Forbes valuations and the stagnant Sens

Photo credit to the Ottawa Citizen

Photo credit to the Ottawa Citizen

For those of us who like to take a system view of league sports but aren’t economists, Forbes’ list of franchise valuations is a vital talking point. Sure, the math is inexact. Sure, it’s a snapshot of a situation in perpetual motion. Sure, sports is a whole lot more fun when we don’t pay as much attention to the dollars and cents. With those caveats aside, I think the list is illuminating. I can’t help but find takeaways with every annual list.

On the surface, this year’s list doesn’t hold too many surprises. The league, as advertised, continues to increase in value, buoyed by regular growth and new television deals. Last year’s list had the Toronto Maple Leafs breaking the billion dollar threshold–the first in the league. This year’s list has three teams with a big B next to their name: Toronto, the New York Rangers, and Montreal. Every team gained value, with a full 23 teams gaining in the double digits and 12 gaining in excess of 20%.

A 20% return…in one year…on any investment is bananas. And thanks for the new Collective Bargaining Agreement, the owners will have a chance to keep more of that than ever before. So, the picture of league health is a good.

Now, this isn’t exactly cheery news for the Ottawa Senators. Ottawa gained a paltry 5% growth on the year–the same year they announced a 12 year broadcasting deal with TSN. While a 5% return isn’t exactly terrible, it is comparatively unimpressive when you look across the league. Teams in both non-traditional markets, like Nashville (22% increase) and established sports markets where you’d think there wasn’t room for massive new growth, like Dallas (26%), Boston (25%) and Washington (21%) are outperforming Ottawa in terms of value growth by a factor of four to five.

Some of this might be expected. Calgary gained only 7% and Winnipeg 5%, which means smaller markets and a weak Canadian dollar might be the main contributor. But the fact remains that even with its television-deal the needle barely moved on Ottawa’s value.

This with a team that has the lowest payroll in the league, and who plays in an aging building. It you put any stock in Forbes’ valuations (and not everyone, or even most people, should) it casts a bit of a pall over the future of the team, if only because there doesn’t seem to be much incentive for Eugene Melnyk to spend on the team or on the arena.

That means, potentially, continued mediocrity on the ice and a fight with city hall over who pays for a new arena. Not tomorrow, but certainly in the next few years. There’s no new windfall in the making. The owners got the deal they wanted, Bell Media showed Ottawa the money. What’s left, other than winning?

I’m not pitying Melnyk here at all, of course. He bought the team and arena for a song, and has seen almost a four-fold increase on his investment. But if the only way Ottawa is going to see growth in value is by becoming a hot(ter) commodity than it already is, then it’s going to need to win–which means either Paul MacLean and Bryan Murray working miracles with the lowest payroll in the league, or Melnyk being willing to take a loss on player salaries now in the hopes of cashing in bigger later.

Not that spending guarantees you a winner…but not spending gets you a line of Chris Neil, David Legwand, and Milan Michalek, and we’re watching the (painful) results of that every night.

7 thoughts on “Forbes valuations and the stagnant Sens

  1. Still with the “not spending” narrative. Who should the Senators have signed instead? Oh… right, reality has no place in fiction.

    • Mark…you comment on this every single time, and you get a little snottier with each post. I’ve never said “Ottawa should spend for the sake of it!” as you’ve implied several times. I even say in this post that spending doesn’t guarantee you a winner. It’s your narrative, disconnected from reality, that people want Ottawa to spend frivolously, or needlessly, when in fact it’s so obvious that Ottawa shouldn’t spend frivolously or needlessly that it doesn’t even need to be said. That’s like saying Ottawa should score more goals than the opposition. It’s not insightful.

      Are you saying you can’t think of ANY possible ways Ottawa could have improved its roster by spending more over the past few years? Not a single UFA, not a single departed player who we might have kept in the fold? Not a single time we re-signed a mediocre player because they were willing to stay for less? Are you saying that this is legitimately the best team that Ottawa could have assembled regardless of its budget?

      Anyway, until Ottawa no longer spends at the bottom of the league, I consider it relevant to any post about revenue and expenses. Ottawa doesn’t have the money to spend on things like payroll. If they did, they could if there was an opportunity to do so wisely. That’s the story.

      • “Are you saying you can’t think of ANY possible ways Ottawa could have improved its roster by spending more over the past few years?”

        Nope. Not what I’m saying.

        “Not a single UFA, not a single departed player who we might have kept in the fold?”

        Just one: Alfie. Here’s a list of UFA players who the team let go over the past four years:

        Ales Hemsky
        Stephane Da Costa
        Mike Lundin
        Daniel Alfredsson
        Peter Regin
        Andre Benoit (again)
        Cory Conacher
        Nikita Filatov
        Flip Kuba
        Matt Carkner
        Zenon Konopka
        Rob Klinkhammer
        Bobby Butler
        Jesse Winchester
        Kaspars Daugavins
        Ryan Potulny
        Curtis McElhinney
        Ryan Keller
        Ryan Shannon
        Roman Wick
        Cody Bass
        Derek Smith
        Andrew Benoit
        Josh Hennessy
        Martin St. Pierre
        Jonathan Cheechoo
        Anton Volchenkov
        Matt Cullen
        Andy Sutton

        Who on that list should the Senators have made significant investment to “keep in the fold?” Which of those players would have a significant impact on the team’s fortunes this season? For real. I’m asking.

        “Are you saying that this is legitimately the best team that Ottawa could have assembled regardless of its budget?”

        Nope.

        All I’m asking is that the people who assert that Ottawa is bad because their payroll is low demonstrate exactly how, given the market, the team could have spent more money to be better. No one is doing that, so you’re damn right I’m snotty about it–because it’s a convenient fiction like “compete level” that sounds great but doesn’t require any proof.

        Your claim in this article is that “not spending gets you a line of Chris Neil, David Legwand, and Milan Michalek” but that’s a cheap straw man argument. Who were the UFAs out there BETTER THAN THOSE THREE that Ottawa had the opportunity to sign?

        There were 82 centers signed before the start of this season. Should the Senators have thrown $5.5M a year for 5 years at Dave Bolland just to avoid signing Legwand? $5M a year over 4 years to sign Mikhail Grabovski, who has two fewer points than Legwand?

        Seriously… what center could the Senators have spent on who would be an upgrade on Legwand? There’s exactly one, by my count: Paul Stastny, and it’s unlikely the team could have signed him for $7M a year. Let’s say they simply outbid the Blues because they have the money. Call it Toews money. Stastny is 28. How many years of his contract will he be worth $10.5M a year? 3? 4? Can you imagine paying Legwand $10.5M this year? He’s 34 years old. Is Stastny going to be putting up Stastny numbers at 34? Centers in the NHL take a nosedive in production after the age of 31. Just as Brad Richards or Vinny Lecavalier.

        “It’s your narrative, disconnected from reality, that people want Ottawa to spend frivolously, or needlessly, when in fact it’s so obvious that Ottawa shouldn’t spend frivolously or needlessly that it doesn’t even need to be said.”

        But that’s the problem in a nutshell: Ottawa can’t be faulted for the quality of players available on the market. We’re all in agreement that the team shouldn’t spend frivolously or neededlessly, so why are you suggesting that there are players out there that WOULDN’T have been frivolous or needless signings–and why haven’t you named them in any of the posts you’ve written? I maintain that it’s because those players simply don’t exist, which makes the claim that Ottawa should spend more money on payroll baseless–that spending would be frivolous and needless by default.

        I realize that’s hard to swallow, because it means there’s no one to blame. There were plenty of Michaleks available in this year’s UFA class. Does it really make a difference if the Senators spend that money on Michalek or Kulemin or Moulson or Pouliot… or even Vanek?

        That’s just the nature of the collectively-bargained NHL: Players who are allowed to reach unrestricted free agency are bruised produce, and they reap the benefits of salary inflation that occurs because teams will do anything they can to avoid losing players of long-term value.

        Ottawa’s payroll is low because it’s lacking in players of long-term value. It’s really that simple. Players like Zibanejad, Lehner, Hoffman, Stone, Puempel, etc. haven’t reached the point in their careers where they’re worth significant investment yet–some of them may never get there.

        The team doesn’t have guys like Neil, Legwand, Michalek, and Phillips (I’m adding him because, ugh, time to retire) because of a evil, mustache-twirling miser–they have guys like that because there aren’t better options yet.

        To see the fanbase tilting at the payroll windmill infuriates me. Sometimes I think this group just wants something to blame no matter how the team is doing.

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