The KHL Board of Directors meeting took place on September 17 in Moscow. The Board members discussed the financial results from the 2019-20 season. And they are good enough despite the negative effect caused by the coronavirus pandemic. Jokerit Helsinki has shown its importance for the league once again.
Jokerit Helsinki Receives the Biggest Payment
The KHL shares over ₽466 million, incl. VAT, so around €5,5 million with 24 clubs, including Admiral. It is the biggest sum ever distributed in this way. And more than the league planned (₽453 million). You can read about the league’s revenue-sharing model here.
Jokerit Helsinki receives the biggest payment – over ₽50 million (around €600,000). Its significant part coming from the most lucrative television contract in the league. How so? The league sells the television rights inside Russia and abroad. While calculating the revenue sharing, concretely its TV demand portion, the league takes into account the number of sold games for a team and the financial income from those games. So, the axiom is simple, the club with the most sold games with the highest price receives the most money from the league.
If looking at the table below, Jokerit & Dinamo Riga lead the league because the broadcasters most often translated their games while paying the biggest price. Obviously, Jokerit’s games were the most popular at the Viasat channel in Finland & other Viasat regions, but also in Switzerland. On the other hand, Dinamo Riga was popular, besides Switzerland, among the British broadcaster as well.
Finally, SKA St.Petersburg leads all Russian teams in TV demand but having a huge gap from Riga and Jokerit. So, now we know why the KHL has been trying to expand to the new markets, especially in Europe.
Consequently, the KHL’s revenue-sharing model is attractive for the European clubs because the club with higher business potential gets more money from the revenue sharing formula. Moreover, Slovan Bratislava has recently advocated for this KHL model to be applied in Slovakia.
Besides that revenue sharing, the KHL also helps all clubs with their major sponsors. Guessing it is around €500 million per season.
The Unpaid Luxury Tax
Among others, the KHL published the league’s revenues & expenses structure for the last season. Reminding you, it shows the league’s results, not clubs’. The league’s total turnover came to ₽2.68 billion, so around €30 million, but that sum does not include the clubs’ payments of the luxury tax. It is the payment for exceeding the salary cap ceiling. Now with the new salary cap mechanism in place, the luxury tax does not exist because the clubs can not exceed the ceiling anymore.
Just noting, CSKA Moscow & Salavat Yulaev Ufa have refused to pay the luxury tax, so a court hearing is scheduled with them. They behave in that way because the previous season was cancelled due to the pandemic. Hence, their claim is simple, we are not obligated to pay the luxury tax. As per unconfirmed sources, both clubs should pay around ₽550 million (€6 million) in total. The remaining clubs have already paid the luxury tax. But we know just the name of one club paying the luxury tax – Dynamo Moscow. We could speculate about others. All in all, I’m guessing, the clubs should pay over ₽1 billion in luxury tax. The league transfers that money into the league’s stabilisation fund while the KHL Board of Directors has the right to use that money for special programs.
The League’s Revenues & Television
But back to the graphs. As we can see, the league’s sponsorship agreements contribute with the half of the league’s revenues (доход in Russian). A quarter comes from the television contracts while another 15 per cent is from the league’s television channels. KHL TV & KHL TV HD are two league’s channels as a joint venture with Gazprom Media Holding.
So, 40 per cent of the league’s revenues are from broadcasting. But the league does not share all money with clubs because the league invests a part of that money into broadcasting. We need to realise the league makes the television signal from all games. Perhaps the league shares some costs with Gazprom Media Holding (games on MatchTV), Viasat (Jokerit home games) & others. But the vast majority is paid by the league itself. It was 744 games in the last regular-season while elite leagues in Sweden, Germany, or the Czech Republic played just 364 regular-season games. Hence the costs, even though I do not know if those respective leagues pay for it.
Of course, the KHL should perform better on the television market. But we need to take into account the level of the Russian television market which is a core one for the league. That market has never been as developed as European or North American. The pay-subscription sports network has started just with MatchTV a few years ago. So, the league’s attempts to get to more lucrative European and Asian markets and ideally with a local team playing the KHL. Jokerit Helsinki is a great example.
How the League Distributes the Expenses
The league’s budget (costs or расход in Russian) is not available, but let us assume it is balanced with revenues. So, the KHL runs three different leagues, it is not only about the KHL itself. The remaining are the major junior league (MHL) and the women league (WHL). This model is unique to the world’s hockey. No other hockey league follows this model, even the NHL operates separately from the AHL & the junior leagues. Of course, such a model is not cheap, all three leagues consume around 31 per cent of the league’s budget.
Another 21 per cent the league used for the fulfilment of the sponsorship & advertising agreements, various PR campaigns & events.
The KHL uses 13 per cent of its budget for governing the company. Guessing, it includes the employees’ wages as well, but not only them.
As noted earlier, the league pays 17 per cent of the budget to clubs in revenue sharing. Not enough? Of course, the clubs would like to see a bigger share of the pie.
The costs for the KHL TV channels & other related media rights are at 11 per cent of the budget. And the smart pucks & tracking technology cost the league another six per cent of the budget. Just reminding you the KHL installed a special technology at all venues, plus operates the system on daily basis. So, a total of 17 per cent of all expenses are directly invested into the league’s media product.
Next year, hoping, the league will reveal how much money has been invested into COVID-testing this season. It should be really interesting because the league pays all costs.
Feature Image Credit: (Anton Novoderezhkin\TASS via Getty Images)