Thursday, December 13, 2012

Mark Cuban: "[the NHL] didn't fix the problems last time...

and they should have."

So spoketh the Dallas Mavericks owner, Dallas Stars season ticket holder and Pittsburgh Penguins fan.


I thought that the NHL, when they steamrolled the NHLPA in 2004, fixed the problems with their plan--a hard cap, and an immediate 24% salary rollback, amongst other things.

The players were getting too much of the pie. Right?

So they sliced the players take from approximately 71% down to 57%.

Their plan was to bring "cost-certainty" to the league by linking salaries to revenues. Right?

So they instituted a salary cap to put every team on a level playing field.

And things seemed to be working out...for about a year and a half.

That's how long it took for league revenues to start jumping and for the big-dog owners and their GM's to start developing their individual plans to circumvent the cap.

The Philadelphia's and NY Rangers' of the league started getting creative with stashing away contracts in the AHL. Soon thereafter, teams got more creative with front-loaded contracts spread out over double-digit, or near double-digit years. Then, if that wasn't enough, came the circumvention of the throttled circumvention--signing bonuses that kept the year-over-year variance within league guidelines.

Former Sabres owner Tom Golisano, being the shrewd businessman he was, knew where this was headed and as soon as late 2006 was rumored to be looking for a buyer then. A small market like Buffalo could not compete with the big dogs without cost certainty.

Golisano, much to his credit, and with great thanks from Sabres fans all over, held on to the team until he found the proper buyer--Terry Pegula. But during that time, he placed a simple edict upon the shoulders of his COO, Dan DiPofi--"at least break even." (he made a profit only one year--2006)

The "at least break even" edict kept the team within it's own salary cap, that was beneath the league's. And they failed to make the playoffs two out of the next three years.

Even though the team was in the red, a close eye was kept on the parameters of revenue sharing--another part of the last CBA--so that the team would be very close to "breaking even."

Let's post how the league actually fixed the problems between lockouts.

Michael Ozanian of Forbes, stated in a November 29, 2004 piece entitled, Ice Capades, "The 30 teams in the NHL lost a combined $96 million (before interest, taxes, depreciation and amortization) on revenue of $2.2 billion during the 2003-04 season, with 17 teams posting a loss. The prior season the NHL lost $123 million on revenue of $2.1 billion."

Eight years later, Forbes released it's annual report again. The 30 NHL teams were collectively in the black to the tune of $250M on revenue of $3.3B. (click here for link to Forbes article via a previous blog)

The breakdown had 13 teams losing $130M before profit sharing while the rest of the teams made $380M. The top three teams--Toronto Maple Leafs- ($81.9M,) NY Rangers (74M,) and Montreal Canadians (51.6M)--made a combined $207M.

The league's turnaround represented nearly $350M in the seasons between lockouts.

How's that not fixed?

Mr. Cuban explained, "When you have all your southern franchises basically sucking wind, there's a message there that you have to fix it. I mean, you have two different worlds; the north and the south. It's kind of like the civil war right now going on, and it's got to be fixed."

So, because there are teams struggling in southern markets like, say, Phoenix, due to Bettman's overzealous expansion plan that reached deep into these "non-traditional hockey markets," it's up to the players to prop them up? By grabbing more of their share?

Yes, they want the players to do it. To the tune of a 50/50 split.

And the players are OK with that.

Based upon $3.3B in revenue a 7% drop in players salaries equates to $231M. If everything stays the same, the league will end up nearly doubling their 2011/12 cumulative operating income.

But that's not enough.

I guess in order to further fix the problem, they want the players to help keep "drunken-sailor" GM's in check by limiting the contracts to five years and not allowing for a year to year variance of more than 5%. This is to help keep the weaker franchises on a level playing field.

Because the salary cap wasn't enough. Nor was the salary rollback (in 2004.) Nor is the 7% grab the league now has in it's pocket.

Not only did they dictate how much the players share would be, they also want to dictate how the players divvy up thier share in the name of "a level playing field."


Thanx, Mark.

No matter how asinine ownership can be. No matter how faulty Commish Gary Bettman's grand expansion plan was. And no matter how much money the top franchises will hoard and keep from their "have-not brethren franchises" it's the players that need to bail out NHL stupidity and greed.

*shakes head*

BTW, from that 2004 Forbes piece. They estimated the average worth of an NHL franchise to be $130M.

Today, based upon Forbes' most recent estimates, the average worth of an NHL franchise is $282M.

The lowest estimated value for any NHL franchise is St. Louis which Forbes estimates to be worth $130M, the same amount as the average franchise before the last lockout.

FYI, Tom Golisano bought the Sabres in 2003 for $92M and sold it in 2011 for $189M.

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