Last November, Forbes.com listed 18 NHL teams as losing money, but that number is being challenged by some hockey bloggers and fans.
Considering some of the NHL’s top teams (San Jose Sharks, Pittsburgh Penguins, Washington Capitals, LA Kings) were listed among those which Forbes.com indicated were on the negative side of the ledger, its understandable why there’s scepticism over those numbers.
I’ve read several fans and a few bloggers questioning Forbes.com’s numbers in recent weeks. Blogger “J.J. from Kansas” of “Winging It In Motown” put it best in a recent observation:
“Every year, Forbes releases a valuation of NHL franchises in which the magazine does a lot of research not only to hammer down what each team is worth, but also how their cash flow works. Last year’s rankings showed 18 of the NHL’s 30 teams running at an operating loss. The problem is that NHL teams are run as private businesses and private businesses don’t release their financials for review. Forbes builds their data off what they can gather off publicly available data, but that data is extremely sensitive to Hollywood accounting. For instance, last year, the Colorado Avalanche reported $7M more in gate receipts than theFlorida Panthers, despite the Panthers drawing 1,100 more fans per game and having a higher average ticket price.
The Truth: Sadly, only the league, and possibly the players know the truth. Did the Panthers lose money? Yeah, probably. Did the Capitals lose more money than the Panthers? Probably not. Did the Sharks lose more than both of them? Come on now. Part of the reason for the Panthers’ gate receipts being so low is that their lease agreement leaves nothing to the team for luxury box sales. Of course, the Panthers lease their arena from a company owned by the same company that owns them, but Forbes doesn’t count that.”
For those unfamiliar with the term “Hollywood Accounting”, here’s the Wikipedia description:
“… the opaque accounting methods used by the film, video and television industry to budget and record profits for film projects. Expenditures can be inflated to reduce or eliminate the reported profit of the project thereby reducing the amount which the corporation must pay in royalties or other profit-sharing agreements, as these are based on the net profit.
I recently referred to Forbes.com’s evaluation in my six-part series examining the NHL’s money-losing franchises. While I agree with “J.J. from Kansas” that the numbers provided for some clubs may be worthy of a justified, healthy measure of scepticism, since the NHL doesn’t make their books public, the Forbes.com report remains the best available data to go by.
Few would quibble over the fact the Phoenix Coyotes, Columbus Blue Jackets, Tampa Bay Lightning, NY Islanders, Carolina Hurricanes, St. Louis Blues and Anaheim Ducks lost money during the 2010-11 season. Even “J.J.” agrees the Florida Panthers probably lost money that season.
For that matter, no one will question the Winnipeg Jets lost money in that season, their last in Atlanta as the Thrashers.
A decline in attendance also accounted for the Minnesota Wild’s losses in 2010-11, while the Buffalo Sabres losses were due in part to being the smallest and poorest NHL market in the United States.
In its report, Forbes.com does provide a brief analysis of each club, where some explanation for some of those losses can be found.
As I noted in my series on money-losing NHL teams, Forbes.com in November 2010 observed the Sharks losses for 2009-10 were due to:
“… a high payroll and a lease that funnels some of the arena revenues to the city. On the years that it is in the red its owners have funded the P&L statement with capital calls rather than debt. The Sharks contribute about 55% of the revenue to its parent company, Silicon Valley Sports & Entertainment, a $155 million a year business that is involved in everything from ice rinks and tennis tournaments to mixed martial arts and apparel.”
I daresay those factors, as well as a fan cost index among the bottom third of the league, continue to explain the Sharks losses for 2010-11, and their reported $15 million in losses for 2011-12.
As I also pointed out in my series, the Capitals are part of Monumental Sports and Entertainment, which suggests – like the Sharks – part of their revenue may be redistributed back to the parent company.
To be fair, I’m also sceptical when I see a team like the Pittsburgh Penguins showing losses in its first full season in a new arena:
“The Penguins sold out every game in their inaugural season playing in the $321 million Consol Energy Center. The Pens control the arena and generated revenue from a lot of non-NHL events, such as concerts, professional wrestling and the circus. The Penguins enjoyed the highest local television ratings in the NHL last season, averaging 8.7, 7% more than 2009-10. Mario Lemiuex continues to be innovative when it comes to creating sponsorship and marketing platforms for his team.”
But, as noted earlier, NHL teams don’t open their books for public scrutiny, so we have to defer to the Forbes.com evaluation.
It should also be pointed out the NHL, during the last lockout, dismissed Forbes.com suggestion the league’s losses were less than half of what it claimed to be. During the current lockout, however, the league has not been critical of the site’s report of eighteen teams losing money in 2010-11.
I’m certainly not implying Forbes.com is skewing the data. Indeed, they’re doing us a service by providing insight into the business of hockey, giving us some idea about NHL franchise values. Obviously, they’re doing the best they can with what’s available.
Given how guarded NHL teams are with their books, fans will never know what the true figures are, how many teams are truly losing money, and which clubs may be employing “Hollywood accounting” to their figures.
Ultimately, fans will have to use their best judgement when reviewing those figures.