 |
|
|
|
CBA: The Levitt ReportSunday, February 15, 2004The much anticipated report on the financial state of the NHL was released this past week. The study, which was headed by former U.S. Securities and Exchange Commission chairman Arthur Levitt, basically confirmed the league's claims of heavy financial losses. The players, not surprisingly, disputed the report. First a look at the report, which came out Thursday. The league has been suggesting that combined NHL teams lost $300 million last season. The Levitt Report put that figure at $273 million. The league has claimed that player compensation eats up 76 percent of NHL revenues. Levitt's study stated a figure of 75 percent. Here's a simple breakdown of the numbers from the 2002-03 season, according to the Levitt Report.
The report put the league's operating loss, excluding depreciation, amortization, interest and taxes, at $272.6 million. Here's a more detailed look at the revenues and costs according to the report.
The report said 19 of the league's 30 teams lost money in 2002-03. No teams were identified in the report. Four teams lost more than $30 million, with the highest being $40.9 million. Those 19 teams combined for an average loss of $18 million or a total of $342.4 million. Of the 11 teams that made a profit, the highest was $14.6 million. The 11 teams averaged a profit of $6.4 million or a total of 69.8 million. Do the math and you get the $272.6 million figure. Levitt, in releasing the report in New York, painted a grim picture of the league's financial state. "The results are as catastrophic as I've seen in any enterprise of this size," Levitt said. "They are on a treadmill to obscurity, that's the way the league is going. So, something's got to change. "I would not underwrite as a banker any of these ventures, nor would I invest a dollar of my own personal money in what appears, to me, a business that's heading south. "The league as it is going now is not viable. It's not a business that makes sense. I'm telling you the business model is severely flawed. It's a rotten business." Levitt also said the amount of revenues that go to player compensation is out of whack. "The current relationship between league-wide player costs and league-wide revenues is inconsistent with reasonable and sound business practices," Levitt said. "Player costs of $1.494 billion, or 75 per cent of revenues, substantially exceed such relationships in both the NBA and the NFL as those relationships are set forth in their collective agreements." He indicated interest and depreciation could add another $100 million to the losses. One member of Levitt's group was quoted in the St. Louis Post-Dispatch that there were "seven teams that have been bankrupt or on the verge of bankruptcy." And in anticipation of criticism of the report by the NHLPA, Levitt said he believes the numbers are indisputable. "I know of no way of challenging these numbers," Levitt said. "It's as close to being unchallenged as anything I've been associated with." But the NHLPA did challenge the findings. NHLPA Executive Director Bob Goodenow quickly sent out a media release disputing Levitt's conclusions and methods he used to reach them. "We have consistently stated that one critical issue of disagreement between the NHLPA and the League on finances is how to define the complete business of owning an NHL franchise, and how to address the significant inconsistencies contained in the NHL's voluntary and unaudited URO reporting process," said Goodenow. "At the outset it is clear the Levitt report, commissioned by the League, is fundamentally flawed when the author "elects" to define hockey revenues on the same basis as used in the NBA and NFL for defining revenues in their salary cap systems. "We were given access to the UROs (Unified Report of Operations ) for 30 clubs, but were only able to conduct a thorough review of four NHL clubs. On those four clubs alone we found just over $52 million in hockey related revenues and benefits not reported in the League's voluntary and unaudited URO process. If we are given similar access to all of the other individual teams' financial information, presumably used in the Levitt report, we will be in a position to provide further comment." Part of the NHLPA's problem with the report was the definition of revenue. According to Ted Saskin, a senior director with the union, Levitt based his revenue formula on the NBA model. That formula is laid out in the NBA's collective bargaining agreement. "In the NBA they have a contrived formula for revenue, and that's a negotiated agreement between the players and owners in that sport," Saskin told the USA Today, "and we don't consider to be the appropriate measure at all." And players were quick to cast doubt on the numbers as well. "There's a lot of things that aren't reported," Detroit captain Steve Yzerman told the Detroit Free Press. "The huge debate is, basically, what are the revenues of hockey, and the league chooses to not include some significant revenues in the business of hockey (that) the players' association feels there are. There's your big discrepancy. It's not really a secret; they're not hiding anything, they're just not there. And we say they are." Anaheim captain Steve Rucchin expressed similar doubts. "We're not sure if we're seeing the whole picture," Rucchin told the Los Angeles Times. "Unless they show us that everything is being counted, then we really can't be sure whether that's the real number." And the players have another problem. The report was commissioned by the league. "We all know that there are ways to be creative in accounting," Anaheim defenseman Keith Carney told the Los Angeles Times. "This guy was hired by the league. That just makes it hard for the players to buy." And the debate over revenues are key. The league wants to set player compensation as a set percentage of NHL revenues. That may not be easy if the two sides can't agree on just how much revenue the league produces. More survey comments We've received a few more responses to our reader survey about the CBA. The original survey was posted last month. Here are two more responses that came in this week. My opinion is that the players will lockout for a short term period. Eventually, I believe that the players will buy into the system of playing and promoting the National Hockey League instead of promoting themselves for better pay. Once this happens and everyone begins to promote the league, then league revenues can climb. Then a profit sharing system will actually benefit the players, perhaps with higher salaries than today. However, players will have to swing the pendulum back towards the owners a little in the interim in order for them to lower ticket prices. Lowering the ticket prices will generate more seat sales and therefore more fans of the game, and the process starts. As far as sympathy, I have none for no one because there doesn't seem to be any interest in the integrity of the game itself, only in the players and owners by their respective sides. Hey, I am a die-hard hockey fan and don't want to see a lockout, but I think
there will be one. I hope that the owners lock out the players becasue I agree
that the players salaries are inflationary and need to be addressed. If the
salaries stay the way theya re now, at leat 15 teams will struggle financially,
especially teams in canada and smaller market US teams. Honestly, I think the
NHL should reduce the league to about 24 teams, that is a good number, I mean,
there are cities that don't deserve teams at all, and they are still in the
league what reason, no one knows. I think U need a salary cap of some sort at
about 30-35 million. This is stupid the way its going, obviusly the players are
going to be against this, but they make too damn much. I agree with some people
who say do away with salary cap, and ahve categories and cap those, and then
select players on your team who fit into the category, ex. franchise player,
role players, etc. Andrew's Dallas Stars Page is powered by HostingSports.com
|
|
Indicates Subscriber only
content