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Despite Stanley Cup championship, Blackhawks were a financial loser last year

Jul 30, 2010, 10:02 AM EDT

rockywirtz1.jpgPerhaps there was a method to old “Dollar” Bill Wirtz’s madness and Scrooge-like ways. A story out of the Chicago Tribune by Melissa Harris claims that even in spite of the Blackhawks selling out the United Center on a nightly basis, reaching the playoffs and ultimately winning the Stanley Cup the team finished the season, financially speaking, deep in the red. No truth to the rumor that the sound of late owner Bill Wirtz saying, “I told you so” have been heard coming from the halls of United Center.

Wirtz first revealed that the team was not profitable in private. “It’s going to take four (or) five years before we can actually get back in the black,” Wirtz said at an April 19 forum at the Economic Club of Chicago, according to a transcript. “And right now we’re still supporting the Blackhawks with our other Wirtz organizations.”

In a follow-up interview this week, Wirtz said that the Blackhawks ran out of cash several times last season. Each time, he received a memo, known as an internal capital call, in which the team requested money from Wirtz Corp., the Blackhawks’ parent company, to cover operating expenses. And at the end of the season, Wirtz said he double-checked that the playoffs did not cover those losses; the franchise remained in the red, the team’s accountant told him.

“We have multiple businesses and obviously we want every one to stand on its own,” Wirtz said. “And what you don’t want to do is manage one business from the profit of the other one.”

One of the things the team is doing to counter the financial shortfall is to raise season ticket prices. After all, a team’s gains and losses can pass down to the consumer, this time to the tune of an average 20% raise across the board. What once used to be a comparatively cheap ticket to buy in the NHL is now one of the priciest. If you’re worried that this will cause current owner Rocky Wirtz to start conducting business the way his old man did, however, fear not.

“We’re going to do everything we can to win,” team President John McDonough said. “We want this to be a destination for free agents. We want this to be a place where players want to play. … We’re going to charter our players (to away games) and we’re going to stay in hotels that are going to be synonymous with a first-class operation. When Rocky and I first met, we talked about this commitment.”

At least the Blackhawks no longer have to worry about home games being blacked out on local television. Progress finds its way into Chicago at long last. But why have costs gotten so out of control for the Blackhawks even in spite of success? Perhaps you might want to sit down for this one. Escalating salaries are to blame.

Compared with professional basketball, baseball and football, the economics of hockey are difficult.

The league operates under a 2005 revenue-sharing agreement. The way it works is that the teams that rake in the most income, generally regardless of expenses, subsidize the teams that generate the least.

A drawback is that it disqualified the Blackhawks, because of the size of the Chicago market, from receiving revenue sharing dollars.

The primary benefit is that it capped players’ salaries — an owner’s largest expense.

“The collective bargaining agreement has been a major help, but by no means did it create a league where all teams were going to be profitable from that point forward, or even most of them, quite frankly,” said Marc Ganis, president of SportsCorp, a Chicago-based sports consulting firm.

Under the agreement, the more the Blackhawks earn, the more they have to share.

For instance, the Blackhawks keep ticket revenue from their regular-season home games. But for every playoff home game last season, the Hawks had to give the NHL at least 50 percent of what their gate receipts would have been at a regular-season United Center sellout.

And gate receipts are everything in hockey. Ticket sales typically account for up to half of a team’s income.

“You can technically lose money during the playoffs if you don’t raise your ticket prices” for them, Wirtz said.

Obviously the league’s tough position with television contracts play into this as teams aren’t earning nearly as much as the other professional leagues but that’s something all the teams have to deal with. Forgive my cynicism here, but hearing from a team that has a license to print money with a reinvigorated fanbase that’s going crazy for their team (and all the merchandise and ticket sales that entails) makes me feel that this claim of losing so much money feels out of place.  The team is pushing the limits of the salary cap and spending money that they were more than happy to do in order to win it all.

Granted, Rocky Wirtz isn’t playing the “woe is us” card through all this and comes off more as explaining that all is not as rosy as it appears. But isn’t that the point here? It comes off as finding a subtle way to complain about the system in place but doing so in a way so as to not offend anyone in particular. They’ve accepted what they’re doing and their role in everything but don’t want to upset the fans when those costs get passed along to them. Thankfully for Rocky Wirtz, the easiest way to make sure complaints about higher ticket prices are kept to a minimum is to win it all. Mission accomplished.

  1. J.J. from Kansas - Jul 30, 2010 at 10:33 AM

    It’s a complete smokescreen. Nobody would blame them for raising prices, but to say it’s because they aren’t making money is a lie and to further that lie by complaining about how they have to pay into the revenue sharing pot is even worse.

  2. Matt Reitz - Jul 30, 2010 at 12:16 PM

    Rocky Wirtz also owns half of the United Center… tell me that the money their arena made didn’t cover their expenses. They report the Blackhawks and United Center as two separate entites; but I’m sure at the end of the day the Wirtz group did just fine.
    And if the Stanley Cup champions–who sold every game out (at 20,000+) for the entire season PLUS the playoffs cant operate at a profit, tell me how we’re not going to have a lockout in 2012.

  3. SK - Jul 30, 2010 at 1:59 PM

    I believe the Wirtz group also owns the liquor distributor that supplies the United Center.

  4. InTheKnow - Jul 30, 2010 at 4:02 PM

    Pay attention to the article… Wirtz does not want one business to salvage the other. Yes Wirtz owns several business, including liquor distro, but as he stated, they are separate companies and he wants the Hawks to stand on their own. The UC, separate from the Hawks, Liquor distro, separate from the Hawks. The other companies do well thankfully or else Hawk’s fans would not be as committed as they are now… because there may not be any Hawks worthy to speak of.
    Nobody owns a business to lose money… not even Mark Cuban.

  5. KnowBetter - Jul 30, 2010 at 4:14 PM

    Until ANY professional team cries poor first show me how much the owner, president, GM, Board of Directors, family members, etc earned. This has been a practice that has been going on for years with the professional teams just like CEO’s, Executives and Board of Directors of companies earned millions while the company stock loses it’s worth or goes belly up. Blackhawk fans will either suck it up and pay or stay home like they started to! Open the books then I will beleive you!

  6. KMcD - Jul 30, 2010 at 4:24 PM

    It’s actually a very good article and worth the time to read the whole story. Prior to this ticket increase they had the 21st most expensive season ticket prices…given the teams success and the fact that this is Chicago I don’t think there should be any suprise that they are going to get their pricing more in line with the major markets in the NHL. It’s also clear that he know a big part of the reason they aren’t doing as well now is due to the fact that his Dad did sucha poor job running the business prior to his death. They lost more money in his Dad’s final years than they do now, but it takes time to build up the advertising, merchandising and other revenue streams that were so neglected previously. The Wirtz’s will never have to worry about money and I pretty confident that Hawks fans wont have to worry about things going back ot the way they used to be when Dollar Bill was in charge.

  7. Little Tommy - Jul 31, 2010 at 9:44 AM

    I don’t buy any of it. Do they want us to believe that raising ticket prices in a venue that seats 25-30,000 fans is all that stands in the way of profitability…hogwash.
    It’s a load of crap.
    He’s starting to sound like his old man already!

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