Wednesday, November 9, 2011

Are the Blue Jackets "on the brink of collapse"?

A reader dropped this Huffington Post link on me this morning via Twitter and asked me for my thoughts.  Because some questions can't be answered in 140 characters (though we try, oh do we try...), I thought it would be best to try a response here on the blog.

So let's start with what I presume to be the premise of the question: "Are the Columbus Blue Jackets on the brink of financial collapse?"  (Or, for that matter, are any of the other professional sports teams listed in the article?)

First, let's look at what I consider the three most valuable facts of the article vis a vis the CBJ:
10-year change in attendance: -23.67 percent (biggest decline in NHL)
W-L record 10 years: 285-356-24-73 (the worst in NHL)
Operating income (2010): -$7 million
The premise of the article is, more or less, teams that have poor records over prolonged periods have precipitous drops in attendance, starving teams of ticket-driven funding and presumably a drop in community support.  And if you bought this premise, the Blue Jackets are not sitting in the catbird seat.

The problem with the article, however, is that the premise is a tad flawed.  You see, the overwhelming majority of major league professional sports teams don't operate on such rational premises.  That's because they are owned by people and organizations that are filthy rich.  By filthy rich, I'm generally talking about that nebulous "1%" over which people are occupying in the Zucotti Parks of America.  So when you look at ownership of major league sports franchises through that lens, you'll understand that rational supply-and-demand economics don't apply.  There are tremendously well-endowed (financially speaking) benefactors - some call them "sugar daddies" - who, by their whim, decide to keep what would be otherwise financially struggling or unsuccessful teams afloat.

Bringing it home to the CBJ, that's what makes the comments following the 2009-10 season of John P. McConnell so fascinating.  You can watch the entire video, but the financial matters start at the 2:58 mark:




The very brief comments starting at 5:29 are even more profound.  Much as a team operates largely at the whim of these extremely rich folks, they die when the muse loses its attractiveness.  J.P. McConnell threw down the gauntlet to the community...pony up and cut/eliminate my need to keep writing extraordinary checks to keep this venture afloat, or I'll eventually cut the team off.  This, of course, led to the arena deal that now is winding its way through the halls of city and county government.

Back in September, this was my thumbnail assessment - one that stands true today:
Should the plan pass, the announced $12 million annual losses that the Blue Jackets have faced would drop by almost $10 million. Add in the $1 million saved by shifting marketing responsibilities to Ohio State University, and you're looking at a minor uptick in ticket sales to get the team to a break-even position. Win a few more games, and that shouldn't be a problem.
The "win a few more games" part isn't coming to fruition, but that theoretically could be corrected with a personnel shift here or there on the ice, behind the bench and/or in the front office (and I'm leaving the issue of so many "legacy contracts" off the table in the interests of simplicity). The arena lodestone will be removed very soon, and the law of averages suggests that McConnell and his wealthy partners will eventually get the personnel thing right while they absorb much more tolerable (to them) losses.  I daresay McConnell's imposition of an organization-wide strategic plan is the first step in this direction.

So what Huffington Post missed (besides mentions of the Dallas Stars, who are in bankruptcy and appear to be hemorrhaging cash while apparently collecting financial support from the NHL to prop them up as they wait for a new owner to emerge - and the New Jersey Devils, who appear to be in tough straits while they, too, search for a new benefactor) is the fact that these sports teams are only normal "businesses" in the paper sense.  They're hobbies for really, really rich people.

And as long as really, really rich people (or, in the case of the Phoenix Coyotes, the City of Glendale - which has been writing $25 million checks to the NHL for the past couple of seasons to compensate for the losses the team is experiencing) want to keep unprofitable teams going through their largess (and use the franchise operating losses as nifty tax write-offs...can't forget that!), there's no reason to worry.

See why this discussion takes more than 140 characters?

2 comments:

  1. blue jackets r gonna be gud jus wait an see

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  2. @Anon. Wow what a profound statement! Letestu must be the "answer" huh? Oh yeah....Hitch won on his debut. Imagine that?

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