Just before his team lost in another shootout this week — this time to Boston at Verizon Center — Washington Capitals owner Ted Leonsis was involved in his own shootout in his private box.
The spat was with Forbes Magazine, which claimed last week that Leonsis’ team actually posted a profit last season.
That runs contrary to Leonsis’ claims that his team lost money last year, even under the new NHL collective bargaining agreement.
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Forbes, in an article that was, for the most part, a glowing endorsement of the new NHL, claimed that the Capitals were one of the beneficiaries of revenue sharing, as one of the league’s bottom feeders, and that “the only reason why the Buffalo Sabres, Pittsburgh Penguins, San Jose Sharks and Washington Capitals posted profits last season was because of the money they received from revenue sharing.”
Leonsis said that is not true.
“We lost $6 million last year, with revenue sharing,” he said. “That is inaccurate. They said we were going to make money this year, and we’re going to lose money. They said we are worth $125 million, and we are probably worth $180 million. I read it, and you just go.
“They weren’t close on the numbers,” Leonsis continued. “Our revenues are higher, we’re losing money … we did not make a profit. If you do the math, it is like losing $15 million, and then you get $10 million revenue sharing.”
First, Kurt Badenhausen, one of the authors of the article, said Forbes didn’t say the Capitals made money. But later he responded by e-mail with this explanation: “By our calculations, those four teams we listed went from posting an operating loss to an operating profit because of revenue sharing they received (there are still several teams that posted a loss by our estimates even with revenue sharing as I told you). Our figures are earnings before interest, taxes, depreciation and amortization. These kind of expenses (non-cash in the case of D&A) can add up and teams will post a loss on a net profit level. Again, these are our estimates and we don’t have access to the team’s filings with the IRS.”
That makes it perfectly clear.
What is perfectly clear, though, is that no matter how the Capitals play — better than expected, as they have so far, or fall short of expectations — or whether they make money or lose money, Leonsis is not going to veer away from his plan of slow growth through player development. Despite a payroll of about $31 million — much closer to the bottom of the salary cap limits than the top — don’t look for any big moves to get to the next level, because Leonsis is rock solid in his belief that the next level will come anyway, and patience will only make it better.
“Right now my vibe is, maybe we’re going to make the playoffs this year, but we are going to be right there and compete,” he said. “Next year we are going to make the playoffs, and the year after we are going to go deep in the playoffs. Alex Ovechkin just turned 21. Mike Green just turned 21. Alexander Semin is 22 years old. These kids will be in their prime when they are 25 and 26 years old, and we will have a great team for a long, long time. That is my feeling about building this the right way — a generational team that the fans will identify with, because they grew up with these kids.”
Then, intentionally or not, Leonsis fired a few shots at the way a certain other team in town has operated.
“Teams don’t win in the offseason,” Leonsis said. “They win when they perform. I remember at the beginning of the year, certain teams were going to win championships, and our team was picked to be last, and the opposite has happened. You can’t fake team chemistry. You can’t shortcut a team going through tough times together and learning how to win.”
Now, while Leonsis insists they are still losing money, it is still not something he is particularly crazy about, although under the new CBA they are losing a lot less money. He has plans to make money.
“We are a couple of million dollars away in ticket sales, and the burning off of Jaromir Jagr’s contract, and then we are at break even,” Leonsis said. “Then, if you make the playoffs, then you can really start to make some profit. We are a couple of years away from that.
“The goal is to have the asset appreciate more than you are losing money,” he said. “That wasn’t happening pre-lockout. You would lose $30 million and the team would appreciate $5 million. Now if you are losing $4 million or $5 million or breaking even, your team is appreciating. The rule of thumb is you should double your asset value every seven to 10 years. So right now the Wizards are probably double their value in the last 10 years, with a new CBA and stability. We have a better CBA in the NHL. So we think team values will increase dramatically. So we are really happy. This is the most relaxed I’ve been since I’ve been in the league.”
As relaxed as a man can be who has to set the record straight about how much money he lost.
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