NHL report: Teams lost $273 million last season

Posted: Friday, February 13, 2004

NEW YORK Painting a gloomy financial picture that could lead to a lockout, the NHL released a report Thursday that its 30 teams combined for $272.6 million in operating losses last season.

To bolster its contention of widespread red ink, the league hired former Securities and Exchange Commission chairman Arthur Levitt Jr. to examine franchises' financial figures. Levitt said his report was independent and concluded 19 teams had operating losses in 2002-03.

''The results are as catastrophic as I've seen in any enterprise of this size,'' Levitt said. ''They are on a treadmill to obscurity, that's the way the league is going. So, something's got to change.''

The NHL Players Association immediately challenged the results. Ted Saskin, the union's senior director of business affairs, said that its examination of four teams' finances Boston, Buffalo, Los Angeles and Montreal found revenue and benefits to the clubs had been underreported by $52 million.

''The Levitt report is simply another league public relations initiative,'' NHLPA head Bob Goodenow said in a statement. He called it ''fundamentally flawed'' because it defined NHL revenue in the same manner used by the NFL and NBA in their salary-cap systems.

In addition, the league released figures to The Associated Press that show 10 consecutive seasons of operating losses totaling $1.544 billion on operating revenue of $12.98 billion. The league says players got 75 percent of operating revenue last season, up from 57 percent in 1993-94.

Hockey's collective bargaining agreement expires Sept. 15, and commissioner Gary Bettman, echoing baseball management in its 2002 bargaining talks, said change is needed.

In 1994-95, a 103-day lockout canceled 468 NHL games, cutting each team's schedule to 48 games. After reaching a six-year labor contract, the sides decided in 1997 to extend the deal through this season.

Bettman conceded that decision to extend the agreement, and the one to expand by four teams, was based on a belief that the league was on sound footing. He said Thursday that might have been overly optimistic.

''If we don't fix this, I want you to hold me accountable,'' he told reporters.

Levitt reported the league had $1.996 billion in operating revenues last season and spent $1.494 billion on players.

''I would not underwrite as a banker any of these ventures, nor would I invest a dollar of my own personal money in what appears, to me, a business that's heading south,'' Levitt said.

Levitt was paid $250,000 in advance to produce the report and said the league did not interfere with his conclusions. In addition, the accountants he used were paid at least $500,000, he said.

The report said $1.047 billion of the league's money came from tickets $886 million from the regular season, $111 million from the playoffs and $50 million from exhibition games. Broadcasting contracts and new media brought in $449 million and arenas took in $415 million from areas such as concessions and advertising.

Factoring in below-the-line costs such as interest and depreciation, Levitt said the loss increased to $374 million.

He said 26 of the 30 teams were audited. Buffalo and Ottawa were not because they were in bankruptcy proceedings, and two unidentified teams could not be audited because accountants concluded they were not viable ongoing concerns.

While six teams combined for $188.4 million in operating losses, 11 teams combined to make $69.8 million.

While Levitt did find some owners put relatives on their payrolls at salaries that were above market, it was no more excessive than other businesses he had examined.

Part of the debate between management and players is how to define revenue. Twenty-two of the 30 teams play in arenas that are owned at least 50 percent by affiliates or related parties, and Levitt used attendance to apportion revenue among the different teams and events that use the buildings.

In addition, he increased revenue for the league by $30 million to account for underreporting of broadcast money by teams that are owned by networks that televise their games.

''We've always said it's not an accounting issue of making sure the numbers add up,'' Saskin said, ''but a much more complex task of how one defines the revenues in a business with many related parts and complicated corporate structures. There's no way to tell because they continue to refuse to give you individual team financial information.''

The last bargaining session was Oct. 1. Bettman said the sides had ''plenty of time'' to reach an agreement.

''We have an economic system that doesn't work,'' he said.

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