Monday, August 15, 2005

Small Market Malarkey

Well I've had a dabble in web board land (aka HF Boards) and have already had a couple posts deleted. Why? A nutso moderator for one, who equates "shit disturbing" with "having a different opinion" from the united army of Oiler fans who all agree with each other. Apparently, Edmonton is a small market team because Cal Nichols says so, and to question the obvious (ie. our relatively high payroll, the healthy Canadian dollar, the unlikelyhood of being a "have not" with the new revenue sharing plan, etc) is, I guess, as the moderator put it, dwelling "on the past."

One thread "More Toronto media jealous of the Oilers" seems to hammer away at this small market point like whiny Oilers fans always have. Steve Simmons asks "Will some hockey economist please explain this to me: If the Edmonton Oilers couldn't make money pre-lockout spending less than $31 million on salaries, how exactly are they going to make money spending basically the same amount in an NHL that will bring in less revenue than before?"
There's plenty of mockery but little in the form of a convincing rebuttal or answer to this simple question, and curiously, the same nutty moderator locked the thread. Some posters deny that the Oilers salary is over $30 million, but I have a USA Today quoted 2003 salary of $33 million.

Others vaguely refer to "escrow and revenue sharing" without really explaining anything or seeming to know what they entail. For one thing, this idea that revenue sharing would help Canadian teams is a fallacy, for as hurting as Edmonton supposedly is, American teams like Nashville, Buffalo or even St. Louis were in far worse shape and definitely lost money. The Oilers mentioned "barely" making a profit which is far better than a lot of other teams in the league.

Escrow is a complicated matter and there is no actual PDF of the new CBA to refer to (thanks a lot, the "new" NHL!), but even if players were to give back a portion of their salary based on future hypothetical revenues, you wouldn't exactly think of this as a green light for the Oilers to spend a bunch of money. Many posters have used the Exhange rate as a reason in itself (I believe there's a unhappy face emoticon next to a quoted exchange rate of 16 per cent), but surely this can't be brought up every year forever. The exchange is better but it also has been better for years now, not to mention the Canada assistance plan that is no longer applicable under the new CBA.

Another argument is that while league revenues will be down, the Oilers will maintain their fan/community support and not be too hurt by the lockout, affording them to spend more or as much. Fair enough, but this is the team that cried wolf last year saying they were spending over $30 million just to "stay competitive" and that only a new CBA would save the Oilers. Also you'll notice that Oilers salary has gone up almost $10 million in five years!
When I mentioned this on HF Boards, all I got was denials: "
The Oilers NEVER claimed to be losing tonnes of money. " etc. That takes a lot of gall to say that, or at least a willfully selective memory, so I pulled out some recent Cal Nichol quotes from the Journal, including:

From 2003 October 26 Journal:

"The Edmonton Oilers reported a net loss of $202,000 Cdn for the 2002-03 season -- the closest the Edmonton Investors Group has come to breaking even."

From Jan 27, 2005 in the Journal:

"There certainly was little new in the comments Tuesday from Oilers board chairman Cal Nichols that the owners would sell the franchise if the CBA talks fail to implement an economic model based on a salary cap."

"If the league wavers, he said, it will be the death of a NHL team that has sold out nearly all its home games for the last two years, yet struggles to meet its bottom line."

Oilers ownership = lame! Just like Pocklington, they basically say "give us our way or we'll move the team," the only difference is that they want a new CBA instead of a free tax-subsidized arena. Then, fans and media fall asleep and cream their pants when we get Pronger. The facts remain: the Oilers are going to spend as much -- if not more -- than last year, when they were supposed to be "scraping by." All I ask is: Why? I don't expect much from fans, but just once I'd like to see Edmonton sports media ask the most obvious question of all.


nikeisevil said...

It's worth it for a team like Edmonton to spend big bucks on players like Pronger because they know that other teams won't trump them by spending 10's of millions of dollars more.

You are more willing to spend $35 Million a year when the competitor who used to be able to spend whatever they want can only spend $39 Million maximum.

Edmonton always wanted to be competitive but they weren't going to play a ridiculous game of buying high-priced talent when it was plainly obvious they couldn't compete financially with the NYR's and Detroits of the previous CBA.

Now they can and have the longterm safeguards in place to ensure they won't LOSE money anymore.

It's really quite simple, actually.

mike w said...

Your right, it is quite simple...

The Oilers have been saying they've been losing money despite having maxed out revenues, now they're spending as much if not more. Where's the money coming from?

The only way they said they'd survive is if the league cut down player costs. Now with a rollback and the likelihood of decreased revenues they're spending as much if not more? Doesn't sound like sound financial management from a team that's barely surviving.

It's more likely the Oilers were doing okay all along.

PS: This idea that the Oilers couldn't compete is silly.
Just look at the payrolls of the Stanley Cup Finalists in the last few years.

CG said...

Good to see Mike is coming around to my fans-are-dumb point of view. Also interesting to see possible problems emerging in the New NHL – that CBA might not have been all things to all men, after all.

I'm going to stand by my post of last night, which was basically Simmon's point. First off, I've got the Canadian Press saying that the Oilers spent $35.6-mill in '03-04, not $31m as Simmons says, but his point is still valid.
There are still going to be have-teams and have-nots in the new NHL — as not every team has $39.5 million to spend on salaries each year.
In a $40-million cap situation, an extra five million salary ($7or$8-million in the 2003 NHL) could be a huge difference.

It's obvious that the Oilers won’t be straining the cap this year, and the owners didn't sit out a year to go broke immediately.
It might be a kick in the gut, but the Oilers problem is still pure economics (ar pure incompetence from the club's management to thrive in a harsh economic reality).
The Oilers may still be a mid-range team at best from a financial aspect, and whether they can win in that set of circumstances is up to them.
Personally, I'm intrigued to see how the team and front office reacts to life in their new dream-NHL. If they crap the bed, they really don't have any more excuses.
Also, I doubt that they've been making money all along.
The Oilers’ revenues won’t drop from 03 but how can they rise with a better team? Aside from Pronger and Peca stenciled jersey sales, how?
Edmonton sold out 37 of 42 home games in 2003-04 and never had more than 1,000 empty seats. This will continue this year, for there are no "casual fans" in Edmonton.


Dave (Berry) said...

Though it hardly accounts for all of it, I think the Canadian Dollar has had some small effect here. I mean, the dollar really didn't start to jump until the early part of the 2003-04 season, so it's reasonable to assume that the balance between US salary and Canadian revenue would have evened out a bit. Not enough to account for all this money screaming up from everywhere, but it would have some marginal effect. (Also, Colin, could the descrepancy in numbers result from the a difference between using US dollars and Canadian dollars? Just a thought.)

But, yeah, I think this all just goes back to the classic Edmonton problem: no one in this city can criticize anything else in this city, because apparently criticism is actually the worst thing in the world, and you're only supposed to blindly support your city. Otherwise you're just being negative, or something. Because no one, not once, ever, has ever needed to be told they're fucking up and should stop doing so. For nearly one million people, we sure are about two steps away from building the world's largest donut just to prove how great we are.

Also, it's worth pointing out that the NHLPA, and Goodenow, were saying for years that owners were hiding revenue. But, you know, those spoiled, millionaire players are, uh, spoiled millionaires, so what do they know? Surely we can trust the billionaire owners instead.

mike w said...

>The Oilers’ revenues won’t drop from 03 but how can they rise with a better team?

Yeah, I guess a half-decent American TV contract still is the main goal of the NHL, 15 years after they started trying. This would explain why Canadian teams would go along in a new CBA that subsidizes struggling American teams.

All of this small market stuff aside, it's good that they won't be able to pull out the old excuses anymore when we don't make the playoffs.

Anonymous said...

Canadian funds would add to the total -- 36 million US is over 40 million Canadian. Unless this is were Simmons tripped up.



Anonymous said...

Sure, you can look at the salary totals of the Cup Finalists for the last few years. You can also look at the salary totals of the Cup *winners* for the last decade. Without exception - Tampa Bay notwithstanding - they're in the top half of the league salary-wise. The '99 Stars, '01 Avalanche, and '02 Red Wings were top 3 spenders. So, define success.

For whatever it's worth, there have been several posters on hfboards - some even well-respected - who agree with you. *shrug*

mike w said...

>You can also look at the salary totals of the Cup *winners* for the last decade.

Sure enough. But spending doesn't equate to success, nor has Edmonton been held back by budget as much as Oilers fans like to think. Calgary's run last year should have been the nail in the coffin to that, I think.

Even the teams that have spent more, most of them were simply better at developing players from within, like New Jersey, Colorado and Detroit. Sure, it doesn't hurt to buy a Robert Lang (or maybe it did?) near the trade deadline, but part of me just thinks the Oilers biggest problem has been not developing a couple of Hossa-like players who can score more than 30 goals.

>there have been several posters on hfboards - some even well-respected - who agree with you.

Yeah, it's true. Aside from overzealous moderators there are bunch of posters that are thoughtful and make interesting points.

Anonymous said...

Nope, I don't think it's so much total budget for Edmonton as spending it in the wrong places. Edmonton went for depth, Calgary went for throwing the bank at their one superstar (but boy oh boy, is he worth it). Would Iggy have developed in Edmonton? Hard to say. Don't forget though, Calgary had an utterly terrible team while the Oilers were making the playoffs (albeit bowing out early). Which is the better strategy? Depends what you want and who you ask, I guess. They both have the same number of Cups won since 1992 though. :) We'll have to see what the next season will bring. I think Edmonton's weaknesses right now are lack of proven goaltending, and lack of a true scoring winger. Hemsky's going to be pretty good, I think, but not a scorer, which puts the load on Smyth again. Calgary's made some good signings this off-season. Should be interesting.

Anonymous said...

(forgot to say, re the moderators at hfboards: there have recently been scads of flamewars, I don't really blame them for being a bit overzealous atm, particularly if you were a newer poster: they don't get the same latitude that established guys get.)

CG said...

>Calgary had an utterly terrible team >while the Oilers were making the >playoffs (albeit bowing out early). >Which is the better strategy?

The Flames have a terrible draft history, much worse than the Oilers. They didn't benefit one thin dime from missing the playoffs.
In 1996 they drafted Steve Begin and Derek Morris then there's Rico Fata and Oleg Saprykyn, Chuck Kobasew and Matthew Lombardi ...and that's it, all the NHLers drafted by the Flames from the previous playoff appearance to 2003.
A lot of those year's they made a late run and wound up 9th or 10 in the division.
I honestly believe that Button had a lot to do with that cup run team, but Sutter brought it all together, he shipped out the deadweight and then stole players (Kiprusoff, Simon, Neminen) after he was hired.
Heck, Sutter even dumped Commodore and his flaming red fop realizing that Commodore was the team's 13th best defenceman.
That's the good thing about a new GM, he gets to call outright BS on the previous GM and get rid of borderline guys that the old management had to boost up to save their reputations around town.
The argument could be made that's the problem in Edmonton,
Mind you, the spin machine jams into reverse pretty hard now and then. Brewer went from a darling future star to hog on the block pretty fast. On the contary, do you remember when Dopita left town? That was pretty quiet.
Simpson will coach the powerplay until he takes the big Fredo fishing trip, hopefully sometime before now and September.