Flames and Rebuilding – Follow the Money

 

 

Feaster has been at the helm of the Calgary Flames for just over a year. And while some superficially significant moves have been made over that period (specifically, the trades involving Robyn Regehr and Daymond Langkow) the organizational path and mantra hasn’t changed much despite the switch in management. Calgary continues to market long beloved heroes like Jarome Iginla and Miikka Kiprusoff while battling to remain in the playoff picture in the Western Conference.

There has been a lot of discussion over the Flames apparent lack of a future direction since the off-season. While Calgary’s reluctance to engage in a  "full rebuild" has various origins, "revenue" is probably one of the prime reasons.

According a recent story in the Toronto Star, the Flames are currently fifth in the league in terms of per game ticket sales ($1.5 million). Only Montreal, Toronto, Vancouver and New York make more at the gate. Clubs like Chicago, Pittsburgh, Boston, San Jose and Detroit take in about $400,000 less than the Flames in terms of ticket revenue per contest.

As a result, the Flames are currently only one of five teams that gross more than $60M via ticket sales per year.

That’s big chunk of dough for an NHL club. It’s also a big disincentive to change. Whatever dissatisfaction the fans may feel about the Flames futility the last few seasons, it hasn’t shown up at the gate (at least, not yet). As a result, the signals Ken King and ownership are getting from the market are more "stay the course" than anything else. Veering off into uncharted waters in an attempt to push the club beyond the purgatory of mediocrity means potentially risking the strong, ongoing sales the Flames have established under King since the 2003-04 cup run.

Which isn’t to say the franchise’s motivation is necessarily venal. Calgary has spent at or near the cap for numerous years and the ownership has shown a willingness to bury various mistakes (be it of the coach or player variety) since sales improved in the early part of the new millennium. The franchise is also active in the community and with various charities. 

Nevertheless, $61.5M is a lot of cake to gamble with. There are obviously some aspects of the Alberta/Calgary market which make a rebuild gambit less risky for the Flames – the lack of other professional sports teams, the relative affluence of the city, a downtown dense with corporate headquarters and strong, grassroots support for the team (which is why Edmonton, despite being a weak sister for five years running, comes in sixth right behind Calgary).

But that’s theoretical. It’s easy to speculate from a distance that gate receipts would remain constant regardless of management’s successes or failures. The truth is the potential fall-out of trading a player like Iginla or suffering through an unsuccesful rebuild could have large ramifications for what is currently a very healthy bottom line.

Loss aversion is a strong cognitive bias. People generally prefer to avoid losses more than anything else. It’s a heuristic I once used to partially explain Darryl Sutter’s descent into madness. As such, folks tend to try to avoid losses even more than they look to maximize gains.

This isn’t my call for fans to boycott their tickets or refuse to pay for Flames merchandise until the team decides to fundamentally alter it’s team building philsophy. I’ll leave that up to the individual fan.

Just know that the Flames are probably at or near their regular season cap in terms of revenue; even with the team perpetually finishing 10th in the west. The club could therefore potentially risk a lot with an overtly aggressive rebuild, which is why we’re unlikely to see a more meaningful "switching of gears" by the Flames in the near future.

Until there are stronger signals from the market to change or literally no other choice left on the ice, expect the Flames to continue to more or less tinker around the edges. 

  • ChinookArchYYC

    re: the article – I’ve been saying this for years now. The team is scared of the Young Guns era and prefers the status quo. Eventually though, they’ll be right back there, it’s just a matter of time.

    re: Iginla – trading him just means fans will buy Baertschi jerseys next year. It’ll be the new hot thing. Bottom line is this team needs top young talent and the only feasible way to acquire it is by trading Iginla at the deadline.

    I agree with John Deere Green and Shutout. Having a sports team is about more than profit or should be anyways, from both a sporting and financial standpoint.

    Also agree that refusing to spend $ is the only way for fans to get change. Supporting a broken system doesn’t make one fan superior to another. Why should aperson have to blow their hard earned $ on millionaires and billionaires just to prove that they’re some sort of super-fan? Especially when the millionaires and billionaires aren’t giving it their all back to the fans.

  • Section205

    Q: Do you think Iginla and/or Kiprusoff will have a dialogue with ownership and give them the opportunity to trade them at a future deadline if they do not intend to re-sign with Calgary?

    A: Yes. They have class and respect for the organization.

    Q: Is it possible that either one will want to re-sign at a fair value and be significant contributors?

    A: Yes.

    Q: What type of teams would trade for Iginla or Kiprusoff?

    A: Cup contenders.

    Q: What position will those teams be drafting at?

    A: 25th or worse

    Q: What is the probability that those picks will develop into elite level talent?

    A: Let’s be generous and suggest 10% probability

    Q: So how would a 25th overall pick significantly enhance the gradual rebuilding that every team endures?

    A: There is a slight chance that it could significantly speed up the rebuild, but more than likely it would not speed things up at all.

    Q: Do you think #12 and #34 trade value is significantly higher this deadline than in 2 or 3 years?

    A: While they are getting older, it is probable that the return (late 1st round draft pick) will be only marginally less significant in 2 or 3 years.

    Q: While the Flames are gradually rebuilding in cyclical fashion like most other teams, do you think Flames fans will enjoy celebrating the future career achievements of Iginla and Kiprusoff?

    A: Follow the money.

  • Section205

    @section205 – yeah, I guess that makes sense if you believe that the most you can get for Iginla is a late 1st round pick.

    Most people think otherwise.

    • Section205

      I can almost guarantee that you would (will?) complain about the actual return for Iginla.

      Obviously he wouldn’t get anywhere near what Mike Richards got as a 26 year old centre.

      • Section205

        Well I guess thats where this thing is at the crossroads. If the return isnt overwhelming and Iggy wants to stay & be part of a rebuild, why even bother asking him to waive. Get him signed to a front loaded 4 year extension before the CBA expires so we can pay him 7.0 mill per year on the first 2 years & then 3.0mill for theother 2 years & then the cap hit is only 5.0mil. Add an extra year to get the cap hit even lower if need be. But if Iggy doesnt want to be part of a rebuild, then the time is “now” to get a bidding war & get a meaningful return. But if this thing is about t-shirts & jersy’s for another year, then that will be the upsetting thing.

        • Section205

          Exactly, to say that Iginla would only fetch a late 1st rounder borders on the absurd.

          @section205 – I’ve also stated many times in the past that you obviously only make the move if it’s worth making. I think it would be. But I’ve never advocated giving Iginla away for nothing. And certainly never compared him to Mike Richards. But at the deadline, signed for 2 runs, you should be able to get something meaningful back.

          You may be interested to know that I never complained about the Nieuwendyk return. That was left to the hero worshipers.

          Moving Iginla and Kipper (move on may as well move the other) remain the only solid bet to get skilled youth into the organization (more of it anyways). By the time Baertschi, Backlund, etc. develop Iginla will be just a memory. Of a guy who never won anything for the Flames.

          Don’t worry, neither of us have any control over the situation, but time will tell who was right. After all, I was apaprently wrong years ago for suggesting Carter and Giroux would be a good return for Iginla after his last 50 goal season. How short-sighted of me.

          • Section205

            We’re on the same page bro, I may hero worship Iggy more but I know when its time to do the right thing for the hockey team. Personally, I think the Nieuy trade was like getting fired from a job only to find a way better opportunity. That trade back then & Fleury as well was precipitated by a .65 dollar & no salary cap. They were gone like Brad Richards if we didnt trade them. This time around, its just good hockey management.

          • Section205

            “Don’t worry, neither of us have any control over the situation, but time will tell who was right.”

            I infer from your comments that one way or another you will eventually declare yourself the winner of this debate.

            I can accept that we may not be a legit cup favorite until 2017. All this pushing and shoving to “blow it up” may speed up the process by 1 year, but there is no secret antidote.

            The team is going to be massively restructured over the next 2 years as long term contracts expire. This is natural and every team goes through it at some point.

            We will remain competitive and sometimes make playoffs as we rebuild gradually.

            Meanwhile Iggy and Kipper will reach career milestones that no other Flame has reached.

    • Section205

      Bingo! I think having Iggy for this years Stanley Cup run & having him for next year as well will pry much more than a late 1st rounder, at least an A level NHL ready prospect for team who thinks their time is now. Kipper will get you better than a late round 1st rounder just because of contract versus $$$ owed on the remaining 2 years of the contract & the fact he is still a reliable, rarely injured solid goalie. I see Tampa & possibly Phoenix if Smith is injured more seriously. Can you imagine Kipper actually playing behind a well coached decent defence. Scary.

      • Section205

        “Can you imagine Kipper actually playing behind a well coached decent defence. Scary.”

        If this is true, then why should we trade him?

        Imagine how scary we could be with Kipper plus a well coached decent defence.

        Funny People complaining about this core (ie Kipper and Iggy) for years, and then those same people complaining are the ones trying to suggest the fantastic trade value in the marketplace.

        It has always been true that these players are more valuable to the Flames than they are to anybody else in the league.

        • Section205

          Buddy, if our D was like Phoenix & we were a playoff team, no way I would want to trade Kipper. But here’s the facts, we are well on our way of missing the playoffs for the “3rd consecutive year” & I only see storm clowds no rainbows. Just look at our top 4 d & I only see 1 genuine top 4. Hannan really is only a 5 dman who can pinch 3-4 in an injury scenario.

          I find it funny how many said Regehr was old & washed up & wouldnt get anything on the market & he’s been one of Buffalo most solid Dmen. Guess what, you think Buffalo would part with him a 2nd round pick & a salary dump for Byron & Butler. Not a chance.

  • Section205

    Interesting comments here.

    If you look at http://www.forbes.com you can see the revenues, operating expenses and net income of every NHL team over the past 5 years.

    While the Flames have one of the highest ticket revenues, they have finished with net loses 4 of the past 5 years. So… even if you continue to sell out the regular season you NEED to make the first round of the play offs OR you NEED to cut salaries in order to continue to generate a positive net income. Revenues don’t mean a damn thing… it’s the bottom line that matters in a business.

    The oilers may not generate as much revenues, but they’s make positive net income for the past 6 seasons for over 20M in profits. Hmmm… when you put it that way it sounds a lot better.

    Oilers have finished out of the play offs for 6 years (already assuming they’re effed this year too) and have made 5 times the profit the flames have. Last time the Flames finished 6 years out of the playoffs the team was pending sale twice, and had an average attendace of 13K fans.

    • Section205

      I find that very interesting. A good argument youth and enthusiasm vs. overpaid vets.

      Both teams, in the end, given their hockey decisions over the last decade + are very fortunate they’re in the markets they’re in, to say the least.

    • Section205

      Dont think I agree with your last comment. The .65 dollar was crushing every Canadian team & dont tell me there wasnt a chance the Oilers were folding the tent before that huge group purchased the team prior to Katz. Winnipeg went down, Calgary & Edmonton were reeling. We couldnt keep our top players when it came time to paying the big US dollars.
      It was ironic that the lockout brought in the Salary Cap & shortly thereafter the Canadian dollar rose back to par. If we still had a .65 dollar, you think Katz would have allowed ST to bury Sourays 5.5 mill for 2 years. Dont think so.

      • Section205

        The dollar was above 85 cents by the time the lockout was over, and was sitting higher than that for the majority of of the remaining 5 years with the exception of a few months in 2008 after Lehman’s went under.

        Thank you for your wonderful comments though.

        If you care to discuss finance in better details I’d be more than happy to. I spend more than 12 hours a day dealing in finance.

        I sited where you can go find the net incomes of these teams yourself to save the 30 flames fans on the website from silly and moot comments like the one you just posted.

        Wait a second… is this Jay Feaster? Hmmm… that would explain a lot…

        • Section205

          Duh! Yeah by the time the lockout was over the dollar rebounded. I thought we were talking about when the Jets folded & teams like Calgary & Edm needed to get the required season ticket sales to qualify for Bettmans currency equalization. That was in the mid- late 90’s. Edm went thru their share of ownership changes so whats your problem. You think Calgary couldnt support the Flames if we were to rebuild Edmonton style & spewing history how we almost packed her in? As to more profitable teams and bottom lines, our ownership group is involved with community & charities as much as any ownership group out there. Nice to see Katz hammering the City of Edmonton taxpayers to build him a new arena to make his money.
          Thanks for showing up.
          Oh by the way. I known a brokerage/lending company & know more about finance than you will ever hope to & no I’m not interested in having financial discussions with goofs like you.

          • Section205

            You think Calgary couldnt support the Flames if we were to rebuild Edmonton style & spewing history how we almost packed her in?

            -Never said this. Interesting take.

            As to more profitable teams and bottom lines, our ownership group is involved with community & charities as much as any ownership group out there.

            -Not sure if you know this but the NHL has awarded Edmonton twice in the past 5 years for their community involvment. So…. your point?

            Nice to see Katz hammering the City of Edmonton taxpayers to build him a new arena to make his money. Thanks for showing up. Oh by the way.

            -Even with the marginal increase in taxes the Citizens of Edmonton will still on average pay less property taxes than the citizens of Calgary (0.0528 in Cal vs 0.0492 in Edm). Also, the Province and Federal Government helped fund the Saddledome in the mid 80s to help bring the Olympics here to Calgary. The funded the majority of the project and increased property taxes for the surrounding area also helped fund the remaining costs. All that Katz and Edmonotn was looking for was the same repect.

            I known a brokerage/lending company & know more about finance than you will ever hope to & no I’m not interested in having financial discussions with goofs like you.

            -Hmmm, maybe the person you know works for me? Which firm? It’s a small banking town here in Calgary.

          • Section205

            My bad, I own not known. Typing isnt my strong point, many typo errors all the time. Is a small town, have a small brokerage/ private lending company. Only have 6 people with my company but doing this stuff for over 25 years.

            Your first post came across that we had to do season ticket pushes twice to get to the 14000 required season ticket holders while the Oilers breezed thru that period. Assumed you made that point with respect that people would stop going to games if the Flames traded Iggy & Kipper. Those days sir were in the 90’s when all the Canadian teams were suffering from that US dollar. Those days are long past & my point was that rebuild would not hurt ticket sales for the team & the best case in point are the modern rebuilding Oilers.

            The Winter Olympic funding of facilities here in Calgary had & continues to benefit Canadian athletes across Canada. Different cup of tea comparing that to an Billionaire owner demanding the City build him a building for his 200 million dollar hockey team. You dont think he didnt use a tactic like moving the Oilers to Quebec City if he didnt get his building?

            I just took more exception to your trolling of my self & more over the other 30 Flame Fans on this site. That’s Ok. I’m over it & you can go on thinking you are so superior over us peon Flames fans on FN.

  • Section205

    @section205 – “It has always been true that these players are more valuable to the Flames than they are to anybody else in the league.”

    See, I say it’s the opposite. Not for always, but right now the parts are worth more than the sum.

  • Section205

    I must also note, that I’ve also advocated going after Spezza for the last 2 summers. Who knows if there was any chance at landing him, but if you want to win now than try and win now. It’s this stay in the middle and do nothing attitude that irks me. Go for broke or rebuild, stop pretending you can do both through some gradual process. That only works if you’re already a contender.

    P.S. Please don’t mention the attempt at Richards, that was a combo PR stunt/pure pipedream. Go and actually do something in the real world.

    • Section205

      The truest thing I’ve read on Flamesnation.

      I’ve seen my team sit as a middle contendor from 1997 to 2003 and it made for some really crappy 4 game sweeps in the first round.

      Sometimes it’s not even fun wasting an entire season hoping to squeeze into 8th just so you can get smashed by the top team. There is that chance though.. that ONCE chance you can get through. An 8th seed has lost to a 1st overall only a few times in the past decade…

    • RexLibris

      Interesting idea. I thought the Oilers were contractually obligated to be in every Spezza trade rumour, though.

      While I seriously doubt Spezza gets moved from Ottawa, what do you think Calgary could offer Murray (assuming he’s still employed there in a year) for Spezza? I think it would be quite a bundle, given that he is still under 30 and relatively injury-free.

      This is proving to be an interesting topic, Kent. There are some very provocative arguments being made.

      Great read, guys, thanks.

  • ChinookArchYYC

    One more comment though to help you through this frusterating time.

    The flames salary was about 45% less than it is now, and operating costs of the building were significantly less than now as well. Taking this into consideration with the fact that the dollar was 30-40% less in value in 1998 than it is today there is virtually no grounds to your arguement.

    Plain and simple… your avarage attendance of 13K was killing your team… not the dollar.

  • RexLibris

    @section 205 – infer all you want, I have no difficulty in admitting when I’m wrong. You’re just covering for yourself now.

    @Rex Libris – I’d highly doubt he’s available anymore. Not with his maturation this year. He might never have been available, but if he was it would’ve been last summer or the one before when public opinion was against him.

    The point was more that I’d rather have seen Calgary completely sell the farm and a couple of more 1st rounders to actually get another top flight player or 2 and really be able to go for it (lets not get into salary cap issues right now, obviously that would have to be worked around) than continually watching them tinker around the edges. And if you won’t go for it, then rebuild and like it or not, Calgary only has 2 pieces that can really expedite a rebuild.