1995 League Financial Report

 

In the NFHL, cash is king, though you may not know it. So much of a team's success hinges on their financial health, and while being flush with cash doesn't ensure success, being in the red can hamstring a team's ability to develop players, plunge them deep into crippling debt, and result in premature liquidation (heh) to avoid financial ruin and potentially even removal from the league. With payrolls exploding in recent years and the game of hockey reaching unprecedented popularity, the days of a $10 million average team salaries are ancient history. Today, players have the ability to earn tens of millions of dollars in their careers, with the current maximum annual salary sitting at a whopping $8 million - a figure that would have been previously considered ludicrous. Additionally, league rules have made spending more possible than ever. Years ago, franchises were unable to make any trades that would dip them further into the red, being unable to add salary or make pushes that added to their payroll if they were already in the negatives. Today, as the 90s roll on and stock markets reach record highs, the concept of conservative fiscal policy has been swept aside, the relic of a bygone era when people required 50% down to purchase a reasonably priced home. This year, the cumulative league payroll is approaching $1.1 billion, an all-time high. As Wu-Tang eloquently announced back in 1993, "Cash rules everything around me" and it's never been easier for teams to get their hands on it...but at what price?

 

While the money flows in quickly, it leaves even quicker. If a team dips into the negatives, they now receive a loan - one that the Consumers Protection Bureau would be gob smacked by. Each loan that an NFHL team receives comes with a whopping 25% interest rate, enough to make CEOs at Mastercard and Visa envious. In some cases, the riverboat gambling mentality can pay off. The equation is clear - put together a star-studded team, salaries be damned, and a deep playoff run (where there are no game day expenses, only revenues), can help balance the books and make it all worthwhile. In the meantime, there are various other methods of in-season payouts that could help in the accounting department. Having a player or goalie win a weekly or monthly award result in a small cash prize. Activity Points can be generously traded in, both at the All-Star break and end of the season, a common practice to help teams get back on track. Endorsements, more easily hit with star players, can also be extremely lucrative if teams play their cards right. In other words, spending aggressively isn't inherently a bad or dangerous thing, as long as there is a plan in place. But like Mike Tyson said, "Everyone has a plan until they get punched in the face."

 

When looking at the financial health of each franchise, it's important to establish a baseline for comparative sake. For example, when this report was completed, only two teams are not selling out their arenas: Chicago (91%) and Buffalo (93%). And while sell outs are indicative of the overall health and popularity of the sport, it's also important to look at the next factor - arena size, along with ticket prices. Currently, NFHL arenas range widely in terms of capacity, with the Saddledome in Calgary seating just 14,000 spectators. On the other end of the spectrum, seven teams have maxed out their arena sizes with massive 23,000 seat marvels of engineering. Additionally, ticket prices play a role in revenue generation, though most teams are now charging the league mandated maximum of $60/ticket. In fact, only Calgary, Tampa Bay, and Toronto offer discounts, with $50 tickets. These nuances might not be eye popping at first glance, but they greatly impact a team's ability to earn and offset rising salaries. 

 

Generally, analysts look at three key indicators for a team's holistic financial outlook: Pro Payroll, Current Balance, and Projected Balance. In pure NFHL fashion, the variance is wide and is getting wider:

 

 

The Buffalo Sabres, recently a true contender before their scorched earth tear down, currently has the league's lowest payroll at just $13,425,000. On the other end of the spectrum, the Philadelphia Flyers have the league's highest payroll, at $72,190,000 - much of which was acquired last year in a bid that fell just short. Incredibly, James Patrick and Phil Housley have a higher combined payroll than Buffalo's entire roster, and nearly exceed Tampa Bay's $14,602,000 payroll. Unsurprisingly, there are correlations between payroll and success, but it's not even across the board. Buffalo currently is tied for the fewest amount of points in the league with just three through 13 games, a low water mark they share with Tampa Bay, the second lowest payroll. The Chicago Blackhawks make up third team mired in the league's cellar, with a higher but still modest payroll, $29,299,999, the eighth lowest in the league. On the other side of the equation, the Minnesota North Stars currently have the league's best record, but have the 13th highest payroll, coming in just a shade below the $40,000,000 mark. Last year's SMJ Cup Champions, the Detroit Red Wings, have the 7th highest payroll with a $54,690,000 payroll, and currently sit in 2nd place. The Vancouver Canucks, long the poster child for the pitfalls that accompany bloated payroll without the success, finally are off to a hot start, one they'll need to maintain in order to justify nearly $70,000,000 in salary. The Winnipeg Jets and Colorado Rockies are predictably near the top of the league in salaries, but also have had plenty of success, especially the league's most feared team, Colorado, despite a lukewarm start, at least by Rockies standards. So, while an exceedingly low salary likely correlates with poor play on the ice, higher salaries do not necessarily equate to a victory parade. Philadelphia has gotten off to a very poor start, to the point where GM Simon Hoggett has considered making some large changes. The Florida Panthers, sporting the league's third highest payroll, have not sustained any meaningful success in over a decade, although their management's crafty maneuvering and shrewd business dealings have helped avert financial catastrophe.

 

But payroll by itself is a meaningless metric. A well-positioned team flush with cash can support even the most bloated contracts, especially if management is strategic about generating Activity Points throughout the year. Unfortunately, plenty of teams don't fit that bill:

 

 

For Vancouver, despite the hot start, the financial cliff is here. Just a handful of games into the season, and the Canucks are already deep into the red. The question isn't if Vancouver will need to take a loan this season, but for how much. Anything short of a deep playoff run will be catastrophic, and the fact that Vancouver is already in loan territory means that they will not be eligible to purchase any training camps next offseason, potentially hindering player development. To say the Canucks are all in would be an understatement, and will be interesting to see how GM Panunto navigates these turbulent waters. If there was any doubt about relations, Montreal is clearly cut from a similar cloth, with brother Andrew Panunto's club flying dangerously close to the equator, with only $1,700,000 in current funds. However, the situations between Vancouver and Montreal are dramatically different. With a much lower payroll, Montreal actually projects to turn a small profit this year, a comfortable position to be in and one that few NFHL teams actually enjoy. Meanwhile, Vancouver could be on the hook for more loans than the league has ever doled out, potentially needing to repay over $42,000,000 before the start of the 1996 regular season. Thankfully, most of the other teams with comparatively low coffers are teams that also have low payrolls, making their financial plight manageable. One notable deviation is the Philadelphia Flyers, who are rapidly careening towards the red as well and could end up challenging the Canucks for the largest ever loan. Interestingly, the Chicago Blackhawks, long a doormat competitively, are at least winning something, dominating the cash game with almost $38,000,000 to spare. Comparatively, no other team has more than $30,000,000 in cash, and only five currently have more than $20,000,000. This asset could serve as a major lifeline if the Hawks decide to flex their financial muscles and provide a bailout to teams like Vancouver or Philadelphia when the taxman comes. Notably, the next four teams with the most money are four of the league's best teams: Colorado ($29,680,478), Minnesota ($23,005,515), Detroit ($22,861,050), and Hartford ($22,159,353). Colorado is particularly strong example of how a team can continue to compete for more than a decade - not only can they afford to pay superstars, they have reserve assets ensuring they don't dip into the negatives, allowing them to simultaneously develop young talent, trade money to cash-strapped teams, and expand their arena over time, which pays dividends. The latter is something another team in this list finally committed to this year, as the Hartford Whalers, who long played in one of the league's smallest barns and have had years of unsteady financial circumstances, finally have committed to a new degree of fiscal responsibility. The team expanded its arena and simultaneously shed significant amounts of cap, positioning the Whalers favorably from a player development standpoint.

 

As the year goes on though and salaries are paid out, balances can diminish and teams may be forced to pay more attention to an unhappy reality. Projected balances can change, teams will make trades and can cash in Activity Points at the All-Star break, but nonetheless, 10 of the league's 26 teams currently project to end the season in the red:

 

 

Unsurprisingly, the teams in the most tenuous positions are the ones with the highest payrolls, and therefore also the ones with the highest expectations and biggest need for a deep playoff run. These teams also tend to be some of the most active and creative, which should help allay some of the problem one way or another, though it may result in sacrificing the development of young assets. Perhaps most worrisome though are teams like Anaheim and Pittsburgh. While the Penguins have been better in a weak Wales Conference and could sniff a playoff berth, the Ducks, who are also improved, probably will not. Both teams have some of the lowest current fund totals in the league, though Anaheim has been actively looking to both shed salary and trade for bits of cash along the way, but dipping into the negatives for either team would be very unfortunate and could hinder sending young player to training camps. As the season progresses it will be interesting to see how teams manage their balance sheets, as some teams may end up with salary casualties, and others could use their strong financial position for a competitive advantage. We'll continue to monitor things as they progress, especially after the All-Star break.