Saturday, January 12, 2008

What will Ted spend?

Something that's quickly become all part of the Alex Ovechkin business has been a discussion over just how close to the salary cap owner Ted Leonsis is willing to go.

Postlockout, the Capitals have always been on the low end of the spending scale, and some are reasoning that it makes little sense for a team in that position to spend more than 25-per-cent of its budget on one lone star.

The thing is, however, Leonsis has spent before, and despite the fact this has often been a money-losing venture, he upped the ante this off-season and the team has made some modest gains. My guess is, when the time comes, he won't have any problem spending again.

A look at the Capitals' payroll through recent history:

There's a wrinkle here, however, something that comes in the fact that under the new CBA, even with revenue-sharing funds, the Capitals have been in the red. Leonsis said he lost $6-million, even with the handout, in 2005-06, and with a slightly higher payroll and negligible increases in attendance, that didn't change last season.

Attendance, in fact, has been downright awful this season, 28th in the league, and it stands to reason any jump in the team's salary will have to follow an increase at the gate.

Capitals' attendance through history (announced figures):

1998-99 was a great time for hockey in Washington. The team went all the way to the Stanley Cup finals the year before, and despite the fact they were swept there in four games, hockey was in in D.C.

Unfortunately, that trip to the finals was the last time the franchise won a playoff series. It was also the only time the club was above the league average in attendance in the past 14 years, something that is certainly related.

The fact is, the Capitals can afford to spend — especially if they can perform better in the standings and then at the gate — and logic dictates they're about to start doing so. Olaf Kolzig's $5.45-million deal comes off the books this off-season, and given he's one of the older netminders in the league (and has been one of the worst this season), it's time for him to take a supporting role with a much smaller price tag. There are, however, a few new big tickets on next season's cap, and adding in Ovechkin's $9.54-million contract, they've already allocated somewhere in the neighbourhood of $35-million in 2008-09.

What they're going to need more than production from Ovechkin, which at this point seems a given, is something from the other key components there — namely Alex Semin, who'll make $4.6-million next season, and Chris Clark, who was given a generous, $2.633-million-a-year deal.

Add in new deals for Mike Green, Shaone Morrisonn and a goaltender, and this isn't a low-spending team anymore — and those revenue-sharing checks will presumably stop coming.

And that, one assumes, is the moment of truth.

Labels: ,


At 11:40 a.m., January 12, 2008, Blogger DMG said...

The attendance figure can be misleading, or so I am told. According to Tarik El-Bashir (who covers the Caps for the Washington Post) the Capitals give away about 900 tickets a night, whereas other markets that aren't so strong give away 3-4k; as I'm sure many readers know the NHL calculates attendance based on tickets distributed not tickets sold or people through the turnstiles. Apparently Washington is not competing for the cellar in tickets actually sold.

At 1:06 p.m., January 12, 2008, Blogger J. Michael Neal said...

James, stop. Please. Are the Capitals losing money? Probably. However, you MUST keep in mind that Lincoln Holdings, of which Leonsis is the majority partner, owns 44% of the Verizon Center, in addition to 100% of the Caps.

You can not rely on the figures for the Caps profit/loss without taking a look at the profit/loss of the arena itself. Simply saying that the team is losing money is meaningless.

At 1:12 p.m., January 12, 2008, Blogger James Mirtle said...

I'm talking only about the team, as is always the case in these discussions. And I think this is pretty straightforward: "Leonsis said he lost $6-million..."

Nowhere do I say they're unable to spend more, as many have. What we're interested in is hockey-related revenue as per the revenue-sharing agreement, and according to that, the Caps are a have-not team.

At 3:26 p.m., January 12, 2008, Anonymous TG said...


I think that the correct way to think about it is not that the Caps are losing money, but that this is essentially a loss-leader for him until he can buy the Wizards and the rest of Verizon Center. (Of course, this is also something that all of those who write about the Caps moving to another town either conveniently forget or just flat-out ignore.)

At 3:28 p.m., January 12, 2008, Blogger J. Michael Neal said...

"Leonsis said he lost $6-million..."

The problem is that this is not a straightforward comment. There is a huge difference between Ted Leonsis saying, "I lost $6 million on the corporate entity of the Washington Capitals," and Ted Leonsis saying, "I lost $6 million by owning the Washington Capitals."

If what he means is the first, but not the second, then it doesn't make any sense to say that he is losing $6 million dollars on the team, and any statements he males to that effect should be ignored.

At 5:14 p.m., January 12, 2008, Anonymous Gerald said...

Add in new deals for Mike Green, Shaone Morrisonn and a goaltender, and this isn't a low-spending team anymore — and those revenue-sharing checks will stop coming.

James, you have this completely wrong. Revenue sharing is not affected by what a team actually spends on salary. It is determined by revenue and what a team is notionally able to spend on salary, determined by multiplying that team's HRR by the relevant percentage for the particular season. Where they stand in terms of what they actually spend is not relevant at all in the calculation for revenue sharing.

At 1:18 a.m., January 13, 2008, Blogger S said...

The attendance factor is really the worst here. I saw a Flyers/Caps tilt in November, and I'm traveling to DC again tomorrow to see the matchup.

If Ovechkin gets my Philly ass in the seats, why doesn't he get some DC asses there too? If you have a player like Ovechkin and you can't put people in seats, then what possible remedy do you have for poor attendance? Really? Not only that, but a significant chunk of fans at these games are Flyers fans. It's quite unfortunate.

At 1:31 p.m., January 13, 2008, Anonymous stephen said...

I thought one of the revenue sharings was designed to allow a team to spend to the midpoint. Wasn’t their teams recently attempting to spend only to a certain amount in order to be able to benefit from all the types of revenue sharing?

It is interesting to hear when people trying to defend their teams ability to spend to the cap, how all their owners claims of losses and poverty are meaningless because of how the owners often allocate and report revenues. During the lockout, those claims seemed to always be taken at face value and used as justification for radical change. Present company excepted of course.

At 1:35 p.m., January 13, 2008, Blogger James Mirtle said...

I thought one of the revenue sharings was designed to allow a team to spend to the midpoint. Wasn’t their teams recently attempting to spend only to a certain amount in order to be able to benefit from all the types of revenue sharing?

I think you're right Stephen, but I haven't had a chance this weekend to pick through the CBA at all. I'll try and clear this up on Monday.

At 2:25 p.m., January 13, 2008, Blogger James Mirtle said...

Here's Tom Benjamin's post about the Sabres spending to the midpoint.

At 8:03 p.m., January 13, 2008, Anonymous Gerald said...

James, the portion dealing with actual salary (section 49.7 is so far down the chart in terms of revenue distribution phases that it is pretty irrelevant IMO. Hence I have usually given it very short shrift. Short of a huge escrow amount being available, the escrow funds are eaten up in the earlier phases, which makes that provision completely moot. As such, the idea that it would deter teams from spending is improbable at best.

In theory, that could change if revenue increases in a year do not exceed the 5% base figure upon which the payroll range is calculated and the teams continue to spend over the midpoint collectively. That seems improbably IMO, but it is theoretically possible.

At 8:33 p.m., January 13, 2008, Blogger James Mirtle said...

It seems completely bizarre that a team with a higher payroll could be subsidized by one with a lower one, but it appears that's the case. I hope I get a chance to look into this a little more.

I was under the impression a higher percentage of the revenue-sharing funds would disappear if a team spent, say, $50-million, but as you say, that percentage appears fairly small.


Post a Comment

<< Home

Links to this post:

Create a Link


Free Page Rank Checker
eXTReMe Tracker