thinkwild said:
Andrews page had a good summary of the problems defining revenues in the Levitt fashion. Its a good read. Heres a snippet
Exactly. Everyone surely agrees that the players deserve a percentage of the revenues they generate. Nobody knows what that percentage should be and nobody knows exactly what is meant by hockey revenues. That is why the NHL phrase is "designated" hockey revenues. Levitt took the NBA formula for defining revenues and applied it to hockey. The NHLPA (and MLBPA) reject the idea that a formula could possibly capture the revenues that teams actually generate.
The problem is that a formula doesn't reflect reality for any team. There are 30 different businesses in the NHL with several different models. Levitt invented a composite that is supposed to present a proxy for the real revenues. He invented an imaginary team, one that splits revenues with affiliated entities in defined ways.
There are thirty different businesses involved can all report very exact numbers set out by the Levitt formula and many will still be wildly under-reporting the revenues the players actually generate.
One business model involves real estate deals. The Phoenix Coyotes are at the centre of a $750 million real estate deal, one that is designed to turn a very large capital gain for the developer and team owner. Isn't part of that capital gain generated by hockey players?
Another business model structures the team as a tax shelter. The Ottawa Senators started out as a real estate deal, but if Rod Bryden had not run out of time and he had successfully skinnied his partnership past the banks, he would have converted it to a very profitable tax shelter. The hockey team would have generated $60 million a year in tax savings for the partnership. Why shouldn't those savings count as hockey revenues?
Madison Square Gardens is a television network as well as an arena. The Rangers don't make money? How often do television networks get content for nothing? If the Rangers make money it is a huge bonus for MSG. How many cable subscribers does Comcast sign up because of the Flyers? The Anaheim Mighty Ducks were a key marketing element in three Disney movies. How does Levitt count that money?
In some arenas - like GM Place - the hockey team is probably responsible for 95% of the advertising revenues and luxury box rentals. In other arenas - like the Staple Centre - the Kings might generate a third. Levitt sets out a formula that will almost surely be wrong for both places.
There are three things the players can be sure about:
1) The only individual who knows exactly how much revenue the players are generating - including value added to all the affiliated companies - is the owner. The players can never really know given their level of expertise and resources. Left to his own devices, an owner will count all the revenues and benefits when setting his payroll.
2) Any cookie cutter formula that forces 30 different business models into one mold is sure to be wrong. "Designated hockey revenues" does not equal "real hockey revenues".
3) The owners would not negotiate a formula that set "designated hockey revenues" higher than the real hockey revenues. No matter what is negotiated into the package it will be less than what the players actually generate.
Not only does the Levitt report expect players to accept that the "official" NHL revenues are the only revenues that should count, they are expected to accept that there is a fair fixed percentage of those "designated" revenues. Obviously this is incorrect. The player share should not be fixed. It should fluctuate according to how well the business is doing. It should be increasing as long as revenues are increasing.
Tom