Following the Levitt report all kinds of silly figures started to turn out in

Following the levitt report all kinds of silly

This preview shows page 11 - 13 out of 40 pages.

Following the Levitt report, all kinds of silly figures started to turn out in the media. For instance, based on obviously unreliable financial accounts, a reporter ran three successive stories claiming that the Montreal Canadiens had lost 40 million dollars in 2003 and 140 millions over the 1998-2003 period (Blanchard, 2004). On the other hand, Forbes magazine ran its yearly revenue and value assessment of NHL franchises. The numbers for the 1993-94 and 2002-03 seasons are compared in Table 5. They show that operating losses had been exaggerated to the tune of five million dollars by the NHL and the Levitt report. However, the Forbes assessment also confirmed that the financial situation of NHL teams had clearly deteriorated over the decade, and that teams overall were making operating losses, that is they were losing money even before interest payments on the purchasing cost of the team were taken into account. In addition, while the NHL claimed that players got 75% of team revenues, Forbes data showed that the players’ share was only 67%, although this was much higher than the 41% obtained before the 1995 CBA. There may be discrepancies in the figures provided by different sources, but they all pointed in the same direction: in the red! INSERT TABLES 5 AND 6 ABOUT HERE The crippling financial state of the NHL was even more obvious when the NHL bottom line – operating profits or losses – was compared to that of the other major leagues, as shown in Table 6. It then became obvious that the financial state of the NHL had gone down over time not only in absolute terms but also relative to that of the other three major leagues. Obviously, whereas the profit share in NHL revenues was in the same range as that of other leagues in 1989- 11
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1990, it has long ceased to be the case. Other leagues, most notably the NFL, have managed to remain profitable. There were other indications that the financial situation of the NHL was bad at the time of the 2004-05 lockout. Several teams had gone through a bankruptcy procedure (Pittsburgh, Ottawa, Buffalo) before being salvaged; and several other teams, five in 2004, were being put under surveillance by their banks and asked to provide additional collateral. NHL PROBLEMS AND THEIR SOLUTIONS The strategy being pursued by the NHL was similar to that adopted by major league baseball in 2000, with the release, before starting negotiations with the players’s union, of the report of the so-called Blue Ribbon panel on baseball economics, which ‘demonstrated’ that the attempt by clubs to remain competitive led to salary and ticket price inflation, and to persistent operating losses, to the tune of 10 million dollars per team (Levin et al., 2000). The Blue Ribbon panel also claimed that free market processes led to large and growing revenue disparities that were causing rising competitive imbalances. These, and the higher ticket prices, could potentially destroy fan interest in the game.
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