Forbes vs the Leavitt report

Forbes released their annual “review” of the NHL teams. In this report, it says that the combined teams lost a total of $123 million during the 2002-03 season, and $96 million last season. Earlier this year, the league commissioned former SEC chairman Arthur Levitt to review each team’s financial reports as submitted to the league. He reported that the teams lost a combined $273 million for the same 2002-03 season.

The no. 2 at the NHLPA, Ted Saskin, immediately jumped on the Forbes report, saying, “Forbes is a highly respected publication by everyone in business, including NHL owners and their investment bankers who use Forbes’ analysis and valuations when they buy and sell teams. The independence and the integrity of Forbes is unquestionable.” Yeah, okay Ted. And Arthur Leavitt is a freshman commerce student at the local community college.

First, Forbes does these reports based on third-party figures, publicized news reports, and estimates from banking industry experts. But they don’t get actual do*****entation from the league or teams themselves. Jim Lites of the Dallas Stars told TSN, “Forbes has never once asked for one number concerning our business.”

Second, they make certain assumptions that may or may not be accurate or proper. For instance, they state that the Chicago Blackhawks did not include revenues from the luxury suites at the United Center. “While the United Center is a separate corporate entity from the Blackhawks, the building and team are part of one equation for Wirtz.” Well, any first-year accounting student will tell you, if it’s a separate entity from the Hawks, then the Hawks would not report it. I’m sure that Bill Wirtz has many other business ventures. Should all their revenues be reported on the Hawks financial statements? If Bill sells a real estate investment, should that be reported as a gain on investment on the Hawks’ income statement? Only if the Hawks owned the investment.

Forbes also goes on to report that the Islanders reported only half of revenue from their cable television deal. They don’t mention the fact that when Charles Wang and his former partner Sanjay Kumar bought the team in 2000, they also bought the New Jersey Nets, which they intended to move to Long Island initially. Did the cable TV deal include the right to televise Nets games? If so, then the reporting may be accurate. Remember that the Nets and Islanders were at one time involved in a partnership with the New York Yankees and George Steinbrenner as YankeeNets, until George left the group a couple of years ago.

So as much as the Levitt report may be inaccurate, it may be as accurate as this Forbes report. Leavitt got the access to the NHL’s figures that Forbes did not get, or apparently even ask for. Until the owners agree to a 30-team audit, both sides can issue as many “independent” reports as they wish. And the opposing sides can shoot holes in them ’til they run out of bullets. It’s really not going to matter.

Forbes report: http://www.forbes.com/free_forbes/2004/1129/124.html

TSN story on Forbes’ report: http://www.tsn.ca/nhl/news_story.asp?id=104411