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After slashing player salaries and instituting a hard cap in 2005, is the league still leaking cash?
Renaud Lavoie of RDS is setting tongues wagging this afternoon, with an anonymous "tip" from inside the NHL that seeks to build sympathy for reining in player salaries:
League source indicated to me that the NHL as a whole is losing a significant amount of money.
Another one said close to 240 million lost total, in the last 2 seasons.
NHLPA don't agree with their losses info, but are proposing a system to adress [sic] some individual team issues.
Yes, it is possible, I suppose, to continue bleeding money while revenues have been climbing to ever-higher heights for the league, as the NHL has proudly touted repeatedly. Possible, if expenses are escalating even more quickly than revenues are.
But how can that be the case?
We've Been Down This Road Before
The owners played this card the last time around, too. Let's take a look at how USA Today broke down the report that the NHL commissioned former SEC Chairman Arthur Levitt to produce in 2004 (PDF), detailing how much money the league was losing ($273 million) at that time:
• The league had $1.996 billion in revenues and $2.269 billion in player and other costs. About 75% of revenues - $1.494 billion - went to player costs, which includes salaries, bonuses and benefits.
OK, let's do a little back-of-the-envelope math here.
In order to lose $273 million back then, "other costs" (outside of player costs) must have been in the ballpark of $770 million.
Since that time, however, the league rolled back player salaries by more than 20%, and put a cap in place, so that player costs rose in line with revenues. In today's world of $3.2 billion in league revenues, that can only mean that "other costs" have basically doubled since then, as player costs have only risen by 25-30% overall.
Even if you use a generous figure of the players getting 60% of revenues today (a little higher than 57% due to high-salary players stashed in the AHL, long-term injury costs, etc.) that puts player costs around $1.9 billion for last season. $3.2 billion in revenue - $1.9 billion in player costs yields more than $1.3 billion in "other costs" that would still allow them to break even, but apparently they are even higher than that if Renaud's informant is correct.
So let's see... how could the league be bleeding cash so badly? Let's vote on some likely options.
How could the NHL as a whole lose $240 million over the last two seasons?
Vulcanized rubber prices have skyrocketed (52 votes)
They all secretly hired hockey stats geeks for $4M/year, but now nobody has an advantage (30 votes)
That $10 beer? It cost them $20! (146 votes)
Blame global warming. It's hockey, duh! (56 votes)
$240 million blown on NHL Guardians movie that couldn't avoid NC-17 rating & was scrapped (216 votes)
500 total votes