Published on January 10th, 2013 | by James Conley0
Penguins Likely Lost Millions in NHL Lockout
The Penguins certainly appear to have been one of the NHL clubs unhappy with the lockout that lasted four months and irreparably shaved 1,020 games from the NHL schedule.
Throughout negotiations, no team put together the owner-player dynamic like the Penguins did in December, when Sidney Crosby, Ron Burkle and Mario Lemieux broke the stalemate for three days of player-owner meetings that seemed to create positive momentum, even if a deal wasn’t to be struck until a month later.
“Having Burkle in that room, as someone who is a different voice in the process who doesn’t come off as the same sort of suit the players are used to dealing with…it really did change the dynamic,” said Yahoo! Puck Daddy’s Greg Wyshynski. “From everything I heard from those meetings, there was a lot of positive movement towards there being a potential resolution.
“It may have seemed like PR at the time, but I don’t think there’s any question that the Penguins are one of the teams that wanted to play. At the very least, that relationship in that moment really gave everyone a sense of positive momentum in the talks, even if it didn’t get it done.”
Coming off the Hindenburgian Flyers series last Spring, the Penguins were still tagged by Vegas oddsmakers as the Stanley Cup favorites heading into the 2012-13 season. That has since become the 2013 season, and the Penguins are still among the favorites to win it all.
As far as the on-ice product goes, few teams should have wanted to get the season underway as badly as the Penguins.
That likely holds true in their front office, too, where the Penguins figure to be one of a handful of teams who lost money during the work stoppage.
Given their business successes—a five-year home sellout streak, league-best local television ratings and a freshly minted RSN deal to go along with it—one reasonably expects that the Penguins lost more in revenue than they saved in frozen player salaries.
Let’s try to guess what kind of money was at stake.
For their part, the Penguins (and every other NHL club) lost 34 contests to the work stoppage, or 41 percent of their regular season schedule. If Forbes’ estimated 2012 revenues of $120 million are accurate—and let’s guess that number would have stayed about the same in an 82-game schedule this season—the Penguins lost out on something roughly between $45 million and $50 million in revenue for the year.
And while we’re guessing things, let’s also assume that residual fan disgust wouldn’t complicate the numbers by costing the team the sort of money they might otherwise generate in an unabated season.
Fifty million dollars is little to sneeze at. And while revenue doesn’t account for costs, Forbes also estimates that the Penguins pulled $9 million in operating income last season. So it’s reasonable to say that real money was lost as the league announced one cancellation after another.
As for the players? Assuming salaries are issued on a per-game basis, Penguins players lost 41 percent of their schedule and 41 percent of their annual salary. The numbers vary to a man, but as a percentage of their $60.9 million team payroll, the Penguins saved roughly $25 million in salary payments, or half the gross revenue lost in terms of cancelled games.
For a team like the Lightning, which generated roughly $32 million less than the Penguins in 2012 yet carry a payroll worth $2 million more, a $25-plus million salary savings is a massive, massive gain. Consider the number of teams which, like the Lightning, spend to own a competitive roster without generating the kind of revenue to cover their player costs. One begins to see where the drivers of the lockout existed.
Let’s go one deeper. Assuming about half of those lost dates would have come at CONSOL Energy Center, that’s about 17 contests worth of revenue that the city of Pittsburgh was forced to let go down the drain. As Visit Pittsburgh CEO Craig Davis reported in October, each home contest that was cancelled cost the city of Pittsburgh some $2.2 million in gross revenue.
That money is drawn from bars, restaurants, hotels, taxi services, retailers and the arena and Penguins themselves. That $2.2 million number doesn’t include the revenues generated by three home preseason games that were shuttered. While not as significant as the money brought in during regular season games, these aren’t insignificant sums. If $2.2 million was lost on each of 17 home games and the three preseason home tilts are thrown in, one can guess the city lost nearly $40 million in revenue during the 2012 lockout.
To wit, no NHL club, including the Penguins, has promised reimbursement of public funds used to build arenas that were shuttered for 20 or so contests during the lockout. The Penguins are one of approximately 30 NHL clubs whose arena was built or renovated using some amount of taxpayer funding.
Free hot dogs are nice. But perhaps the NHL’s apology tour would be better served to start by reimbursing taxpayers for their contributions to games they’ll never see.