
FORBES 4-YR PACIFIC DIVISION REVENUE ESTIMATES - JAMES MIRTLE
Forbes National Editor Michael K. Ozanian and Sr. Statistics Editor Kurt Badenhausen released the annual
NHL Franchise Valuation report yesterday. Forbes ranks the Sharks
19th out of 30 NHL teams, with a franchise valued at $179 million. Forbes estimates the Sharks increased revenue 9% over last season to $85 million.
In his
Morning Buzz column for the Mercury News, John Ryan notes that the Forbes $2.4 million estimate for Sharks revenue in 2007-08 differs with what Sharks President and CEO Greg Jamison told beat reporter David Pollak earlier this month. Jamison told Pollak that the Sharks lost $2-3 million last season. Ryan also noted a Sharks statement that the figures were put together without any cooperation from the NHL, something that differs with the Forbes
MLB valuations which saw all but 2 teams contribute information (operative quote "to some degree").
James Mirtle states in a caveat to his
4-year analysis of Forbes revenue estimates, that the figures in the graph above for the Pacific Division are net of revenue sharing. Mirtle also says in an email that concrete numbers are impossible to come up with. Facts matter. The National Hockey League and the NHL Players Union burned an entire season due to the numbers, and the memory is still fresh in the minds of many fans.
There are fundamental principles at play that are not up for debate, everything must even out on the books. Determining a team's concrete revenue figure and developing an accurate franchise valuation involves navigating a maze of complex revenue sharing agreements, determining hockey-related and non-hockey related revenue, franchise value appreciation vs depreciation and amortization, travel/affiliate costs, and any number of local or business factors that Forbes could not accurately represent without involvement from individual NHL organizations.
The Sharks have reportedly told the Mercury News that they were not contacted by Forbes. They confirmed that to this blog. Washington owner Ted Leonsis said Forbes was wrong in
2006, noting that the Capitals were going to lose money that season instead of running a $4.6 million operating profit as noted in the Forbes valuation report. The Los Angeles Kings were apparently upset enough by the estimates to let money manger and Kings fan
Philip Propper evaluate the books in 2003. A pdf file of his report was linked on the sidebar of this blog for several years. The Kings claimed to lose $105 million since AEG bought the team in 1995, and were on pace to lose $10 million in 2002-03 according to Ralph Frammolino of the LA Times. Propper found a
serious discrepancy between the Kings financial claims and the Forbes estimate of a $7 million operating profit for the franchise in 2001-02.
So, how accurate are the figures developed by Michael K. Ozanian and Kurt Badenhausen? How complete is the information Forbes used for each team? An email and a phone call to Michael K. Ozanian for this post was not returned. Prior to the lockout three competing financial assessments released by Forbes, the
Levitt Report, and
Moag and Company painted three disparate pictures of league finances.
With no publicly available alternative, and no transparency from individual leagues or the NHL, the Forbes numbers are accepted by most at face value. Teams allege that releasing comprehensive financial information could significantly impact their business negatively, and they have a point. Evaluating the Forbes estimates can also be instructive up to a point. Ozanian writes that the NHL's biggest problem is the financial health of the Phoenix Coyotes franchise, who at $68 million according to Forbes has the second lowest revenue for 2007-08. The Coyotes are ranked 30th out of 30 NHL teams with the lowest franchise valuation in the NHL at
$142 million. Other than a sale price of $193 million and an enterprise value (equity plus net debt) of $174 million, nothing about the
Nashville Predators is mentioned. Lynn Zinser of the
New York Times reports the Predators have jumped from last place to 23rd in one year, but she notes that Forbes also recently included Nashville on a list of top 10 sports franchises most likely to move.
Forbes estimates a league wide revenue increase of 13% for a $92 million per team average, and an operating income average (earnings before interest, taxes, depreciation and amortization) that rose 48% to $4.7 million per team. O.C. Register beat reporter
Dan Wood reports the Anaheim Ducks are ranked 16th with a franchise valued at $202 million, and revenues equalling $90 million.
Rich Hammond of the LA Daily News reports that the Kings are ranked 12th, with a franchise valuation of $209 million. Hammond also notes that a reported operating income of $1.2 million is far higher than the Kings claims of losing millions each season.
So, how accurate are the Forbes numbers and what do they mean for the NHL and the San Jose Sharks? Your guess is as good as mine, and apparently, as good as that of Forbes.
[Update] In addition to the league valuation, Forbes also published an article by
Peter J. Schwartz on the best fighters for the buck. Sharks enforcer Jody Shelley finished
14th. Schwartz writes that Shelley's salary is 13% below other UFA qualifying enforcers, but that the number of fights he has won declined in each of the past 4 seasons. This year, Shelley is undefeated (2-0-1) according to the readers of
hockeyfights.com. Schwartz took a fighters experience into account, their salary and win totals, and noted that only 15 active players dropped the gloves 20 times or more and played in half their team's games over the last two seasons.
Michael Ozanian also runs a
Sports Money blog at Forbes covering the sports financial beat. Kurt Badenhausen is the author of the annual "most miserable city"
index, which raised considerable controversy when Detroit and Stockton were ranked first and second overall in 2008. Forbes popular annual ranking of business schools (based on rankings, reputation and resources) caused a near revolt in some academic circles they were so despised. Yahoo's
Greg Wyshynski notes Forbes dependance on ticket sales in revenue determinations, that 18 teams had an operating income of less than $2 million, and how a stronger Canadian currency has had a significant impact on revenue growth for Canadian NHL franchises.
Jim Kelley of Sportsnet is skeptical of the Forbes valuations, but uses the data to point to the impact of the Carolina Hurricanes missing league-mandated revenue targets to qualify for revenue sharing. The Hurricanes have the lowest operating income in the NHL at -$11.5 million.