If you were away from Canes and Coffee on Monday, I kicked off a pretty full assessment of the Hurricanes’ prospect pool with separate articles analyzing and ranking first the goalies and then the defensemen.
I will get back to that project either Wednesday or Thursday.
Today’s Daily Cup of Joe will go in a different direction looking at three different thoughts on Hurricanes’ financial situations.
The importance of matching team progress to player progress
The the 2016-17 season, the Hurricanes attendance struggled, and it is no secret that the team has been losing money and that the losses have probably increased in the past couple years (based simply on watching the attendance numbers decrease).
At the same time, enough young players are rising up that the team’s salary is almost certainly scheduled to increase in the next two to four years.
To make the math work, the Hurricanes need to push up into the playoffs soon and hopefully use that rebound at least in part to fuel an increase in ticket sales and revenue. The fact of the matter is that the many of those who have wandered away from Canes hockey are not going to come back because we netted Noah Hanifin and Sebastian Aho in the 2015 NHL Draft and are supposed to win again someday because of those young players. Many of the departed fans will return when ‘someday’ actually arrives.
A scenario that sees the Hurricanes young players continue to progress individually but unable to convert individual development into winning hockey presents a challenge financially. The result would be increasing costs paired with still stagnant attendance and revenue and widening losses.
Modest improvement from key players could win out over booms
Next summer (or possibly sooner), the Hurricanes will need to re-sign Brett Pesce, Elias Lindholm and Noah Hanifin. The following summer, the Hurricanes will need to re-sign Jeff Skinner, Sebastian Aho, Teuvo Teravainen and Haydn Fleury. Six of those seven players are young players with a wide range of potential outcomes heading into contract negotiations.
On the one end of the spectrum for 2017-18, if things click for Hanifin and he settles into a top 4 role, Pesce continues down the same path but also boosts his scoring and Lindholm finally breaks out to the tune of 60+ points, the total cost for those three players could easily be $15 million on more annually for their next contracts. If instead, Hanifin continues his modest development pace and spends some time in the bottom pairing, Lindholm plays well but continues to be a 40-50-point scorer and Pesce is sound defensively but light offensively, the same three players could cost more like $10 million. That range represents a significant $5 million swing.
The range of possibilities is at least equally large for the following summer with four more players up for new contracts.
Winning trumps everything else and also helps with the financial situation because it increases revenue. But in a strange way, the Hurricanes could benefit from finding a way to win but without it requiring massive leaps by players coming up for new contracts.
Walking a fine line to a perfect world
Wishing for Hurricanes players not to do well is ridiculous obviously. The extreme version of that is wishing a path back to the bottom of the NHL.
But is there a version of the 2017-18 Carolina Hurricanes that makes the playoffs led by stellar goaltending by Scott Darling, blue line scoring in bunches from Jaccob Slavin and Justin Faulk and the veterans like Jordan Staal, Justin Williams and maybe Jeff Skinner stepping up at forward? That version sees the team’s success concentrated in players who are already locked in financially (with the exception of Jeff Skinner). If the veteran driven success is coupled with youngsters like Noah Hanifin, Haydn Fleury, Elias Lindholm, Sebastian Aho and Teuvo Teravainen making only modest improvements, the result could be the best of both worlds for the Hurricanes. First, the team nets the playoff berth that will help rejuvenate attendance. Second, the revenue boost is accomplishments with minimum impact on salary costs.
What say you Canes fans?
Is it simply a matter of winning solves everything, or am I right to think that the timing and cause of the next leg up could be significant in terms of making it sustainable financially?
Is reasonable to have a slight bias toward 2017-18 success being driven more so by players who are already locked in financially?
Go Canes!
1. Yes, winning solves most everything. That said, it a low probability that all our young players pan out and receive extensions. There will likely be one or two dealt at some point, potentially alleviating any financial need we have at that time. Plus, GMRF is drafting and building a sustainable farm of talent. In a few years Roy may be Staal’s replacement, Booth/Ned potentially Darling’s replacement, Bean may replace Faulk, and so on. Costs will be staggered and controlled, which I believe is part of GMRF’s master plan (pay for a players prime, not before or beyond).
2. Completely reasonable to rely on Staal, Skinner, Faulk. For work, I coach and manage a group of seasoned and rookie individuals. I tell them all the time “you create your own luck”. I think the same is true for the ‘Canes veterans and young players alike. This is why the team is paying the vets the salary they make, to actually pave the way (even financially) for the growth of the team and future players. Nothing wrong with your assessment here!
Some of the future costs are fixed (or at least within a small range). Aho and Skinner are going to be quite valuable assets (Aho probably 5.5-7M and Skinner 6.5-8M). So the challenge for GMRF is to make the correct decisions on the others. He has already made the decision on Teravainen with a 2-year deal. The opposite decision was made on Slavin. Everyone likes the Slavin deal and I would argue it should be the templatejfor just about all the others. Pesce and Lindholm could probably be signed for 5 or more years at something like $4-$4.5M. While that increases the costs next year, it would be a long-term bargain. I understand the hesitancy to commit to much greater spending prior to winning/playoffs. However, there was an article when Johnasen signed in Nashville how the organization had made several early commitments to other players that were now paying off and actually allowed the big contract for Johansen. So yes, winning will help. I admit that having a higher payroll while not making the playoffs this year is bad. But the true disaster is winning then not being able to retain one or more of the key players because the organization defined penny-wise and pound foolish.
Staal should see an offensive uptick, but he has been consistently good in all other areas. I think it is unlikely that either Faulk or Skinner significantly improves goals because they both had really solid years. Williams might get 25. My point is that the increased offensive output is almost assuredly coming from Teravainen, Lindholm, and Rask. And increased overall scoring will mean Pesce and Hanifin are likely to get a few more assists. The only scenario where waiting makes any sense is if the team misses the playoffs because all the players up for contracts do no better. That is both too pessimistic a position for a front-office that has done so many things well and a recipe for short-lived success.
I’m not sure there’s a scenario where everybody preforms so well that they get max raises, yet we don’t make the playoffs on a regular basis, and start making money. Consistent winning will solve just about anything. Ask Chicago(and a more fan friendly owner doesn’t hurt, either).
At the end of the day, I think your statement that “consistent winning will solve just about anything” rises about the other details.
I remember reading at the start of last season that ticket revenue has stabilized and has gone up even – the result of the shift Waddell made a couple of seasons ago to limit the number of free and steeply discounted seats. So we have probably hit the base there.
For a team like Carolina the primary revenue stream is from the TV deal.
With that said, increases in attendance should lead to a real boom in the team’s finances – recognizing there is probably quite a debt load.
One error the ownership has been continually making is UNDER FUNDING this team! The predictable outcome was a poor team that historically underperformed, missed playoffs, and decimated arena ticket sales. Losing teams eventually lose money!
The good news is “apparently” RF recognized the problem, and seems to be ameliorating the situation… though it seems like he avoided spending more money until all else had failed!!! Better late than never, I guess…!
This market will, once again, make money and support the hockey team, as long as the fans feel there really is an effort being made to achieve excellence!
Question 1: Winning solves everything
Question 2: Puckgod and I partially agree. We will not have a consistent winning team until we spend money. That money needs to be spent on our players. If Hanifin jumps to a 50 point elite defenseman, I’d have no problem paying him as such. I grant that this penny-pinching mentality has been a necessity for the last decade of our existence, but at the end of the day I care infinitely about these players improving and developing into a long-term foundation and I care zero if we have to pay an extra $5-$10 million in raises to do it.
CASE IN FREAKING POINT. That’s how you retain a quality player GMRF. Pesce/Slavin FOREVER!!!!!!
https://twitter.com/NHLCanes/status/892476003435655168
That is a great deal for the Canes. I love both Pesce and Slavin–just not sure how one is 30% more valuable than the other.
In any event, having both signed for less than $9.5M per year is fantastic from a fiscal standpoint.
Matt – just read something interesting in yesterday’s article by Chip Alexander after his Karmanos interview. According to Waddell, the team finished in the black in the 2016-17 season – the first time ever the team has done so in a year we did not make the playoffs. And season ticket renewals are running at 90%, and another 500 STMs have signed on – a very successful offseason for ticket sales.
So your remark, “The the 2016-17 season, the Hurricanes attendance struggled, and it is no secret that the team has been losing money and that the losses have probably increased in the past couple years (based simply on watching the attendance numbers decrease).” is, perhaps surprisingly, in accurate.
“inaccurate” not “in accurate”.
I don’t doubt you, but HOW DID THEY MAKE MONEY?
I’m very surprised!
Better ticket revenue than previous years – Waddell’s mission has been to enhance the value of the tickets and he has been successful.
Season ticket holder retention and addition have both been solid and improving the last two seasons.
Add in the television contract, of course.
Ha! I just realized it could also be the one-time shot of the Vegas expansion team fee.
$2M profit last year, not including the $16M expansion fee according to an interview with Waddell with Lavalette.