This is well done and very thought-provoking. Read this article here.
Here is a thought we all need to chew on though regarding this new CBA. The Capitals look like a model franchise. We have a young team, an up-and-coming team. We can keep it together. Our business is booming and we have great fan support. We have managed the salary cap well. We may end up selling close to 5,000 new season tickets this off season. All signs are up. Couldn’t be better, right?
Then how come we will lose MORE money this coming season than we did last season? We have done everything right - our fans are in love with the team and we are growing double digit in revenues – and yet our payroll is growing faster than our revenues. Hence we will lose more money as we grow.
So something isn’t working regarding the new CBA and, frankly, I have yet to receive an email or read a message board post or blog post or a media article that says, “Spend less money in building your team or keeping your team together.” I am not sure how the new CBA will play out in the long term but the salary cap inflation and the new contracts offered to young players and free agents are making the business model turn upside down yet again. I know that is a fact in DC. I am sure it is a fact around the NHL, too.
Even if your numbers are true (and I think the other posters have made some good points regarding lack of concessions and how some of that may come back to you in the end), what is the team’s value?
The owner in Nashville complained and complained about how much money he was losing. He put around $40 million of his own $ into buying the team. He sold the team 10 years later for just under $195 million, and had an offer for $228 million. According to HIS numbers, he lost $70 million during the 10 years, so he made about $80 million. That was a team in Nashville.
How much would you make if you sold the Caps today, Ted?
The biggest problem for the Caps is the limited revenue stream by not owning the arena, not getting anything from the concessions, etc. The revenue sources for the Caps are:
Lower Bowl and Upper Deck ticket sales (no money from the suites, the mezzanine, or other seats, no money from the food sales, beer sales, etc.)
TV revenue from Comcast Sports Net
Ad sales from the radio broadcasts
Merchandise sales
Now some of the money for arena does eventually get back to you as Lincoln Holdings is a minority partner in WSE (which owns the arena, Wizards, and the concessions…) but even then, that’s a separate corportate entity.
The Caps used to lose a lot of money when Abe owned them too, so did the Bullets. The old arena, on the other hand, made money and showed a profit that was more than the loss of the Caps and Bullets combined. It made more economic sense for the Caps to be a loss leader and for the arena to make the money. And if you’re Abe Pollin, it still does…
Once you have control of the Arena and the concessions, the money will come into proper balance….
I would like to see the spin on your numbers from a real perspective. After all statistics is the art of manipulation. so what does your income include? just ticket prices or vending contracts too or does that go to Washington sports which you own (44% if I’m not mistaken)part of which I was told controls the 200s sections which are never full except the last three games and playoffs. example; the company I work for owns a company (that sells material and supplies)and looses money every year but it is convenient and ads to the profit margin of our other company. So if “The Capitals” loose money but you and your partners make money through other companys are you loosing money? And if you are loosing money why is it? to feed your ego (nothing wrong with it, I would do it myself if I had the $$)to “Be” a sports team owner? It is hard for us the little people to hear wealth men complain. You have all the right to be wealth and i wish you all the wealth you want, but when you are worth over 100m you should not complain about money. FYI I am a Season Ticket Holder but I dont have the cash to go see my brother before he ships off to Afganistan for a year so that is a real quandry do i give up my tickets to go spend a week with my brother who I may see in a year or he may be killed in action and i may never see him again. Sorry about your rough life Ted I hope it gets better for you!
ted
This is all too complicated for my limited brain, however a couple of uninformed comments:
Are you an owner of the team to make money, contribute to the positive fabric of your community, or because you enjoy the game? Your response is probably all of the above, but given the economics involved you may need to prioritize and recognize that in dc it may be really tough to generate profits.
You indicate that things could not be better and things are looking up. This is all true, but obviously the caps are not in the same situation as for example montreal. In mtl there will be no increase in season ticket sales this year, because they are sold out (and of course they also have great tv and brand related revunues). It is unrealistic to expect the dc market to ever approach the levels of popularity hockey has in mtl, toronto,et al., where hockey is front page news year round. Therefore as you have the same player expenses(ie., the cap) as those clubs,yet less revenue, it will be even harder for your club to make money. This is a challenge you have and must continue to accept.
Ted-you are doing a great job… stick with it …. enjoy it… and keep on communicating with us.
thanks
ps-given the economic challenges you face coupled with your love for films (and of course if there is cap room), maybe my prior idea of signing brad pitt will work. If not how about george clooney…beyonce maybe?
Ted, as a season new season ticket holder I was suprised by those facts, and I think it needs to be publicized more so the everyman players(not involved in negotiations) have an idea of whats coming down the pike. Hopefully the new PA leadership communicates with all players better than the last. You guys need to get this fixed as you can’t be expected to keep sinking your personal money into a losing venture. I bought 4 season tickets as I live and work all the way down in Stafford, I could finally afford it and you called for support in building the team, and I wanted to do my part. I’m sad that with all the great work You and your organization have done and all the new interest that you aren’t yet reaping the monetary benefits. When we finish up top of the conference and are hosting 16 playoff games I hope that will put a dent in the losses(I truly believe we are this years Montreal team). Thanks for being the best owner in sports.
Ted,
I’d be interested in an analysis showing how not having the Capitals as a part of Washington Sports and Entertainment is hurting the bottom line of the Capitals and how it helps or hurts Washington Sports and Entertainment. The Capitals have to pay rent on the Verizon Center to another organization that you own a part of, so in some ways that cost you, in other ways, that helps you.
I ask this only from the standpoint that some teams own their arena. Also from the standpoint that at some point, you should be the majority owner in Washington Sports and Entertainment.
Thanks
Joe
Seems the NHL owners are digging themselves yet another hole. The contracts that just were offered to players this year was crazy. Can you say over pay?
Teams need to get a grip or they will we right back to square one before the lockout.
I want the Caps to be a good team but I also want them to be around for years to come. It has to start with the owners and getting together and to stop the madness on these contracts. I mean really, Jeff Finger for 3.5 mil ????
As with all things, the cap will find its level. I suspect that next year the cap will not rise much, and thus the desired effect will begin. Then we will see who is wise and who is foolish.
but YOU helped create this deal under Bettman! Remember – we lost an entire season to an OWNER LOCK-OUT? over what was it again – $1M??
And now, you’re crying poor?? I don’t get it, you had your own report commissioned to show how poor each team is/was and ever since, the revenues have MAGICALLY grown each season to where we’re at a cap of $56M in a rough economy??
Give me a break!
Ted, sincerely, what is the answer in your opinion? Seems like it’s a “no-win” situation the way you describe it. You seemed very upbeat just a few weeks ago. Is all of this precipitated by the events after 1 July 2008 and the crazy contracts? How is this different than last year?
Is it just a matter of the team not getting the concession or club level revenues? Most teams aren’t at such a disadvantage financially I would think.
Otherwise, it is probably just a matter of a few select teams (Toronto, Montreal, Rangers) driving up league revenues, which in tern drive up the cap. It’s a bit of a shame that their overwhelming financial successes are driving up the floor and in turn putting significant pressure on the smaller fish, but I guess that’s the way of the world, keep up or fail.
Ted, if you could elaborate on that thought I’d be very interested. I know that if you exceed the midpoint you are kind of on your own dime, but can that not be recouped through playoff series victories, and ultimately a Cup? Can you really put a financial number on the value a Cup would bring to this franchise?
We appreciate that you are not ‘one of those owners’, but your costs are certain, your cap is in place – if you can’t make money isn’t it something you should be resolving with your fellow owners? Yes, some contracts are getting pretty stupid right now but with the cap that will work itself out, e.g., dumb owners forced to buy out and dip into their own savings?
As long as this team is supported you should be able to make money. So what does it take? 16,000 average and second round of the playoffs? More? Thanks for keeping ‘our guys’ together.
Ted,
It sounds like you didn’t really understand what you read. If you have a problem with the way the CBA is going, that is your own fault. You, and the other 29 owners, agreed to it. You got exactly what you wanted. You (the owners, not the players) cost all of us a season of hockey because you had to have a cap. Well, the players caved and you got it. You had them over a barrel, but you gave in on free agency changes. Now, you, and the other 29 owners, need to get your butts in gear and reign in your GMs. The only reason salaries in the league are rising out of control is because you, and the other 29 owners, are allowing your GMs to sign players to outrageous deals, which now become the benchmark for future deals (you do remember how arbitration works, right?) You owners couldn’t control yourselves and your GMs before the lock out (remember that, lock out, not a strike. The players were willing to play, you owners wouldn’t let them because you had to have cost certainty, which you sure as hell have now) and that’s why salaries got out of your control. Now, you’re doing the same damn thing all over again. STOP BLAMING THE PLAYERS FOR YOUR OWN INABILITIES TO RUN YOUR BUSINESSES!!!!
If you can’t afford to sign someone DON’T!
If you think the price is too high, DON’T AGREE TO THE CONTRACT!
The owners broke the union and got the deal that they wanted. You have no one to blame but yourself and your NHL partners. The “we’re loosing more money” talk was fine pre-lockout, but now it’s time to make it work or get out. No one is forcing you to own a hockey team.
Ted,
If player salaries are fixed at 56-57% of total HRR, wouldn’t revenue sharing close the gap? How do you see this playing out? It seems unlikely that the players would opt out of the deal and you know this league cannot sustain another work stoppage 2011 or 2012.