Friday, February 18, 2005

Apropos of nothing...

News item: Vikings owner reaches agreement to sell team for $625M

Tale of the Tape:
1998 purchase price: $246M
Return on capital investment: 154%
Annualized: ~17%

Annual broadcast revenue: $84M (2004)
Annual ticket revenue: $61.63 x 10 x 64,000 = $39M
Annual player payroll: $57.4M (avg. 2000-2003)
Annual operating profit: approx. "considerable"

Reason for selling team: taxpayers won't build him a new stadium

Number of Vikings Super Bowl appearances since 1998: 0

Money quote: "McCombs said the Vikings couldn’t generate enough revenue in the 22-year-old Metrodome to compete. "

Throw it on the pile - just a little more evidence for NHL fans to ignore while calling the players greedy.

4 Comments:

At 6:30 PM, Blogger Chris said...

Matt,

While you do have a number of coherent points to make on the subject of the recent failed NHL negotiations I think you're analogy between the NFL and NHL is really quite misleading. The general state of the NFL is wholly different than that of the NHL.

I'd direct you here to a post I made on the subject and examined a number of the causes for the rather pathetic state of the NHL.

http://nitorinadversum.blogspot.com/2005/02/nhl-season-is-over-topical-take-on.html

The rather telling numbers are the TV ratings as well as the tv revenues in the states where obviously the majority of the teams are situated. For the NFL a large portion of their revenue comes from television. While the NHL gets peanuts essentially because its competing with bowling and figure skating for ratings not the other major sports.

The relevant statistics are as follows:

Television ratings in the US for hockey are also the lowest of the four big sports (baseball, football, basketball, hockey).

NHL: 1.1 rating on ABC, 0.47 on ESPN and 0.24 on ESPN2
MLB: 2.7 rating on FOX, 1.1 on ESPN and 0.6 on ESPN2
NBA: 2.4 rating on ABC, 1.3 on ESPN, 0.9 on ESPN2 and 1.4 on TNT
NFL: 9.0 rating on CBS, 9.9 on FOX, 7.1 on ESPN and 11.0 on ABC.

Consequently the tv rights for broadcasting NHL games in the US is the lowest.

NFL cashes in on per year: ABC (Monday night)- $550 million, FOX (NFC)- $550 million, CBS (AFC)- $500 million, and ESPN (Sunday night)- $600 million.

MLB has this: FOX- $417 million and ESPN- $141.8 million

The NBA cashes this: ABC/ESPN- $400 million and AOL Time Warner/Turner Sports- $366.5 million.

Now let’s turn our attention to the NHL: $120 million for their last contract with ESPN, ESPN 2 and ABC and this year, a whopping $60 million or half of what was made last year.

Compare that with average player salaries..

NFL- $575,000 (although a lot of additional costs are tied up in signing bonuses)
MLB- $1,003,000
NBA- $2,366,000,
NHL- $1,795,000

Given that gate revenues in the NHL haven't been anything to be excited about, its unrealistic to see their market value as being anything resembling that of players in the other four major sports. Nor is the worth of all but a few major NHL franchises anything comparable to even the meanest NFL team.

 
At 2:23 PM, Blogger Matt said...

Chris, I've read your comment and your post. As I've tried to explain in my handful of posts on the salary cap, I reject the notion that more central planning will save the NHL; I believe it should be less.

Anyway, this post had nothing to do with comparing the size and popularity of the NHL and NFL. It was an attempt to highlight this:

Thanks mostly to the NFL's salary cap and revenue sharing, the owner of the Vikings made a tremendous amount of money in a short time with very little risk. Meanwhile, his ownership stint provided no observable benefit to either the players or fans of the team. And this is the model I'm told is the right way for the NHL go.

Sorry - no sale.

 
At 3:52 PM, Blogger Paul said...

I'm not sure of the wisdom of paying over $600M for a business reporting $4.1M EBITDA.

You call this a low-risk busines? Have I got a deal for you! You can buy high-grade bonds and get 6-8% return annually, compounded - about $40 or $50M increase in value every year.

 
At 3:52 PM, Blogger Paul said...

Oops. Meant to include this link:
http://forbes.com/lists/results.jhtml?passListId=30&passYear=2004&passListType=Misc&searchParameter1=unset&searchParameter2=unset&resultsHowMany=25&resultsSortProperties=-numberfield6%2C%2Bnumberfield1&resultsSortCategoryName=Revenues&fromColumnClick=&bktDisplayField=&bktDisplayFieldLength=&category1=category&category2=category&passKeyword=&resultsStart=26

 

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