Saturday, June 02, 2007

Crazy question

When Bob MacKenzie says this:

"But we also believe the league is not generally in favor of adding a team in southern Ontario."

Why would the league not be in favour of putting a team in a massive market that is a certainty to be a success? Anyone know the background here? Sure, I understand the Leafs' concerns and even Buffalo's, but why would "the league" see this as an issue?

I can't think of a good reason.

24 Comments:

Blogger SweatyO said...

Hmmmm....

One more team in Canada means one less team in the States, which means a smaller US TV deal with NBC next time around?

Not like it matters one way or another....

6/03/2007 12:09 am  
Blogger oilswell said...

How many teams currently want the cap to increase?

6/03/2007 10:56 pm  
Blogger Showerhead said...

Well hmm. I have no idea what the revenue growth distribution is like in the NHL or if revenue is 100% correlated with profit.

Under a simple example where revenue IS assumed to correlate with profit, imagine the 30 teams ranked from 1-30 by revenue/profit. For the cap to go up, either most teams would have to be making money or a few teams at the top would have to be making disproportionate amounts of money relative to the rest of the league's teams. While I would guess that the latter is more representative of the NHL than the former, I have yet to come across anything that would convince me owners would be significantly against a cap increase.

Or am I missing something and linkage isn't all it was cracked up to be?

6/04/2007 2:06 pm  
Blogger RiversQ said...

oilswell said...
How many teams currently want the cap to increase?


Not too many I would say. Probably ten teams would be fine with a higher cap.

There are also probably a couple that wouldn't mind getting bumped down the revenue sharing list. Like say, the Oilers. That's a tough call for them. Lower revenue sharing payments and a higher cap or vice versa? I'm not sure which is particularly more palatable.

6/04/2007 7:14 pm  
Blogger namflashback said...

Check out tsn. Apparently the Canadian Competition Bureau is investigating the legality of NHL's veto clause. My guess is that as a franchisor with a certain amount of retained rights, the NHL keeps the right to do this -- but it will likely get some light in the press about how petty TMLSE is. Other than the unsavoury moment of moving a franchise, this is nothing but good for the League. More TV revenue, more gate revenue, and more fans buying merchandise.

The only conceivable down side is the conference alignments.

6/06/2007 9:52 am  
Blogger Scott said...

Hey, I'm a Kings fan -- just found this blog and am very impressed. I think I may be reading regularly here.

I heard on ESPN radio that it is virtually certain that a team WILL be moved to Ontario, maybe Kitchener area. I don;t recall who the guy was who was saying it.

6/06/2007 4:10 pm  
Blogger Vic Ferrari said...

I would think that there are several GMs that are hoping that league revenues do not grow. Lowe included. But I doubt that there are many, if any, owners that feel the same way.

If Balsillie does indeed move the team to Hamilton, how many more man-games of TV viewership will the league gain? How much more in paid attendance? How much will the price point in Detroit, Buffalo and Toronto be affected? Would these be new customers, or would the NHL fanbase in the area be cannibalized?

I don't know the answers to any of these questions. But I wouldn't be surprised if the addition of another franchise in southern Ontario would be a poor business decision for the league as a whole. Obviously it would be a solid business decision for Balsillie though.

6/08/2007 8:32 am  
Blogger RiversQ said...

Vic Ferrari said...
I would think that there are several GMs that are hoping that league revenues do not grow. Lowe included. But I doubt that there are many, if any, owners that feel the same way.


Agreed. Personally I doubt the EIG cares all that much about the cap and I bet they'd love to be paying less in revenue sharing. The people that actually own the league must want higher revenues leaguewide.

If Balsillie does indeed move the team to Hamilton, how many more man-games of TV viewership will the league gain? How much more in paid attendance?

Millons more in TV viewership and 41 games of an entire building full?

How much will the price point in Detroit, Buffalo and Toronto be affected?

Buffalo might be hurt, but they haven't even found their price point yet. 100% attendance with the lowest ticket prices in the league.

Detroit's too far away IMHO. Kitchener's as far away as Calgary is from Edmonton for fucksakes. And I imagine traffic actually matters there.

I don't believe Toronto has found their price point and I think a rivalry has value to that franchise. Furthermore, that's the perfect one to feed off. It's the biggest hockey market with the highest franchise value.

Would these be new customers, or would the NHL fanbase in the area be cannibalized?

Of course I could be wrong but I imagine the ticket sales would be almost totally new customers. They would mostly be people that can't get into the ACC on a regular basis and were not interested in driving 2+ hours to Buffalo.

Even if there is some cannibalization I would argue this is a far more attractive means of revenue sharing anyway. Why write Nashville or Atlanta or Phoenix or Florida a cheque when you could move them to a market where they'd actually survive? Best of all, you're directly siphoning the funds from the biggest revenue generator in the league. If the Leafs make $25MM/yr instead of $45MM/yr, what's the big deal?

I guess the question is mainly Buffalo. If a new team would siphon off of Buffalo more than Toronto despite the big difference in proximity (80 km vs. 170 km) then that's probably an untenable situation.

6/08/2007 1:56 pm  
Blogger Black Dog said...

I tried to post in response to a similar comment you made at Ty's site, Vic, but it wouldn't let me.

Well, I live in Toronto. Detroit would not be affected but I cannot speak for Buffalo. I would say this, however. 8 million people or thereabouts around here and many are not Leaf fans. Also, tickets to the ACC are limited. Even if they weren't so expensive, you still have endless people who would love to go to games who cannot because demand exceeds supply. RiversQ is absolutely right. I've been to a game a year for the last four seasons(with two last year). All but one were through a friend's company. My wife has been to none. We would go to a whack of games except the supply of tickets is not there.

I would say that a new team would succeed and that likely your overall revenues are going to increase. You have an increase in gate receipts, new merchandise sales, probably more TV.

The Leafs might get hurt a bit. Buffalo too (though not much, I think, just based on anecdotal evidence). But overall its an increase in revenues over Nashville or any new American city.

Full house at full price (not all of these giveaways/freebies they have down in Atlanta, Tampa etc)

6/09/2007 2:14 pm  
Blogger Vic Ferrari said...

Pat:

Well, Toronto ticket prices still average lower than Edmonton. Food and beer inside the ACC are cheaper as well iirc. Though its close and both are a bargain compared to Vancouver. Point being, if the Leafs really could push up the ticket prices 20% without consequence ... they would.

It seems that the real advantage the Leafs have over most American franchises is the huge television audience. This affects not only TV revenue but board advertising, building naming rights fees, etc.

Now clearly moving the Predators would increase the total NHL viewing in southern Ontario a bit (Ontarians already watch a shitload of TV every week on average) ... but it seems likely to me that much of the new TV audience would come at the expense of the Leafs, and Sabres and Wings to a lesser extent.

I suspect that Gary Bettman's primary mandate is growth. And the largest opportunity for this is in weaker markets, and new markets.

I mean how much revenue will the NHL draw from TV and new media this season? $600 million or so? A lot of scratch in any case. And while the local TV ratings for Canadian teams and for a lot of American teams is very good (MIN, DET, BUF, PIT, PHI, NYR) ... for a lot of other teams the TV revenue must surely be virtually nil (ANA, L.A, S.E. division, etc. pull in local DMA ratings well below 1% iirc, I don't even know if that is enough to cover production costs).

I dunno, I'm just spitballing here. But I really don't think it's as clear cut as Riversq says. And I don't think that the executive of the NHL, and the dozens of professionals that support them ... I don't think they are complete fools.

6/11/2007 7:06 am  
Blogger Black Dog said...

Vic, well, nothing is ever black and white and obviously nobody knows the impact this move would have until long after it happens.

I would actually say Gary's primary mandate is to make the owners more money. That ties in with what you say, if that growth brings about better TV money in the US. But considering that having added 8 new franchises in the States in the last 15 years has not done so, I would suspect that ship has sailed. I know they are talking about KC and Vegas now but KC failed once before.

I would think a new franchise would generate more revenues then a franchise in Houston, say, that
eliminating one of the teams that sucks up revenue sharing dollars is a plus as well and finally that the money Basillie has paid for the Preds is also a factor. Tyler makes an argument that the whole idea of this increasing franchise value is wrong headed and bad economics. He's a lot smarter then me and his points are good ones but I think the argument that it does do that has merit and some owners will look at this deal in that way.

6/11/2007 9:43 am  
Blogger RiversQ said...

Vic: I certainly don't know the answer regarding the TV issue. My guess is that more people in Southern Ontario would watch more hockey if they had a horse in the race so to speak. Just a hunch.

We definitely disagree on the ticket sales though. I just don't buy the Leafs and Detroit angle there, but as I said, I don't know what it would mean to Buffalo.

Do the Leafs, Detroit and Buffalo have more pull in the league than just 3/30? I would guess so, but how much more?

6/11/2007 3:25 pm  
Blogger RiversQ said...

One more thing...

Vic Ferrari said...

Well, Toronto ticket prices still average lower than Edmonton.


From Spector's article in the National Post on February 10th, 2007:

The Maple Leafs still have the priciest ticket in hockey at $80.31 and bring in the most gate receipts per game at just over $1.5-million per game. By the New Year, the Leafs had rung in nearly $31.8-million in gate receipts, roughly equal to the combined total of Chicago, St. Louis, Atlanta and Carolina.

Spector said the Oilers had the 6th most expensive tickets at $61.16/seat in the NHL. That's after the 21.4% increase for the 06/07 season.

6/11/2007 3:32 pm  
Blogger Black Dog said...

I don't think Detroit would care either way, to be honest.

As for Toronto's pull, well, remember during the lockout Tanenbaum apparently made an impassioned plea to the owners to come to an agreement to save the season - apparently he was savaged. I think they may not have as much pull as they think they do.

Buffalo is the one team that might hurt but I really don't know if it would really be that big a hit. I think not but that's based on nothing more then my feeling from living here.

How much does a roast beef sandwich cost in Edmonton. A couple years back it was 40 bucks here.

I think the Leafs would barely even notice, to be honest. They're like the Cubs now - a brand.

6/12/2007 5:29 am  
Blogger Vic Ferrari said...

RiversQ:

I took my information from Team Marketing Report Inc. For questions regarding this survey, please call Becky Vallett, at 312-280-2311; or contact her via e-mail at: becky@teammarketing.com.

Spector is a journalist, so I suspect that he has looked at the 5 or 6 ticket price tiers listed for the Leafs all over the net, averaged them, and multiplied by the readily available attendance figures. Just a guess mind, but that would mesh, because the tiny volume of Leaf premium seating is extremely expensive.

6/12/2007 1:28 pm  
Blogger Vic Ferrari said...

RiversQ:

I took my information from Team Marketing Report Inc. For questions regarding this survey, please call Becky Vallett, at 312-280-2311; or contact her via e-mail at: becky@teammarketing.com.

Spector is a journalist, so I suspect that he has looked at the 5 or 6 ticket price tiers listed for the Leafs all over the net, averaged them, and multiplied by the readily available attendance figures. Just a guess mind, but that would mesh, because the tiny volume of Leaf premium seating is extremely expensive.

6/12/2007 1:28 pm  
Blogger RiversQ said...

Cool stuff Vic. Here's the link for anyone that wants it:

http://www.teammarketing.com/fci.cfm?page=fci_nhl_06-07.cfm

I think Spector got his data from NHL or more likely NHLPA documents on gate receipts. It's not clear from the article how he's calculating the average ticket prices. I assumed he was doing it based on attendance and gate receipts, but he could be doing it the way you described.

What I don't understand is how the numbers work out. Spector has the Leafs making just over $1.5MM per game in gate receipts based on NHL documents.

Multiply 19500 announced attendance by TMR's average ticket price and you're not even close to Spector's per game gate receipt number for Toronto and you get less than $1MM/game.

Something doesn't jive here...

Becky!?!?!

6/12/2007 2:01 pm  
Blogger mc79hockey said...

I'm pretty sure that the team marketing stuff does not include premium seating. I know that I read this in the comments to some post somewhere about Sharks ticket prices, of all things. They mentioned it in passing to explain one year where the price seemingly dropped a ton. That might explain the confusion.

Interesting comments on the price of food at the rink. Pat, I'm imagining that you sat in the good seats when you were at the ACC. I usually sit in the shitty seats that the college students can afford if they don't eat for a week ($100) and found the food and drink reasonably priced enough for a hockey rink. For some reason, I'm pretty sure I've read that the ACC engages in variable pricing. Where do you usually sit Vic?

6/13/2007 12:29 am  
Blogger RiversQ said...

Yeah that's exactly it, mc79.

Average ticket price represents a weighted average of season ticket prices for general and club-level seats, determined by factoring the tickets in each price range as a percentage of the total number of seats in each stadium.

The average price is only for club level and general seats. It does not factor in premium level seating.

If you assume that Spector's and TMR's numbers are both correct, you can figure out the fractions of premium seating. Toronto has 29.5% premium seating as defined by TMR. Edmonton only has 14.1% premium seating as defined by TMR. Is that hard to believe?

6/13/2007 1:40 pm  
Blogger Black Dog said...

Two times I went this year, Ty. One game I sat six rows up from the ice (that was the HNIC Oilers game). Those were $180.00 or thereabouts. Access to the cocktail lounge, the sandwich guy etc etc. Tickets had a pic of Mats Sundin.

Other game was six rows from the top - $40.00 I believe. Regular food up there. No frills. Picture of Belak or Brendan Bell on the ticket (I kid you not).

6/14/2007 5:44 pm  
Blogger Vic Ferrari said...

Riversq:

MC79 is right about the exclusion of the premium seating in the TMR numbers starting in the 2001-2002 season. These are luxury suite revenues. They are clear about that, and it's a cool thing because it gives you a good idea of the suite revenue for the teams.

Looking at this site on sports buildings ... ACC has a ridiculous number of suites in that building, and a lot of them lower down too, which is a huge thing because suites at mid-level sell for about treble the cost of the sky boxes. A shitload of luxury restaurants as well, presumably with ice views.

I'm not going to do the sums, but Spector may not be too far off here, I dunno. I'm always cautious about beliving the numbers journalists bandy about, I read two Larry Brooks articles recently and one or both claimed information from "sources inside the NHLPA" and both spewed numbers that didn't make sense. And in fact contradicted each other within the same column ... that's not an opinion, arithmetic and the CBA say so.

Back to point: ACC can't touch the United Centre though. 216 luxury suites! damn. No wonder Forbes always estimates Wirtz to be earning about $20 million more than he claims to be. It's a money spinner.

6/15/2007 7:49 am  
Blogger Vic Ferrari said...

MC79:

Ya, as stated in the post above you are quite right. Andrew's Stars Page really lays that out explicitly as well, which is good because he's the main source for this stuff for most of us fans digging about.

How did this subject come up with regard to the Sharks, Tyler? They are an interesting team in a lot of ways. And very comparable to the Oilers in a lot of the ways that they do business. And they have about the same number of suites low (40ish) and high (25ish) as Rexall Place. Charged out at similar rates as well ($100k-ish plus tix at the top and $300k-ish plus tix at the mid level).

And almost nobody in the Bay Area watches them on TV, a 1% rating in the local DMA. Ouch! They also buy airtime from FOX Sportsnet and sell their own advertising, at least for the road games iirc ... in any case again, it's Oilerish. :)

And as far as the pursuit of the elusive $40 beef sandwich:
I have sat everywhere in that barn over the years and there is no variable pricing. Aside from the fact that beer from the walking vendors always seems to be cheaper than from the taps. I can't remember by how much, just registered with me because you'd think it would be the opposite ... still, people go and stand in line when a vendor is standing right there with a tray of beer around his neck. Maybe I'm missing something.

If the ACC has 40 restaurants, then surely at least a few of them offer open roast beef sandwiches as main courses. And more than a few feature buffets with a cook whacking off slabs of roast beef under a heat lamp. I'm guessing that this is where the $40 thing comes from. Is that right, Pat?

Somehow I just can't imagine anybody selling a plastic wrapped, 7-Eleven style roast beef sandwich for $40 anywhere on this earth. Maybe an airport retailer in Sweden or Iceland ... even at that, I dunno.

6/15/2007 8:12 am  
Blogger RiversQ said...

All good points Vic.

The only reason I give much credibility to that Spector article is because it reads terribly. Kind of like he's just transcribing numbers, which is exactly what we want him to do. Quit thinking Mark, just leak the data and get on with things. ;)

6/15/2007 10:02 am  
Blogger Tyler said...

The other reason I think that those numbers are legit is that Spector's article didn't publish the underlying data. That showed up in the Globe a little later on and it fit exactly with what Spector said. I've meant for a while to copy that data and throw it up on my site for the edification of those who missed it (I was amongst those who did and got lucky in that Tom Benjamin forwarded it to me).

Vic - with respect to the Sharks, the issue was them bumping their prices pretty significantly for next year. There was some fan whining on the topic, despite the fact that they've iced a pretty successful team - tough to complain about a Conference Final and two semi-final appearances in the past three years.

6/15/2007 10:37 am  

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