On the Forecheck
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Is New York a “small market”?
by Forechecker on 02/02/09 at 11:55 AM ET
Comments (7)
Good old Larry Brooks of the New York Post is at again, crying to the heavens that the NHL’s revenue sharing guidelines are “unfair”, because the woeful New York Islanders are unable to tap into those funds. Specifically, since the Islanders play in a market with more than 2.5 million households (PDF), they are excluded from any distributions under the current Collective Bargaining Agreement (CBA).
Larry understands this much, for as he says, “NHL owners couldn’t bear the prospect of giving a portion of their revenue-share money to the Blackhawks back in 2005 when Bill Wirtz was doing his very best to drive his historic franchise into the ground.” The NHL was, somewhat understandably, reluctant to dish out revenue sharing to a team that could tap into a major metropolitan market, but failed to do so purely through its own misguided policies.
Why, then, should the Islanders deserve anything different today?
Now that the Blackhawks have proven how quickly things can be turned around, both on and off the ice in a large traditional NHL market, the New York Islanders stand out all the more as a shining example of enduring incompetence, drafting talented players then trading them away as they approach NHL stardom (Roberto Luongo, Olli Jokinen, Todd Bertuzzi), locking themselves into awful long-term contracts (Alexei Yashin, Rick DiPietro) and failing to address stadium issues which have lingered for far too long. Back in 1998 the team had to abandon the Nassau Coliseum for a time due to structural concerns, and they’ve been trying to move forward with plans for a replacement venue for a decade now, without the first brick being laid.
The question that needs to be asked is, are the problems the Islanders are facing tied to the local market, or are they self-inflicted? I’d lean towards putting the blame on their ownership and management. If they can snag a $20 million/year TV deal, they certainly should have the market to draw upon to fill a rink that is among the very smallest in the league (capacity 16,234). Heck, if even the Islanders bloggers are calling out Brooks on this one, you know it stinks.
A major reason behind the big-market clause, and the performance measures like paid attendance minimums, was that the current revenue sharing system was intended to help teams in smaller markets that demonstrated commitment on the business side. The league was leery about handing out cash to reckless losers. The Blackhawks were an absolute basket case in recent years, just as the Islanders are today. The responsibility for that rests entirely with the ownership and management of the team. But Brooks wants to lump them in with teams like the Nashville Predators, which are a beneficiary of today’s revenue sharing plan:
Bettman has endorsed the concept of teams purchasing their own tickets at deep discounts in order to reach revenue-share recipient benchmarks. He has flat-out rejected the notion that such an act constitutes circumvention of the CBA, though it sure seems to violate the spirit of the agreement.
The Islanders, though, can’t worm their way into eligibility. And they need help, every bit as much help as the Predators, who always seem to be in the middle of some scam, not that there’s anything wrong with that.
Nice, but inaccurate, dig at David Freeman there; yes, he discussed the possibility of purchasing tickets if needed to help the Preds reach the revenue sharing requirement (at market price, not “deep discounts”), but it’s looking like that won’t even be necessary. Besides, the NHLPA (and NHL) don’t have a problem with it because the money spent on such tickets counts as Hockey Related Revenue, so the majority of it goes right into paying player salaries.
As for the “spirit of the agreement,” I think it’s worth quoting from the preamble to the appropriate section of the CBA:
The NHLPA has conditioned its agreement to the Team Payroll Range System, set forth in Article 50 of this Agreement, on the NHL’s agreement to establish this Player Compensation Cost Redistribution System. The Player Compensation Cost Redistribution System acknowledges the reality that the Upper Limit of the Payroll Range prevents certain high-revenue Clubs from spending as much of their revenues toward Player Compensation (i.e., Player Salaries, Bonuses and Benefits) as they might otherwise be capable of spending. In addition, there may be lower-revenue Clubs that may have challenges in spending more than the Lower Limit of the Payroll Range. The NHLPA has focused on the limitations on the spending ability of the Clubs, and desires that these Clubs be financially supported and thereby able to spend sufficient amounts on Player Compensation Costs to achieve a closer range of payroll spending than might otherwise occur.
The Player Compensation Cost Redistribution System described herein, therefore, is designed to cause certain high-revenue Clubs to contribute even more of their revenues toward the payment of Player Compensation - albeit indirectly - by redistributing a certain portion of the revenues of such Clubs to the lower-grossing, small market Clubs so that such lower-grossing, small market Clubs may be able to, and elect to, spend more on Player Compensation. The Player Compensation Cost Redistribution System is intended to enhance the ability of all Clubs to be financially competitive with one another, and, at the very least, to allow all eligible Clubs to be able to spend to at least twenty-five (25) percent of the Team Payroll Range, plus the Club’s share of Benefits, on Player Compensation (i.e., Player Salaries, Bonuses and Benefits).
Basically, in exchange for agreeing to the salary cap, the players got a salary floor, which, in the case of “lower-grossing, small market Clubs”, was to be subsidized in part by the top revenue-generating teams. The goal was to ensure that all clubs could spend to at least a quarter-way into the overall salary range (with today’s cap of ~$56M, and a floor of ~$40M, that target is $44M).
The CBA sets out three barriers to a club becoming eligible for revenue sharing, and the “small market” requirement is just one of them. The other two are 1) being in the Top 15 in terms of Preseason and Regular Season Revenues, and 2) if the team “has Available Team Player Compensation for the League Year that exceeds the Targeted Team Player Compensation for such League Year.” So how do the Islanders fare on those fronts?
#1: Again, with a $20M annual local television deal, I’d be very interested to see that ranking of NHL clubs by Preseason and Regular Season revenue. I find it hard to believe that the Islanders are too far down that list. If they are out of the Top 15, I doubt they’re any lower than 20th. I’ll give them a cautious “maybe” here.
#2: As to the ability to pay the targeted 25% mark, it doesn’t appear that the Isles are having trouble there; this season they’re right in the middle with a team salary over $48M, and last year they were at the mid-point as well with a payroll just shy of $42M, between last year’s cap of $50M and floor of $34M. If things were so bad, you’d think the Isles would be scraping the salary floor.
At best, the Isles match only one of three criteria to qualify for revenue sharing, and for good reason. The intent of the program is to enable financial competitiveness (the relatively narrow $16M spending range that teams have between the floor and the cap) by redistributing some revenues from the major markets to the smaller ones. It’s not designed to support struggling teams under any and all circumstances. We don’t know the actual state of the Islanders’ books, but I’d bet that this is more of a case where the team isn’t foundering nearly as badly as some would claim, but if the do get their act together, they could make an absolute killing, much like Chicago is.
The bottom line is that since the NHLPA has declined to re-open the current CBA for renegotiation, it will remain in force through at least September 2011 (the players have the option of extending it to 2012). Whether or not Brooks thinks the current system is “unfair”, it’s not going to change anytime soon. Yes, the Islanders are in a sorry state, but that’s not related to the strictures of the Salary Cap System; it’s the fault of on- and off-ice management that has ruined a proud tradition on Long Island.
UPDATE: Lest ye think that I’m merely harshing on the poor Islanders, I have a constructive suggestion for a better way to help them.
Filed in: NHL Commentary | On the Forecheck | Permalink
Tags: CBA, revenue+sharing, salary+cap,
Comments
The Isles are actually way near the bottom in terms of revenue and as the commenter above notes, have a ton of challenges in their market. Yes, the team was a basketcase in the past, but they’re rebuilding this season just as teams like Pittsburgh and Washington did in the past.
How long do they get punished for the Milbury years? Forever? I don’t think they’ll survive that.
Posted by James Mirtle from Toronto on 02/02/09 at 01:15 PM ET
How long do they get punished for the Milbury years? Forever? I don’t think they’ll survive that.
Considering all the moves Milbury made and the effects they had in player personnel selections (trading Luongo to draft DiPietro for example), the team will feel these effects for what seems like forever anyhow.
The team needs the help now because things will get better. Spot on James.
Posted by HockeyJoe from Upstate New York on 02/02/09 at 01:35 PM ET
Wow, color me stunned on the revenue aspect; I’m seeing them ranked 29th in terms of revenue as of 2008 per Forbes. Given the local TV money they’re getting, that only underscores how poorly they’re doing everywhere else.
My point about the market is, ownership and management have been working on this arena issue for a decade now, with nothing to show for it. Is the current Lighthouse project taking things too far? Is it a case of “best being the enemy of better”?
Maybe the NHL needs to take the approach that the NFL did a few years back, establish a central pool of funds that can be tapped into for stadium development. With a modern arena and a turnaround on the ice, the Islanders could provide a similar shot in the arm as what Chicago has given the league this year. If the league wanted to gather forces to help with the specific purpose of upgrading the arena (for the Isles as well as others), I could see that making a ton of sense. To make them eligible for ongoing revenue sharing, however, does not.
Posted by Forechecker from Nolensville, TN on 02/02/09 at 01:39 PM ET
To see how the lead in article affect spolling go to Mr Mirtles From the Rink Site http://www.fromtherink.com/ and see how the same question fares.
Posted by Hockey1919 from Montreal on 02/02/09 at 01:45 PM ET
Forechecker: To give you an idea of how the Isles are viewed, at least up here in Upstate NY where we don’t get the full compliment of MSG Networks, the Isles easily check in fourth out of four NY/NJ teams for us TV wise. Sabres, Rangers, Devils and Islanders are a distant fourth.
The Sabres got a sweetheart deal when Empire Networks folded up the tents with the Rigas crooks going to jail and cut a deal with MSG that has Sabres games shown all over upstate New York on MSG, more often times than not bumping off Rangers games from the main MSG network. The Devils get play on what was FSNY and is now called MSG+. The Islanders, maybe, get a game every couple of weeks up here - mind you I’m near Albany (200+ miles east of Buffalo, 150 miles north of NYC).
The Isles most certainly are third banana amongst hockey teams in the Tri-State Area and if you factor in football/baseball coverage for those parts of their seasons and competing with the Nets and Knicks in basketball…. Forget it. If you’re the third banana hockey team in NYC playing in a dump of an arena mired in a mess where the smoldering wreckage of what Milbury left behind is still being cleaned up - yeah it’s going to be bad and they need the help. Just seeing “New York” in the name doesn’t automatically mean people are shoveling out their bucks for them
Posted by HockeyJoe from Upstate New York on 02/02/09 at 09:06 PM ET
Valid points all around.
Sure, the market isn’t the same here on Long Island as it would be elsewhere, but to deny a team help when it is struggling just seems to go against everything the CBA was drafted for in the first place. If the Rangers, Red Wings, Stars or even Bruins fall on hard times - they should get help regardless of their markets or household reach.
All dynamics aside - as Mirtle already said, it’s not fair to lump all the past negative and/or poor management decisions of the past onto this lastest bit of news.
The Coliseum is horrible, antiquated and in dire need of replacement. Heck, it should be razed and have a brand new stadium built in it’s footprint. However, the fact of the matter is no matter how long talks have been going on about a replacement and or improvements - it isn’t the fault of the owner. There has been a serious political problems here on Long Island for as long as I can remember. Politics are the only thing holding up the Lighthouse, the county gave their approval - they are going to wait forever on the town as they seem hell bent on allowing development of the surrounding land. Land that belongs to the county…..
Landing John Tavares would be a big step in the right direction for the Islanders, is he a means to an end? No, but put on a team with an ever growing group of good prospects will be fun to watch.
Posted by Michael Schuerlein from Long Island, NY on 02/02/09 at 09:09 PM ET
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The Islanders abysmal rink is directly related to the local market. The Town of Hempstead hasn’t allowed them to develop the parking lot paradise surrounding the Coliseum even after the County approved the developer. The onerous lease was signed by previous and not the current ownership.
In turn, hte Islanders are a “large” market that is excluded from tapping into that market by the NHL itself. Plans for the otudoor game at Yankee stadiume that was originally brokered by the Islanders has been scuttled in favor of placing more “marketable” teams if the event is to take place.
Point #1 The $20 million cable deal is a remnant of the Islanders and the creation of Cablevision in the early 1980’s when the Islanders were the centerpiece of the fledgling network. When Cablevision was bought up by MSG it netted the Islanders a substantial annual payment. Every other statement is just fluff and conjecture (hardly believing sin omehting doesn’t make imore or less of a fact). It has nothing to do with market or market share it is dividends paid on an investment in the cable sports market thirty years ago.
Point #2 Is contrary to the point of whether or not they have good ownership. You have an owner willing to lose exceptional amounts of money to maintain the league trageted payroll of $44 million. Where do other revenue sharing teams fall in terms of the salary structure? Is Nashville dead last in salary? So salary structure apparently doesn’t matter in terms of NHL handouts.
Posted by Hockey1919 from Montreal on 02/02/09 at 12:58 PM ET