Quote:
Originally Posted by acottawa
First of all the Senators have never made money. Melnyk bought the team out of bankruptcy and he has lost money on the team pretty much since day one.
http://www.ottawacitizen.com/sports/...118/story.html
I think some people confuse “operating income” (which Forbes lists) with profit, but those are not the same thing. But if someone rents out a condo out for $1000, pays $200 in condo fees, $200 in taxes and $800 in mortgage interest, their operating income is $800 a month, but the are taking a loss of $200 a month.
Yes the capital asset has appreciated (which has happened across the league, mainly because broadcasters are currently overpaying for rights), but that is not the same as making money.
It is possible another owner may be willing to take a loss on the team in hopes capital appreciation exceeds the annual loss on the team, or in hopes of a future relocation, but such an owner has zero incentive to build a new arena. |
Okay, a few things. First, having an asset that appreciates by roughly 300% in 15 years is a pretty good return on investment. Most people would consider that to be making money. That is the way franchise ownership in professional sports works. Owners make their real gains on the increase in the value of the franchise, not on operations. That is why Bettman's single purpose over his tenure has been to increase franchise value.
Secondly, no one can definitively state that the Senators have never made money. The team's financials are not public. An owner crying poor is pretty weak evidence that the team isn't making money. There are many ways to move profit to associated businesses to minimize tax. Even if you take him at his word, the article you linked says this:
"On Melnyk’s decade-long watch, they say, the team has generated a grand total of just $6 million on operations — that is, total revenues minus the costs associated with paying and moving the players, advertising and managing the arena.
After subtracting items unrelated to operations — such as interest on the team’s debt and capital expenditures to keep the arena up-to-date — Melnyk has had to absorb cumulative cash losses of $94 million"
So even taking Melnyks own words, the operations of the team have made a small profit over the time he has been in ownership (i.e. the positive operating revenue that Forbes cites every year). The team has lost money in some years, no doubt, but in years with high attendance and long playoff runs, it is clear that they were profitable, as the net cashflow on operations has been positive.
Melnyk bought the team cheaply and the team was debt free when he bought it. The fact that he highly leveraged his purchase and the team (to support his other questionable businesses according to some reports), and has high debt payments to make from his operations does not mean that the team "never makes money". Operating revenue is the best measure of the viability of the operations. That is why Forbes uses that figure.
It will always be tight in this market, but an owner who buys the team using less debt has a reasonable prospect of making money. There is great incentive for a new owner to invest in a new arena - higher revenues generated from a more central location, both from the team and other events like concerts etc. Also, buildings don't last forever. The CTC is probably 60% of the way through its life cycle, so he needs to be planning for 15 years from now.
The question is whether those increased revenues are enough to justify him funding the full cost of constructing the arena . Other than in the biggest markets, there is usually some public support required to make the massive cost of a new arena viable.
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