Edmonton with revenues of $83 million US made an operating profit of over $9 million last year. Image Courtesy Forbes.

Forbes magazine has once again ushered out it's annual valuations of NHL teams.

http://www.forbes.com/2009/11/11/nhl-team-values-business-sports-hockey-values-09-nhl_land.html

Now the NHL has questioned the validity of Forbes' work saying that none of the NHL clubs nor the Head Office provided tangible numbers for them to audit. Curiously, the NHL never offers to "help" set the story straight either. And we never hear that the NBA, MLB or the NFL are complaining about Forbes' numbers. So the relatively bad news story from Forbes continues to go unchallenged by the NHL.

History shows especially after the saga in Phoenix, One would be OFFside to reject Forbes' numbers due only to NHL denials.

Bar none, these are the best numbers that NHL fans see year in, year out with collaborating stories about this club or that one over the past few years that appear to be very close to what Forbes amasses.

By their calculations 16 of 30 teams last year made an operating profit. Some of these teams are perennially on this list. Most ebb and flow due to player payroll costs and/or the value of the Canadian Dollar, which drives overall team revenues up or down once they are converted to American Greenbacks.

Check it out here: http://www.forbes.com/lists/2009/31/hockey-values-09_NHL-Team-Valuations_Income.html

Forbes actually helps make the case for Winnipeg's re-entry by presenting these numbers year after year.

After reviewing the total revenue for all 30 teams, a very interesting distinction occurs. There are 18 of 30 clubs that pulled in $84 million US or more last season. 15 of these 18 clubs had a positive operating income. The 3 exceptions were Calgary at $95 million (lost $800,000), Ottawa at $90 million in revenue (lost $3.4 million) and San Jose who generated $84 million in revenue(lost $5 million). Notably were Colorado at $84 million which made an operating profit of $3.4 million and Edmonton who only drew $83 million in revenues made an operating profit of over $9 million!!

See it here: http://www.forbes.com/lists/2009/31/hockey-values-09_NHL-Team-Valuations_Revenue.html

What this shows is that two teams making $84 million and another 2 teams that made $83 million in revenues had 2 teams making money and 2 teams losing money. Therefore it is pretty easy to show that NHL team breakeven is somewhere around $83 to $84 million in annual revenues regardless of team expenses! And if your team makes $84 million US in revenue last season, you have overwhelming financial support that your teams should have made a profit.

So for Manitoban NHL fans, the profits and losses are not the driver in this debate, it is whether this team could achieve "revenue certainty". The driver is the size of your revenues since expenses are largely a set number. Of course, each team has a theoretical $16 million swing in discretionary player compensation costs but all the other expenses are in practice set even before season opening faceoff.

So if your conservative financial projections of a new Manitoban team shows revenues above $83.5 million, then you have practical understanding that a loss should be avoided in all seasons without a currency meltdown.

http://www.manitobamythbusters.com/facts_figures/media_release_2009/Summary%20and%20Charts.pdf

The above link shows our financial projection for a new Manitoba team as if it were back in the NHL since 2005. Revenues, such as ticket sales, were not maximized but purposely set very conservative (ie. zero sellouts assumed) while expenses were generous based on information collected from various NHL sources. Added to that were several other key limitations: Zero revenue sharing, Zero playoff revenues and Zero non-hockey related rink-generated revenues are included. Yet at the same time, the past four Stanley Cup Champ payrolls were used to validate a more-than decent on-ice product to ensure above-board scrutiny for the analysis. The Canadian dollar was averaged using true-to-life values over the same time.

(Based on our projection, a 94 cent Dollar would generate $83.5 million in revenues. However, our analysis shows a $3.1 million US profit at that currency value. By the way, our projection was over $6 million more conservative than Edmonton's actuals according to Forbes magazine's numbers. Our breakeven is shown to be at 87 cents.)

Oh and by the way, any revenue sharing received should NOT be counted within a team's revenue count because that "sugarcoats" the reality of their business. It is unclear if Forbes included them or not. (Just to clarify: only the bottom 10 teams would receive revenue sharing, which did not include any of the teams included in the above anaylsis. The top 15 teams pay INTO revenue sharing. This means that the LA Kings at $92 million were included in clubs forced to cut these cheques. For curious Canadian fans, both Ottawa and Edmonton did not contribute but the other 4 Canadian teams did, based on Forbes' numbers.)

Now given the new CBA from four plus seasons ago the trend that really matters is from these last few seasons not those before. (The game changed so dramatically financially with the new CBA that looking at financials before this time may not give a true understanding of the team's situation relative to the rest of the league.)

What we see from the new CBA onwards are trends that are strong for Canadian teams and about a half dozen US-based teams. Other trends have turned from negative to positive for select teams such as Boston, Chicago and Washington. Still other teams' trend shows them middle of the pack each year suggesting they have stabilized at the current levels of revenue generation with little opportunity to push them further beyond inflation. Buffalo is a good example here. And then yet other clubs have trended at what can only be termed as "threatened-existence" revenue levels. These are teams now famously suspected of comtemplating relocation.

In June 2008, we past the 3 season mark with the new CBA. Alot of NHL clubs took notice then that the new CBA was either (a) their savior (b) a helping hand (c) neutral (d) capped expenses to increase profits or (e) forced up player costs without enough offsetting help through revenue sharing. Business reviews tend to look at 3 and 5 year windows.

And in June 2010, that 5 year window draws to a close. For all 30 teams, this upcoming summer will chart a very clear trend of success, stability or slow death. Some teams are falling further behind the revenue generation game. Phoenix was the first shoe to drop in 2008 and 2009. We know that there are others.

The new CBA gave the owners that similar refrain of "cost certainty". What some of these NHL markets needed and cannot find is "revenue certainty", even after new arenas, new owners, new players and new marketing gimmicks could not solve the real root cause of the problem: poor business location! But upon closer review of Forbes magazine, $83.5 million in revenue or better is as certain a path to profitability as Gary Bettman being booed when he steps out onto the ice to present the Stanley Cup to the winning team captain.

Thankfully, Forbes offers truth where the NHL offers mostly spin. As an NHL fan in Manitoba, it is heartwarming to know that Mark Chipman, part of our prospective ownership group, was able to study the Edmonton Oilers' books to learn the NHL financial model. Here's hoping Mark Chipman also learned some of the Oilers financial stickhandling too!

If you have a differing view, snap a witty shot onto the forum or our chatroom! www.mbmbforum.com www.mbmbchat.com

Chris
President, www.myNHLincludesWinnipeg.com
~ The Reality May Surprise You! Excite You! ~