Article: McDermott Concerned about PSE Dysfunction

[Warren Zevon]

2 minutes ago, oldmanfan said:

Epic fail?  Spiraling out of control?  Calm down.  It will turn around at some point.  I think Kruger might have what it takes. 

 

 

 

I admire your optimism. Kruger might but the GM is dumber than a box of Flutie Flakes. 

[oldmanfan]

13 minutes ago, billsfan89 said:

 

There is a reasonable limit to what you can eat as far as losses. But if you are a billionaire worth 5 billion dollars (as is Pegula's suggested net worth) eating 20-40 million in losses yearly can sound like a lot but in reality is a very small position of his wealth (Even at 40 million a year we are talking about less than 1% of his wealth) considering that you could make double that on a very stable bond I don't think his lifestyle or wealth is all that threatened by Sabers and sports yearly losses (and considering the write off on taxes that number does come down a bit.)

 

I think that there also exists the matter of how much the franchise is appreciated in value yearly as well. Beyond the business aspects the fact remains that modern sports ownership is a loss leader operations wise. These teams are the toys of billionaires and there are many owners willing to eat 20-40 million in operating losses in order to win as many games as possible. So if you aren't willing to treat the team like a loss leader than you are likely going to be behind the eight ball and handicap your team from winning sustainably. 

 

So the question then remains does Pegula have the stomach to be a modern sports owner? Or does he need to make as much money as possible? Is he willing to eat the losses on the Saber and on occasion the Bills?

None of us know their balance sheets.  I think he can and would stomach losses on the Sabres, but right now their businesses are being adversely affected by this crisis as are everyones.  If you look historically at what they've done in terms of improving locker rooms, being willing to get rid of coaches that didn't work out and eat the cost, I think Terry is willing to put the money in.  

[billsfan89]

10 minutes ago, Mr. WEO said:

 

For guys like Ralph and Jerry it was an investment that paid off massively and was/is the majority of their net worth.

 

You can't lose money investing in an NFL team.  Buy one, make tens of millions in profits per year whether the team wins games or not, sell it at any time for 10% profit (compounded annually).  It's the best investment in the world.

 

Like any asset a sports team tends to appreciate. However if you factor in yearly operating losses that return on investment is probably less than that of an index fund. For example let’s say you buy the team for 500 million and 15 years later sell it for a billion dollars (which is a healthy but fair market estimate) that sounds like a super good investment to double your money in 15 years. BUT factor in 100-150 million in operating losses and that return is more like 70%. So 70% still sounds good however if in 2005 if you invested in an index fund you would have gotten a 232% return on investment without dividends reinvested and that’s now during the market crash (you would have collected 30% in dividends too.) 

 

So yes some have made good money but odds are the market probably would make you more money. 

[oldmanfan]

1 minute ago, Warren Zevon said:

 

I admire your optimism. Kruger might but the GM is dumber than a box of Flutie Flakes. 

Botterill is an example of a guy that was highly thought of coming from a solid winning organization, who just has not measured up yet.  As I said above, sometimes you just don't know until you give a guy the shot.

[Warren Zevon]

Just now, oldmanfan said:

Botterill is an example of a guy that was highly thought of coming from a solid winning organization, who just has not measured up yet.  As I said above, sometimes you just don't know until you give a guy the shot.

 

He has had 3 years and most of the roster is players he has brought in. The team still sucks. Next!

[May Day 10]

I wonder how much is wasted on terrible hires and paying people not to work.

 

 

They were at the very top of the NHL in salary this season.  So much so that they had to juggle players in and out of Rochester to try to stay within the cap, and they still likely ended up over and will be penalized.  With a team that was probably in the bottom 5 in the league.  And they still, for some reason spent assets and money on upcoming UFAs such as Simmonds and Frolik.  

 

 

Maybe cut it out with this marketplace of ideas approach and get some help to refine and run the hockey team the right way.  Home playoff games that we havent seen in nearly a decade, mean breaking even to most small market hockey teams.  

 

 

The next step (this summer or next) is promote Kruger to GM and Taylor to HC.  Cant wait to watch more inexperienced people fail again for 3-4 more years before we can hope the Pegulas back into the right philosophy.  

Edited April 21, 2020 by May Day 10

[IDBillzFan]

20 hours ago, ngbills said:

But but the Pegula's are great, wait maybe they are just rich billionaires, no they saved the Bills from Bon Jovi and Trump, they made the playoffs. 

 

My hope - own the team and leave it alone. Invest the money and resources required and let the football brains do their job. 

 

Seriously? This is where we are? If only the rich billionaires would buy us all a toy and leave us alone to play with it?

 

Man, I hate the off season. Some of you people lose your minds. 

 

This team stands in the best position it has been in in years. Now, if we could just get rid of those pesky billionaires who ruin everything!

 

Batschittcrazy.

[JoeK]

This bulls*** better not scare McBeane out of town. Unreal. Kim Pegula should not be in charge of 2 professional sports teams. These people dove in head first and spread resources all over the place. Its blowing up in their face now.

[oldmanfan]

2 minutes ago, Warren Zevon said:

 

He has had 3 years and most of the roster is players he has brought in. The team still sucks. Next!

i suspect you're right this off season.  I'm wondering if they do with Kruger like they did with McD and let him have input on his GM.  for that matter, I think if I were Terry I'd have McD and Beane sit down with Kruger and talk about philosophies, etc.  

[Warren Zevon]

Just now, oldmanfan said:

I'm wondering if they do with Kruger like they did with McD and let him have input on his GM.

 

I hope so. They need to take advice from as many smart hockey people as they can.

[oldmanfan]

4 minutes ago, May Day 10 said:

I wonder how much is wasted on terrible hires and paying people not to work.

 

 

They were at the very top of the NHL in salary this season.  So much so that they had to juggle players in and out of Rochester to try to stay within the cap, and they still likely ended up over and will be penalized.  With a team that was probably in the bottom 5 in the league.  And they still, for some reason spent assets and money on upcoming UFAs such as Simmonds and Frolik.  

 

 

Maybe cut it out with this marketplace of ideas approach and get some help to refine and run the hockey team the right way.  Home playoff games that we havent seen in nearly a decade, mean breaking even to most small market hockey teams.  

 

 

The next step (this summer or next) is promote Kruger to GM and Taylor to HC.  Cant wait to watch more inexperienced people fail again for 3-4 more years before we can hope the Pegulas back into the right philosophy.  

Experienced people are not necessarily the answer.  I noted above guys like Bylsma and Babcock, both Stanley Cup winners who got canned.  Just have to keep trying the best you can, talk to as many folks as you can and try to get the right guys. 

[Mr. WEO]

1 minute ago, billsfan89 said:

 

Like any asset a sports team tends to appreciate. However if you factor in yearly operating losses that return on investment is probably less than that of an index fund. For example let’s say you buy the team for 500 million and 15 years later sell it for a billion dollars (which is a healthy but fair market estimate) that sounds like a super good investment to double your money in 15 years. BUT factor in 100-150 million in operating losses and that return is more like 70%. So 70% still sounds good however if in 2005 if you invested in an index fund you would have gotten a 232% return on investment without dividends reinvested and that’s now during the market crash (you would have collected 30% in dividends too.) 

 

So yes some have made good money but odds are the market probably would make you more money. 

 

Not your car.  Maybe not your house.

 

Anyway, no need to guess what your team value will be:  the average NFL team value in 2002 was 532 million.  last year it was 2.9 billion.  That's not 'double your money.  In fact the time to double your money in the NFL was 6 years from 2002-2008.  It was 3 years from 2013-2016.

 

Also, there are no "operating losses", essentially, in owning an NFL team.  All labor costs are covered by the network contracts.  With theoretically no stadium or purchase deb to service, any team generated revenue is gravy.

[billsfan89]

1 minute ago, oldmanfan said:

None of us know their balance sheets.  I think he can and would stomach losses on the Sabres, but right now their businesses are being adversely affected by this crisis as are everyones.  If you look historically at what they've done in terms of improving locker rooms, being willing to get rid of coaches that didn't work out and eat the cost, I think Terry is willing to put the money in.  

 

I hope you are right in that they are willing to take short term losses in order to make the team as successful as possible. But I think as a fan it is fair to speculate that if the Pegula's insist on a team being a profit center they could cut costs if things get tough. Especially if they are heavily invested in the oil and gas industry. 

[oldmanfan]

2 minutes ago, billsfan89 said:

 

I hope you are right in that they are willing to take short term losses in order to make the team as successful as possible. But I think as a fan it is fair to speculate that if the Pegula's insist on a team being a profit center they could cut costs if things get tough. Especially if they are heavily invested in the oil and gas industry. 

I'm not sure how heavily invested they are right now in oil and gas.  They sold their company for the billions they now have, and from some of the discussion above they have a relatively small company with one of the daughters (a geologist) still in the industry.  I don't think Terry necessarily sees the Sabres as a huge profit center, and given he's been a big hockey fan forever I suspect he's OK with some loss, but it would depend on the extent of the loss.  If this viral crisis extends out a long time it's going to alter all professional sports in ways we can't really imagine as of right now.

 

It would be interesting to get data on other NHL teams to see how bad off they are with the current crisis.  

[RiotAct]

23 minutes ago, oldmanfan said:

Epic fail?  Spiraling out of control?  Calm down.  It will turn around at some point.  I think Kruger might have what it takes. 

 

 

it’s a confirmed fact that the Sabres have been an epic fail since the Pegulas took over.

[oldmanfan]

2 minutes ago, RiotAct said:

it’s a confirmed fact that the Sabres have been an epic fail since the Pegulas took over.

It has been a bad run to be sure.  But it will eventually turn around just like is happening with the Bills.

 

 

[Mr. WEO]

31 minutes ago, oldmanfan said:

Epic fail?  Spiraling out of control?  Calm down.  It will turn around at some point.  I think Kruger might have what it takes. 

 

 

 

 

Kruger is a soccer coach, no?  And Olympics guy years ago? This is the guy who is going to lead the Sabres out of 8 years of irrelevance?  Had Freddy Kruger hung up the blades?  They lsot 22 of their last 35 games.

Edited April 21, 2020 by Mr. WEO

[jimmy10]

Since McDermott and Beane came on board, their regime has been famously tight-lipped. Does it strike anyone else as odd that all of the sudden “sources close to” McDermott are flapping their gums?

[billsfan89]

1 minute ago, Mr. WEO said:

 

Not your car.  Maybe not your house.

 

Anyway, no need to guess what your team value will be:  the average NFL team value in 2002 was 532 million.  last year it was 2.9 billion.  That's not 'double your money.  In fact the time to double your money in the NFL was 6 years from 2002-2008.  It was 3 years from 2013-2016.

 

Also, there are no "operating losses", essentially, in owning an NFL team.  All labor costs are covered by the network contracts.  With theoretically no stadium or purchase deb to service, any team generated revenue is gravy.

 

The NFL has experienced insane growth that would probably have eclipsed an index fund even with dividends reinvested. I was more so talking about sports leagues in general being an investment compared to an index fund. However the NFL does have operating losses for some teams (the TV deals only cover the player salaries) as there exists a large operation needed and other forms of revenue don’t always cover it. But let’s say that even if teams have a operating loss the NFL was a good investment to make. 

 

However my point is that if you are a billionaire investing in sports is probably not the best way to make money. It is a speculative endeavor filled with operating losses and a reliance on a Television medium whose bottom might fall out sooner rather than later. Billionaires get into pro-sports as a way to have fun and network into other business ventures. They don’t get into it as an investment. Could it be a great investment? Yes of course, but overall the purpose of getting into sports as a billionaire is more so as a hobby/toy than anything else. 

[Bleeding Bills Blue]

21 minutes ago, Warren Zevon said:

 

He has had 3 years and most of the roster is players he has brought in. The team still sucks. Next!

 

And what did he inherit from a prospect pool?  Oloffson?  Is that really it?  The O'reilly trade is terrible, but was his hand forced?  Do you fire him for that when TP may have made the final call?  That kind of thing gets around if you do that.  

 

Let me emphasize that I don't think he did a good job.  The Skinner move was alright.  Hutton has been just terrible this year after a promising start, but they really need to fix goaltending.  I'm just saying like... what does one even do to fix the middle six? Prospects don't show up in 3 years since they're all drafted at age 18.  I think he's trying to take a more patient approach to a rebuild than what Murray did.  Murray gutted the prospect pool depth for NHL players, and built a flawed roster.  

[yungmack]

16 hours ago, 4merper4mer said:

He's a commie so he worked in the proletariat crap.

What? Concern about the working stiff is now Communism? Who are you? Charlie Koch?

[Kirby Jackson]

5 minutes ago, billsfan89 said:

 

The NFL has experienced insane growth that would probably have eclipsed an index fund even with dividends reinvested. I was more so talking about sports leagues in general being an investment compared to an index fund. However the NFL does have operating losses for some teams (the TV deals only cover the player salaries) as there exists a large operation needed and other forms of revenue don’t always cover it. But let’s say that even if teams have a operating loss the NFL was a good investment to make. 

 

However my point is that if you are a billionaire investing in sports is probably not the best way to make money. It is a speculative endeavor filled with operating losses and a reliance on a Television medium whose bottom might fall out sooner rather than later. Billionaires get into pro-sports as a way to have fun and network into other business ventures. They don’t get into it as an investment. Could it be a great investment? Yes of course, but overall the purpose of getting into sports as a billionaire is more so as a hobby/toy than anything else. 

The bolded isn’t right. Each team received $255M last year in national revenue from the league. The salary cap was $188.2M. That’s why I called the NFL “idiot-proof” earlier. The revenue from the league alone paid all of the players salaries with a surplus of $67M (assuming teams spent all the way to the cap which they didn’t).

Edited April 21, 2020 by Kirby Jackson

[Bleeding Bills Blue]

5 minutes ago, Mr. WEO said:

 

 

Kruger is a soccer coach, no?  And Olympics guy years ago? This is the guy who is going to lead the Sabres out of 8 years of irrelevance?  Had Freddy Kruger hung up the blades?  They lsot 22 of their last 35 games.

 

No scoring depth whatsoever.  Hutton losing every start from 10/24 to February certainly didn't help their standing.  

[CountDorkula]

4 minutes ago, dneveu said:

 

No scoring depth whatsoever.  Hutton losing every start from 10/24 to February certainly didn't help their standing.  

 

Hutton has been injured the entire season. its just not public yet.

[yungmack]

4 hours ago, BeastMaster said:

So I read the article, and I also read the Q and A with Kim.

 

Seems like the writer is looking to bash them from the way it's written.

 

There's some stuff that doesn't look good, for sure. I've always hated the nepotism garbage, but it's pretty much SOP for these big companies.

 

Bottom line for me is don't let it affect our Bills! 

 

Hopefully they learn from the mistakes like Kim claims...they get their house in order, and this fades away once the country gets back to business as usual.

 

 

Nepotism? Or preparing the next generation like Jerry Jones and the Hunts?

[Mr. WEO]

1 minute ago, billsfan89 said:

 

The NFL has experienced insane growth that would probably have eclipsed an index fund even with dividends reinvested. I was more so talking about sports leagues in general being an investment compared to an index fund. However the NFL does have operating losses for some teams (the TV deals only cover the player salaries) as there exists a large operation needed and other forms of revenue don’t always cover it. But let’s say that even if teams have a operating loss the NFL was a good investment to make. 

 

However my point is that if you are a billionaire investing in sports is probably not the best way to make money. It is a speculative endeavor filled with operating losses and a reliance on a Television medium whose bottom might fall out sooner rather than later. Billionaires get into pro-sports as a way to have fun and network into other business ventures. They don’t get into it as an investment. Could it be a great investment? Yes of course, but overall the purpose of getting into sports as a billionaire is more so as a hobby/toy than anything else. 

 

I was just talking about NFL ownership specifically because of it's massive valuation growth.

 

Player costs can be estimated by the annual cap.  It was 188.2 million in 2019.  The value of the network contracts for the same year was 255 million.  so every team is operating with a significant cushion.  Plus all other revenues from tickets, merchandise and ads and rights naming.  the average income before taxes and interest is over 100 million now.

 

PLUS (here's the best part, unless you are a taxpayer) from Forbes:

 

"Terry Pegula's purchase of the Buffalo Bills for $1.4 billion in 2014. Pegula was able to allocate more than 80% ($1.1 billion) of the purchase price toward intangible assets and therefore was able to deduct $75 million a year from earnings before paying Uncle Sam.

Sports teams are loaded up with intangible assets"

 

It's free money all around.  If you have the entry fee, it's a massive can't lose revenue generator and, ultimately jackpot upon selling. 

 

 

 

 

[yungmack]

3 hours ago, Dirtyd415 said:

Oil prices have never before in history fallen this fast or remained this low for an extended period of time.  They only thing worse to have your money in right now would be entertainment.  At least people still need oil, albeit at much lower demand.  The entertainment industry (including sports) will emerge from the pandemic a battered and disfigured version of itself.  When only essential business are able to operate, you don’t want to have all of your money tied up in the least essential business of them all.

They are not in the oil business. They are barely in the energy business anymore. But they are heavily in entertainment racket.

[Mr. WEO]

2 minutes ago, yungmack said:

Nepotism? Or preparing the next generation like Jerry Jones and the Hunts?

 

 

Propping up your kids' livelihood with $9 smoothie businesses isn't going to prepare them for NFL ownership.

 

But they could probably run the Sabres as well as mom does now.

[Bleeding Bills Blue]

6 minutes ago, CountDorkula said:

 

Hutton has been injured the entire season. its just not public yet.

 

Either way - Murray spent a 1st on Lehner... and it didn't work.  His time here was basically alcohol and drug abuse, and Murray did nothing to help or prevent.

 

JB hasn't fixed goaltending either.  Its been a problem since Miller and the Sabres have basically been bad since Miller.  

[nucci]

33 minutes ago, oldmanfan said:

It has been a bad run to be sure.  But it will eventually turn around just like is happening with the Bills.

 

 

it's been almost 10 years

[BillsVet]

13 hours ago, May Day 10 said:

Kim pegula is not qualified to run operations of a sports team, let alone like 4 of them.  So, the most senior sports business guy?  Kevyn Adam's.  His qualifications are that he played in the nhl and lives in buffalo.  He is in over his head. 

 

The pegulas need help.  Its amateur hour.  Mark my words that the Bill's will have their "polian moment" as well if things appear to be going well.

 

A major element behind McD agreeing to coach in Buffalo, I believe, was the Pegula's giving him unprecedented control for a HC (EDIT: for this franchise).  He sought Beane from Carolina and they've had authority over football operations most of us long-time posters dreamed of when RW owned the team.  I hope and trust this does not change provided they continue improving the team's W-L record.  If there's interference, yeah, I could see a Polian situation brewing.

 

2 hours ago, Warren Zevon said:

Not too peeved about the chart either but people aren't interpreting anything the chart doesn't blatantly say. Return on Investment--> fund lifestyle. It's a stupid slide to show to your employees.

 

I gotta say that it's extremely tone-deaf to talk about "lifestyle" on a spreadsheet to employees.  No CEO or corporate executive would do that, whatever the implication.  

 

Terry comes off as aloof and KIm seems enchanted with the optics.  It's an emperor has no clothes situation at this point. 

 

32 minutes ago, Mr. WEO said:

Kruger is a soccer coach, no?  And Olympics guy years ago? This is the guy who is going to lead the Sabres out of 8 years of irrelevance?  Had Freddy Kruger hung up the blades?  They lsot 22 of their last 35 games.

 

I'll continue to give Krueger the benefit of the doubt, this being his first season.  Botterill OTOH deserves a lot of blame for mismanaging the cap and not changing the roster when it was clear some players are not up to the task.  At least Beane and McD overhauled the roster in their first 3 seasons. 

Edited April 21, 2020 by BillsVet

[yungmack]

58 minutes ago, oldmanfan said:

None of us know their balance sheets.  I think he can and would stomach losses on the Sabres, but right now their businesses are being adversely affected by this crisis as are everyones.  If you look historically at what they've done in terms of improving locker rooms, being willing to get rid of coaches that didn't work out and eat the cost, I think Terry is willing to put the money in.  

If the Pegs put 4 of their 5 billion in a basket of hedged Vanguard funds, they would easily earn 10% a year at virtually no risk, this anomalous moment aside. That's $400 million a yaer, plus whatever millions they earn from the Bills. That would fund a pretty lavish lifestyle AND under right any losses from their other businesses.

Edited April 21, 2020 by yungmack

[Mr. WEO]

4 minutes ago, yungmack said:

If the Pegs put 4 of their 5 billion in a basket of hedged Vanguard funds, they would easily earn 10% a year at virtually no risk, this anomalous moment aside. That's $400 million a yaer, plus whatever millions they earn from the Bills. That would fund a pretty lavish lifestyle AND under right any losses from their other businesses.

 

 

Well putting that aside would eliminate this thread. 

 

[FireChans]

17 hours ago, Coach Tuesday said:

You mean something like State Media, er, Fox News?

Don’t look now but the two star anchors of CNN and MSNBC both reported that Kim Jung Un was on life support/brain dead last night and then just deleted it. 

 

Journalistic integrity is dead.

[oldmanfan]

45 minutes ago, Mr. WEO said:

 

 

Kruger is a soccer coach, no?  And Olympics guy years ago? This is the guy who is going to lead the Sabres out of 8 years of irrelevance?  Had Freddy Kruger hung up the blades?  They lsot 22 of their last 35 games.

I think Kruger is a lot like McD and Beane.  Process oriented.  And no he's not a soccer coach, yes he has significant hockey experience, and yes you're just bringing up things you already know aren't correct just to be a smartaass.

[Pine Barrens Mafia]

48 minutes ago, jimmy10 said:

Since McDermott and Beane came on board, their regime has been famously tight-lipped. Does it strike anyone else as odd that all of the sudden “sources close to” McDermott are flapping their gums?

 

No, because Tim Graham.

 

[aristocrat]

 

getting bad in the tpegs household.  this is one of the pegula kids running the account supposedly

[PromoTheRobot]

3 hours ago, Warren Zevon said:

Why do some folks hate Tim Graham so much?

 

I take it you've never read his posts when he did post here, or read some of his twitter flame wars? He's a talented writer but he's also a bit of an egomaniac and has skin as thin as onion peel. He also nurses grudges like a pro.

[ILBillsfan]

dumping the sabres be best thing pegulas could do

[Dirtyd415]

33 minutes ago, yungmack said:

They are not in the oil business. They are barely in the energy business anymore. But they are heavily in entertainment racket.

I am aware of this, which is why I tried to make the point that they are up the creek in the short term.  If they still had major oil investments/business ventures they would still be able to generate cash flow.  Granted it would be at low oil prices but being fully vested in the entertainment industry they have extremely limited to zero ability to generate any cash flow at all.