Post by NHLJets2point0 on Aug 20, 2012 0:19:16 GMT -5
San Jose Sharks owners say they'll stay committed to winning, despite financial losses
By David Pollak
dpollak@mercurynews.com
Posted: 08/19/2012 05:06:39 PM PDT
Updated: 08/19/2012 09:54:26 PM PDT
SAN JOSE -- It has taken a decade, but the ownership group now known as Sharks Sports & Entertainment is starting to show a personality that can be as unconventional as its Silicon Valley surroundings.
Consider:
The Sharks' parent company said this summer that it lost $15 million last season despite selling out every game. But the disclosure -- coming shortly before the start of NHL collective bargaining talks -- wasn't as surprising as the group's response.
"We're OK with that because that's a decision we've made to stay competitive," said Kevin Compton, referring to the fact his team's player payroll bumped up against the NHL salary cap.
A franchise valued by Forbes magazine at $211 million operates with no CEO or president.
"We've taken out a few layers (of management) in the organization, and that makes it faster to get decisions made," said Stratton Sclavos, who along with Compton forms the ownership group's de facto executive committee.
The owners say the Sharks are debt-free. Instead of turning to banks to cover operating losses, they turn to one another with annual cash calls.
"We're a completely liquid organization and so far have continued to fund operations by choice," Compton said. "This isn't Phoenix."
Eleven names are listed as the owners of Sharks Sports & Entertainment, but Compton, 53, and Sclavos, 50, matter the most. Friends for more than two decades, they met while watching their sons play soccer. They have other intertwined business interests.
Compton is a venture capitalist with the Menlo Park firm of Kleiner Perkins Caufield & Byers who sat on the board of directors at Verisign when Sclavos served as CEO of the security software company. The two also helped establish Radar Partners, a Palo Alto venture capital firm.
The Sharks do not disclose what percentage of the team each partner has, but Compton and Sclavos -- along with German software magnate Hasso Plattner -- are the most heavily invested.
Since the departure of CEO Greg Jamison nearly two years ago, Compton and Sclavos guide the franchise, presiding over monthly meetings with the team's six executive vice presidents and reporting back to the full ownership group quarterly.
The two say they have faith in general manager Doug Wilson to run the hockey department and executive vice president Malcolm Bordelon to handle business operations. The owners say they are comfortable with Wilson reporting directly to them -- even though he is one of only four NHL general managers who are not accountable to a team president, CEO or individual owner.
"I'm not sure why anybody thinks in a sports business, a single individual would have super knowledge over the business and the sports side that would add tremendous value to either or both," Compton said.
Though Compton now plays hockey twice a week, neither he nor Sclavos -- who feels more at home on a basketball court -- was involved in the sport until purchasing the Sharks. Compton doesn't see that as an issue.
"I've been fortunate enough to have been able to help build several tech companies, very big ones," Compton said. "Never written a line of code."
Compton, Sclavos and the other owners have authorized a player payroll close to the maximum allowed for each of the past four seasons. That wasn't always the case.
"It all comes back to mission No. 1 -- win the Stanley Cup," Sclavos said in June. "We have to give the hockey side the resources to put the best team on ice every season that we can."
Still, there are limits. San Jose's owners do not approve extremely long contracts with huge signing bonuses, such as the 10-year, $98 million deals that Ryan Suter and Zach Parise got from the Minnesota Wild this summer.
Even so, the Sharks' player payroll continues to increase despite an NHL salary cap that has gone from $39 million in 2005-06 to $70.2 million now, though that figure could drop under a new labor agreement.
A November 2009 article in Forbes placed the team's losses at $20 million since the current ownership group purchased it in 2002. Compton disputed that figure but declined to provide a different one.
Nor would he give numbers for other than the most recent fiscal year. The Sharks' early playoff exit meant only two postseason home games this spring compared with a combined 17 games in 2010 and 2011, but Compton said the losses in all three seasons were comparable.
Sports economists such as Roger Noll at Stanford are skeptical of figures provided by pro teams, noting that operating losses often can be partly offset by depreciation and other legitimate financial practices.
As a privately held corporation, the Sharks can keep their books closed. Compton, however, said the $15 million factors in depreciation and that the actual loss is even higher.
Economists also point out that the profits for many pro teams occur when the franchise is sold. The Sharks, for example, were purchased for $147 million -- about two-thirds of the current estimated value by Forbes.
Specific numbers aside, Sharks fans do appear to benefit from the ownership group's stated priorities, said Scott Rosner, an instructor at the Wharton School of Business in Philadelphia and co-author of "The Business of Sports."
"If the owner is what we call a win-maximizer in economic-speak -- that they really are out to pursue championships and they've got deep pockets and that philosophy doesn't change -- there's no reason you should worry about it," Rosner said of the annual dollar losses claimed by the Sharks.
It's not as if Compton and Sclavos aren't cost conscious. They did preside over a 2011 companywide review that led to the elimination of 19 jobs.
But Compton said he spends less time on Sharks financials than any of his other business interests.
By all indications, the Sharks again will spend close to the salary cap limit as they attempt to rebound next season -- presuming there is no repeat from 2004 when a lockout shut things down.
Compton indicated the commitment remains the same, even if a new CBA -- one subject he and Sclavos would not discuss -- isn't much different from the current one.
"Have you ever heard us complain about it?" Compton said. "If that changes, I'll call you."
But Wharton's Rosner noted there really is no way of knowing how long any ownership will put up with annual losses.
"That's a question they probably can't even answer," he said. "I mean, they can give an answer, but it's hard to know what the real answer is."
By David Pollak
dpollak@mercurynews.com
Posted: 08/19/2012 05:06:39 PM PDT
Updated: 08/19/2012 09:54:26 PM PDT
SAN JOSE -- It has taken a decade, but the ownership group now known as Sharks Sports & Entertainment is starting to show a personality that can be as unconventional as its Silicon Valley surroundings.
Consider:
The Sharks' parent company said this summer that it lost $15 million last season despite selling out every game. But the disclosure -- coming shortly before the start of NHL collective bargaining talks -- wasn't as surprising as the group's response.
"We're OK with that because that's a decision we've made to stay competitive," said Kevin Compton, referring to the fact his team's player payroll bumped up against the NHL salary cap.
A franchise valued by Forbes magazine at $211 million operates with no CEO or president.
"We've taken out a few layers (of management) in the organization, and that makes it faster to get decisions made," said Stratton Sclavos, who along with Compton forms the ownership group's de facto executive committee.
The owners say the Sharks are debt-free. Instead of turning to banks to cover operating losses, they turn to one another with annual cash calls.
"We're a completely liquid organization and so far have continued to fund operations by choice," Compton said. "This isn't Phoenix."
Eleven names are listed as the owners of Sharks Sports & Entertainment, but Compton, 53, and Sclavos, 50, matter the most. Friends for more than two decades, they met while watching their sons play soccer. They have other intertwined business interests.
Compton is a venture capitalist with the Menlo Park firm of Kleiner Perkins Caufield & Byers who sat on the board of directors at Verisign when Sclavos served as CEO of the security software company. The two also helped establish Radar Partners, a Palo Alto venture capital firm.
The Sharks do not disclose what percentage of the team each partner has, but Compton and Sclavos -- along with German software magnate Hasso Plattner -- are the most heavily invested.
Since the departure of CEO Greg Jamison nearly two years ago, Compton and Sclavos guide the franchise, presiding over monthly meetings with the team's six executive vice presidents and reporting back to the full ownership group quarterly.
The two say they have faith in general manager Doug Wilson to run the hockey department and executive vice president Malcolm Bordelon to handle business operations. The owners say they are comfortable with Wilson reporting directly to them -- even though he is one of only four NHL general managers who are not accountable to a team president, CEO or individual owner.
"I'm not sure why anybody thinks in a sports business, a single individual would have super knowledge over the business and the sports side that would add tremendous value to either or both," Compton said.
Though Compton now plays hockey twice a week, neither he nor Sclavos -- who feels more at home on a basketball court -- was involved in the sport until purchasing the Sharks. Compton doesn't see that as an issue.
"I've been fortunate enough to have been able to help build several tech companies, very big ones," Compton said. "Never written a line of code."
Compton, Sclavos and the other owners have authorized a player payroll close to the maximum allowed for each of the past four seasons. That wasn't always the case.
"It all comes back to mission No. 1 -- win the Stanley Cup," Sclavos said in June. "We have to give the hockey side the resources to put the best team on ice every season that we can."
Still, there are limits. San Jose's owners do not approve extremely long contracts with huge signing bonuses, such as the 10-year, $98 million deals that Ryan Suter and Zach Parise got from the Minnesota Wild this summer.
Even so, the Sharks' player payroll continues to increase despite an NHL salary cap that has gone from $39 million in 2005-06 to $70.2 million now, though that figure could drop under a new labor agreement.
A November 2009 article in Forbes placed the team's losses at $20 million since the current ownership group purchased it in 2002. Compton disputed that figure but declined to provide a different one.
Nor would he give numbers for other than the most recent fiscal year. The Sharks' early playoff exit meant only two postseason home games this spring compared with a combined 17 games in 2010 and 2011, but Compton said the losses in all three seasons were comparable.
Sports economists such as Roger Noll at Stanford are skeptical of figures provided by pro teams, noting that operating losses often can be partly offset by depreciation and other legitimate financial practices.
As a privately held corporation, the Sharks can keep their books closed. Compton, however, said the $15 million factors in depreciation and that the actual loss is even higher.
Economists also point out that the profits for many pro teams occur when the franchise is sold. The Sharks, for example, were purchased for $147 million -- about two-thirds of the current estimated value by Forbes.
Specific numbers aside, Sharks fans do appear to benefit from the ownership group's stated priorities, said Scott Rosner, an instructor at the Wharton School of Business in Philadelphia and co-author of "The Business of Sports."
"If the owner is what we call a win-maximizer in economic-speak -- that they really are out to pursue championships and they've got deep pockets and that philosophy doesn't change -- there's no reason you should worry about it," Rosner said of the annual dollar losses claimed by the Sharks.
It's not as if Compton and Sclavos aren't cost conscious. They did preside over a 2011 companywide review that led to the elimination of 19 jobs.
But Compton said he spends less time on Sharks financials than any of his other business interests.
By all indications, the Sharks again will spend close to the salary cap limit as they attempt to rebound next season -- presuming there is no repeat from 2004 when a lockout shut things down.
Compton indicated the commitment remains the same, even if a new CBA -- one subject he and Sclavos would not discuss -- isn't much different from the current one.
"Have you ever heard us complain about it?" Compton said. "If that changes, I'll call you."
But Wharton's Rosner noted there really is no way of knowing how long any ownership will put up with annual losses.
"That's a question they probably can't even answer," he said. "I mean, they can give an answer, but it's hard to know what the real answer is."
