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Blackhawks Employ Old Hidden Profits Trick

If there was such a thing as a sports owners playbook the bread and butter play would be “cry poor.”  It’s actually a trick play, ask look variations of which include “blame players’ salaries” and “damn taxes!”  Some old timers just call it “the hidden profits trick.”\n\nFor team owners, pilule the objective is not two-points or a touchdown of course, no rx but to score more profits.  Ticket price increases and hundreds of millions in public subsidies are really good for the bottom line, but any owner running the straightforward “more profits in a market that will bear it in cities that will give it up” play might be stuffed at the goal line.  Why run that when the dazzling “cry poor” play is converted for a score almost every time?\n\nAnd veteran owners know that if you can employ a decoy, someone to help sell the fake—politicians, economists, journalists, etc.—chances of successfully executing the “cry poor” are much improved.\n

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\nThe Blackhawks are raising ticket prices again in order to gain another $10 million in revenue, according to Crain’s Danny Ecker. Hawks owner Rocky Wirtz and Crain’s claim that the hockey team is a financial loser buoyed by profits from Wirtz’s other businesses.\n\nSo the average price of admission to a Blackhawks game next season will be nearly $73, or a 40 percent increase since ’08-’09.\n\n“It’s all part of Mr. Wirtz’s effort to get the team to turn a profit on its own merits,” writes Ecker, citing a “Crain’s estimate” of annual Blackhawks losses between $10 million and $20 million and linking to another Crain’s article from June of this year.\n\n“[Y]ou don’t want (the team) to be dependent on some other business to siphon off profits,” Rocky Wirtz told Crain’s back in June.\n\nThat’s right, the Blackhawks—Stanley Cup champions two of the last four seasons, operating in a huge sports market, setting highs for television ratings and merchandise sales—must siphon profits from other businesses.\n\nWell, it depends on how you define “other businesses.”\n\nMike Ozanian contributes much of the brainpower that goes into Forbes’ annual sports team valuations.  The writer describes himself as “Traffic cop at the intersection of money and sports.”\n\nOzanian and Forbes ranked the Blackhawks as the league’s fourth most valuable franchise in November 2012 (before they won the Cup this year) worth $350 million.  Whereas Ecker reports that the Hawks are experiencing as much as $20 million in annual losses, Ozanian calculates that Wirtz’s Blackhawks are enjoying $20.5 million in annual profits (or “operating income”).\n\nBoth writers peg the Blackhawks gate receipts around $50 million.  The discrepancy is in Blackhawks revenue beyond ticket sales.  Ecker cites only $20 million to $25 million while Ozanian calculates outside revenues of a robust $74 million.\n\nThe difference is explained in this June post from Ozanian, reporting that the latest Stanley Cup win added $50 million to the value of the Blackhawks franchise.\n\n“Although team owner Rocky Wirtz says the Blackhawks are losing money, it is only because his math omits revenue from United Center Joint Venture,” writes Ozanian.\n\nWirtz’s United Center JV is the company that operates the stadium that Wirtz co-owns with Bulls owner Jerry Reinsdorf.  On the United Center JV books (i.e. not on the Blackhawks financial statements) are revenues generated from things like advertising and concessions, even luxury suite sales.\n\nSo while Blackhawks ownership still offers league-average general ticket prices (although the team gets a say in which tickets are counted as “general”), which count on their books, they offer some of the NHL’s priciest luxury suites ($200,000 a year on average), concessions, and parking, which are counted on their other company’s books.\n\nIn another “off-balance sheet beauty” cited by Ozanian, the Blackhawks claim relatively little in television revenue from Comcast SportsNet Chicago, $8 million annually in rights fees.  But Blackhawks ownership controls 20% of the regional sports network, so what Wirtz is not getting from the cable station for the Blackhawks he (and other sports team owners) is profiting from in carriage fees and advertising for a hugely popular but low-cost television product in Jonathan Toews, Patrick Kane, and crew.\n\nAnd of course, none of Wirtz’s CSNC revenues are on the Blackhawks books.\n

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\nRocky Wirtz claims that the Blackhawks are not profitable because of players’ salaries, amusement taxes, and league revenue sharing.  But if Wirtz was really worried about breaking even, he wouldn’t raise ticket prices, he’d fire his accountant.\n\nBut Wirtz won’t do that.  The creative bookkeeping employed by the Blackhawks suits his needs.\n\nFor one thing, crying poor is required as the Blackhawks and Bulls negotiate to extend their lucrative property tax abatement deal with the city of Chicago.\n\nSince it’s not breaking even that has Wirtz continually raising Blackhawks ticket prices, it probably has to do with this little nugget from Ozanian in the Forbes valuation:\n\n“The Blackhawks’ fan base had the largest percentage growth among all teams in the NHL, NBA, NFL and MLB during the past five years…The Blackhawks also boast a season ticket waiting list of more than 10,000 and have a renewal rate of 99%.”\n\nThere is a clamor for Blackhawks tickets and Wirtz wants the wealthiest fans at the United Center.  I get it.  Just don’t tell me it’s necessary.  Shelve the playbook for once and say: “I’m not losing money, I just want more.”\n\nBecause it’s all about supply and demand baby!  That and a game accountant.\n\n 

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