Posse81
November-12th-2003, 02:27 PM
Good article on the state of the Caps. With the lockout looming, looks like it will be a while before we have anything to root for...
http://www.washingtonpost.com/wp-dyn/articles/A28146-2003Nov11_2.html
'A System-Wide Failure'
Leonsis Has Lost Nearly $100M as Caps Have Faltered; Lockout Looms
By Jason La Canfora and Thomas Heath
Washington Post Staff Writers
Wednesday, November 12, 2003; Page D01
The Washington Capitals' on-ice misery that has left them with just three wins in 15 games is being exacerbated by the franchise's woeful financial picture and the expectation that the NHL's labor problems could darken the league's arenas next season.
The Capitals and their owner, Ted Leonsis, are bracing for losses of up to $30 million this season, according to team sources, bringing the total lost by the local entrepreneur to nearly $100 million since he and fellow investors bought the team for $85 million in 1999. Season ticket sales are down to 9,500 from a high of 12,000 last year, sources said, with actual attendance at some of this season's first six games at MCI Center appearing to be even lower.
Both on the ice and in the front office, the Capitals' brass is already making personnel and financial decisions that are responses, at least in part, to the team's financial picture and the prospect of a work stoppage or lockout that could cancel all or part of the 2004-05 season for a league in which 20 of its 30 teams are said to be losing money.
"We're kind of like the poster boys for what's wrong with the league," Leonsis said in an interview yesterday. "We're spending a lot of money and we're losing a lot of money. Those are the facts.
"If the question is, would we spend more money to lose more money -- and that is one of the fundamental issues with the league right now -- the answer would be that we've spent our money. So the criticism to us should be, 'Did you spend it the right way?' And we're in last place so you would say no. . . . But we do have a budget like all other teams do, and we're living within that budget."
The Capitals have only rarely this season carried 23 healthy players on their roster, the maximum allowed by the league. When the team has called players up from its minor league affiliate, it has on at least one occasion chosen the least-heralded prospect, who had a much lower salary. Last month, the team decided not to hire a replacement for its senior vice president of business operations.
And the Capitals have tried to trade some of their highest-paid players, particularly underachieving forward Jaromir Jagr. Jagr's $11 million-per-season contract, coupled with the new climate of fiscal restraint in the NHL given its uncertain future, has handcuffed the team's ability to acquire players. Leonsis's decision to reward Jagr with a seven-year, $77 million deal when he acquired the five-time NHL scoring champion from Pittsburgh in 2001 has proven to be a huge mistake, especially given the downturn in Jagr's play.
"The situation of the Caps is symptomatic of a lot of franchises in the league," said Bill Daly, the NHL's executive vice president and chief legal officer. "Ted was paying what the market was dictating that he pay [for salaries]. He showed an incredible commitment to the on-ice product, even with revenues that might not justify that commitment."
The collective bargaining agreement between NHL players and management expires next September and two general managers said privately this week that they do not expect the issue to be resolved until December 2005 at the earliest.
The uncertainty has cast a pall over the league, with teams trying to prepare for a salary cap in the $35 million to $40 million range in a new collective bargaining agreement. The possibility of such a ceiling has rendered players such as Jagr -- who has four years and $44 million guaranteed beyond this season -- almost impossible to trade and glutted the market with high-salaried players.
Leonsis announced last week he has added two more investors to his ownership group, Lincoln Holdings LLC, hoping to stabilize the team's finances. But sources said the Capitals' annual ticket revenue barely covers the salaries of its five most expensive players -- Jagr and fellow forwards Peter Bondra and Robert Lang, goalie Olaf Kolzig and defenseman Sergei Gonchar. The NHL target is for ticket sales to offset the entire payroll. Many NHL executives believe Gonchar will be the next player to be traded as the Capitals seek to trim payroll, which this year is about $49 million, well above the league average.
In the meantime, General Manager George McPhee has little recourse to address the club's deficiencies, particularly on defense. The team has given up the second-most goals in the league. McPhee had to corral a host of journeymen defenders over the summer to replace stalwarts Calle Johansson, who retired, and Ken Klee, who signed with Toronto during training camp. The experiment has failed, and there are few options to improve the group.
"George is paying for the mistakes his owner made," one NHL general manager said. "He's not in a position to be able to help his team."
Said Leonsis: "If we could make a trade to replace a defenseman then we would do so, but this is a system-wide failure. We don't have an unlimited budget. It's not like, 'If only we would pay $53 million we would be a better team.' Because two years ago we spent $57 million and we didn't make the playoffs."
With McPhee unable to take on significant salaries in trades, the team would have to continue to settle for prospects, almost all of whom would be a year or two from making a real impact. McPhee continues to speak to other general managers about defensive help, sources said, but available players are out of his price range.
Most NHL players have two sets of salaries -- a figure generally at $100,000 or less in the minors and a salary of at least $400,000 in the NHL -- and by keeping players in the minors a franchise can save money. Several times this season the Capitals have lost a player to injury, yet have not called up a replacement.
"When you see a situation like that, nine times out of 10 it's about the money," an NHL source said. Leonsis and Dick Patrick, the Capitals' team president, said such decisions have been purely hockey-based.
Washington recently recalled goalie Rastislav Stana to replace injured backup Sebastien Charpentier, rather than the more heralded prospect Maxime Ouellet; Stana makes $400,000 in the NHL, while Ouellet would make $1.2 million.
The Capitals also decided not to hire a replacement for senior vice president of business operations Declan Bolger after he left last month for the NBA's Portland Trail Blazers. Bolger, who ran the team's office, earned around $200,000, according to team sources. Sources said the NHL's murky labor situation was one reason the team did not search for a replacement, although Leonsis disagreed.
"When you're losing this much money, saving $200,000 is noise," Leonsis said. "It's not why we're doing things."
The team's poor play might eventually put McPhee's and Coach Bruce Cassidy's jobs in jeopardy, although money and labor issues could ultimately become a factor in those decisions as well. Hiring qualified candidates midseason with a lockout looming, and signing them to contracts only for the remainder of this season, would be challenging. McPhee and Cassidy do not have guaranteed contracts beyond this season, but Leonsis continues to give them public support.
"I don't think that [McPhee and Cassidy] are the issue," Leonsis said. "This year has been painful, but it's not that much worse than any of our previous starts. The hole is deeper this year, and that is unfortunate, but the season is not over and we haven't thrown in the towel."
http://www.washingtonpost.com/wp-dyn/articles/A28146-2003Nov11_2.html
'A System-Wide Failure'
Leonsis Has Lost Nearly $100M as Caps Have Faltered; Lockout Looms
By Jason La Canfora and Thomas Heath
Washington Post Staff Writers
Wednesday, November 12, 2003; Page D01
The Washington Capitals' on-ice misery that has left them with just three wins in 15 games is being exacerbated by the franchise's woeful financial picture and the expectation that the NHL's labor problems could darken the league's arenas next season.
The Capitals and their owner, Ted Leonsis, are bracing for losses of up to $30 million this season, according to team sources, bringing the total lost by the local entrepreneur to nearly $100 million since he and fellow investors bought the team for $85 million in 1999. Season ticket sales are down to 9,500 from a high of 12,000 last year, sources said, with actual attendance at some of this season's first six games at MCI Center appearing to be even lower.
Both on the ice and in the front office, the Capitals' brass is already making personnel and financial decisions that are responses, at least in part, to the team's financial picture and the prospect of a work stoppage or lockout that could cancel all or part of the 2004-05 season for a league in which 20 of its 30 teams are said to be losing money.
"We're kind of like the poster boys for what's wrong with the league," Leonsis said in an interview yesterday. "We're spending a lot of money and we're losing a lot of money. Those are the facts.
"If the question is, would we spend more money to lose more money -- and that is one of the fundamental issues with the league right now -- the answer would be that we've spent our money. So the criticism to us should be, 'Did you spend it the right way?' And we're in last place so you would say no. . . . But we do have a budget like all other teams do, and we're living within that budget."
The Capitals have only rarely this season carried 23 healthy players on their roster, the maximum allowed by the league. When the team has called players up from its minor league affiliate, it has on at least one occasion chosen the least-heralded prospect, who had a much lower salary. Last month, the team decided not to hire a replacement for its senior vice president of business operations.
And the Capitals have tried to trade some of their highest-paid players, particularly underachieving forward Jaromir Jagr. Jagr's $11 million-per-season contract, coupled with the new climate of fiscal restraint in the NHL given its uncertain future, has handcuffed the team's ability to acquire players. Leonsis's decision to reward Jagr with a seven-year, $77 million deal when he acquired the five-time NHL scoring champion from Pittsburgh in 2001 has proven to be a huge mistake, especially given the downturn in Jagr's play.
"The situation of the Caps is symptomatic of a lot of franchises in the league," said Bill Daly, the NHL's executive vice president and chief legal officer. "Ted was paying what the market was dictating that he pay [for salaries]. He showed an incredible commitment to the on-ice product, even with revenues that might not justify that commitment."
The collective bargaining agreement between NHL players and management expires next September and two general managers said privately this week that they do not expect the issue to be resolved until December 2005 at the earliest.
The uncertainty has cast a pall over the league, with teams trying to prepare for a salary cap in the $35 million to $40 million range in a new collective bargaining agreement. The possibility of such a ceiling has rendered players such as Jagr -- who has four years and $44 million guaranteed beyond this season -- almost impossible to trade and glutted the market with high-salaried players.
Leonsis announced last week he has added two more investors to his ownership group, Lincoln Holdings LLC, hoping to stabilize the team's finances. But sources said the Capitals' annual ticket revenue barely covers the salaries of its five most expensive players -- Jagr and fellow forwards Peter Bondra and Robert Lang, goalie Olaf Kolzig and defenseman Sergei Gonchar. The NHL target is for ticket sales to offset the entire payroll. Many NHL executives believe Gonchar will be the next player to be traded as the Capitals seek to trim payroll, which this year is about $49 million, well above the league average.
In the meantime, General Manager George McPhee has little recourse to address the club's deficiencies, particularly on defense. The team has given up the second-most goals in the league. McPhee had to corral a host of journeymen defenders over the summer to replace stalwarts Calle Johansson, who retired, and Ken Klee, who signed with Toronto during training camp. The experiment has failed, and there are few options to improve the group.
"George is paying for the mistakes his owner made," one NHL general manager said. "He's not in a position to be able to help his team."
Said Leonsis: "If we could make a trade to replace a defenseman then we would do so, but this is a system-wide failure. We don't have an unlimited budget. It's not like, 'If only we would pay $53 million we would be a better team.' Because two years ago we spent $57 million and we didn't make the playoffs."
With McPhee unable to take on significant salaries in trades, the team would have to continue to settle for prospects, almost all of whom would be a year or two from making a real impact. McPhee continues to speak to other general managers about defensive help, sources said, but available players are out of his price range.
Most NHL players have two sets of salaries -- a figure generally at $100,000 or less in the minors and a salary of at least $400,000 in the NHL -- and by keeping players in the minors a franchise can save money. Several times this season the Capitals have lost a player to injury, yet have not called up a replacement.
"When you see a situation like that, nine times out of 10 it's about the money," an NHL source said. Leonsis and Dick Patrick, the Capitals' team president, said such decisions have been purely hockey-based.
Washington recently recalled goalie Rastislav Stana to replace injured backup Sebastien Charpentier, rather than the more heralded prospect Maxime Ouellet; Stana makes $400,000 in the NHL, while Ouellet would make $1.2 million.
The Capitals also decided not to hire a replacement for senior vice president of business operations Declan Bolger after he left last month for the NBA's Portland Trail Blazers. Bolger, who ran the team's office, earned around $200,000, according to team sources. Sources said the NHL's murky labor situation was one reason the team did not search for a replacement, although Leonsis disagreed.
"When you're losing this much money, saving $200,000 is noise," Leonsis said. "It's not why we're doing things."
The team's poor play might eventually put McPhee's and Coach Bruce Cassidy's jobs in jeopardy, although money and labor issues could ultimately become a factor in those decisions as well. Hiring qualified candidates midseason with a lockout looming, and signing them to contracts only for the remainder of this season, would be challenging. McPhee and Cassidy do not have guaranteed contracts beyond this season, but Leonsis continues to give them public support.
"I don't think that [McPhee and Cassidy] are the issue," Leonsis said. "This year has been painful, but it's not that much worse than any of our previous starts. The hole is deeper this year, and that is unfortunate, but the season is not over and we haven't thrown in the towel."