On this whole “we need to get to the second round to break even” thing.

Another day, another claim from the team’s ownership that the Senators need to go “deep” in the second round just to break even.

This has been repeated like a mantra ever since the 2007 run to the Finals, and to this day it smacks of creative accounting. How can a team with better-than-average attendance in a terrible year (11th best, better than the Rangers or Penguins or Bruins), higher-than-average ticket prices (again 11th), and all of the television revenue and merchandising sales that comes from being in a Canadian market possibly claim to be losing money?

Granted, they spent to the cap last year, but it’s hard to understand how a team that does better than almost 2/3rds of the league and spends to a ceiling linked to the prosperity of the league in general could possible be required to get to the second round just to break even. If that’s the case, how on earth do the other 2/3rds of the clubs get by? What kind of business model is that?

It’s not that I doubt that television and merchandising revenues are higher in a market like Boston or New York. Or that clubs like Columbus and Florida (who haven’t made the playoffs in years) are losing boatloads of cash. But an enormous market or consistently horrible club are exceptions, not the standard by which the league’s model is designed. A team simply can’t be expected to be among the very best year after year just to get in the black.

More likely is that the team is getting creative with the public face of its accounting in order to scare up more support – a tactic that just might work, given the team went bankrupt back before there were revenue-sharing schemes and a salary cap. This fanbase is just sensitive enough to respond to a good scare campaign right on the eve of a new season. Oh, check it out: tickets just went on sale! How convenient.

Also, with a CBA negotiation lurking next offseason, it’s in the owners’ best interests to present a united front of hard-done-by billionaires losing cash just because they love hockey that much. From public investment in new arenas to salary control: there’s a lot more to be gained by claiming to be losing money than in claiming to be doing fine.

The fact of the matter is that Melnyk owns the arena, and whatever revenues the team generates probably go into paying off fixed costs associated with franchise ownership, including operating expenses. The team, with all of its salaries and travel, may lose money relative to ticket sales. But television, merchandise, concerts at Scotia Bank Place and everything associated with assets owned because of the club but not directly related to its operations probably represent pure profit. Melnyk’s overall financial picture is rosier than what we’re being presented with.

After all, creative accounting isn’t exactly new around here.


4 thoughts on “On this whole “we need to get to the second round to break even” thing.

  1. Pingback: Followup on last week’s economics meltdown « The Cory Clouston Fashion Review: An Ottawa Senators Blog

  2. Pingback: Exciting times in Palookaville. So let’s look at next season! |

  3. Pingback: How the 2012 lockout affects the way I interact with hockey |

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s