Should Sharks owners be allowed to profit?

July 16, 2012, 5:29 pm
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As news of the upcoming NHL labor battle starts to break, as it did over the weekend with reports of the owners making a bold first proposal to the NHLPA, its worth circling back to about a month ago when a couple members of the San Jose Sharks ownership group sat down for a Q-and-A session with the local media.

Kevin Compton and Stratton Sclavos, two of several individuals listed among the teams ownership group, help to represent an NHL club that has seemingly done everything right on the business side yet still falls short in terms of profit. In fact, its been reported that the club lost upwards of 15 million last season despite selling out HP Pavilion every night.

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Its worth listening to what they have to say, especially if youre planning on picking sides in what could quickly turn into an ugly feud resembling the summer before lost season of 2004-05. After all, the Sharks are perceived as being somewhere in the center of the so-called big marketsmall market teams.

Were right in the middle, said Compton on June 18.

As such, they could be the perfect team to analyze when it comes to the overall health of the league.

Because of our market, and things like that and the way the cap has gone from 39 to 70 million since the CBA started, to stay up with the cap it has not kept up with revenues, Compton said. But were okay with that, because thats a decision weve made to stay competitive.

Compton is referring, of course, to the NHLs salary cap that was implemented following the great lockout. At that time, the players were given 57 percent of hockey-related revenue while NHL clubs were not permitted to surpass a hard 39 million salary cap.

Since then, NHL business has been booming, and revenues have gone from approximately 2 billion in 2003-04 to 3.3 billion just eight years later. With that, the salary cap has skyrocketed to todays figure of 70.2 million for the upcoming 2012-13 season. In fact, the salary cap floor, or the required figure that all NHL teams are required to spend to, is 54.2 million well above the salary cap in 2005-06.
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In order to reset the model that now greatly favors big market clubs and squeezes the smaller markets to spend much more than they would like to, there are reports that the NHL wants to lower the players take of revenue to 46 percent and lower the cap to 52.5 million, among other things.

That proposal has already led to several doom-and-gloom prognostications from fans and media alike, both of whom have the 2004-05 debacle fresh in their memories.

To be clear, Compton and Sclavos are not permitted to comment on the negotiations or their thoughts on the CBA as a whole. But they are certainly allowed to discuss their own clubs revenue situation, and did just that in mid-June.

It became obvious after sitting down with them that the two successful businessmen and the rest of the ownership group they speak for run the Sharks as a labor of love, and not to fatten their coffers.

If we decided to cut our expense level to get profitable, and were a rotten team, I dont think youd see any of us involved, Compton said. Thats not how were wired."

We made the decision to spend to the cap even though the revenues dont justify it, in the goal of winning the Cup. Could we have spent a whole lot less? Yeah, sure.

While several teams operate with an internal cap number, the Sharks do not. In fact, Compton said that general manager Doug Wilson is often the first to bring up the issue of dollars.

Hes come to us regularly for what he thinks the salary cap is going to be, and where he thinks pieces will move years out. Weve typically just said, good, said Compton.

If theres a vision where we say, ok, we went into a room, set up a number, white smoke came out, and said heres your new number and then he went and picked players, thats not how its worked at all. Hes come to us and said, heres what its going to take to be competitive, you guys still want to win. Do you still want to invest ahead of revenues? We say yes, he says great, heres the plan, we say ok. Nothings been turned down.

Sclavos admitted that its been a bit frustrating to see the salary cap rise as it has over the years, but that doesnt change how the club operates.

If goal number one was to make it the most profitable franchise in the NHL we would have done things completely differently. But, its not, he said. Our goal will remain the same next year, and well do whatever we need to do.

But, is that fair? Should the owners of a team that has now sold out 110 straight regular season games be forced to take a loss?

If the weekend reports are true, NHL commissioner Gary Bettman seems to say that it isnt. What happens from here is anyones guess.