Thursday, September 15, 2011

Prudent Austerity or A Case Of Alligator Arms?

If you want to try to decipher or read between the lines of the interview that the excitable (and sometimes rambling) Senators owner Eugene Melnyk gave to the Citizen’s Wayne Scanlan yesterday, you would probably head straight to this part with your magnifying glass:

“Melnyk wouldn’t say if the suggested $14-million loss figure was accurate, but he admitted that scaling down the payroll makes sense in a city like Ottawa, where “the revenue base is somewhat flatlined.””

That seems to be a significant statement. Melnyk has pretty much spent to the salary cap ceiling since 2005, which was a luxury Sens fans didn’t enjoy under Rod Bryden before the cap-era, and no one can accuse him of going cheap in his zeal to win a Stanley Cup. But it sounds like Melnyk is tired of losing money.

Does this mean that the reduction in payroll after the player purge last year is going to be a permanent state of affairs? Melnyk goes on to say that “We should not be in business if we have to make the playoffs just to break even…That’s not fair. That’s your bonus.”

My hunch is that Melnyk will once again break out the wallet if and when this team gets close to real contention (no reason to spend outrageous sums on a rebuilding team anyways) but there seems to be some signals that perhaps Melnyk is going to be much more careful about the bottom line despite his obviously competitive nature. There is always the possibility the Senators could become like the Sabres pre-Pegula or the current Nashville Predators. After all, Ottawa is a small-market team with a building that doesn’t regularly fill to capacity or have a high season-ticket base. Melnyk describes the revenues as having “flatlined”, which is not what you want to hear an owner say. Perhaps the big spending days are truly over, even if it may mean important players will have to depart due to a new self-imposed cap in the future.

Perhaps the only way to safeguard against such a possibility is to sell the building out regularly like other Canadian cities do. That’s a tough task in a town without a major corporate base and a public service facing major cuts under the Conservative government.

It will be interesting to see if the fans who actually have the money to afford tickets will do so in the next few seasons. The young rookies stirring up some excitement will certainly help in that regard.


Anonymous said...

Ottawa has an additional problem of there being tons of Leafs and Habs fans and a good portion of the city that could give a shit about the team, period.

Additionally, I hear more and more people that don't go to games because Melnyk is rich and unlike the Bryden days when they had to go or the team would move. Now, people take the team for granted or are just cheap.

I don't think revenues will go up until the team rattles off 100 point seasons and makes te playoffs all the time or Melnyk threatens us.

Anonymous said...

Will be interesting to see this year, but I've been a fan for years but bought my first multi-game pack this year. I'm excited about the direction being taken.

Anonymous said...

My take is that they reduced the payroll because they realize that there's no sense spending a lot of money if you're not going to be contenders. I'd bet that the payroll ramps up as soon as it looks like we can do some damage. Just a guess.

As for the Bryden reference, here's a little perspective.

It's true that our payroll (in US dollars) was a lot lower under Bryden, but you cannot under estimate the effect of the low Canadian dollar.

Here's some rough analysis:

October 2002 - CAN dollar at 63.3 cents US
***Melnyk takes over***
October 2003 - CAN dollar at 74.3 cents US
October 2005 - CAN dollar at 86.1 cents US
October 2006 - CAN dollar at 89.5 cents US
October 2007 - CAN dollar at PAR with US
October 2008 - CAN dollar at 94.2 cents US
October 2009 - CAN dollar at 92.2 cents US
October 2010 - CAN dollar at 98.1 cents US
Today 2011 - CAN dollar at 1.02 cents US

Roughly, this is what the Sens spent on salary in Canadian dollar terms: (I assumed that 02-03 had a $30M US payroll and 03-04 had $33M US payroll. Every other year, I assumed that they spent to the cap, even though they usually were slightly below it)

02-03 $47.4M
03-04 $44.4M
05-06 $45.3M
06-07 $49.2M
07-08 $50.3M
08-09 $60.2M
09-10 $61.6M
10-11 $60.6M
11-12 $50.0M Appoximately

These figures are very rough. They might be off by a bit.

The point I'm trying to make is that, due to the rise of the Canadian dollar, the Sens payroll has been pretty stable over the last 10 years.

Bryden kinda gets a raw deal for being tagged as a guy who didn't spend much on salaries. The fact is that he spent about as much we are spending now, in CAN dollar terms.

Add to that, ticket prices have increased. The payroll has been relatively stable. The CAN dollar could keep going up in the future.

I think the Sens are in good shape.

Jeremy Milks said...

Great points about Bryden. I didn't intend to belittle him if that's what came across. He was a great owner who fought to keep this team in Ottawa and should always be remembered fondly by fans here.