I’ve been researching the Tampa Bay sale a bit. Some bloggers (and some newspaper reporters) have been looking at the sale price ($206 million is the reported number) and using it to justify all sorts of statements, from the “owners get rich when they sell a team” to “hockey has failed in the US” (popular in Winnipeg, but it’s really unclear to me how they made this leap of logic).

But is it really true? The numbers, when you look at them in more detail, aren’t quite so rosy…

The numbers as I’ve been able to find: Absolute Hockey is a new partnership led by Doug MacLean and backed by Jeff Sherin, a real estate developer, Oren Koules, a hollywood type best known for the “Saw” series of films.

They’re buying the Tampa Bay Lightning and other properties for $206 million, from Palace Sports and Entertainment. Palace Sports bought the team for $115 million eight years ago, and have reported about $70million in losses since. (throw enough zeroes at it, and it starts looking like real money).

So if you just take those numbers at their base value, Palace has put in $185 million to reap $206m, a net profit of $21 million. Seems like a not-bad investment.

Life’s never that simple, and raw numbers don’t tell the real story. Just on these numbers, starting with $115m and adding in about $8.5m per year for every year, your rate of return is a lousy 2.3%. That’s worse than investing in money markets, S&P 500, or even 12 month CDs over that term (right now, I can get 5.35% from ING on a 12 month CD). They seem to be selling this off having made money — but they could have made more money with less (or zero) risk by simply parking the money somewhere.

There are complications here, of course.

The first one is that losses generated by the team can be used to shield profits by the owners elsewhere. Part of that $70m/ loss will get recovered by keeping money elsewhere from going to Uncle Sam. Let’s assume (since there are no real numbers available) that half that loss is a “paper” loss, that it’s recaptured away from the team. In other words, every year the owners were writing a check for $8.5m to cover operating losses, but writing a tax check that was, say, $4m less to the government because the losses shielded profits elsewhere. If you roll that tax gain back into the the franchise as an asset, you see a rate of return around 5%.

That’s actually a decent rate of return for that time period. Maybe not great; at least it’s not insanely bad.

On the other hand, let’s look at that $206 million number. It’s not for the hockey team.

It’s for a set of properties including the team. The three key components:

The hockey team.

The lease at the arena and the right to operate it

Two pieces of property near the arena totalling 5.5 acres.

The property is on the books and assessed at $17.5 million. They are evidently (from researching them through the tampa papers and local real estate info I could find) properties that have high potential for condos or mixed condo/retail development, except that the market is down right now. But in a longer-term look, these properties have a huge upside to someone experienced in Florida real estate. Oh, gee, one of the partners is a Florida real estate developer. What a coincidence.

So, what are these properties worth? well, they’re assessed at $17.5m, so I’ll go with that, but their value to someone who can develop them is a lot more; This is, if you ask me, the investment upside of the deal.

The arena operations? Tampa’s arena is one of the more profitable in the country; it grossed $18m last year, and is on pace to match that this year. Half of its light dates are non-hockey, but it’s also a business much like a movie house: much of the “profit” goes back to the act, not the house.

But the ticket take isn’t the only story; there’s signage, naming rights, sponsors — and every team/arena deal differs in how these are split between the sports team and the arena, but some of those dollars end up with the hockey team (and factor into the $70m loss above), and some end up as part of the arena management agreement.

All told, it’s not unreasonable to assume around a 10% profit off the arena management — say, $2m a year or so. It’s value? A good round number would be 6x or 7x that profit number, or $12-15m.

So now we can get at least into the ballpark of the value of the hockey team.

$206m for the sale, minus $17.5m minus, say, $12m, or about $175m.

The franchise was awarded in 1991 for $50m. If you just look at that price and the $175m, you get a rate of return of 7.2%. That’s pretty good over 15+ years. But that ignores that the owners were continuing to “invest” by covering operating losses every year. Even at $3m a year, that drops the rate of return to well under 4%, and given the numbers the current owners have announced and taking into consideration both tax advantages and the probably profit on the arena side, your rate of return drops under 4%.

That’s a lousy investment over that time period, even trying to make it as rosy as I can. It wasn’t bad for Palace, but the earlier owners — they didn’t do well.

How does this make things look for the new owenrship?

I’m encouraged. here’s why

Doug MacLean — as a hockey guy, he understands the core of the franchise. By the way, while it looks like all of the money is to be made away from the team — and that’s actually true! — if you don’t own the team, none of the other opportunities exist. you can’t do the arena without the team, and you can’t develop the property without the arena. So to some degree, the Lightning need to do what the Sharks do, which is manage expenses and limit the “losses” in such a way that the arena income and tax offsets make up for the losses.

In other words, you don’t need to be profitable to be profitable. But that doesn’t mean you should assume that any loss is acceptable… By my guesses and assumption, a team like the Sharks or Lightning can “lose” about $5m a year in “team losses” and do okay because of the other aspects of the situation. That’s roughly where I’d put the “break even” point on the entire financial picture, as opposed to just looking at team numbers, if the team manages the arena and the partnership can take advantage of the losses in the taxes.

If MacLean can keep the team competitive on a decent budget and help the organization succceed, they ought to do fine. I’m especially happy to hear they’re planning on moving in and being local owners. that’ll help engage the business community and it’ll also keep someone with motivation to make it work close at hand and watching.

Second, they have a guy from the entertainment industry; increase the entertainment factor, and you can improve your attendance and ticket revenues.

Third, they have those plots of land, and a good person to figure out what to do with them. If they can make that work, they can turn this into a great investment. As it is, it’s a good investment, from what I can see.

Some really good quotes and information from Dean Lombardi on Cammalleri and the arbitration process. A good window into some of the complexities of these situations.

In my mind, this is the kind of case that arbitration was made for: the two sides were a huge gap apart (millions of dolllars per year) and saw the situation very differently; not a lot of common ground to build from. Arbitration allows both sides to make their case and get an outside party to come up with a solution both sides live with.

It isn’t perfect — far from it — but to me, that’s actually a good thing, it’s a motivation to both sides to avoid it and find a way to make a deal without it. I do wish there was some formal mediation process that could be implemented short of arbitration — they’re very different things — but we have what we have. In this case, I think it worked as well as can be expected.

Read the whole thing. well worth it..

Inside the Kings:

Lombardi: Yeah, that’s fair to say. What I don’t want to do here is… nobody wins at these things. I think it is safe to say that it came out closer to our end, but these situations aren’t for winning and losing. The L.A. Kings and Cammalleri have got to be on the same team. So that’s the danger of saying, `Well, it was closer to us,’ is that you have to connotation of winning and losing, and that’s not what this is all about.

[....]

Lombardi: Yeah, I certainly hope so. You know, athletes are competitive people, or they don’t get this far. That’s unfortunately what can happen, and that’s why I say that this process itself is dangerous, because you’re looking for a resolution rather than turning it into a battle for a loose puck, where there’s a winner and a loser. This was kind of new ground too, don’t forget. The concept of young players getting so much now, so early, is fairly new. I don’t think there (previously) would have been an issue like this, where the spread was based upon the formation of this new market for players with one or two years under their belt. Usually you’re able to see a player for six years or seven years.

So I think part of this was a theoretical discussion about how the market is evolving under this new system, with free agency at such a young age, and its impact on young players getting a lot more money than they did in the past. So I think in a lot of respects, for the union and the league there was a bigger issue here than just Michael. Michael and the Kings couldn’t get caught up in that. But to answer your question, if there’s one thing we know about him, he’s a competitor and he’s driven. I do believe, as I’ve said before, I certainly prefer parts of the old system, where players had to pay more dues before they maybe got into this rent district.

But this is what we have to deal with, so the challenge for him, as well as the team, is to go to another level and take responsibility for winning. He had a good year last year, but it’s one year. The team still has not had success. He has to take responsibility, especially when you start getting in this (salary) neighborhood. Obviously I’m not saying that not making the playoffs in the last two years in Mike Cammalleri’s fault. Of course not. But there still is an element of, `As the team goes, the young player goes.’ When he takes responsibility for winning, with that comes more dollars too. Steve Yzerman learned to win, and Joe Sakic. What those guys went through to become the great players that they were, part of their greatness was learning to win. That takes time and I think Michael, given the driven kid that he is, I don’t think he’s going to let this hinder him from anything. If anything, knowing him, he might use it for incentive. With other players, yes (it might be a problem), but I don’t think that’s the case with him. I really don’t.

[....]

And like I said, this wasn’t the typical arbitration, where you go in and say, `OK, these are the 10 players,’ and the other side comes in with five different ones and you’re just looking at who is comparable. This had some bigger issues, as I said earlier, in terms of this shift in the marketplace.

Quite frankly, one of the things was the relevance of (Thomas) Vanek. So there was an issue there. That was an offer sheet, so (there was the question of) should that be applied in this setting? So like I said, there were larger policy issues here than in your normal arbitration hearings. I’ve had six of these and this, more than any other one, had more theoretical discussion than I guess practical discussion, where you’re just arguing about which (comparable) player is more relevant. I think that probably might have had something to do with it.

james mirtle: Avery’s arbitration hearing – A hockey journalist’s blog:

And while Brooks rips the Rangers for penny-pinching, the same can certainly be said for Avery who, in fighting for a $2.6-million contract after a career-high 48-point season, surely presented an eye roll-inducing argument as to his value to the team.

This has been almost a classsic example of “how not to make friend and influence enemies” — the joys of arbitration.

The case for Avery: when he was traded to the Rangers, the Rangers DID catch some fire and go on a roll. We have to face the fact that these things did happen together, and it’s unlikely a coincidence.

The case AGAINST Avery: The Rangers are basically correct when they say: “Avery is not a mature player. He plays, at times, like an individual rather than a member of a team. This is sometimes referred to as an inability to see the ice, and in Avery’s case this seems to fit with his overall approach to the game.”

Now, Avery may not like hearing that. But it’s true.

Let’s not forget that Avery is basically one season away from being kicked off a team and sent home, where he was considered such a detriment to the Kings he was told to pack and leave. Where he was put on double-triple-secret-probation by Lombardi and told to keep his nose clean and mouth shut — or else.

I swear, the best thing someone could do for Sean Avery is sign him to a multi-year deal and then trade him to Edmonton or Buffalo, away from the lifestyles of LA or New York. But he’d probably find a way to cause problems anyway.

Avery has always seemed to have a much higher regard for his talent level than his teams. He’s a feisty player with attitude who actually has some talent — but not nearly the talent he thinks he has. His off-ice attitudes reminds me of Link Gaetz in some ways. Yeah, the Rangers got better when he got there; they needed some grit. They can get that grit many other ways than Avery if they need to, though, he’s a very replaceable player. There’s also no indication — or track record — that he would be able to sustain that kind of spark for the entire season for them. Given his career numbers, the chances he’d maintain the scoring impact is zero.

So for me, this one’s a no-brainer. Avery’s feelings might be hurt, but tough. He doesn’t seem to worry about other people’s feelings much (ask Bryan Hayward), and he played way over his head, and way more disciplined, for a short period of time. To believe he can continue that for a full season with that impact is unrealistic.

And he’s once again shown he has trouble handling the truth. A sad reality for a player so happy to get in everyone else’s faces…

I’m with the Rangers here. And if Avery wins arbitration, I’d walk. He’s not worth it, epsecially given the risk for a badly timed off-ice controversy. Not a small issue, given his history.

Hockey Rants:

Don’t tell this to Dave Harrison of Prince George, who apparently still pines for the 1930s, and thinks women’s hockey has no place in the Hockey Hall of Fame.

Women’s hockey is just a shade faster than Tai Chi but only half as interesting.

If any event is worthy of an “escape call” early in the first period, it’s women’s hockey.

As a crowd pleaser it seems to appeal only to other women who have convinced themselves that it’s entertaining, feminist promoters of lost causes, anxious sponsors who are about to lose their shirts, milquetoast males who allow their women to choose their clothes (Real Men Don’t Eat Quiche), and husbands who nod in agreement if they know what’s good for them.

No self-respecting, red-blooded, beer-drinking, Canadian male hockey fan ever takes women’s hockey seriously.

I will agree that women’s hockey is boring (to me) and it is like comparing the original Iron Chef to the watered-down American version, but the Hockey Hall of Fame is not exclusively for males, in title or in theory.

How could a serious hockey fan ever discount the impact that certain female players have had on the game and on the national consciousness?

This came up today on the women-in-hockey mailing list Laurie and I have managed for years. You can only imagine the response.

My favorite: he’s welcome to his opinion, no matter how wrong he is.

Me — I’m just sad that those kind of attitudes are not only still in existence in today’s society, but tolerated by some, and promoted as positive by others. Sad, but not surprised.

Jes, without realizing it, defines the problem wonderfully — by looking at women’s hockey in the mirror of the men’s game, and finding it wanting. This is the same reason the WNBA is considered by many a geek show — it’s not really marketed at women, but as a way for male basketball fans to waste some time waiting for the real stuff to return. (The ABL actually wasn’t afraid to market to women as a primary audience — unfortunately, it got eaten by the financial power of the NBA)

Fortunately, women generally don’t CARE what guys like Dave Harrison think; they’re not in it to get validation from some idiot male chauvinist, they’re in it because they enjoy hockey. And that, I think, is what scares guys like Harrison and makes them try to belittle women’s sports.

Fortunately, the reason anyone’s even paying attention to this is because this kind of attitude has gotten increasingly rare, or at least, the people who believe this are generally smart enough not to stand up on a soapbox and promote it quite so loudly. We’re making progress.

But it’s clear we’re not there yet.

The real good news is this: the women will keep playing hockey and enjoying it for what it is, without trying to be guys in a guys game. And that’ll continue pissing off guys like Dave Harrison… But where 15 years ago, people like Dave might have been able to influence the situation, now he’s merely a sad voice in the distance.

Oh, and jes? Women find your writing boring, too. But that’s okay, no? Different strokes and all that, right? And more important than that: women really don’t care what you think about their game, as long as they get to keep playing.

And THAT’s what matters. Not what anyone thinks about how they play.

(and me? I”m proud to have been able to support the growth of women being able to play the game and enjoy it in the small way I have. And I find their version of the game far from boring. Different from how men play — but men could learn from them, if they wanted to…)

PuckUpdate .: The Hockey Blog :: Archives Archives (weekly):

Larry Brooks is officially on my personal ‘NHL is Too Big’ bandwagon. The league is looking to expand into two more markets (the NHL as Starbucks approach to a league), but Brooks says the active roster should drop down to 20 per game (from 23), with 16 players dressed per game (down from 18). As Brooks points out, two expansion teams would bring 46 players into the NHL and it’s a safe bet they wouldn’t be 46 Joe Sakics.

No; in realty, each team would need to find the equivalent of one mid-2nd rounder to fill out the roster. During the initial expansion, you can expect the rules to be set so the teams suck early on (it’s what we do!), and guys like Brooks will declare how right they were, but over 3-5 years, the teams will be able to build decent teams and it’ll be very much a non-issue.

This argument was made when the league brought in Nashville, Columbus, Atlanta and the Wild — yet nobody today seems to be complaining that the talent is too diluted. it was made when the ducks and the Panthers came into the league. It was made when the Sharks, Senators and Lightning arrived.

heck, this argument was made when the team expanded from 6 to twelve teams.

Funny, the world hasn’t ended. More importantly, expansion in the last fifteen years has had a lot less impact on the quality of hockey than the league rule changes — the TV timeout has allowed teams to focus on the top three lines more, and the rules to cut out obstruction have brought back into the league the smaller, talented player that was being manhandled out of the league (we’ll call that the “Dennis Savard” rule), giving us better hockey than we’ve seen in a decade.

And it would make things much better for players. The Rangers traded center Matt Cullen back to Carolina to free up cap space. But if the Rangers only had three lines, he would have been a keeper, with plenty of money under the cap to keep him. Heck. They could have probably even given him a raise. Instead, the Rangers had to trade a strong player for the sake of salary, and a player who wanted to stay in New York had to leave.

Sorry, but — you want to do away with the jobs of 90 players (3 per team x 30 or 32 teams), and those guys will most likely be younger guys or journeymen, mostly making from league minimum to maybe $1.5m a year — so that we can take that money and give a few players already making a lot of money even more money? And this is good for players — how?

Well, it’s good if you are a top player who’s upset that you’re only making $6 million a year and not $8. It’s not good if you’re Mark Gandler trying to get their client money up to the limit. But benefitting players by cutting a bunch of jobs that hurt the working stiffs of the game? (because, of course, teams aren’t going to cut the roster by cutting their Joe Sakic….)

I just don’t buy it. I wonder what the elite players most likely to benefit from this cut would say. Actually, I think the contracts of Joe Thornton, Syndey Crosby and Jarome Iginla, all of whom took much less than the legal max they could have demanded, already answers that question.

ESPN – Burnside: Did Bettman tell Preds to back off Balsillie talks? – NHL:

Canadian billionaire Jim Balsillie has accused NHL commissioner Gary Bettman of forcing the owner of the Nashville Predators to break off discussions about the sale of the team to Balsillie, ESPN.com has learned.

The Canadian ownership group also alleges Bettman directed Predators owner Craig Leipold to focus on closing a deal with William “Boots” Del Biaggio III, who is the front man for a group trying to bring an NHL team to Kansas City.

“We were advised by Mr. Leipold that the commissioner had found out about the existence of the negotiations and ordered him to immediately cease any further communications with us,” Balsillie’s legal representative, Richard Rodier, told ESPN.com this week.

Maybe Bettman did. Maybe he didn’t. Probably did, but not in the way Balsillie is portraying it.

In this case, I tend to side with Bettman, also. It’s no secret that Balsillie’s intending to move Nashville — no matter what the league wants — to Hamilton. it’s been clear since early on that he’s not unwilling to try the “Al Davis” gambit, either, of basically moving the team and throwing it into the courts and seeing how much money he can cost the league along the way.

So, if you’re Gary Bettman, and you’re hearing from the Board of Governors about it, OF COURSE you’re going to go to Leipold and say “hey, this guy’s not going to be approved, don’t bother”. Remember: Leipold owns the team and can sell to anyone he wants, but the buyer has to be approved by the league for the sale to finalize. If the league’s decided that’s not going to happen, the right thing to do is tell Leipold so he can stop wasting time on something that’s going to be tossed out.

The scenarios for the league to get into nasty legal fights here is just stunning. Which lawsuit do you want the league to be involved in? the one where Balsillie sues the NHL for rejecting his purchase? The one where Balsillie sues the NHL for rejecting his move to Hamilton? Or the one where Bailsillie sues the NHL for having moved the Predators ANYWAY and trying to force the NHL to accept it?

The league doesn’t need this kind of fun. And that, I think, is the message Bettman took to Nashville. And he should have. Of course, so many folks want to see Bettman as the root cause of all of the league’s real and perceived problems — but in reality, he’s the messenger for the Board of Governors, and I think it’s clear the Governors decided the Balsillie was nothing but trouble and decided he wasn’t going to be approved, no matter what. And that’s their privilege, as the owners of the league.

Many players have told ESPN.com they believe a new team in Hamilton would generate significantly more revenue than a team in Kansas City. Governors and GMs have told ESPN.com in the past year they believe a second team in Southern Ontario would be a surefire success. Phoenix Coyotes coach Wayne Gretzky, still one of hockey’s most influential figures, recently said he thought a team in Hamilton would be a success.

This, of course, is actually irrelevant, and when did the players become better businessmen than the owners, anyway? or sit down and study the deal and the numbers?

Ultimately, I think Balsillie blew it here. He could have played the game, made all of the proper noises about nashville, and structured it to make sure he could break the lease — heck, given how low the average ticket price is in Nashville, he could use the “we have to run this as a business” argument, jumped the ticket prices 20% in two seasons, killed the season ticket sales and be in Hamilton in four years.

But instead, he opened up ticket sales in Hamilton before actually owning the team — and made it clear what his intentions were and what he intended to do, with or without league support. His history of solving things with lawyers is well-known. And that — ultimately, his lack of patience for playing out the end game in Nashville — is what killed his chance of owning an NHL team. At this point, he’s never going to get one, and his continuing attempts to badger the league is only going to hurt his chances further, not help them. He’s going to win the battle for the hearts of Canadians — and lose the war, which is getting a team into Southern Ontario.

I’m not surprised at this, either. That’s his style. And the league clearly doesn’t want a team in Hamilton at this point. Not only will the Leafs never go for that (and don’t minimize the power of the #1 revenue team — and revenue sharing contributor — and their ability to convince other teams to support them here), but I’m sure Buffalo wasn’t thrilled, either. If you start looking at realignment if Nashville moves to Hamilton, and how that affects team travel issues, you can easily find six or seven teams that would see Hamilton as a really bad thing; say, everyone west of St. Louis has a reason not to encourage this.

I’m wondering, in retrospect, whether the league tossed an olive branch at Balsillie and had it trampled. Remember back around the All-Star game where Bettman suddenly came out and talked about how Winnipeg was starting to look attractive to the league? I’m now wondering whether this was the start of an attempt to encourage Balsillie that if he really wanted to move a team to Canada, that the league wouldn’t get in the way of a move to Winnipeg. That would be a useful compromise position for both sides: the team moves back to Canada, but not to Southern Ontario.

Balsillie pretty clearly rejected that; he wants what he wants, and isn’t interested in what might be the interests of the rest of the league. And that’s why the league has decided that his money’s no good here. Think about it: Balsillie has never tried to work with the league to find common ground. He negotiated with Leipold in secret, he started the move to Hamilton early and without permission, he brought lawyers and threats about the possible move into the discussion, and now that he’s been frozen out, he’s playing the “let’s fight in public” game to try to make the league and Bettman look as bad as possible.

Imagine being one of the other 29 owners of an NHL team and having to work with this guy for the next ten years. Is that the kind of owner you want around? Money isn’t everything, and while the various owners aren’t necessarily friends, or even friendly competitors, there HAS to be some common ground of cooperation for the good of the league. Seen any inidication that Balsilie recognizes that (or cares) anywhere? Neither do I.

So in this case, the league is right to exclude someone like Balsillie. Hey, for all Mark Cuban rips on the NBA and the league — he’s doing it to improve the league, and he works within the league to get it done. You can’t even say Balsillie would be that cooperative.

In other words, he’s not Mark Cuban. He’s not even Charlie Finley. he’s Al Davis. And can you see any league, anywhere, at any time, willingly adding an Al Davis to their ownership group? I can’t.

We need to be realistic, unless this local ownership group can rally significant money into the deal: Nashville is done. it’s all about when and how gracefully and to where now. Balsillie’s strategy backfired, and he’s now no longer an option; I think he was offered Winnipeg and rejected it, and that ended the discussion. So now, it’s giving Nashville a fair chance to make it work, and if/when it fails it has to go somewhere. If Balsillie had played even a marginally cooperative “go through the motions” strategy, he’d have gotten his hands on the Preds, and then the league would have had a fun fight keeping them out Hamilton. By playing the game so bluntly — Balsillie played himself out of the game, and gave the league the ability to save themselves from that disaster.

So the reason Balsillie doesn’t have a team — and now, never will — is all his fault. Because he took a group of 29 guys who are all successful businessmen who didn’t get there by being bullied, and tried to bully them. And it didn’t work.

Talk about a misread on how to play this….