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Not every money-losing owner is a Leipold

Sep 20, 2012, 4:06 PM EDT

Craig Leipold, Ryan Suter Getty Images

Let’s start off with a little math:

If each team in the NHL had spent just enough to reach the salary cap floor in 2011-12, 57 percent of hockey-related revenue would’ve gone to the players.

Last year, 57 percent of hockey-related revenue was $1.87 billion.

On the other hand, if each team in the NHL had spent to the salary cap ceiling in 2011-12, 57 percent of hockey-related revenue would’ve gone to the players.

Last year, 57 percent of hockey-related revenue was $1.87 billion.

Sometimes it seems like not everyone understands this. Or, they’re choosing not to publicly.

“We’re agreeing to pay our players a certain percentage of our revenues. That’s a fixed dollar amount,” deputy commissioner Bill Daly told FAN 590 earlier in the week.

Again, “That’s a fixed dollar amount.”

In the new, yet-to-be-negotiated CBA, the NHL wants a reduction in the percentage of revenues going to the players because the league thinks 57 percent is too high. Such a reduction would result in the loss of salary for players via escrow, which is used to reconcile any “shortfall” or “overage” to the players as it relates to the revenue split.

Losing money to escrow would not be a new thing for the players. Five times since the 2005 CBA was introduced the players haven’t received as much as their contracts said they were supposed to receive.

Of course, twice they received more than their contracts said they were supposed to receive. You just don’t hear them talk about that very much.

Not once have the players received the exact amount their contracts said they were supposed to receive, because another contract – the CBA – overrides all.

So to those arguing it’s the damn owners that are paying the players too much, the owners, as a group, don’t have a choice. Last year, the players were going to get $1.87 billion, regardless of what total player salaries added up to on paper.

As individual teams, however, the owners have a choice. Take the case of the Minnesota Wild, which now boasts one of the league’s highest payrolls thanks to the massive contracts the club awarded Zach Parise and Ryan Suter.

That, for lack of a better term, may have been dumb. Minnesota is a mid-level market; it’s not Toronto or New York.

“Some clubs may spend poorly,” admits Daly.

But Wild owner Craig Leipold believed it was the kind of investment that needed to be made in order to reconnect with fans, get the team back into the playoffs and kick-start future revenue growth. And the only way he was going to get those players was to give them the kind of front-loaded deals the NHL wants to do away with.

Absolutely Leipold was hoping to claw back some of that salary in a new CBA. Was it distasteful? Perhaps. But Parise and Suter knew the score. So the players can spare us with the babe-in-the-woods routine (h/t FBI agent in Goodfellas).

From a public-relations standpoint, what Leipold did looked awful, and you can bet Gary Bettman wasn’t pleased. Most everyone would agree that owners who take massive financial gambles should have to feel serious financial hurt if they don’t work out. That’s business. And no owner should be guaranteed a profit every season.

But it’s unfair to throw Leipold in with all the other small- to mid-market owners that adhere to their self-imposed budgets. It’s those owners that need help, be it through more revenue sharing or reduced player expense. Chances are it will be through both. To which degree of each is the question.

Ultimately a new CBA won’t guarantee every team a profit, and nor should it. If an owner spends his money poorly, then that owner should lose money.

But as it stands, there are owners that could spend their money well and still lose money, and that’s not a sustainable model.

Fortunately, a deal is possible — this isn’t a broken industry.

Which is what makes all this so frustrating. We can see the deal through all the rhetoric and posturing and pandering to fans.

It just needs to happen.

  1. davebabychreturns - Sep 20, 2012 at 4:15 PM

    I am fairly sure the (now-expired) CBA guaranteed players were not paid more than 57% of hockey related revenues, there was no mechanism to ensure that players could not be paid less than that figure.

    Also, Elliotte Friedman has a (great, as usual) article this week detailing what HRR is exactly, and how its calculation has allowed teams to deduct non-player costs directly from revenue in order to reduce the share paid to the players since the last lockout.

    So even if the players had received exactly 57% of “HRR” every season that transpired under the last CBA, you can make a cogent argument that they never actually received 57% of the revenue their work generated for the league.

    • Jason Brough - Sep 20, 2012 at 4:37 PM

      Yes, there was a mechanism. The players are guaranteed 57 percent of HRR. They cannot be paid less.
      Section 50.11
      http://www.nhlfa.com/CBA/2005-CBA.pdf

      (c) Procedures in the Event of a Shortfall. In the event of a Shortfall in a League Year, the entire amount of funds in the Escrow Account shall be released to the Clubs for payment to the Players, in the amount of each Player’s escrow account, net of applicable payroll taxes. In addition, in order to ensure that, in the aggregate, the Players’ Share has been spent on League-wide Player Compensation, each Player shall also receive, pro rata to his actual Player Salary and Bonuses, supplemental payments from each Club, net of applicable payroll taxes.

      • davebabychreturns - Sep 20, 2012 at 4:39 PM

        Well shut my mouth..

    • somekat - Sep 20, 2012 at 5:43 PM

      2nd point isn’t correct either. Why would hockey reltated revenue only include expenses for players? Do they not have to pay insurance? Do they not have to pay for rent at arenas? Administrative staff? The word revenue includes expenses, if it didn’t, it would be hockey related income.
      Seems to me, they want it both ways. Much like the NFL refs, this will only get solved when the members (refs in that case, players in this), take over from the union and get a deal down. The union is worried about the union, not the members, and not the business

      • davebabychreturns - Sep 21, 2012 at 1:46 PM

        Revenue is income, the terms are interchangeable.

        If you are deducting all of your expenses from revenue then what you are left with is profit (or for some businesses, losses).

  2. windmiller4 - Sep 20, 2012 at 4:25 PM

    The Owners Proposed CBA is tailored to owners like Leipold. Spend big money, sometimes over fair market value, then give the players less money if/when they cant live up to the contracts. I’m sure Geoff Molson would love to cut Scott Gomez’s salery, or Snider and Bryzgalov, all over the league players are overpaid and now the owners are scared they might actually have to pay them the money both sides agreed upon. This wont be fixed until there is a hard cap, somewhere in the range of 60-65 million, so its a set number for a player. 5-6 million for a first liner 3-4 for a second liner, etc. limiting contract length to 5 years would also go a long ways toward cleaning up the mess. Split revenue 50/50 and now we have a new cba, one that makes sense for small, and big market teams

    • somekat - Sep 20, 2012 at 5:29 PM

      Funny you know how the owners offer, which isn’t public, is tailored

      Can you use those powers go give me next week’s powerball numbers?

      • windmiller4 - Sep 20, 2012 at 5:37 PM

        I believe the last offer the owners presented included salary cuts, which would be tailored to owners such as Leipold who spend big money then use the CBA as a loophole to not have to pay the contracts in full. And if their last offer didn’t include it then common sense tells you the next one will as thats something bettman and daly have discussed as a main point in what they believe should be part of the new cba. So really, these “powers” that i have are basically just reading about the negotiations and making a simple conclusion. And if i could get the powerball numbers im sure not giving them to a jackass like yourself

      • somekat - Sep 20, 2012 at 5:48 PM

        So now you “believe”, that wasn’t included in the last post. Do you also “believe” in Santa? What you believe doesn’t matter.

        What part of this article wasn’t clear? Their contracts are almost irrelivant. A 5 million contract is only a 5 million dollar contract if that is how it winds up after the players get their percentage. It could be more, it could be less. If they are as optomistic about the game becoming more popular as they pretend to be, they would expect that to be more than what the contract states. All they decide is what percentage of the 57% each player gets. Of course the owners want it to be less. They have no loss risk, NO business spends 57% of revenue to staff, let alone one aspect of staff.

  3. freneticgarfieldfan - Sep 20, 2012 at 4:38 PM

    amen, Mr. Brough.

  4. gmenfan1982 - Sep 20, 2012 at 6:56 PM

    If your boss gave you a raise and revenue sharing and then asked for it back would you say yes? No. That’s what I thought.

  5. gmenfan1982 - Sep 20, 2012 at 7:02 PM

    Maybe there shouldn’t be teams in cities that can’t sustain hockey teams. Ever hear of location location location? Cant sell something where’s there no market.

    • snowman218 - Sep 20, 2012 at 8:13 PM

      I think you meant to leave this comment 3 articles ahead of this one.

  6. csilojohnson - Sep 20, 2012 at 8:25 PM

    Agreed now lets see some hockey!

  7. jersey77girl - Sep 20, 2012 at 9:16 PM

    Who exactly are these owners that are ‘losing’ money ?
    In 2011, Philadelphia Flyers Owner Comcast had revnue of $55.8 Billion yet they’re arguing over 47-57% of $3.3 billion? The $3.3 billion they’re arguing over is only revenue considered HRR by the previous CBA. It doesn’t include money from other revene sources that may be driven by the team.
    For example, it doesn’t count any revenue that Comcast brings in on the 40% of their cable tv subscriptions which are ONLY subscribers because of Comcast refuses to offer CSN Philly [aka flyers games] programming to alternate tv providers. The FCC essentially determined that Comcast would lose 40% of their subscribers if Flyers games were available to DirecTV or Dish Network subscribers. Despite the Philadelphia Flyers games being responsible for the 40% boost in subscribers to Comcast’s Cable service, 0% of Comcast Cable revenue is included in HRR.

    Comcast went one step further and purchased the majority share of NBC-Universal, just before the NHL made their tv agreement with NBC [which coincidentally pays out $200 million to the owners, even during a lockout]. Comcast then turned around and BLACKED OUT round 1 flyers playoff games nationally aired on NBC-SC to the rest of the country from philadelphia area households unwilling to subscribe to Comcasts’s cable services [aka DirecTV and Disn Network]. They effectively lowered ratings for these broadcasts by intentionally preventing a large majority of people in one of the team’s home markets from viewing the game. Lower viewership = lower ratings = less advertising revenue, of which the portion paid to the NHL would be counted towards HRR. In having done so the resulting fans wanting to watch Flyers Hockey [including away games] were forced to overpay for Comcast subscriptions [locked into long term over priced contracts], revenue from which DOES NOT count towards HRR.
    Forget the 47-57% of ‘HRR’ the NHL and NHLPA are fighting over. The NHLPA should be calling the NHL out on tactics which intentionally lower money counted towards HRR in order to generate non-HRR money for their other financial interests.

    The ticketing system used by the Ottawa Senators is a company called ‘New Era Ticketing’. Service fees or flat fees paid out by the Senators [or Senators fans purchasing tickets] aren’t considered HRR. Which would be understandable if New Era Ticketing wasn’t a fully owned subsidiary of [wait for it...] Comcast-Spectacor. How’s that for revenue sharing. Here’s a small market team paying out money associated with hockey games to the owner of a big market team which, when all is said and done won’t be considered part of HRR yet ends up in the pockets of Flyers Owner Comcast.

    The deal that Comcast made with NBC to aquire the majority of NBC was supposed to have forced Comcast to offer CSN Philly programming [aka Flyers games] to other television programming providers [aka DirecTV and DISH network] but they STILL REFUSE to do so. Now ALL of the NHL broadcasting in in the hands of Comcast via NBC thanks to a deal the entire league signed with the owner of ONE team.

    • jimw81 - Sep 20, 2012 at 10:51 PM

      Everyone needs to stop with the flyers-snider-conspiracy bs. Ed Snider has ZERO to do with Comcast. He is not a chairman of Comcast, that would be Brian Roberts and the rest of the Roberts family. He is not a huge stakeholder in NBC Universal. I hate it when people seem to have this thing where they think Snider is running Comcast. It’s the reverse. He needed someone to help him come in and pay off his debt on the building of the WF Center, that someone was the Roberts family from Comcast. THEY own something like 40-45% of the Flyers, Snider owns 51% and there are a few others smattered in between. The regional networks are usually owned by a combination of the sports teams and Comcast, for example, in Philly it’s owned by Flyers, Sixers, Phillies and Comcast (Sixers and Phillies are not owned by Snider or the Roberts family).. If you want to argue that Comcast should have stake in this with their loss of programming on NBC Universal networks, fine, but knock it off with the whole conspiracy theories involving Snider and flyers. Plus comcast got in trouble with the fcc over comcast sportsnet network stuff and It’s currently being appealed by comcast.

      • jersey77girl - Sep 25, 2012 at 10:32 PM

        http://comcast-spectacor.com/ is the corporate website for Comcast-Spectacor, majority shareholder of NBC.
        Click on the link for ‘Org Chart’
        At the very top of the chart, [with all arrows pointing downward] is Ed Snider, Chairman.
        With the exception of NBC-Universal, Comcast-Spectacor is the parent company of all subsidiary companies, including the Philadelphia Flyers, the company under which Comcast Cable operates, and the company under which the RSNs operate. Ed Snider is pictured at the top of the chart, above Peter Lukko [President] of Comcast-Spectacor. According to Wikipedia, Ed Snider owns 35% of Comcast Spectacor [More than any other single person owner]. Ed Snider’s face/name is at the top/center of the chart, so if he didn’t want to take the wrap for the poor company decisions, then he shouldn’t make himself the face of the company in corporate communications.

        The only company which is a full-owned subsidiary under the Comcast-Spectacor brand is NBC-Universal. In regards to NBC-Universal, while not wholly owned by Comcast-Spectacor, the majority shareholder [over 50%] is Comcast-Spectacor [of which Ed Snider owns 35%. While the presentation of facts may resemble a non-existant conspiracy, the information stated is factually correct, most of which was obtained from corporate communication published by Comcast-Spectacor. I stand by the factual information presented in my comments and there is overwhelming evidence that Ed Snider maintains a deep personal interest in Comcast-Spectacor, NBC and all of their subsidiaries. If he isn't a driving force behind many of the business decisions made by Comcast-Spectacor then he's intentionally putting himself in a position to appear as though he is.

        The FCC already ruled on the Comcast's requirements to make their programming available to competing programming providers prior to the blackout of Round 1 playoff games in the Philadelphia area, yet to this day, CSN Philly is not available [even for a fee] to DirecTV / Dish Network Subcribers in the Philadelpia market area.

    • tatdue - Sep 21, 2012 at 1:16 PM

      @jersey77girl – Way to do your homework there jerseygirl…I like it…..

  8. jimw81 - Sep 21, 2012 at 4:07 AM

    Additionally comcast wouldnt put networks on directv unless they are willing to allow NFL Sunday ticket on cable providers.

    • jersey77girl - Sep 25, 2012 at 10:36 PM

      With the exception of CSN Philly in the Philadelphia market area, all of Comcast’s RSN programming is available to DirecTV and DISH network subcribers in their respective regions. DirecTV subscribers in the Philadelphia market area within Delaware [20 minutes from the Wells Fargo Center] receive CSN ‘Mid-Atlantic’ [WashingtonDC/Baltimore area Sports Programming] despite being located over an hour from Baltimore and an Hour and a Half from DC. They allow their DC-based RSN to be provided to DirecTV and DISH cutomers located within the very same market area that [had they been Comcast subscribers] would be receiving Philadelphia area Sports Programming.

  9. lostpuppysyndrome - Sep 21, 2012 at 9:35 AM

    I was expecting this to be another Leipold bashing blog but it actually turned out not to be. Good article Jason.

  10. gmenfan1982 - Sep 21, 2012 at 12:24 PM

    Ed snider is co chairman of Comcast spectator and has a 30% stake.

  11. gmenfan1982 - Sep 21, 2012 at 12:29 PM

    Actually it’s 37% ownership of Comcast spectator who is also owned by Comcast. NBC universal owns Comcast and NBC.

    • jersey77girl - Sep 25, 2012 at 10:46 PM

      You’re correct about the 37% ownership Ed Snider has in Comcast-Spectacor [I mistaken quoted 35% in an earlier comment] based on information from Wikipedia. Regarding NBC-Universal and Comcast-Spectacor however, it is Comcat-Spectacor that hold the majority share in NBC-Universal in addition to managing the NBC-Universal company.

      Reference Information:
      http://comcast-spectacor.com/
      Corporate Webite for Comcast-Specator, parent company of the Philadelphia Flyers and all Comcast-branded subsidiaries.
      Click on ‘Company Brochure’ [PDF File]
      Page 4 of the ‘Company Brochure’ Corporate Communication clearly states that:
      “Comcast is the majority owner and manager of NBCUniversal… [followed by NBC-Universal programming information]

      The brochure also goes on to describe all of Comcast-Spectacor’s fully owned subsidiaries, including comanies which profit from services provided to other NHL teams. [New Era Tickets].

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