Devils Financial Situation - A Brief Look Back

by Matthew Ventolo on Jan 18, 2012 3:20 PM EST in Devils Business

There's been some talk about the murky state of the Devils finances and debt. Every couple of months, some report comes out that sends a message that the end of the Jeff Vanderbeek era as Devils owner has begun; that the Devils are bumming out on debt payments; that the whole Newark arena idea was a bust. This sends an array of speculation through fans that the team will move away or soon to be superstar free agent Zach Parise will go to more clear waters.

As the great George Carlin would say - "Calm down....have some dip." Seriously.

Around the start of training camp, a report from the NY Post suggested that the Devils missed out on a huge debt payment and were on the verge of bankruptcy. John did a great breakdown on the article and the Devils response (yes, the Devils responded). I suggest reading it if you haven't and or brushing up on it if you don't remember it. The Post article was written by Josh Kosman and there were many, many inaccuracies (including getting the first day training camp wrong). Around the same time - I did a timeline of the Devils financial situation since the mid-90s. It's never been easy with the Devils from a business standpoint - but nothing happened then (i.e. no move to Nashville).

There have been two big reports since September - both from anonymous reports, both from the NY Post, both written by Josh Kosman. What are they?

One was that Wendy's owner and billionaire Nelson Peltz was looking to buy the team (or a portion of the team). What was also interesting was the $100 million the Devils owed in debt in September turned into $250 million in November (that's a bad APR!).The big thing in this article was the securitization of the MSG TV deal to pay debt. This pretty much means any or all profit from the TV deal will be invested to pay the debt now instead of gradually paying it over time.

There have been multiple reports that Brick City LLC (Mike Gilfillan and Ray Chambers) were looking to sell there 47% stake in the Devils. There were reports Vanderbeek was going to purchase that portion (a report written by you guessed it Kosman).

The other report, in which Devilman3030 made a FanShot for was yet again about debt payments. The big thing here was also about that securitization deal. The deal was scheduled to be finalized around now (mid to late January). But that new anonymous source suggested the deal won't be done in the month that they have. That the NHL will step it's foot in if it doesn't (even though the NHL said it isn't an ultimatum). Soo? Okay? This article stated nothing new - that saying a deal (that has over a month until the NHL gets involved - but not with authority) may not get done.

Where the Devils are at now is still the season where ticket sales and season ticket sales are up. Where attendance is averaging over 1,000 more people this season than last season. Where they are making money through their social media outlets and Mission Control through marketing and ticket promotions. Even seeing fans doing their part in suggesting and linking ticket deals to fill the arena.

I will conclude this by how I am taking all this news as well as a few questions that are still in the air from actual reports.

A big missing link in all these stories is the state of Brick City selling their stake in the team. Maybe they can't find one? Maybe they can't reach a deal with Peltz? Who knows - and we won't until a deal is reached and a new owner is announced. I feel once this part of the financial situation is concluded, Vanderbeek and co. can and will continue to do whats best for the Devils. That includes signing Parise.

Fans and/or the public will never know the full story. This is a private business and their documents are sealed. When the Devils release a report announcing (or denying) something they wish to disclose - then we can make and discuss speculation from that report. There's no use in freaking out over "sources close to the situation." You may as well call that an E5.

Thanks for reading. Hope the dip was good.

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The Devils would be helping themselves out by making the playoffs and making a run in the playoffs.

I still think Parise stays in NJ, because after all, this is a business, and business requires risk/reward. By not signing Parise, what does that tell the sponsors and fans of the team? It’s not going to help attendance in the short-term and if players feel that ownership is a problem, who’s to say next summer’s free agents (Elias, Zajac, etc.) will want to re-sign in NJ? Letting Parise leave NJ will only hurt the team’s image to the public and within.

Losing Parise is not an option and will not happen.

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by DownGoesAvery on Jan 18, 2012 3:27 PM EST reply actions

You can keep saying that, but it’s all up to Parise, theres a chance that no matter how much money they throw at him he says no.

And Kovalchuk speeds away, great moves, busting through, DID YOU SEE THAT?

by KovyisLove on Jan 18, 2012 4:25 PM EST up reply actions

it’s going to require quite the delicate balance of signing him- and i’m in agreement with the face-of-the-franchise thing- but still be able to put a competitive team out there.
obviously it’s great right now with patty scoring like he’s in his 20s while his contract will be up and he’ll probably take less on 1-3 year deals until he’s done.
marty, again obviously, is a little more imminent, and zach has or will wonder how they’ll solidify the G situation with he and kovy set to take up a good part of the cap. the best way to do that is draft and develop slowly, like they’ve been doing, so we have a lot of contracts going to end while our young guys will come in all on entry-level contracts that really kinda buy time and are cheap before 1 player comes in line for a big payday in the face of free agency.
henrique will probably be the first if he solidifies himself as a top center in future years. but first, he and larsson will have to get through their EL contracts and RFA status before either one really commands that big FA payday. and hopefully most of this will be resolved by then.

by dptox86 on Jan 18, 2012 9:22 PM EST up reply actions

i also am a carlin fan too. very well done.

by dptox86 on Jan 18, 2012 9:25 PM EST up reply actions

You had me at the George Carlin quote.

by elesias on Jan 18, 2012 3:28 PM EST reply actions 1 recs

I’ve said it before and I’ll probably say it again: the only way Parise is not a Devil going forward is if he doesn’t want to be.

We all know what he says publicly, but pretty much every pending free agent says that. That’s just how it works.

The fans, the coaches, Lou, JVB, even the concession vendors at the Prudential Center all know what kind of player Zach is and what he means to the team in terms of marketability, winning and even to the community.

With that in mind it’s unfathomable that Lou, ever regarded for his savvy, won’t make his very best effort to retain his services. If he leaves, it’s because he wanted to.

by elesias on Jan 18, 2012 3:33 PM EST reply actions

Perhaps Parise would agree to a “back-loaded” contract, where the real $ he makes would be less for a year or two so ownership can sort its situation out.

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by DownGoesAvery on Jan 18, 2012 3:35 PM EST up reply actions

That’s an interesting idea, usually used for young developing players and not for veterans. It could balance with Kovalchuk’s deal and put a bit of ease on JVB’s wallet.

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by Alamoth on Jan 18, 2012 4:18 PM EST up reply actions

Why would a veteran player, let alone a star player agree to a deal like that?

by Zelepukin on Jan 18, 2012 4:21 PM EST up reply actions

In fairness, Kovalchuk did. Still, with an impending lockout, I can’t see Parise wanting less money this year – he’ll want to get paid a bonus that’ll be paid whether or not the season starts on time.

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by Triumph44 on Jan 18, 2012 4:59 PM EST up reply actions

I like the idea, but it’s easier said than done IMO. If the deal’s over 7 years long, it’s definitely a possibility. But it’s obviously going to be tougher if it’s a shorter term deal (i.e. 5 years).

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by Kevin Sellathamby on Jan 18, 2012 8:06 PM EST up reply actions

I just don’t think that’s true. If the team goes bankrupt and the NHL has to boot Vanderbeek, they’re not going to agree to a front-loaded Parise deal. The NHL doesn’t keep the Coyotes on bare bones, but they’re not major free agent players, either.

Frankly with the state of the franchise’s finances I have absolutely no clue how Vanderbeek thought that signing Kovalchuk was a good idea, unless he thought he could have a successful season and sell the franchise to someone else for basically nothing.

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by Triumph44 on Jan 18, 2012 4:44 PM EST up reply actions

I was at the Feb 1 game (picture), braved the ice storm that night

Going to Newark has been great, revenues are much higher (by a wide margin) than what they were getting in East Rutherford.
Once this arena debt issue gets resolved, hopefullly soon, we won’t have to keep hearing about these annoying reports from the Post and other media sources.

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by Real Big Devils Fan on Jan 18, 2012 3:59 PM EST reply actions

Good summary.

Good idea to summarize here rather than just let the speculation/ confusion go rampant through comments, FanPosts, etc. It was getting confusing there.

I didn’t know that the Peltz story was a Kosman story though. I thought that came from Forbes’ Mike Ozanian. Either way, it could be the same story from the same source, shopped to two financial journalists. The details of each piece differ very little.

Until from the Devils someone goes on the record (very unlikely), I see this story as lots of speculation and rumor.

Even as rumors go: if one rumor states that Vanderbeek cannot strike a deal… and another rumor states that the NHL might take over the team… and yet another rumor states that Peltz is interested… then if ALL 3 rumors are true, then Peltz may become the new owner and his billions could help lock up Zach Parise. That’s speculation from a rumor that I could live with.

In the meantime, one must sit patiently and wait.

by Alan Wright on Jan 18, 2012 4:17 PM EST reply actions

In the meantime, one must sit patiently and wait.

Our modern human nature conflicts this. We live in a fast world with twitter and facebook where news and stories all around the world are broken instantly. Every media outlet wants to be the first one (which can hurt you..i.e. Yahoo with Penn State, then ESPN with Syracuse).

With the Parise talks heating up (and it will only get worse as the trade deadline approaches – then again to July 1st), the defining factor for all sports media outlets will be these financial reports. It’s fuel for their fire. And yes, we can only sit back and watch what occurs. We have to approach these reports just like we would with any random trade rumor.

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by Matthew Ventolo on Jan 18, 2012 5:50 PM EST up reply actions

There’s no use in freaking out over “sources close to the situation.” You may as well call that an E5.

Fan-tastic.

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by John Fischer on Jan 18, 2012 4:35 PM EST reply actions

Bravo good sir

Thank you for recapping the events in a logical, concise yet thorough, humorous (I am a huge Carlin fan), and easy to follow format.

by David Fine on Jan 18, 2012 6:11 PM EST reply actions 1 recs

Thanks David

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by Matthew Ventolo on Jan 18, 2012 7:45 PM EST up reply actions

I don’t see how the arena isn’t making money. Maybe they aren’t making as much money because the economy went south but to be the 3rd arena in what ever they were advertising in last game and not at least be able to weather the debt then something is really wrong. Either way they aren’t leaving so that’s something to not worry about.

by roomtemp on Jan 18, 2012 6:35 PM EST reply actions

The reason they’re having trouble is because of the amount of debt that had to be taken on to build the arena. Once the team is out from under the debt, they will be extremely profitable as the arena makes plenty of money. That is a huge hurdle to get over, though.

Status quo.

by nyynygnjd on Jan 18, 2012 10:06 PM EST up reply actions

Very true – the Devils put in $100 million for the $375 million building.

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by Matthew Ventolo on Jan 18, 2012 10:23 PM EST up reply actions

It’s amazing Newark was able to throw in as much as it did. Corey Booker is one hell of a mayor, though.

If the Devils leave NJ, the real losers will be the people of Newark. I really want to see that city succeed.

by Dr. Witticism on Jan 19, 2012 12:35 AM EST up reply actions

Thank you Matt! Excellent job.

But in fairness, though attendance is up from last season, it is down from the two seasons before last season’s nightmare. Of course, the stretch run has not begun.

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by Cherno77 on Jan 18, 2012 8:42 PM EST reply actions

Attendance is always higher in the 2nd half than the 1st half of the season though.

At the 20 home game mark these were the running average numbers from 2007-2008 to this season: 15,448; 15,235; 14,963, 14,060, 15,121.

This season is pretty close to the 2008-2009 from an attendance standpoint (looking at trends and the schedule). That season, AA was 15,790 (the highest at the Rock).

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by Matthew Ventolo on Jan 18, 2012 10:19 PM EST up reply actions

And most of the Devils games in-conference are scheduled after the 2012 New Year. Many are also after the ASB. So, a strong second-half attendance could happen.

by Alan Wright on Jan 18, 2012 10:46 PM EST via mobile up reply actions

*in dividion

by Alan Wright on Jan 19, 2012 3:05 AM EST via mobile up reply actions

anyone else notice average AWAY attendance?
take a look at at average road attendance. the devs are pretty consistently in the top 10, going as high as #5 last year. we seem to have a good contingent of fans in other areas, or, despite the constant b****ing about our play and the trap, still attracts fans to see their team play against the devs.

by dptox86 on Jan 18, 2012 11:08 PM EST up reply actions

It helps when 3 divisional rivals average sellouts over the season. But my experience and others – there is always a contingent of Devils fans at away games.

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by Matthew Ventolo on Jan 19, 2012 12:32 AM EST up reply actions

It helps when 3 divisional rivals average sellouts over the season

Yet teams like Ottawa(whose division basically sell out almost nightly) are usually at the bottom in road attendance.

by Marv95 on Jan 19, 2012 8:41 AM EST up reply actions

Plenty of support here in Tampa. There usually about as many Devs fans as Bolts fans, and not just this season with the Lightning sucking, it’s every year.

by SatanicStickholders on Jan 19, 2012 9:28 AM EST up reply actions

Totally agree with your comment.

Wasn’t in the Staples Center that we heard some “MOOOOOOSE” call at the start of the season ?

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by Elektrostal_Kid on Jan 19, 2012 4:34 AM EST up reply actions

Jersey transplants

on the west coast. It’s not surprising.

by Marv95 on Jan 19, 2012 8:43 AM EST up reply actions

What a rag.

I know it is a very popular periodical, but I ABHOR The Post. They seem more interested in opinion and flash than actually reporting reputable news. I do believe that the article is based on truth and conveys the major points of importance. It just seems that printing any anti-Devils news would be more popular with a paper likely read by mainly Rangers fans. I only saw the article printed a few days ago because my co-worker (a Rags fan) thought I should see it.

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by Michael Gianetti on Jan 18, 2012 10:00 PM EST reply actions

Where the Devils are at now is still the season where ticket sales and season ticket sales are up. Where attendance is averaging over 1,000 more people this season than last season. Where they are making money through their social media outlets and Mission Control through marketing and ticket promotions. Even seeing fans doing their part in suggesting and linking ticket deals to fill the arena.

Did anyone catch the Toronto Star report from a few weeks back that had actual ticket revenue numbers? I am curious to see what the Devils produce revenue-wise from tickets.

Also, I hate to be cynical, but the idea that the Mission Control ‘produced’ revenue? I am guessing that money is basically just shadow credit to monies that already would have been acquired. I don’t think collecting first goal guesses is producing revenue for the team.

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by Tom Stivali on Jan 19, 2012 8:53 AM EST reply actions

It’s revenue from partnerships – which the Devils Arena Entertainment said they have made $500 k in it’s first year.

Krezwick said the team does not put sponsored tweets or Facebook posts on its social media, but instead integrates partners with giveaways and promotions.

A company would rather partner with a team that has multiple areas to get to fans (not just games and commercials on TV and radio). 46k followers and 244k likes on FB means more people see your product – I would sign a partnership with the Devils if I were one of those companies.

On your first point – I did not see it. Here’s a link from mc79hockey in which they copied the list for all the teams from the newspaper. The Devils produced $28.7 million in ticket revenue so far (or about $700k per game).

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by Matthew Ventolo on Jan 19, 2012 1:01 PM EST up reply actions

Not buying it. It’s revenue they probably had or would have had anyway.

Basically they probably have either marketing partnerships with groups and are trying to preserve price points and tossing in social media ‘promotion’ might help preserve revenue, but (in my opinion) that’s not creating anything. It’s financial trickery to justify investment. Which is fine, if the initiative helped save $500K that’s great….but I doubt it’s created anything.

A company would rather partner with a team that has multiple areas to get to fans (not just games and commercials on TV and radio). 46k followers and 244k likes on FB means more people see your product – I would sign a partnership with the Devils if I were one of those companies.

Just took a quick look and it looks like the Devils twitter has named two different products in tweets in the last week. Two. I don’t think NJ Lottery signed up specifically just for social media reaches.

As far as ‘likes’ on facebook, there are numerous pros/cons of valuating this and since I don’t use facebook I can’t even speculate. Although Vin Diesal has 23 million likes, so I take ‘likes’ with a grain of salt.

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by Tom Stivali on Jan 19, 2012 2:16 PM EST up reply actions

If it’s created even a little bit of ticket sales, it’s already a success. I have bought tickets from the deals that they have posted on twitter/facebook.

And Kovalchuk speeds away, great moves, busting through, DID YOU SEE THAT?

by KovyisLove on Jan 19, 2012 3:29 PM EST up reply actions