AEG opens the books to fans!

Wow. ™

 

i don't see this as anything more than a great publicity move


the whole concept is a croc because anschutz makes money off the kings by giving them a horrible deal at the staples center... so they lose money

which aids in getting a new deal with the players union


and which leads to a allowing them to have a fan check out the books (because they are losing money in the straight aeg concept), but anschutz... makes a killing


brilliant move publicly, but a complete croc

 

Well why don't we wait and see what the report says before condemning it. Stranger things have happened.

 

jmeissen0 knows all thats why...

 

why would they open up the books to a fan?


they are trying to show they fans they are losing money, which is something they are using in their favor for getting a new contract with the players union

there's been articles before providing specifics about the kings lease... lewieke (sp?) was pretty open about it in an l.a. times article from a couple months ago (when i said the same thing about that being a great publicity move)


with his stake in the staples center, no owner, but anschutz, could make money on the kings (provided they would have the same lease as the kings have now)



it's hook, line, sinker... and everyone is pretty much taking it




the guy is getting the aeg book on running the kings



again, great move by aeg... although it's completely bogus...

 

Knock off the personal attacks.

 

I've been following the stuff on LGK for several months now. The guy who runs that site claims to know a bit about accounting, finance and that stuff. There are several threads about this on their message board.

Bottom line is, the owners/players have a collective bargining agreement due to be negotiated soon. The poorer the owners look, the better position they are in for the talks.

I'm betting the books will prove that they are losing money just like the MLS lawsuit showed they'd lost a ton. It's paper money and can be moved around to show whatever the beancounters want it to show.

 

"Anyone who quotes profits of a baseball club is missing the point. Under generally accepted accounting principles, I can turn a $4 million profit into a $2 million loss and I could get every national accounting firm to agree with me."

--Paul Beeston, former MLB Chief Operating Officer

The key will be how much access this guy will get to same part transactions, shareholder dividends disguised as consulting salaries, increases in the value of the franchise, tax shenanigans...

...which reminds me, do other sports leagues use the depreciation maneuver baseball uses where they use the erosion of a player's skills over times to depreciate a certain percentage of the purchase price of the team? Anyone know what I'm talking about and whether they use it in Hockey, Soccer, et al?

 

The guy at LGK is claiming that he'll have full access to all their books. Then again, this has dragged on for several months now so if they were going to cook the books a bit.....nah, they wouldn't do that, would they?

 

Yes but whose books? Those of the Kings or those of AEG? Or of the Staples Center?

See the problem is that when people think about 'cooking' the books as you say, they think that it involves illegality and such. The problem is that there's nothing illegal about these same party transactions or how they are presented. They are all legitimate.

The problem is looking at figures like profit and loss as a benchmark for the health and viability of a franchise or company. When dealing with large corporations whose products come from a vary wide range of industries, looking at the individual profit/loss numbers for a division within the corporation or an entity owned by the corporation is highly misleading.

In defense of AEG and the Kings, the Kings have absolutely zero obligation to keep their ticket prices and concessions low regardless of the financial health of the team. If they want to charge $9.00 beers and $4,500 season tickets, they're well within their rights to do so. Could be a long term mistake, and the league may have structural problems that cause this to be an attractive option (exorbitant pricing plans like the ones in the early Skydome days usually have questionable long term benefits but are clearly short term profitable), but that's really an NHL issue and not an AEG or LA Kings issue.

 

Given the difficulty the Pens and Sabres have had finding owners, I think it's safe to say hockey has some troubles. If Jerry Jones became bankrupt, there'd be no trouble finding an owner for the Cowboys. (In fact, wasn't there a family dispute with the 49ers that forced them to sell the team? That sale went pretty quickly.) Or look at the Hornets...when the Charlotteans made it plain they wouldn't give the team a new playpen unless they got a new owner, Shinn didn't sell. To me, that indicates the NBA is a good deal, in general.

In contrast, look at the problems of the Expos. Baseball has some serious problems, and that was confirmed when the players lost the last round of negotiations decisively.

You're right, you can't look at what the owner says about the team's finances, but there are other things that can give you hints.

 

The Red Wings have the second highest payroll in the NHL and they NEED to go deep into the playoffs every season in order to make a profit. And most teams don't have the marketing might of the Wings to help boost their overall profitability. Also unlike the Kings, and most of the league for that matter, the Wings have been able to put a consistently successful team on the ice for the past decade. Yet, if they don't get to at least the second round, the team doesn't make money.

Now, I know that I don't have access to the books. But this was regularly reported information at the end of last season.

Imagine what the rest of the teams look like if the Wings are barely profitable.

 

As I mentioned, in terms of how we normally think of profit, that's a _big_ 'if.'

 

True. But with the exception of a few teams, hockey is a mess. Too much expansion for not enough fan base.

Again, take away the merchandising of the Wings, and I don't think they make a Red cent unless they get to the third round of the playoffs.

 

The Hurricanes average 15,000 fans/game for 41 games. Their $31 average ticket price is about $10 below NHL average.

$31x15kx41 = $19,000,000

Each NHL team gets about $5,000,000 in TV revenues from Disney.

The Canes player payroll is over thirty million. Throw in travel and other expenses and the picture just doesn't look too pretty. Last year's run to the Stanley Cup Finals, complete with hugely inflated ticket and parking prices, did not allow the "team" to break even.

 

So we're not counting concessions, parking, merchandising, local broadcast revenues or franchise value escalation (the big winner in owning sports franchises. Forbes estimates the growth to be about 11% in a down economy).

Forbes estimate the Hurricanes brought in about $67 million in revenue last year.

http://www.forbes.com/free_forbes/2002/1223/098tab.html

For example, whether or not the Red Wings are making a 'profit' as they call it, the fact remains that Illitch purchased the team in 1982 for $8 million dollars. Forbes estimates the team's value to be in the neighborhood of $266 million currently which is about 18% increase a year since 1982.

As for the Carolina Hurricanes, Peter Karmanos Junior bought the club in 1994 for $47.5 million dollars. Forbes estimates the value of the franchise to currently at around $128 million an annual increase of roughly 12%. If Karmanos had dumped that $47.5 million in the tech sector in 1994, he'd be _much_ less happy.

Indeed, not a single applicable team on the list has a current estimated value less than the price at which the current owners purchased the club, with the Lightning having the lowest rate at 3%. Not bad for our economy, eh?

Finally Forbes lists operating income for the league at a loss of only $300,000 league wide (a drop in the bucket in this economy).

The reason for the discrepancy between what Forbes says and what the NHL says can be found right there on the page in the notes: 'Earnings before interest, depreciation and taxes.'

"Interest" would be the interest paid on the debt value of the club. Although actual money counting it as an operating expense is clearly wrong since the lion share of these interest payments stem from loans used for the purchase of the team. I'm guessing the NHL counts all this in its official losses and I'm also guessing a lot of MLS 'losses' are of this kind as well.

"Depreciation" would I assume be the tax maneuver I described above where the team depreciates a certain portion of the purchase price of the team due to a loss of the value of the assets of the team when it was purchased. IE, businesses use this to recover capital gains or other tax areas under the logic that when you buy a manufacturing business (for example) implicit in the purchase price of this business is the value of all the equipment and machinery that comes with it. Since this machinery and equipment will break down over time and need to be replaced, the owner has suffered a 'loss' in that the equipment no longer has the value it once had.

The tricky part comes in courtesy of Bill Veeck. Veeck argued that implicit in the purchase of a baseball team, was that you also acquired all of the players that came with it. Since players, like machines, break down over time and need to be replaced, so to like machinery, the owner has sustained a loss and should be able to 'depreciate' this loss in some shape or form.

I won't go into a debate about the merits of Veeck's argument (though Andrew Zimbalist thinks little of it), but to date with some modifications and moderations, the argument has held up in tax law and is used widely (as would you or I in the same situation until we were no longer able to).

The kicker to all of this is that the various leagues have not only used this to various tax advantages (often in same party entities unrelated to the club), but at times when releasing financial statements have included this 'depreciation' in the 'loss' column when releasing figures.

Needless to say Forbes doesn't add them here and also needless to say they aren't losses in any standard way we think of profit/loss (and many would argue they aren't losses at all but net _gains_ for clubs) so including them would not be accurate.

And of course, taxes aren't counted either for a variety of reasons both practical and theoretical.

In short what the NHL thinks profit/loss numbers look like and what others would think NHL's profit/loss numbers look like are two _very_ different things, even though each is technically 'correct.'

 

No - and I bet the last item (franchise value escalation) is a bubble that is bursting.

Jiminy - where did I state that I listed the entire books for the team?

I'm merely pointing out just how overwhelming salaries are to NHL budgets.

 

Here's the thing...Karmanos wants to win. He's a huge hockey fan, and very competitive. He's not like the Bengals' owners, perfectly happy putting a sh**** product on the field and depositing the profits. He wants a championship.

And the Canes are dumping salary like mad. And if they truly thought they were on the cusp of greatness last summer (as they said), then they acted EXACTLY like a team that thinks it's on the cusp of greatness, but ALSO in poor financial position, would act. They just tried to keep everyone they had, they didn't go out and acquire a couple of big goalscorers to put them over the top.

Like I said earlier, I look more at how owners act, and how players who have seen the books negotiate, then the public pronouncements of the owners.

On that basis, clearly, the NFL is strong, baseball may have averted disaster last year, and hockey is troubled.

 

Ok, so AEG opened the books....

...do we know those are the REAL books?

(ask Bernie Ebbers about more than one set, or the folks at Qwest.)

 

More Precise Link

FASCINATING read...

Please note that the analyst is NOT looking at the nebulous concept of "profits," he is looking at free cash flow -- the ULTIMATE indicator of financial health. Why? In a nutshell, if your free cash flow is negative, the only way you will continue work as a going concern is with constant additional cash infusions. If you don't reverse the trend, you ultimately end up with a Ponzi scheme -- only ever-greater greater revenue growth will allow you to secure the ever-increasing credit needed to finance your obligations. When the credit providers turn off the faucet, the game is over. Please note that there is one other source of "cash infusions" in the NHL that may not take the form of debt per se, but should NEVER be relied on for balance sheet health: expansion fees. These one-time financial wind-falls (well, one for each franchise granted) are exactly that, namely one time only. Reading the article drives home the fallacy of financing ever-increasing player salaries with expansion fee proceeds...

In layman's terms, if the Kings are largely emblematic of the state of the league (and I believe they are "middle of the road" in that respect), the NHL teams are always taking on additional long-term and short-term debt, of whatever form, to cover their immediate payment obligations (e.g., player salaries, upcoming interest payment servicing past debt).

Here's another way to describe the phenomenon: U.S. Telecoms, 1996 - 2002 (e.g., Quest). OUCH.

A Financial Analysis of the L.A. Kings

http://www.letsgokings.com/modules....e=article&sid=278&mode=thread&order=0&thold=0

 

Re: More Precise Link

Thanks for the link. Fascinating is exactly way to put it.

There are some serious problems (for instance, he assumes that consolidation of the Alberta and Florida franchises would result in increased support, which is crap -- completely distinct markets) with the recommendations end of it, but it's a very serious look at the finances.

 

And this is why we're headed toward a very difficult collective bargaining time in hockey, to say the least.

But take that Kansas stuff outta here.

 

The solutions he proposes are far-fetched in terms of realistic implementation, I agree, but the purpose of citing the article isn't meant to show how the NHL is heading for a massive train wreck (which it is), but rather to show MLS fans the way to salvation. Section III, entitled "The Facts," is beyond reproach, analytically and conceptually. It clearly illustrates the urgent need for MLS to become positive with respect to free cash flow ASAP.

Expansion in our beloved league should NOT lead to significant salary cap increases, and the next TV contracts should, if possible, start bringing in some revenue (if not a lot, and I must admit I don't know the details of the new FSW package, which is NOT time-buy). Those things, coupled with additional revenue streams secured through soccer-specific stadiums under MLS control, should make MLS a fixture in the U.S. sports landscape for decades to come...

Finally, I totally know Phil's old stomping ground is called "Qwest" -- I just mistyped the name. That mistake necessitates a DOH! in quintessential Homer-speak. May the Big Soccer peanut gallery, of which there are many denizens, forgive me.