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While the current dispute is officially between players and owners, it's also a standoff between the league's rich, powerful clubs (Toronto Maple Leafs, Detroit Red Wings) and its struggling upstarts (Carolina Hurricanes).

Instead of their first home game, we look at the Hurricanes' finances 

A 2010 practice at the Hurricanes' home rink, then called the RBC Center.

File photo by Jeremy M. Lange

A 2010 practice at the Hurricanes' home rink, then called the RBC Center.

On paper, the Carolina Hurricanes season is nearly three weeks old. But only on paper. Earlier this month, National Hockey League commissioner Gary Bettman announced the cancellation of the entire first month of scheduled league play, thanks to the ongoing owner lockout—the second labor dispute in less than a decade—as they haggle with the players over how to split revenues generated by their respective teams.

In this unplayed season, the Hurricanes were to have opened with six road games before returning home to PNC Arena this Friday to face the New York Rangers. But there will be no hockey in Raleigh this weekend.

There's still plenty of room for optimism that most of the season will be played. Bettman announced this week that if a deal for a new collective bargaining agreement is struck before Thursday, previously canceled games could be rescheduled. If not, they'll be lost.

For most teams, that means a significant hit to their bottom line. More so if the season is canceled outright, as in 2004, when the league canceled 1,230 games—the entire season—after team owners and the National Hockey League Players Association failed to resolve their disputes.

While the current dispute is officially between players and owners, it's also a standoff between the league's rich, powerful clubs and its struggling upstarts. While the likes of the Toronto Maple Leafs and Detroit Red Wings could surely weather a long stoppage, the ability of the Hurricanes, who like other comparatively young NHL franchises operate in markets outside of hockey-mad centers in the northeast U.S. and Canada, to do so remains a question mark.

After the canceled 2004–05 season, the Hurricanes reported $2.3 million in revenue for the 2005 fiscal year, according to public documents requested by the Indy. The previous season, the team pulled in $45.9 million, a difference of $43.6 million. And in 2005–06, the season after the lockout, when the Canes went all the way to the Stanley Cup, the team reported $77.8 million in revenue.

In the years since the lockout, team revenues have steadily increased league-wide, as indicated by the Hurricanes' most recent public financial disclosure. In three quarters of the 2012 fiscal year, the franchise booked $80.7 million, despite a poorly performing squad that really never was in playoff contention.

While it's obvious that a prolonged stoppage would cost the team millions in revenue, the Hurricanes declined to discuss the specifics of the stakes. Team President and General Manager Jim Rutherford was not available for comment, while team Spokesperson Kyle Hanlin declined to speak on the team's "private finances," citing a company policy that prevents it.

If no hockey fans pass through the PNC Arena turnstiles this fall, the team is still guaranteed at least one stream of revenue: the already-purchased season tickets. Fans can ask for refunds, but they're being encouraged to accept interest payments during the work stoppage instead.

Should the full 82-game season be canceled, purchasers will earn 5 percent simple interest on the funds, according to Tim Riordan, vice president of the Storm Trackers, a fan club comprised of Hurricanes season ticket holders. The interest isn't liquid, however: It can only be applied toward future games. The team has also promised ticket holders a 10 percent discount on tickets for the 2013–14 season, Riordan adds.

Full-season ticket prices range from $429.57 to $6,880. They are still available for purchase.

Lockout or no lockout, the lessee is still on the hook for the rent. Per the 1997 lease agreement, Hurricane Holdings gives the Centennial Authority, the state organization tasked with overseeing operations at PNC Arena, a base payment of $3 million each year to rent the arena.

Asked if the team could defer payment in case of an extended work stoppage, Centennial Authority Executive Director Jeff Merritt says, "It's my understanding that there's nothing, no agreement, that allows them to deduct or prorate payment due to not playing a full season of hockey."

But given that the team's 2011–12 payroll was estimated by USA Today to be $48.7 million, it may not be the worst thing for an unprofitable team, as the Hurricanes are generally thought to be, to not be cutting paychecks.

"I think it's not secret that this team needs to do well in the playoffs to break even," says Hanlin. (The Hurricanes have made the playoffs three times in the last nine completed seasons, although all three post-season trips were lengthy ones.)

But the finer details of the Hurricanes' finances are not public knowledge. Hurricanes Hockey Limited Partnership, the company that owns and operates the club, is privately held and therefore not required to publicly disclose a full accounting of its expenses. But as the PNC Arena's anchor tenant, the team's owners are required by the lease agreement to provide the Centennial Authority with an annual report of its revenues, along with the revenues and expenses of Gale Force Sports and Entertainment LLC, the facility operator controlled by the Hurricanes. The Indy analyzed 10 years worth of those financial disclosures and found that:

  • Between fiscal years 2002 and 2011, Gale Force Sports and Entertainment LLC lost between $2.2 million to $4.75 million annually. In 2005, the year of the lockout, Gale Force reported a net loss of $4.5 million. A year later, following the Stanley Cup, the loss was $2.9 million.

  • Through the third quarter of the 2012 fiscal year, Gale Force has lost $1.7 million.

  • In 2004, just prior to the start of the season-long lockout, Hurricane Holdings was granted a $90 million line of credit by Comerica Bank. The loan is secured by the revenue from the arena naming rights agreement with PNC Financial Services Group Inc., according to Clyde Holt, attorney for the Centennial Authority.

Team officials decline to discuss the particulars of the franchise's debt load, although estimates by Forbes.com suggest that the team is one of the most leveraged in the league. Karmanos has previously indicated that the club is carrying debt and, prior to the 2011–12 season when he announced that he'd begun searching for minority investors, the thought was that additional investment could help pay down a portion of it.

Those who did take him up on the offer included former Hurricanes player Ron Francis and Capitol Broadcasting President and Chief Operating Officer Jim Goodmon, along with former Red Hat Chairman Matthew Szulik and other North Carolina business figures.

But the latest additions to the Hurricanes ownership group express reluctance to speak on or off the record about the lockout, the Hurricanes' future or their acquisition of a chunk of the team. Others simply did not return calls for comment. (NHL owners and players are under a gag order that prevents them from commenting on the lockout.)

Still, that locals have been recruited to join the ownership group would suggest that Karmanos is committed to the Triangle.

"We're not going anywhere," says Hanlin, adding that the team's lease runs through 2024. Centennial Authority Executive Director Jeff Merritt says that the prospect has never been raised during his two years with the organization. "It's never even been talked about," he says.

Still, in 2011, a Forbes.com report claimed without attribution that Karmanos was making inquiries to sell the team. But even if those rumors are true, says Victor Matheson, a professor of sports economy at Holy Cross University in Boston, fans of the club need not be too worried that the team will relocate.

There are not a lot of people who are willing to jump into the business of hockey, says Matheson. "What's more, there aren't a lot of places that are clamoring for an NHL team," he says.

Meanwhile, talks between the NHL players union and the owners have hit a critical stage. As of Tuesday at press time, owners have yet to settle on a revenue-sharing agreement. The issue is ostensibly the players' share of the revenues. But it's also about the disparity in profits between large market teams and smaller market teams like the Hurricanes, who even in good seasons struggle to break even.

And putting a competitive team on the ice means competing in the labor marketplace for the likes of captain and star player Eric Staal, who is reported to be scheduled to earn $8,250,000 for the 2012–13 season.

The Storm Trackers' Riordan remains optimistic.

"Hopefully, the next collective bargaining agreement will last five or six years," he says. "These labor disputes are just part of the business, I'm afraid."

And what about talk that hockey runs the risk of alienating its fans with a second work stoppage in a decade? Revenues soared league-wide after the lost season of 2004–05. Could it happen again? Matheson is not so sure the NHL can afford to take the same risk.

"Sports rely on addicting fans more than any other product with the possible exception of crack. If you keep allowing people to wean themselves off the addiction, then you've got a problem," Matheson says.

"In places like Phoenix and North Carolina, where there's not a deep tradition of hockey, you can't keep disrupting the season and have people coming back."

Correction: This story originally stated that the Hurricanes are not offering refunds for already-purchased tickets to the 2012–13 season. In fact, ticket holders may request and receive refunds. For more information, see "Collective Bargaining Agreement Frequently Asked Questions" on the Hurricanes' website.

This article appeared in print with the headline "Bucks, not pucks."

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