Vancouver Canucks: Business decisions may cost Jim Benning his job

With all the speculation surrounding general manager Jim Benning’s contract (or lack thereof), I wanted to analyze the business side of this decision. This will cover spending, estimated value of the franchise, and season ticket holders.

General manager Jim Benning is in the centre of a media surge regarding his future employment with the Vancouver Canucks. The debate has been discussed ad nauseam, whether it is between factions of fans on Twitter, or through our local and national sports medias.

It’s a hot topic, arguing the merits of team building, filling the prospect pipeline and everyone’s perception of the “correct” way to rebuild. I will not talk about any of that. Canucks fans want to know how Francesco Aquilini’s final decision will play out in April. Will Jim Benning earn a short-term extension? Or is a clean break in store between him and the club?

I want to put a spotlight on the business factors that may affect Benning’s future employment. This means that I will not talk about the draft, prospects, or the rebuild. Instead, I want to break down the effects this regime has had on the team financially.

A common argument I hear from fans is that the amount of money being spent does not matter since it’s Aquilini’s money. If you feel that way, then you need to understand that the owner has the final say. His opinion is far more important and holds more weight than anyone else.

Aquilini is an owner first and a fan second. If he is not happy with the return on his investment, he has every right to seek out changes. Using the information available through Forbes.com, we will learn if this management group’s choices are best for business.

Value of the franchise

When Jim Benning took over in 2014, the Vancouver Canucks had an estimated team value of $800 million. This was the highest value in franchise history and an impressive feat compared to the $207 million the Aquilini family had originally paid.

In the following year, the team’s value dropped to $745 million. It may seem odd, since the club made the playoffs in a short-lived series against the Calgary Flames. Then, we get to the low point of the current regime. The 2015-16 season was a disaster in several ways. The team finished toward the NHL’s basement and they lost the draft lottery. To make matters worse, the value of the franchise dropped all the way down to $700 million.

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Jim Benning and Trevor Linden reduced the team’s value by $100 million. Another way to express this is a 12.5% loss in value. The scary part is the fact that this all happened in a short span of two years. I don’t care how rich someone is, losing that much value that quickly is a poor outlook on the team. Optics are very important to this ownership group.

The team finished near the bottom again in another painful year. From here, we would normally expect a further decline in value. Instead, the value of the Canucks increased to $730 million. This was very short of what the team was worth in 2014, but they were able to clear the low bar from last season. What could possibly be the reason for the increase in value? I can think of two reasons that supported this team.

First, the addition of the Vegas Golden Knights allowed the remaining 30 teams to split the $500 million expansion fee. That comes out to around $16.67 million per team. Every team got a boost from the addition of a new NHL franchise.

I believe the second reason is Brock Boeser. The Flow is giving fans hope. He is a future superstar in the making and on some nights, is the only reason to tune in. After three years, the team’s value has declined with their play on the ice. Francesco Aquilini can’t be happy with these results.

Season ticket holders

During the height of the Sedin era, the Canucks were rich with season ticket holders (STHs). Having as many as 17,000 with an additional 6,000 on a waiting list was impressive. The team was good. Their popularity led to 474 consecutive sellouts from 2002 to 2014.

As of last summer, Cam Tucker from The Province, reported that the current STH total is as low as 13,000. That’s a decline of 24% since that height. On the Canucks’ valuation page, they estimate that this season has 15% fewer STHs compared to the previous season. The fabled waiting list is all but a distant memory.

If you know any current STHs, you may hear that their seats are a lot closer to the ice. Fans are speaking with their wallets. From the perspective of ticket holders, they are not committing as much money to this team compared to the past. I am sure Canucks ownership is very aware of this trend.

Attendance

Furthermore, attendance does not paint a brighter picture. ESPN tracks average home attendance during the NHL season. The Canucks appear to have 17,936 tickets sold per game. This number does not tell the whole story. During December, that number dipped below 17,500 — the lowest average the Canucks have had since 2001.

You can see it on TV. There are usually large patches of empty seats. In my opinion, the portion of the fanbase that can afford tickets are apathetic. This is a dangerous game to start playing. If people are not interested in your product, it is hard to keep up with rising annual costs. You can debate the reasons leading to this attendance decline, but the fact is, fewer people are going to games.

Rogers Arena’s current average ranks 16th in the NHL. That doesn’t seem too bad, considering the decline, right? Well, not every arena has the same capacity. To factor for that, let’s look at the percentage of Rogers Arena filled with each game.

The Canucks are ranked 23rd in the league, filling the building to about 95% capacity this season. It seems like a high percentage but consider this. The Ottawa Senators have notable attendance issues that they closed off some sections of their arena. Ottawa has an attendance percentage of 89.

Aquilini cares about optics. Judging by the approximate number of empty seats I see on TV, I don’t believe there are over 17000 people there. The Canucks may have tickets paid for, but when those people won’t attend games consistently, there is a problem. And I believe more and more fans are becoming less interested with the Vancouver Canucks.

Revenue, expenses, and operating income

Let’s get to the good news first. Despite finishing in the NHL’s basement and losing season ticket holders over the last three years, the team has managed to keep a consistent revenue stream. The team has averaged $152 million in revenue during this regime. This is usually good for top ten revenue streams in the league.

Now, the bad news. Revenue may be consistent, but the main issue at hand is player expenses. In his first season, Jim Benning was spending $70 million on salaries. At the start of this season, those expenses have shot up to $82 million. The NHL salary cap was $69 million in 2014 and is up to $75 million this year.

Player expenses are up partly because of the cap. However, the biggest reason there is such a massive spike in expenses is the way Jim Benning approaches contract negotiations. Benning went all in during the free agency period over the last two seasons, bringing in expensive deals to Loui Eriksson, Thomas Vanek and Sam Gagner.

In addition to those deals, Bo Horvat is starting his new contract and Brandon Sutter is making top six forward money on the team’s fourth line. Those five forwards are making $23.5 million. That isn’t their cap hit. Francesco Aquilini is cutting cheques for this group of forwards who are part of a team near the bottom of the standings again. Players like Vanek and Horvat earned their money. Although, I find Horvat slightly overpaid considering his performance and contract status.

Benning is spending money with reckless abandon. Since revenues are consistent and player expenses are increasing, there is less operating income to work with at the end of the season. If we subtract expenses from Revenue, the Canucks had an operating income of $46.7 million before Jim Benning arrived. In the latest assessment of the team from Forbes, there was only $22 million of operating income.

The team is not spending wisely as they continue to finish near the bottom of the standings. If I am in Aqulini’s head, the team is spending more, having less money after revenues and is still getting laughed out of the building. The man must be furious. The team isn’t losing money yet, but how many more years of this will it take to get to that point?

Best for business

From a business perspective, Jim Benning and Trevor Linden should no longer be employed. Optically, fans are not pleased with the on-ice product and are showing it with their lack of attendance. There are fewer commitments to season tickets and the value of the franchise has dropped dramatically.

To compound the issue, the team is unable to generate any more revenue, but their player expenses continue to increase. Profit margins are being slashed thinner and thinner and the idea of giving Benning more cap space to waste by forcing the Sedins to retire is nuts.

Their contracts are not the problem. It’s the ludicrous amount of spending done by this regime that is the problem. Finishing in the basement for the third year in a row, despite spending to the cap is an embarrassment. There is money wasted on this roster and the responsibility falls entirely on the shoulders of management.

Terrible optics, poor business decisions and an unwatchable product on the ice is driving the decline in attendance and financial commitment from the fans. Is it fair that Jim Benning will be the only one to pay for these decisions at season’s end? Of course not. The NHL isn’t fair. It is a business of results. And when you don’t get those results, you start to look for changes.

Aquilini can’t blame the players. He can’t blame Travis Green. The only place to look is up. And the next person in line is Jim Benning. The Canucks general manager may be one of the nicest guys in the organization, but the team’s owner needs to make the best financial decision. Being nice is not enough.

These decisions are not easy but are very necessary. Aquilini is sick of losing. I’m betting he is tired of these financial pitfalls. Parting with Benning will prevent potential financial losses. Most of all, I think he is finished with being the punchline of everyone’s jokes. This team is not respected and is flailing around like the Edmonton Oilers. A reset may be what everyone needs at the end of this season.

Next: Canucks should move Markstrom at the deadline

I believe Aquilini has already made his decision. He wants to see how the club finishes the season and prove that those first 15 games were not a fluke. If the Canucks are going to show the same lack of effort that they had against Buffalo, then I don’t think Benning should be too hopeful.

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