It is well known that one of the key planks in the NHL Players Association’s proposal for a new collective bargaining agreement is increased “revenue sharing”; the kind of Robin Hood approach to league economics in which the rich subsidize the poor. It’s an interesting approach considering that 90 percent of the businessmen who own American based teams probably voted “Republican” in last week’s election and Republicans as a group consider subsidies as loveable as communism.
The NHL says that only about one third of the league’s teams make money. Forbes Magazine who painstakingly assess the financial health of the league take it a few steps further. In their most recent survey covering the 2010-2012 season, they estimated that the league’s top five profit generators, Toronto, New York Rangers, Montreal, Vancouver and,believe it or not, Edmonton combined for 212 million dollars in profits. The remaining twenty-five teams lost a combined 86 millions. And now you know why there’s a lockout.
Forget about all of the white noise being generated around the lockout there is only one real issue – the main issue is how to help those franchises that are teetering on the line or are financial basket cases. Both sides of the bargaining table are aware of it. How to arrive at a solution is the problem. The owners think that the players should pay by sacrificing their bargaining rights. The players say a major increase in revenue sharing is the answer.
Somewhere in the middle of that there’s a solution.
Consider the Canadiens’ situation. Geoff Molson and his partners paid 575 million dollars when they acquired 80 percent of the team, the Bell Centre and the concert promotion business from George Gillett. Forbes.com estimates the current value of the Canadiens alone at 445 million dollars. To the Molson family the purchase was not only a sentimental acquisition but, most importantly, a good business deal based on annual revenue and profitability. But we’re also told 65% of the purchase price was financed through bond issues and bank loans; loans that have a repayment schedule based on annual profits.
According to Forbes’ figures, the Canadiens made 47 million dollars two seasons ago (their last survey year). If the rich were to subsidize the poor as is being discussed the Molson family would be asked to hand over almost fifty percent of it’s operating income to small market teams, many of them victims of their own poor management. That kind of assessment would ultimately impact the bottom line and shift downward the total value of the franchise.
A Molson vote for revenue sharing would also be voting for a devaluation of the value of the franchise. Can’t imagine that going over too well on the Bell Centre’s sixth floor.
Still, the NBA faced the same league problem and earlier this year as part of their most recent CBA they tripled the revenue sharing pot. “Tripling” only meant going from an overall 50 million to 150 million. The NHL was already at 140 million in the old CBA and many think the current proposal (from the players) of 250 million is still inadequate.
However there are some things worth considering in the NBA’s agreement which –
“calls for all teams to contribute an annually fixed percentage, roughly 50 percent, of their total annual revenue, minus certain expenses such as arena operating costs, into a revenue sharing pool.”
Would that solution make Geoff Molson or the Leafs, Rangers or Canucks happy?
Not on your life.
It’s complicated and we’ve arrived at another stalemate with another couple of weeks of the schedule about to be cancelled.