Hockey Team's Accounting Questioned

Whether the Philadelphia Flyers are making or losing money depends on whom you ask.


The Philadelphia Flyers wear orange and black on the ice. But financially, are they in the red or the black? Apparently, it depends on whom you ask.

In May, three months after former SEC chairman Arthur Levitt's report on league finances was issued, Ed Snider, chairman of the Flyers, told reporters that the team was 1 of the 19 that were losing money — despite having one of the highest attendance records in the league and making it to the playoffs in the 2002-03 season. At the same time, team president Ron Ryan told reporters that the Flyers were not one of the teams losing money. His explanation did little to clear up the contradiction: "Where it becomes confusing is that it sounds like there are two sets of books," Ryan told The Philadelphia Inquirer in May. "The difference is that the report we make to the league, as directed by the [NHL] Players' Association, is different from our own internal audited statement, which we view as the more accurate statement. So we were talking about two different reports," he said. Ryan's explanation seems to indicate that the team considers its own financial statements to be more accurate than those reported to the league and then to Levitt.

Sandy Lipstein, CFO of Comcast Spectacor, owner of the Flyers, says the team also lost money during the 2003-­04 season, despite playing nine home games in the playoffs and ending up just one game shy of going to the Stanley Cup. "Player payroll was way too high," says Lipstein. The Flyers paid out more than $68 million in player salaries last season, the fourth-highest payroll in the league. Lipstein says the difficulty the Flyers have had making money—even when many games were sold out—indicates that something is wrong with the business model. "I don't think the current system works," he says.

The Players' Association, however, says the system is fine, but the team is hiding revenue. "For someone to say that the Flyers lose money is ludicrous," says Ted Saskin, senior director of the Players' Association. One major dispute concerns the accounting for luxury-box revenue. Comcast Spectacor also owns the Philadelphia 76ers basketball team; the Wachovia Center, where both teams play; and Comcast SportsNet, which televises Flyers and Sixers games locally. The company leases luxury boxes that are available to the occupant for any Wachovia event, including concerts. How those revenues are then attributed to the different teams and the arena itself (which opened in 1996 and was built with mostly private financing) is debatable. The same goes for concessions, parking revenue, and advertising on arena signage.

For more on the accounting dispute between players and owners in the National Hockey League, read CFO magazine's September article "Hockey Fight."


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