa and complete Lebreton
I think it will be somewhere in the middle. Taking on a local investor(s) to get him to the finish line...and continue to run the team on the cheap in the meantime.
NorthCoast
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- May 1, 2017
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Not really. Not if he trades away 5-10 mil in salaries
Ottawa's gate receipts have been pretty healthy even with the overall decrease in attendance the past few years. (see here). This is because while they drastically reduce the number of free tickets, they increased prices. So paid gate actually has been increasing.
So what really does this mean? Say they lose 2000 STH total at an avg. single game ticket price of $45. Over 41 games that's 3.6 mil. Let's say walk-up declines the same and total gate is down 7 million, or basically the cost of EKs salary this year.
The sad fact may be that even at the rate Sens fans are turning away, it might not be enough of an impact on EM to force a sale because 5-10 million lost on 120 revenue can be made up by decreasing player budget.
NorthCoast
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Regrettably I think you are right.
This is why many of the hard-core fans are so pissed. It's not the team on the ice or even the direction of the team (retool, rebuild, etc) Sure losing EK is going to suck, but that's not the real point. The big issue is that in recent years the ownership has not proven through action to have the financial stability or willingness to necessary investments in the team. I'm not talking covering loses with no ROI, I am talking about investments that improve the business and lead to future rev growth.
- Stadium Improvements
- In-Game Entertainment Improvements
- Free tickets to charities (canibalizes short-term revenue but grows fanbase over time)
- Funding big-ticket, front-loaded, lockout protected contracts
- Reducing team debt (currently at 40% I think)
- City-wide promotional campaigns
- Large hockey ops
- Increasing player budget to build up for s playoff run
What is the point of rebuilding the core, or any strategy for that matter, if you cannot resign them and load-up around them for a proper cup contender window of 3-5 years. We just see no evidence that Melnyk has the ability to spend money now that he won't see revenue against until much farther in the future. Very hard to compete if this is the case.
As always, keep in mind the sens revenues are consistently middle of the pack in the NHL and so this isn't an attendance/revenue issue. ie: Melnyk has the same money to play with as approx. 50% of the league.
I think people are forgetting the revenue sharing component of the league.
Melnyk is going nowhere and he has no conundrum. All of his chips are in lebreton.
Melnyk is going nowhere and he has no conundrum. All of his chips are in lebreton.
Yukon Joe
Registered User
Revenue sharing is not a magic bullet. It has not, for example, made the Phoenix Coyotes a profitable team.
Revenue sharing will decrease Melnyk's losses, but not eliminate them.
NyQuil
Big F$&*in Q
Should be merged with this one.
https://hfboards.mandatory.com/thre...t-packages-sold-for-the-18-19-season.2537453/
https://hfboards.mandatory.com/thre...t-packages-sold-for-the-18-19-season.2537453/
LadyStanley
Registered User
NyQuil
Big F$&*in Q
Well, it’s there for perusal given the amount of concrete numbers in it if people are interested and want to be informed.
It certainly hasn't, but I'll tell you its helped shave their losses.
It won't eliminate melnyks losses, but all he's doing is putting a placeholder down until lebreton is done. At that point, Maybe he'll sign the senators to a thirty year lease with his arena, and then sell the team and collect his money.
Maybe he infuses the team with money... Who knows? But he has all the options available to him. Until then, it will be very sad times for the senators.
NorthCoast
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Bang on.
If the annual loss number was as much as Melnyk says, then it's 10 million. Sounds bad, but before relocation consider:
- Is it really 10 million? Keep in mind that he said it was 10 million in 2013. Then the 30 million per year TSN TV deal kicked in. So if he is still saying it's 10 million, and the player budget has not gone up by 30 million....where did the money go?
- How much of that is debt financing from the initial debt he took on to purchase the team?
- How much is he making on the arena from moving costs into the team ledger and profits into the arena ledger? Will any new arena make the same non-hockey revenue as Lebreton will?
- Does this factor in any money that he has pulled out of the business? There have been several playoff years with deep runs where profits were earned. (The team budgets based on regular season only and so any playoff revenue should be profit unless they are abysmal at budgeting)
- The Sens have increased in value by over 20 mil per season.
- When Edmonton rebuild/moved their stadium downtown they saw a profit uplift per year of 10-15 million. Lebreton should be this or more considering the old edmonton stadium was not as badly located as Ottawa's current stadium.
Any relocation will come with significant costs. The relocation fee alone could be 200 mil. Is relocation really more feasible than losing 10 million per year on an asset that increases in value by double that amount.
powerstuck
Nordiques Hopes Lies
We need to put an end onto relocation talk.
The only way Sens relocate is if Melnyk moves the team himself.
But before that happens, there are offers to buy and keep the team in Ottawa (league would prefer that).
Melnyk himself, if he wants to cash in, is better off getting Lebreton started and sell because Sens value now vs Sens value with Lebreton in progress is that much more interesting (Sens now < Sens+Lebreton).
For any new owner buying the Sens, the league requires a mandatory 7 (or is it 8) years contract that stops that owner from moving the team, weather they want to or not.
The only way Sens relocate is if Melnyk moves the team himself.
But before that happens, there are offers to buy and keep the team in Ottawa (league would prefer that).
Melnyk himself, if he wants to cash in, is better off getting Lebreton started and sell because Sens value now vs Sens value with Lebreton in progress is that much more interesting (Sens now < Sens+Lebreton).
For any new owner buying the Sens, the league requires a mandatory 7 (or is it 8) years contract that stops that owner from moving the team, weather they want to or not.
Egil
Registered User
Today's events will definitely help the team sell more tickets. This has the potentially to be a historically bad year for attendance and could easily come up short of 5 figures. Melnyk isn't too fond of papering the crowd either (and a decent chunk of people likely wouldn't even show up with a free ticket at this point). Only thing that might save him are the Leaf (and maybe Hab's but they have their own problems at the moment) games, and possibly the SJ game (which will be an interesting adventure).
NyQuil
Big F$&*in Q
He hasn't showed yet that he has the ability to actually implement Lebreton. He has the first rights to negotiate with the NCC but nothing more. Everything goes slowly with the NCC but there's been complete radio silence which may not mean anything, but is not exactly encouraging. I don't see anyone wanting to become a minority investor with him; if anyone with money is interested in buying the Sens they are just as likely to wait him out. I think the whole "15 rookies/new players" in the roster next season is not so much a genuine rebuild plan, but the "canary in the coalmine" that financially things are coming to a head.
usahockey22flyers
2 years away from being 2 years away
Sens fans, as a nuetral in this situation, I just wanted to pick your brains about ownership. First, dang, re: the EK trade, he seems like a genuinely good dude and it always sucks to lose a player of his caliber despite what the return will be.
What are the main gripes regarding how the ownership has handled the Sens? Is it - marketing, ticket prices, internal cap, transparency?
I hope your fans get your wish for whatever you want to happen, but one thing is pretty interesting.... since Melnyk has owned the team the Sens, I would argue, Ottawa has been a top 2 Canadian team on the ice. I have legitimately no statistics or cumulative records to back up my argument, but they have definitely been better than the Leafs, Oilers, and Flames, and probably on the same level as the Canucks, and marginally better than Montreal if we are placing a heavy focus on SCF + ECF appearances.
Are they winning in spite of the ownership group? That seems to be the general consensus amongst my buddies who are Sens fans.
Just curious to kind of dig deeper, I have seen a couple numbers thrown out that the Sens have been operating under a $10 million loss annually and ownership wants a stadium to be able to make up for the loss and pump more money directly into the cap.
Thanks everyone, I appreciate it any input, wishing the Sens nothing but the best
What are the main gripes regarding how the ownership has handled the Sens? Is it - marketing, ticket prices, internal cap, transparency?
I hope your fans get your wish for whatever you want to happen, but one thing is pretty interesting.... since Melnyk has owned the team the Sens, I would argue, Ottawa has been a top 2 Canadian team on the ice. I have legitimately no statistics or cumulative records to back up my argument, but they have definitely been better than the Leafs, Oilers, and Flames, and probably on the same level as the Canucks, and marginally better than Montreal if we are placing a heavy focus on SCF + ECF appearances.
Are they winning in spite of the ownership group? That seems to be the general consensus amongst my buddies who are Sens fans.
Just curious to kind of dig deeper, I have seen a couple numbers thrown out that the Sens have been operating under a $10 million loss annually and ownership wants a stadium to be able to make up for the loss and pump more money directly into the cap.
Thanks everyone, I appreciate it any input, wishing the Sens nothing but the best
AmericanDream
Thank you Elon!
he is a millionaire acting like a billionaire, he has hired buffoons to run the everyday operation after having class acts in the organization, and he is as cheap as Bill Wirtz was, and when money is spent it is spent incorrectly..same as Wirtz.
sorry Sens fans, figured this would be the cliff note version...lol
Eugene Melnyk is awful. He is the first to show up when he can collect his playoff revenue and the first to say hes moving the team or the typical "Woe is me" BS when the team sucks.
The team did well mostly because of Brian Murray pushing water through a rock in an internal budget. They built their stars through drafting and did their best to keep them budget friendly over the years.
NorthCoast
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Yes, Melnyk has claimed to lose 10 mil per year on the sens and as such, is lowering the payroll to offset the loses. The lower payroll means that icing a competitive team is going to take smoething between very good luck and a miracle.
So why is the team losing money.
Debt from Purchase:
When Melnyk bought the team he paid for half of it with debt. Approx. 100 mil in debt was used to purchase the team. This debt has grown over the years and costs about 5-10 mil per year to service. So that is a large part of it. Is it realistic for the fans to generate enough revenue to both run the team, be competitive, and pay for it's purchase?
Just as an aside, when Vinnik bought TB he wiped out the team debt with his personal fortune so that the team had the best chance to compete financially.
Mismanagement:
Let's start here:
Ottawa Senators revenue 2005-2017 | Statistic
The Flames probably did receive revenue sharing last season
The sens are middle of the pack in terms of revenue. The increases are pretty much all a result of the latest round of TV deals (NBC Nat. US, TSN Local, Rogers Nat. Can).
So right off the bat you have to ask the question, if Ottawa is losing 10 mil a year, are all of the bottom half of the league losing 10 mil? If so, is this an Ottawa market or a League issue?
If Ottawa can't afford a 10-12 mil dollar player, how can any of these other teams?
The fact is that this ownership has invested very little in the business to increase revenues. Stadium improvements, game-experience, marketing int he city, etc, etc, has been very poor due to bare bones funding of the organization. The team has openly admitted that it now runs on one of the lowest budgets.
It wasn't always this way. The team used to have depth of leadership at the top. A great local President, a respected GM, several assistant GMs, etc, etc. Most of these positions have been eliminated and Melnyk as self-appointed CEO now does it all by himself.
Pricing Policy:
Ottawa used to have top ten attendance by numbers. This included a large number of very cheap & free tickets to ensure the building was full. 2-3 years ago the team changed the strategy and dramatically reduced the discounted tickets in an attempt to force the market to pay higher prices. Well, surprisingly the demand in the market did not magically change overnight and the result was lower attendance, but with slightly higher actual paid attendance. (This is what led to the whole seat tarping fiasco) So the strategy kind of worked, but while paid tickets revenue increased, the team lost out on the additional parking, concessions and merch revenue that the additional 2000 fans provided in the past. Further, the team lost out on 2-3 years of fanbase growth since those cheap tickets were primarily used by families and kids charities.
Going into this season the team has relaunched two of the most popular discount ticket pricing options.
Relocation Threats:
The owner has used that threat of relocation to try and drive up attendance. That was a bad move.
The reason it was a bad move, beyond just being a d1ck move by any owner, is that it is a bluff, and the market quickly called him on it. The team is not under any threat to move.
- The revenues as evident above are fine.
- The market has proven in the past it can fill the building.
- The local TV sponsorship (30 mil from TSN per year) is larger than most markets and enables the team to compete even if gate revenue (only 35% of team revenues) might be lower than other markets.
- There is an opportunity for a brand new stadium in the downtown core (current stadium is in the suburbs), offering future revenue growth.
- There are other parties on record who are interested in buying the team and keeping it in Ottawa
- The league has come out and said the team is not moving.
Any impact that the threats had on ticket revenues is the owners fault.
Accounting Magic
It is easy to claim a 10 million dollar loss on the team, but it would be very hard to claim a 10 million dollar loss on the combined team/arena businesses. It is well documented how team play with the accounting to move costs from the arena to the team and revenue from the team to the arena so that HRR owed to the players is minimized. There is a reason why billionaires stay in this business for decades if they own the team, arena, and retail land around the arena.
Increase in Team Value
Okay, say the team is losing 10 mil per year. Is the team a bad investment?
The answer is a resounding no. Since Melnyk bought the team it has doubled in value, increasing over 20+ mil per year.
Other Stuff
There is so, so much. But here are a couple nuggets that have damaged the relationship with the fans.
- Alfie leaving the team, twice. He first left when the org wouldn't pay him an extra 1-2 mil over two years on his final contract. (1-2 mil he had taken off the last contract as a favor to the team when they were going for the cup in 07). The second time he left was as assistant GM when Melnyk refused to pay him a decent salary.
- Ridiculous Penny Pinching: doubling the parking price from $10 to $20 over one offseason, shutting of hot water throughout the building, etc. etc
- Lack of commitment to any plan: They say they are now committed to a new plan. Well, before buying into the new plan, consider that last summer, only one of the following can be true:
1) They had a plan to rebuild and trade away their 2019 1st round pick.
2) They lost commitment to their plan less than halfway through the season
3) They had no plan.
What Fans Really Think is Happening and Why they are so Frustrated
Melnyk used to be a billionaire and he bought the team when it was in duress. Good for him and a big thank you for that.
For the first few years everything was pretty good. Melnyk had plenty of cash to cover the loses, debt, etc and the team, management, brand was highly respected around the league.
Unfortunately most of his wealth was tied up with one company. At it's highpoint his stock was worth over a billion. But the company took a nose dive and he ended up selling his stock for a few hundred millions. His other start-ups have not panned out and he went through a nasty divorce.
He still says he is a billionaire, but it's hard to find any public evidence of him owning assets that amount to that anymore. His largest asset is clearly now the senators and he cannot leverage the team for money anymore because it is already loaded with the debt he never paid off when he bought the team. It is many fans suspicions that he is claiming loses while siphoning money for the new stadium project. Where else is the money coming from?
He simply does not have the cash reserves to properly run an NHL team anymore. (or worse, he is not willing) I'm not talking covering loses. I am talking the cash reserves that are needed to fund front-loaded contracts, arena investments, going above the internal cap for a playoff run, etc. The team cannot be competitive if they have to bring the revenue in before they can spend it because sometimes you need to spend before the revenue comes in.
So the old perennial playoff team is gone and now we have a team that will always be rebuilding because it cannot take any risk involved in going above the budget because you believe your team can make the playoffs.
Meanwhile he refuses to sell to new ownership that could run the team properly because his the team is all he has left and his ego won't let him move on. Forget what's best for the team, the players, the fans, the city....it's only about him still getting to be an NHL owner. This is why the fans are gathering pitchforks.
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Burke the Legend
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There might be a limited pool of people who would want to throw their lot in with that guy as a partner.
Burke the Legend
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A lot of them have other, successful businesses so any operational loses from their hobby hockey club can be partially used to offset some taxes elsewhere. Any leftover losses maybe they don't care about anyway (hobby write off) while they've seen their franchise values inflate over 10 years so they are sitting on big capital gains.
Look at a guy like Samueli, he probably loses a ton every year on the Ducks but he clearly does not care at all. Just part of the billionaire lifestyle.
mouser
Business of Hockey
Just want to point out that Statistica simply copies the Forbes estimates. They're educated estimates, but still estimates none the less.
In fact most of the stuff I've found on Statistica merely copies stuff published elsewhere. I doubt they do any real research or vetting of what they publish.
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