A portrait of a team on the brink: The Coyotes' revenues revealed
by James Mirtle on May 22, 2009 8:15 AM CDT
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As we're all well aware by now, the Phoenix Coyotes have been losing a ton of money for quite some time under owner Jerry Moyes. But what hasn't been widely reported is what sort of revenues the team needs in order to avoid dying in the desert.
Would concessions on the lease potentially alleviate the cash drain? And, given the current situation, is it possible to make the losses more respectable than the figures we've heard leak out the past few weeks?
Because, as it turns out, this is an expensive team to run.
There's an incredible mass of data coming out of the court filings since the Coyotes declared bankruptcy on May 5, and a few of the documents have gone into some detail when it comes to the team's revenues and expenditures. One set of figures I came across that are particularly interesting come from former team CEO Jeff Shumway's projected revenues for this past season (about $70-million) and the team's "potential" revenues (about $103-million).
Graphically, here's where the team's cash comes from in the actual budget figure:
As you can see, the team fits the NHL's mould of being a gate-driven franchise. Although perhaps not as much as it should be...
The Coyotes were projecting to receive about $14-million in revenue sharing this season, approximately 20 per cent of the team's income, and even with that would fall some $30-million short of covering their costs. Given figures I've heard from NHL executives (most notably former Columbus GM Doug MacLean, who is now a member of the media in Toronto and talking about this story a lot these days), revenues of $85- to $90-million should be sufficient to sustain an NHL team.
Phoenix, however, appears as though it would be losing cash even if it generated nearly $100-million a season, a figure that would likely make the team one of the top 10 to 12 revenue-generating teams in the league.
Here are the team's potential revenues, as laid out by Shumway (think of this as the 'dream' scenario):
The big gains here come in ticket revenues, which have nearly doubled, and sponsorships, which have jumped $12-million. To hit those ticket revenue figures, prices would have to increase significantly from the average $37 current average price, however. My rough math tells me that, even if the team sold an extra 3,000 seats a game at current rates, they'd be $12-million shy of the "potential" ticket revenue figure here, meaning tickets would have to cost roughly $15 to $17 more on average to hit that mark.
Tough.
Even if we grant that this dream scenario would be possible had the team gone on a run and made the playoffs (postseason revenue was wisely not included in projections), the one major issue with the "potential" scenario is that the team is still receiving its $14-million in revenue sharing even while its other revenues neared $90-million.
And that's impossible.
Even if the Coyotes could generate that money, thereby potentially generating a profit (at around $100-million in revenue and somewhere in the mid-$90s in expenses), they would be cut off of revenue sharing entirely as a middle of the pack revenue-generating team.
Even the "dream" scenario, then, would see Phoenix max out just shy of $90-million in terms of regular-season revenues. Here's a breakdown of what that would look like (essentially the "potential" chart without the revenue sharing):
In conclusion? From the looks of these figures, it's all but impossible for Phoenix to turn a profit, even under ideal conditions. The team's expenses are too high and its potential for generating revenues too low barring a long playoff run and a massive price hike.
I'm not surprised Shumway declared the situation hopeless. Even if the team's expenses get more inline with some of the NHL's frugal franchises (let's say $85-million a season, the bulk of which is player costs), the franchise is only generating $70-million in revenue when you include $14-million in revenue sharing.
Minus those dollars and other league revenues, the Coyotes were only expected to make about $45-million this season – a far, far cry from a team like the Maple Leafs, which generates about $2-million for every home date on the schedule. Even teams more in the middle of the revenue-generating scale like Edmonton and Ottawa pull in more than $1-million per game during the season, which would easily bring them past the Coyotes.
It's ugly stuff, and I can't see how the NHL's going to find a way to take them out of the red.
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Amazing
Those numbers are even more stunning when you compare them to the league’s big earners. In today’s La Presse, an article on the possible sale of the Habs ends that way:
“Selon les rapports qu’ont obtenus les acheteurs potentiels le mois dernier, le Canadien a généré des revenus de 288 millions lors de la saison 2007-2008 et son bénéfice s’est élevé à 45 millions. Quant à la division Groupe Spectacles Gillett, elle aurait généré des revenus de 100 millions ainsi que des bénéfices de 10 millions.”
(source: http://www.cyberpresse.ca/sports/hockey/200905/21/01-858674-bce-et-quebecor-se-battent-pour-le-ch.php)
Quick translation: it was leaked that the habs had revenues of 288 millions in 2007-2008, turning a profit of 45 millions (before Revenue Sharing I guess), and the Gillett entertainment Group generated 100 millions revenues with 10 milions profits. 288 seems high compared to what I saw elsewhere (most notably in that graph you published here some time ago); I wonder if they didn’t made a mistake (188 millions?).
How important are revenue sharing and the salary cap ?
by Olivier on May 22, 2009 8:54 AM CDT reply actions 0 recs
Quite impressive
Considering that profit would be higher without the $10 million city tax bill on the Bell Centre and the $15 to $18 million welfare cheque handed over to Bettman’s cronies.
by Exit716 on May 22, 2009 10:56 PM CDT up reply actions 0 recs
Great article James, and while it sucks for the fans, like you I don’t see how they can save hockey in Phoenix
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by Jim Schmiedeberg on May 22, 2009 9:18 AM CDT reply actions 0 recs
Do they run an unusually profligate operation, I wonder, or are there some expenses that are always going to be higher because of the location – energy and water costs, travel, etc. Deserts have some unique challenges that other environments might not have reflected in their costs.
(It reminds me of the pie charts showing how a badly-run charity spends most of the money on administrative costs and very little on their actual goals.)
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by Baroque on May 22, 2009 9:24 AM CDT reply actions 0 recs
Here are some of the numbers referenced (http://www.mc79hockey.com/?p=3145) in James’ article:
Total Hockey Expenses – $61,861,642
(Player, coach salaries; equipment; scouting/farm system)
Total Business – $18,209,321
(Administration costs; employee salaries; advertising; etc.)
Total Other – $12,425,167
(Management costs – for league and arena)
The team shouldn’t have to worry about energy or water, as those should be covered by the lease (a $9M annual cost that isn’t included in the above numbers). I don’t see travel in there either – not sure where that would factor in.
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by PRC on May 22, 2009 10:33 AM CDT up reply actions 0 recs
Travel generally costs a team about $3-million. Likely more for clubs way out West, but not as much as you’d think overall.
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by James Mirtle on May 22, 2009 5:50 PM CDT up reply actions 0 recs
Baroque, i have some data from the Nashville Predators (I have been teasing it to James over the last week or so, but have not had the time to put it together for him), and (as i have posted elsewhere) it seems pretty clear that it is unusually profligate.
Nashville’s costs (which also include the arena operations) are over $20 million lower.
by Gerald on May 22, 2009 12:34 PM CDT up reply actions 0 recs
If the team can bring in according to them potentially 100 millin in revenue and still lose money, isn’t that a sign of a poorly run team with bad management? Even if they reach their realistic potential they should in theory be at least close to breaking even, but even then they wouldn’t.
Again that to me screams that this situation is a combination of many things, including bad amangement. One would have to think if someone came in who knew what they were doing they could run the team better where they could come closer to meeting that realistic potential, maybe cut down on the superferlous spending (like 8 mill for a coach) and the team would be right around the break even point. That would be par for the course for a sports franchise. At the very least it would cut down dramatically on the losses and make the team more viable.
by jkrdevil on May 22, 2009 10:00 AM CDT reply actions 0 recs
How many others?
1) The obvious question is: How many other ‘southern’ NHL cities have similar ‘pie charts’? Can it be much better in Atlanta, Florida, Nashville, etc?
2) If so, how many teams can Bettman/NHL prop up until they are forced to the economic realities that his grand plan/sceme of hockey throughout the south isn’t plausable?
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by Fauxrumors on May 22, 2009 10:05 AM CDT reply actions 0 recs
See above, I have the full skinny on how Nashville had done and its projections for the next five years.
by Gerald on May 22, 2009 12:35 PM CDT up reply actions 0 recs
And so it goes . . .
The Predators turned a profit this year. Same posts, same people, different day.
by HartnellsMop on May 22, 2009 11:06 AM CDT reply actions 0 recs
hehe, wasn’t it like $14?
but i know what you’re saying about blanket “southern” statements.
by passive_voice on May 22, 2009 12:00 PM CDT up reply actions 0 recs
The Hurricanes turned a profit this year, but that wasn’t sealed until they made the 2nd round of the playoffs. Now that they’re guaranteed at least two games at home in round 3, I suppose they’ll be squarely in the black, and the brand is certainly still growing.
by hip_check on May 22, 2009 4:37 PM CDT up reply actions 0 recs
Yeah, no, I wouldn’t think it’d be wise to draw conclusions about other teams based on these numbers. We really don’t know what the losses look like elsewhere.
Nashville appears to be doing all right after receiving a large revenue-sharing cheque.
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by James Mirtle on May 22, 2009 5:52 PM CDT up reply actions 0 recs
Would the Preds have made a profit without NHL revenue sharing?
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by Fauxrumors on May 22, 2009 11:17 AM CDT reply actions 0 recs
I don't know about Nashville, but
I know even the Sabres wouldn’t. They base their entire business model around breaking even, which usually involves at least one playoff series. Golisano’s plan is to put together a team cheaply enough to make the playoffs, but only finish in 8th place, so they get that extra revenue.
And there was an article not too long ago that the Canes broke even on the season due to THEIR playoff revenue in the first round.
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by Afino on May 22, 2009 11:27 AM CDT up reply actions 0 recs
I think Golisano’s plan is to build the best team possible within reason. Reason, in my opinion, being a loss of a couple million dollars if they don’t make the playoffs. Not so sure why the guy takes so much heat with Sabres fans. He’s a smart businessman, and actually Larry Quinn is too. Finishing with 105 points is no more guarantee of being profitable than finishing with 90. It doesn’t make sense for any team to budget for 3 or 4 playoff rounds before the season even starts.
I believe Buffalo’s average ticket price is actually lower than it was 10 years ago when they made the finals. Their payroll is probably about double what it was back then. So, yeah, they need revenue sharing to survive, but they also need to be creative to maximize revenues- they’ve done a very good job with the variable pricing thing (even if they overshot it a bit this year), and they have to do cosmetic things like change their uniform or add a different 3rd jersey every year to make more cash. Other than the scouting cuts, they really haven’t cut back on their spending in any way.
The Sabres spend as much money as you could reasonably expect them to. They just don’t spend it especially wisely.
by Make a play Whitner on May 22, 2009 12:26 PM CDT up reply actions 0 recs
They just don’t spend it especially wisely.
Which is a whole different discussion altogether :)
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by Afino on May 22, 2009 12:37 PM CDT up reply actions 0 recs
And yes,
Larry Quinn is a businessman.
The problem is he feels the need to meddle in what he’s not good at, which is trying to run the hockey side of things too. That’s why he’s hated so much.
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"So get some more guys and then it'll be an even fight."
by Afino on May 22, 2009 12:38 PM CDT up reply actions 0 recs
Everyone says he meddles too much- but I’m not so sure if there’s a ton of substantial proof. I think it’s more assumed than anything, because of his general arrogance. I do think it’s a problem that the team might have 3 GMs. Ruff I’m sure has a great deal of say in personnel, it’s alleged that Quinn does too- and neither are the official GM. They definitely need a fresh face, because it seems as though they make decisions by committee instead of having one strong leader in charge of player personnel.
by Make a play Whitner on May 22, 2009 12:47 PM CDT up reply actions 0 recs
I read this a couple of weeks ago and it kind of surprised me. Partial quote from Caps President Dick Patrick from an article in Tarik El-Bashir’s WP blog:
But even if the Capitals were to win the Stanley Cup, Patrick estimates the Capitals would still lose money this season because the team’s average ticket price ranks in the bottom third of the league.
“But that’s something we’re hoping to change in the future,” Patrick said. “The plan is not to lose money, but that’s the reality right now.”
Full article here. Times are still tough financially (though drastically improving) even with the league’s most marketable star
by Cluster on May 22, 2009 3:24 PM CDT up reply actions 0 recs
Would the Preds make money w/out revenue sharing?
From what I’ve read in the local paper here in Nashville, the Preds made roughly $1.4 million in the 2007/2008 season and will eake out a roughly $114,000 profit this season AFTER revenue sharing.
In both seasons they qualified for a full share and they saw their paid ticket sales grow. The difference last year was they also had 3 playoff games, where this season there were none.
If I’m not mistaken, ESPN showed their total average per game attendance was 15,075 this season and of that, the paid number was right around 14,200, Since Craig Leipold sold the team, paid attendance and total attendance have actually grown in the last 2 years, showing that local ownership has a better pulse on the market and is making some in-roads in the corporate community.
Certainly revenue sharing keeps the team alive in this market because without it, the team would not survive. That’s a significant difference though versus markets that can’t make it even w/revenue sharing and that’s the dilemma the owners need to deal with. What price is this worth.
by oilerdago on May 22, 2009 2:25 PM CDT up reply actions 0 recs
The revenue sharing hopefully works to keep Nashville going until the market’s mature enough to support the team and profits without the benefit of that support.
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by PPP on May 22, 2009 2:40 PM CDT up reply actions 0 recs
That’s the idea. Although I think it’s worth paying revenue sharing out indefinitely to teams that have a strong fan base and face other challenges.
The question is if they’re money pits or not.
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by James Mirtle on May 22, 2009 5:55 PM CDT up reply actions 0 recs
Confused
I’m a little confused by this statement:
Minus those dollars and other league revenues, the Coyotes were only expected to make about $45-million this season – a far, far cry from a team like the Maple Leafs, which generates about $2-million for every home date on the schedule. Even teams more in the middle of the revenue-generating scale like Edmonton and Ottawa pull in more than $1-million per game during the season, which would easily bring them past the Coyotes.
Isn’t $1M-game ~$41M per season, and that would put them right in line with the Coyotes.
And I don’t understand why the Coyotes operating costs seem to be so much higher than everyone else’s.
by Jibblescribbits on May 22, 2009 12:11 PM CDT reply actions 0 recs
That 1 million per game for Edmonton and Ottawa is for ticket receipts only. In other words, what the Coyotes take in in total revenue per game is what those teams just get at the gate, concessions and other revenues not included.
by Robert Cleave on May 22, 2009 12:18 PM CDT up reply actions 0 recs
Could be wrong on this, but I would guess debt payments are a major reason why their operating costs seem so high.
by Make a play Whitner on May 22, 2009 12:31 PM CDT up reply actions 0 recs
Debt payments are actually separate. They are also extraordinarily high.
by Gerald on May 22, 2009 12:37 PM CDT up reply actions 0 recs
How is that "potential" column determined?
So I had been thinking about this since I first read the post on mc79hockey… how is that “potential” column determined?
Is it literally just a dream scenario based on on-ice performance? Was there some kind of market research involved? Or is it just a pie-in-the sky calculation? At first I thought it’s just based on a long playoff run, but I noticed the TV rights and sponsorship revenue lines increase, not just tickets/suites/concessions, that you’d expect with more games.
On the expenses side (and this is covered on mc79hockey), the coaching costs stand out the most – $6.5M, I believe. That’s a hell of a lot, and it’s no mystery as to why.
Oh, and count me in as being interested in the Nashville numbers if those can be freely posted.
by jamiebez on May 22, 2009 12:55 PM CDT reply actions 0 recs
heh
I just used pie-in-the-sky to describe these numbers on another site.
Considering that they were banking on getting revenue sharing when they would supposedly be above the threshold I don’t think that they put too much thought into the numbers.
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by PPP on May 22, 2009 1:04 PM CDT up reply actions 0 recs
oops – the coaching costs are $9.6M, not $6.5M My bad.
by jamiebez on May 22, 2009 1:13 PM CDT up reply actions 0 recs
But wait, it's "fixable"
Once more reality trumps Bettman. Even if you could generate all those potential revenues, the expenses are completely out of line with what’s needed to successfully operate a franchise.
So Bettman, what are you going to do? Fire the coach, break the lease, not service the debt, not pay the lease, cut payroll (oops, can’t do that, you’re already at the floor)?
Seriously, I don’t expect anything from mediation next week but let’s just say that the judge rules Moyes owns the team and can sell it to whomever (reasonable). Assume Balsillie’s bid fails because the courts make the decision that the NHL bylaws on relocation can be held up and there is no way he’ll get approval to move the team to Hamilton. How much money does the next owner of this team have to lose before he’s going to be allowed to move the team – because let’s face it, Phoenix does not work no matter who owns it?
No this has to be about finding a more acceptable owner to Bettman and the BOG, one who’ll keep the team in the US because any day now there’s going to be a massive television contract because everyone here in the state’s wants to see hockey played in Phoenix, Las Vegas and Kansas City.
What incredible hubris.
by oilerdago on May 22, 2009 1:54 PM CDT reply actions 0 recs
Phoenix does not work no matter who owns it?
Stand by, I think you may be surprised by the next set of facts and figures comparing them to another NHL franchise.
by Gerald on May 22, 2009 3:23 PM CDT up reply actions 0 recs
Except, Nashville’s average ticket prices are much higher, their debt lower and their lease better. There are a ton of rights that need to come into play for Phoenix to get to that point.
A team can’t make money only pulling in $70-million a season in revenue. It’s not just expenses that are the issue.
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by James Mirtle on May 22, 2009 5:59 PM CDT up reply actions 0 recs
Maybe not, but compitent management makes those types of things possible. Sure it doesn’t make everything perfect overnight, but if they can get someone that knows what they’re doing after the bankruptcy then you can get an awful lot closer to being profitable.
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by OdinMercer on May 23, 2009 1:42 AM CDT up reply actions 0 recs
Here’s my problem with this argument. I agree, it’s much more likely that fans are going to turn out for a winning team. Unfortunately, it can’t be true that everyone is going to have a winning team. Sports is a zero sum game. If Phoenix is going to win more games, someone is going to have to lose them.
We’re to the point that we are saying that Nashville can be a success if they put a winning team on the ice, and Tampa can be a success if they put a winning team on the ice, and Florida, and Phoenix, and Columbus, and Anaheim, and Los Angeles, and the Islanders, and . . .
Guess what? It isn’t going to happen. Who is going to lose all of those games? Is Toronto going to remain pathetic forever? The Blackhawks are looking good again, and they are going to be beating someone. Is Detroit going to become bad?
You can’t build a league strategy around the concept that everyone is going to be a consistent winner.
by J. Michael Neal on May 23, 2009 1:52 AM CDT up reply actions 0 recs
They don't have to consistantly be a winner...
…but have to at least be a contender. Does anyone turn out for a team that doesn’t make the playofs for years on end? No. Everyone gets that there’s typically a cycle where you ride some players to a playoff run for a few years, then they become expensive and you reboot for a couple and then you’re back. THat’s all the Coyotes need to be to be sucessful. Sure they need to raise ticket prices and get some other things turned around. But being at least in the mix and having a staff (Outside of GM Don Maloney) that at least looks like it knows what they’re doing would be super.
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by OdinMercer on May 23, 2009 2:17 AM CDT up reply actions 0 recs
Hmm... in '06-'07 the Preds had the most wins in the West...
and I have lots of reason to believe that we will be a lot better in ‘09-’10 too. With rising star Colin Wilson coming in, Pekka Rinne starting the whole year, our stellar defense, and Steve Sullivan possibly returning for a healthy year, the future looks bright.
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by smashville on May 23, 2009 10:26 PM CDT up reply actions 0 recs
THat’s all the Coyotes need to be to be sucessful.
So you think. You don’t actually know this.
by J. Michael Neal on May 23, 2009 5:13 AM CDT reply actions 0 recs
Yes,
Just Like I don’t KNOW that the NHL will even be a league 4 years form now. I don’t KNOW that anything will happen before it does and never stated it as gospel. Sheesh. It’s a friggin opinion. Get a grip.
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by OdinMercer on May 23, 2009 4:18 PM CDT up reply actions 0 recs
The Coyotes made the playoffs each of their first four years in Phoenix, and five of the first six. Saying that they have never had success simply isn’t accurate.
by J. Michael Neal on May 23, 2009 9:27 PM CDT up reply actions 0 recs
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