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Two dudes blogging and podcasting about the San Jose Sharks, straight from sunny California.

post Sharks Owners Do Their Part In CBA Negotiations

July 18th, 2012, 1:43 pm

Filed under: blog — Written by Mike

First of all, listen to the podcast if you haven’t already.

Kevin Kurz has a post about a Q&A session Kevin Compton and Stratton Sclavos (two of the Sharks owners) had over the weekend about the state of the franchise. They revealed some (alleged) information about the Sharks’ financial situation, stating that they lost around $15M last year. In fact, here are the main points of the article as I read them:

  1. The Sharks owners lost money last year, even through every home game sold out.
  2. The Sharks consider themselves at about the midpoint of teams in terms of market size and revenues.
  3. The cap has gone up a lot since the cap was first put in.
  4. The Sharks owners don’t care about making money, they just want to win.

Reviewed in this easy, albeit jaded format, this could be a blueprint for the PR strategy of any ownership group in the NHL this summer. We lost a lot of money, even though we are doing everything right.  We sell out the building, we work hard to ice a competitive team, but our P&L looks like a horror show. But hey, that’s ok, we just want to win. It looks like this is the owners doing what owners have always done when labor negotiations happen, cry poor, but save personal face with their customers by saying it’s all just part of the deal, and they’re fine with it. In this context, the headline (“Should Sharks owners be allowed to profit?”) and the first three points are brilliant in serving those purposes. This makes me want to launch into a whole argument about the nature (and type) of profit the owners are in fact making, but that will have to wait for another day.

Frankly, I have no concrete reason to doubt Mr. Compton’s and Mr. Sclavos’ sincerity on any of this. However, it’s worth mentioning that only statement #3 above is proven. All the others either burnish the owner’s own reputations, or further the NHL’s bargaining position. It think it goes without saying that these points should be taken with a grain of salt.  Plenty of the commenters on the article noticed correctly that this loss number is not audited, and not present in any public disclosure statement, because SS&E (Sharks Sports & Entertainment, the entity that owns the Sharks) is not a publicly traded company, and therefore not required to release any such numbers. In fact, during the lockout in 2005, there was quite a row made over the players’ claims that they wanted to see the real financial statements of the teams, and they were not being provided the information requested.

The fact that this conversation took place less than a week after the owners submitted their initial bargaining position is not a coincidence.

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    26 Comments to “Sharks Owners Do Their Part In CBA Negotiations”

    1. Tom says:

      Mike, im so glad you wrote this bc I just finished reading this article and thought the same thing. Most of those statements need to be proven. I know Kurz isn’t gonna bite the hand that feeds him, but I’d like to see a little more investigative journalism here and fact check those statements a little (hello David Pollak I’m looking at you!).

      Even more to the point also, is this the supposed reasoning behind the huge ticket increases over the last 5 years? I’d like to have heard from these guys that this is why they felt the need to jack up the ticket prices, even at the expense of loyal STH’ers as you pointed to in a earlier blog.

      I dunno, something just doesn’t seem kosher here and I hope to God it isn’t just posturing for this new CBA.

    2. hateseed says:

      Honestly, it reeks of slimy-ness. I find it inconceivable that the Sharks ownership group is losing money with the amount of sell-out merch and the epic number of events (most in the nation for a venue of its size) that HP hosts…

      Not buying it. Creative accounting.

    3. SharkFanXF says:

      I have had the privilege of attending some of the ‘all hands’ meetings that are held a few times each season. According to what I’ve heard, the losses that the Sharks endure seems to be a point brought up Every year, for at least the last 5 or 6 years that I had attended.

      I also had audience with Ruzzie recently and the topic of CBA came up. So I flat out asked him “How many of the teams in the NHL are actually turning a profit” His answer was “About 6 or so”

      • Tom says:

        It’d be nice if the NHL could open the books and prove that most teams aren’t making money.

        I won’t be holding my breath that happens however.

    4. Slappy_SEZ says:

      It’s very simple: Those whom worship money — NEVER have ‘enough’. The Sharks probably MADE many millions . . . yet . . . to their greedhead minds . . . they LOST millions.

      Television/broadcasting rights, alone – even in the face of “an indifferent American audience” – generate SERIOUS amounts of team revenue.

      If you’re selling out every game and you still can’t turn a profit, you are a terribly incompetent business-person. Especially at those ticket prices. Not to mention parking, concessions and exorbitantly priced team paraphernalia.

      Anybody else notice the crumbling Global Economy — and the Police State being built up around us??? #OWS

      <>

    5. Scott J. says:

      These types of statements are nothing new in the sports world. The key thing to understand is if the owners were saying that the “Sharks” lost money or if “Sharks Sports and Entertainment” (previously Silicon Valley Sports & Entertainment) group, of which the Sharks hockey team is only one branch, lost money.

      I am sure that the hockey team lost money, but chances are that SSE doesn’t count things like concessions and parking as income generated by the Hockey Team, but rather by another arm of the larger organization. They also manage and take a portion of all events that go through the Arena and probably have many other income streams that are separate from the hockey team. I would assume that SSE is profitable, and it’s that profit which allows the hockey team to operate as a lost.

      I also find it interesting that we are in the middle with regards to market size. The Bay Area is 6th largest metro area in the US, and I am guessing that only Toronto Metro is in the same realm with regards to size in Canada. If you figure that the New York Metro area is actually split between NYR, NYI, and NJD and you could argue that San Jose is actually even higher on the list that #6.

      http://en.wikipedia.org/wiki/Table_of_United_States_Combined_Statistical_Areas

      If they mean we are in the middle purely on revenue, then that’s something I can probably see without squinting, but that brings us back to my original statements about the hockey team operating at a loss vs SSE probably operating “in the black”.

      • SharkFanXF says:

        Thanks Scott for balancing out that Occupy Wall Street rant.

        • Slappy_SEZ says:

          rant |rant|
          verb [ intrans. ]
          speak or shout at length in a wild, impassioned way : she was still ranting on about the unfairness of it all.

          noun
          a spell of ranting; a tirade : his rants against organized religion.

          PHRASES
          rant and rave shout and complain angrily and at length.

          DERIVATIVES
          ranter noun
          rantingly adverb

          ORIGIN late 16th cent. (in the sense [behave in a boisterous way] ): from Dutch ranten ‘talk nonsense, rave.’

      • Slappy_SEZ says:

        Thanks for you thoughtful & ADULT commentary.

    6. Jason DiCioccio says:

      Honestly, I’m not sure if people buy sports teams to make money. I think they buy them because they want to own sports teams.

      • Mike says:

        Yep. I want to write a post on this, but it would probably just end up being a more poorly-written version of one Malcolm Gladwell wrote a few years back.

        • Ruben says:

          I think people buy sports teams for the same reason people buy property to operate as a rental. If you can make money on the monthly mortgate, great, but I think it is the increased value of the property that really gets people into it. When/if SSE sells the team (or an investor is bought out of his ownership shares) I sincerely doubt any one is making anything less than a beautiful profit on their investment.

          • Scott J says:

            The problem is that if the numbers are to be belived (Lost $15M, Team is worth ~$200M), then the losses are way, way, way outpacing any potential inflation in the team value. So just like in the real estate example, if you are losing more than your equity is increasing, you are making a bad business decision.

            I don’t believe these are bad businessmen…to the contrary, they have made their millions by being smart decision, not taking wild risks.

            It could very well be the case that they make enough in their other ventures to support their dream of owning a professional sports team (as the OP suggested), but my guess is that they are making more than enough money off of the environment that the SJ Sharks create to justify taking a loss from their Hockey Operations department.

    7. Pher says:

      The fact that the Sharks can field such a competitive team each season, sell out the building, be charging so much for everything, have corporate sponsorships up the yin-yang, and the Oakland A’s to be profitable is either sickening or false. I hope that the latter is true b/c I think that a preseason hockey game is more exciting, competitive and watchable than any A’s game or Giants game postseason or otherwise. No other sport has that kind of intensity, hands down. Many don’t get the credit or prestige they deserve but this sport (I thought it was on the rise?) deserves our utmost respect as sports consumers.

      No matter what the future holds (to 12 or not to 12), I will faithfully watch this team because it is the team that I fell in love with hockey watching. To see its fate jeopardized when there are so many loyal fans in a city dying for people to root for (look at the Giants) we need this team to unify the city and the surrounding area.

    8. MJ says:

      Sharks games are always sold out and HP is a few thousand seats short of maximum NHL capacity. you have to wonder how much longer the ownership group will tolerate this loss of potential revenue.

    9. Patrick says:

      At least when this org complains about losing money they’re aren’t doing it while signing guys to 10+ year contracts for $50MM+.

    10. Tom says:

      Per Daren Dreger, the Sharks and other teams, were rumored on working with Nashville on a possible trade for Shea Weber until of course that hammer of an offer sheet came in from Philly…

      But, does anyone think that could indicate that in fact Dan Boyle is being shopped?

      I know that if a player like Shea Weber becomes available, you MAKE ROOM for that caliber of player, but I have to think DW see’s the writing on the wall that Dan Boyle doesn’t have much time left in the NHL. I’m totlaly with you dudes though, I love dan Boyle as a player and would hate to see him go, but I think it will happen this year or the next IMHO.

      It makes me drool to think of the possibility that Weber could have ended up in teal…!

      • hateseed says:

        Weber is fantastic, don’t get me wrong, but his value is hyper-inflated right now, and he’s seriously overrated. /shrug The age diff is the only reason I would take him over Boyle. Certainly not an insignificant factor, some would argue the most important factor. Worth saying though.

    11. evilducks says:

      To be slightly fair to the Sharks Management. They are at least attempting to abide by the controls on owners they thought were put into the last CBA. It’s hardly their fault hypocrits like Leopold are out there bitching about small market teams and then signing 200M worth of contracts.

      They spend enough to stay competitive, they don’t circumvent the cap and fuck themselves out of tons of money up front. If I was going to listen to anybody complain about the state of things, it would be Sharks ownership.

      There are a couple things I like in the ownership proposal. With the amount of teams that spend to the cap, reducing cap increase to 5% instead of 10% makes sense and I like the 5 year cap on contracts. That’s about it. I think the Players could probably loose a few % points, but it’s hard to argue that somehow the league is in trouble because they’re greedy.

    12. Andy C says:

      I’ll own up to not having listened to the podcast yet as I’ve been on holdilday :-) and having never tried posting a link on here, this may not work as a hyperlink, but having got that out the way:

      The following article is a must read on the subject:
      http://www.theglobeandmail.com/sports/hockey/globe-on-hockey/why-nhl-teams-cry-poor-despite-the-leagues-record-growth/article4429817/

      The graph showing revenue per team and how the Sharks fare ($96m revenue v’s $213m Toronto & $52m Phoenix) shows just why so many teams are making losses.

      It makes a very good case for the players to not take a cut, but that revenue sharing is the key to the financial health of the NHL.

      In terms of your original post Mike, it shows that the Sharks are mid-point in terms of market size and revenue, but this is mid-point in terms of number of teams – but not the mid point of revenue, as this is so skewed by a handful of teams at the top end. It would be interesting to go into more detail on exactly how the revenue is derived and how these teams fare so well, as the answer to turning a profit does not appear to be ticket sales alone.

      • evilducks says:

        Ticket sales play a lot into it. To get tickets to a Leafs game costs substantially more than to a Sharks game.

        There is also merchandising, and of course the teams at the top fare better here as well, since they have a large fan base who buys tons of stuff.

        • Ian says:

          ED hits it right on the head, I’d like to add that a lot of those seats are corporate owned and are paid for regardless of weather there is a butt in the seat or not. I will often hear from friends who make the trip to Toronto to watch a game that they are sitting with the real fans or have good seats. So even if someone gets annoyed at how much they have sucked sand for the last decade there is always someone waiting to fill the few seats left for the average fan and a lot of markets would have a hard time dealing with the leafs level of success because eventually you run out of someone waiting to fill that seat.

          At the end of the day a lot of people have no problem calling into talk radio to cry about how bad their team sucks but they still buy their seats, subscribe to “leafs TV” and buy their merch, and hope the cap gets abolished so they can just go back to buying their team because their management has not been able to build them one yet.

        • Andy C says:

          Thanks ED – wouldn’t have thought that ticket sales and merchandise would have resulted in that much of a discrepancy, but thinking about it, I guess they do considering the number of Phoenix jerseys you see around!

          I can see where the majority of owners are coming from – without revenue sharing for merchandise their main ability to influence revenue is ticket prices and if they try to put them up, they get the reaction from the fans that the Sharks’ have recently experienced.

          The business model clearly does not work for most teams, so the NHL needs to decide – does it want parity or not? With parity must come more revenue sharing (as much as I hate the concept, but lets face it, the league is a cartel so it’s not like the teams are in a truly competitive marketplace anyway).

          To me, it seems that Gary Bettman needs to grow a pair & stand up to the handful of owners who are taking advantage of the cartel & just watching the money roll in at the expense of everyone else. It’s difficult not to agree with the view of the article that there is more revenue than expenses in the league, so when it comes to dividing that profit up, the owners need to get their own house in order before asking the players to give up their share.

    13. Slappy_SEZ says:

      I STRONGLY encourage everyone – to watch Chris Hedges [July 20, 2012] interview on Bill Moyers (website).

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