Earlier, we detailed the importance of the structure of Shea Weber’s offer sheet. In short, the contract aims to 1) lessen total cap hit, 2) give Weber more guaranteed money upfront to avoid any CBA salary rollbacks… and 3) make it very difficult for the Predators to match the length and girth of the Flyers’ wallet.
One of the reasons the Predators will be so hard-pressed to match the offer is the upfront money. Weber is due $27 million in the next 12 months, $41 million in the next 24 months, and $56 million over the first four seasons of the 14-year, $110 million deal. We broke it down earlier, but almost all of that $56 million is guaranteed signing bonus money, which is due to Weber whether there is a lockout or not. That is a lot of coin for the team ranked 27th in the league in value by Forbes to match. So much coin, in fact, that Predators part-owner Brett Wilson had to turn to your friendly neighborhood blog to wrap his head around it:
Well, Brett, I’m glad we have your attention. Now, let’s take a look at your books…
About a year ago, a part-owner of the Predators (not Wilson) independently sought an investor to buy a 25% stake in the team for $50 million. One CB reader kicked that tire (yeah, we do that demo, too), and this is what they received:
That’s an income statement, yo. And it’s not a good one. As you can see, the Predators lost money in every season except 2007-2008. [In April of this year, the Tennessean posted an in-depth article about the Predators’ struggling finances despite on-ice success and receiving public money.] But that happens. Businesses lose money all the time. Hockey teams do, too: According to Forbes, whose estimated team valuations report very closely mirrors our discovery from the Predators, 18 teams lost money during the 2010-2011 season (data for 2011-2012 isn’t out yet). Many of those teams, however, have much higher revenues than the Predators, making the losses less concerning. And while we don’t have enough information here to really understand the overall financial health of the Predators, what stands out to us are the gate receipts. In other words, ticket revenue. Admittedly, it’s more just anecdotal fodder than anything conclusive about what the Predators can and can’t do. But it’s fun. And we like to have fun here.
The Predators don’t have a major attendance problem – they sell 97.5% of tickets, good for 18th in the league – but they don’t charge a lot (average ticket– $51) and their home, the Bridgestone Arena, has a limited capacity (17,100). As such, they only collected $24 million (projected) in gate receipts in 2010-2011 (likely a bit more last season). So, if they match the Flyers’ offer to Weber, they will probably pay him more – $27 million – over the next 12 months than they will receive in ticket revenue.
What’s more, the $50 million-for-25% stake investment proposal values the Predators at around $200 million, meaning the $56 million due to Weber over the first four years of the deal would essentially allow him to buy a quarter of the team. Over the life of the contract? Weber would collect enough money to become majority owner. Now, I’m not an accountant, nor do I play one on the intertubes, but I’m guessing paying your employees enough money to own you in 14 years isn’t a great strategy.
How do the Predators’ finances compare to some of the most valuable teams in the league? Well, let’s look at the Flyers, who rank eighth in Forbes' valuations (that seems low, but Canadian teams and the Rangers have massive profit margins): According to Forbes, the Flyers collected $54 million in gate receipts and generated a total revenue of $111 million in 2010-2011, compared to the Predators’ $24 million in gate receipts and $75 million in revenue (projected). The Flyers, of course, didn’t lose $7 million– they profited a pedestrian $3.2 million. And none of this is to mention the deep pockets of Comcast Spectacor backing the Flyers, which makes their profit numbers inconsequential.
But what you really want to know is: Can the Predators afford to match the Flyers’ offer? We don’t know for sure. They have plenty of cap room– that’s not an issue. It’s the upfront money that will be the sticking point. We dove into that earlier, but here’s more: Weber’s agents told anyone who would listen that they’re not confident the Predators have the means.
"Nashville can probably match us, but does it really make sense for them if there may not be hockey next year?"
"They have to look at the financial side but the philosophical side as well. We could have a shortened season, maybe it doesn’t line up with their thought process. I don’t know what they’re thinking. I don’t know their ownership group as well as some others."
All along, the Predators have said that they would match any offer for Weber. But this is a big one. And they don’t make money– they lose it. $27 million in the next year is a substantial sum of money, and it might be too much for them to stomach. If they can, and they match the Flyers’ offer, then they might as well position Weber outside the arena before games with a can and have him collect the ticket money from every. single. paying. customer, because he’s going to be getting all of it and then some.