Sean Monahan and Johnny Gaudreau. Image by: Getty Images
Flames CEO Ken King said the team will receive a league revenue sharing cheque this year, but don't take that to mean the franchise is in any kind of financial peril.
Answering questions from a team-friendly moderator and speaking to a business-friendly crowd at an event organized by the Calgary Chamber of Commerce, Calgary Flames CEO Ken King yesterday tried to portray his organization as oppressed and downtrodden, so much so that it now is holding its hand out to the NHL to receive a revenue sharing cheque, the same type of cheque that until recently the Flames were stroking to send to the league’s have-nots.
“We are now receivers. We’ll get a cheque this year,” King told the crowd. “Isn’t that ridiculous, in this beautiful market? It shows you where this is heading and it’s in the wrong direction.”
Now, I wasn’t at the event and didn’t hear everything King said, but it seems that one very important fact was left out of this conversation. If the Flames are trying to portray themselves as a have-not franchise, it’s not going to work. Just because a team receives revenue-sharing money does not mean it’s not profitable. The reality is the Flames do turn a very good profit and have likely done so ever since The Great Lockout of 2004-05™. According to Forbes, the Flames had an operating income of $18 million on overall revenues of $121 million in 2015-16. (The figures are not available yet for last season.)
Teams receive revenue sharing if they qualify for it under the terms of the collective bargaining agreement. One NHL executive said that, generally speaking, the way NHL revenue sharing works is that the teams that finish in the top 10 in revenues share some of those revenues with the teams that finish from 11 through 31. This isn’t always the case, but it appears to be a general rule. He said the Flames will not have finished in the top 10 in 2016-17 and are not in the bottom 10 either. That means they will receive somewhere in the neighbourhood of $1 million-$2 million at the upper end and $10 million-$12 million if they are down around 20.
To be fair, the Flames did see a rather significant dip in attendance in 2016-17, when they finished 10th in the league with 18,727 fans per game. That is the first time since 2004-05 that had fewer than 19,000 fans per game and the lowest they’ve finished in overall attendance. Contrast that with their best year since the lockout, which was 2013-14 when they finished seventh in the league with a per-game average of 19,302. That’s a difference of almost 600 fans per game times 41 games, which is not an insignificant drop in revenue. If you base that on an average ticket price of $262 (which is what it was last season, according to Forbes), that’s a potential drop in revenue of $6.4 million.
So what does all of this mean? Well, first of all, it means that the Flames almost certainly need a new arena if they want to get back among the heavy hitters in the NHL when it comes to revenues. There is no way the Scotiabank Saddledome in its present form is going to be able to generate the kinds of revenues that will keep the Flames among the top-earning teams in the NHL. This, then, goes back to the comments King made just last week, saying the Flames are a “small-market team” in the NHL. Well, if that’s the case, then why shouldn’t the league be helping them out a little bit? And if they’re such a small market, why should they expect to be one of the league’s revenue drivers.
Yes, the Flames need a new building. But how much of this recent downturn is due to that and how much is due to the fact that the Flames play in a market that has been depressed by the drop in oil prices and the fact that they take their revenues in a Canadian dollar that has dropped, but pay their most prominent expense, player salaries, in U.S. dollars? And while it’s likely we’ll never see crude oil trading at $100 a barrel again anytime soon, both of these factors could change. And let’s not forget that if those same pressures are affecting the Flames, they’re also affecting Calgary’s taxpayers, whom the Flames want to heavily subsidize their new arena.
To this point, Calgary mayor Naheed Nenshi has indicated a willingness for the city to do its part with $185 million in land, demolition costs and money to a project it priced out at $555 million. The Flames want more than that. A lot more. And even though King said it would be “impertinent, imprudent and inappropriate for us to intercede on the political front,” that certainly didn’t stop them from making their frustration with Nenshi a very public and very prominent issue during a municipal election campaign.
That, and the fact that the Flames are trying to portray themselves as hard done by when, in reality, likely half the teams in the league would be happy to trade places with them from a financial standpoint makes all of what they say seem just a little disingenuous.