Hockey and the economy

[Wombat 26]

I wanted to post this article in another thread but I didn't want to derail the original topic completely. So here is a brand new thread, and perhaps a place we can discuss how the economic situation for the US and Canada is affecting the NHL or hockey in general.

Here is an article from Street & Smith's Sports Business Journal about ticket revenue projections for next year. S&S SBJ uses a paid subscription to read most of it's articles but this one is up for free as This Week's News, so it will probably be blocked soon. Here are a couple pertinent quotes:

Ticket revenue generally accounts for up to 50 percent of a team’s annual budget, and while NBA and NHL teams will hammer out their final budgets in the next six weeks, the prospect of flat or decreasing ticket revenue has teams looking to slash overall costs.

In the NHL, 13 teams plan to offer the same season-ticket prices they did for 2008-09; two clubs, the Tampa Bay Lightning and Dallas Stars, plan to reduce season-ticket prices for next season; and three clubs, the Buffalo Sabres, Toronto Maple Leafs and Washington Capitals, plan to increase prices. Ten clubs haven’t made a decision yet.

NBA and NHL teams benefited this season from completing the majority of their renewal and new season-ticket sales prior to the severe economic downturn last fall. As a result, their respective leagues haven’t had that revenue stream tested by the recession.

I've been stating a few different threads recently that I worry that the economy is going to have a big effect on the NHL in terms of player salaries and the salary cap. We have not seen a recession of this magnitude during the Age of Salary Caps in sports and especially with a gate-driven league like the NHL, any big hit to discretionary money to the citizens will affect the overall league revenues.

Revenues are not down yet this year because sales were made before the economy went sour. Next year, revenues will probably drop one way or the other, either through lower ticket/merch prices, lower attendance, or both.

[Wingsallwin 0]

Well first of all, the issue of the income business and economy of the NHL has been on the surface since.. I don't remember but few years ago. As you know, even though there are some cities that love hockey, the most important thing is whether they are affordable or not. I live in Vancouver and have been some Wings games but also does the Rangers games. Some teams' tickets are unreasonable sometimes and that is one of reasons what kill the NHL.

However, to compare MLB and NHL, there must be big difference. I appreciate you bring up the example of NBA, which is also having a rough time in economy with NHL. More than just tickets, you guys know MLB is providing the service of video; MLB started this service since few years ago. To copy that, Bettman just started to provide the service of video in youtube because Bettman thinks patrons of the NHL must be younger or wealthier than MLB because he thinks poor people cannot visit the hockey stadium according to the high price of tickets. Therefore, Bettman might think if hockey fans know there is a highlight video option in youtube, they will watch.

Nevertheless, the problem is I suppose people here have used youtube.com a lot; if you go to youtube, unless the video's rate or click rate is extremely high, you cannot find the video before you type the main code of the video's name. In my opinion, that was probably the failure by Bettman on growing the popularity of hockey.

Furtheremore, just few years ago, the core of American Hockey was ESPN, not VERSUS or NBC. As the contract between the NHL and ESPN came to the end, ESPN might ask ridiculously low contract money on NHL broadcast because it considers NHL's fan base is very tiny in America. Not to blame Bettman's real mind on NHL, but VERSUS might also kill the NHL's populartiy in America, which directly related to the low income of NHL to decrease the net income. Besides, NBC is not constantly broadcasting hockey. They just randomly pick some Sundays to broadcast hockey.

As I know, other sports' leagues also have a rough time in economy except for the European soccer league because countries' governments or municipal offices take care of them. However, as the time goes more and more, NBA is starting to find a way to recover their low income. For example, Yao Ming(did I spell right?), the chinese famous basketball player, it is an exapansion of the NBA. They tried to expand their broadcasting power to Asia, which has the biggest population in the world as a continent, it will cause a good result on TV rate.

Something similar to the NBA, NHL is trying to do some many new things like Winter Classic and opening the league in some countries in Europe. I do know how result converts to but it is a good try at least for me. The world is in a global period so Bettman is trying to do so many things on the outside of North America.

On the other hand, at least to me, Bettman is not enough a good commissioner who can resuscitate NHL's popularity. You guys probably know more than me about the MLB but I know the commissioner of MLB, Bud Celic was also blamed a lot when he just became the commissioner of the MLB.

What about now? To overcome the depression in the MLB, now MLB is in a prosperous condition. Just I hope this kind of commissioner will appear in the NHL.

Now, the NHL is making only deficit, not black ink. If the NHL wants to cover this up, it is not only ticket sale but have to fix so many problems around it,

Edited March 17, 2009 by Wingsallwin

[Wombat 26]

"NHL on thin economic ice" from thestar.com (12-2-08)

"Hockey is the most vulnerable and that's primarily because of the lack of a TV contract in the United States," said Richard Powers, associate dean of Rotman School of Business at the University of Toronto. "I really do think we're going to see some contraction and/or relocation. And it's very likely we're going to see another franchise in Canada.

"The NHL is much more dependent on gate revenue than TV revenue," said Phillip Miller, an associate professor of economics at Minnesota State University. "That makes it more susceptible to the ups and downs of the economy."

The NFL is the financial king of North American sports generating an estimated $6.5 billion in annual revenue, followed by MLB at $6 billion, the NBA at $3.6 billion and the NHL at $2.5 billion.

Larry Grimes, president of W.B. Grimes and Co., which specializes in sports team acquisition, says the recent up-tick in interest in hockey – its success with outdoor games, the marketing of Sidney Crosby and strong Stanley Cup ratings – might act as a buffer for the league.

But he said the decline of the Canadian dollar after the six Canadian teams generated $150 million in profit last year is an issue.

"The falling Canadian dollar versus the U.S. dollar certainly can't be good news if you're a Canadian owner," Grimes said. "It's heading south again. That would make it difficult to pay the big salary and compete in the free-agency market."

What I like about the last quote is that I think some aspects of the NHL are really strong right now. There are a lot of great, young players. The talent level is high. With parity, the talent is spread around the league and most teams have at least one really good player, if not a handful. But I see the big problem being that the NHL envisions itself as being bigger than it is. NHL players should not be making as much money as they do because the sport does not earn enough money like the NFL and MLB to be at least somewhat sustainable.