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cusimano_brothers

Injuries + The League = Money.

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From Vancouver Sun:

Rock 'em-sock 'em hockey may give many fans a thrill, but researchers estimate that resulting player injuries cost the NHL more than $200 million a year — a hit to the league's bottom line they suggest is likely recouped from the public's wallets.

In a study published Monday, researchers at Toronto's St. Michael's Hospital estimate that NHL owners paid out at least $653 million US over three seasons to players who missed games due to injury.

The study found that more than 63 per cent of the 1,307 NHL players who laced up skates during the 2009-10, 2010-11 and 2011-12 regular seasons missed at least one game because of a hockey-related injury.

Within a single season, 51 per cent of all players were out with injuries for at least one game, representing a salary cost of $218 million US a year.

As the first paragraph suggests, this study seems to be leaning toward a mindset which the League (and sports overall) has operated under in a time-honoured fashion for decades, that of "Why should we incur these costs, we'll just pass it on to the 'the greatest fans in the world'".

That's a lot of cheese they're talking about. Then again, when they prefer to start "_ilions" with a "b" rather than an "m", the League might consider this to just be one of the costs of doing business and not that big of a hit to "the bottom line".

I realize there are a lot of variables to consider in this equation. But, in the end, it comes down to one question...Is the League doing enough to try and make the game as safe as it possibly can be or are they just "going through the motions" to make it look as if they really care?

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I disagree with their hypothesis.

Yes, there is a cost, but to imply that it is directly related to ticket prices or should be treated differently than other costs is silly. It's like saying a Big Mac costs 30 cents more today because the fry cook stuck his hand in the oil.

Yes, there are costs, but to say that if they made the game less hockey-like and therefore safer (less injuries) that the costs would go down is nonsensical.

Son of a Wing likes this

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I disagree with their hypothesis.

Yes, there is a cost, but to imply that it is directly related to ticket prices or should be treated differently than other costs is silly. It's like saying a Big Mac costs 30 cents more today because the fry cook stuck his hand in the oil.

Yes, there are costs, but to say that if they made the game less hockey-like and therefore safer (less injuries) that the costs would go down is nonsensical.

So if a team spend less money this season because they didn't have to call up as many injury replacements and pay them NHL scale, while also paying to the injured player, their costs would not decrease and therefore their profits would not increase? I don't follow your logic here.

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So if a team spend less money this season because they didn't have to call up as many injury replacements and pay them NHL scale, while also paying to the injured player, their costs would not decrease and therefore their profits would not increase? I don't follow your logic here.

Pretty sure what he is saying is that the paying public would not be paying less if the costs go down (i.e. if there are less injuries). Ticket prices are not determined based on expected costs to be incurred, they are determined based on the market.

Also, it's probably not as simple to say that injured player X, making $5 million a year is costing the NHL $5 million if he misses the year due to injury.....that's what insurance is for. I'm sure it is way more complicated than they are presenting it (e.g. how long is a player out with an injury before insurance kicks in? how much are insurance premiums and how much would they reduce if injuries are reduced? etc.) - none of that has anything to do with $ paid by the consumer of course.

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Economics 101 suggests that if costs go down, supply increases, and prices fall, unless demand is totally inelastic (that is if the public doesn't care how much the tix cost and would buy the same number at any price) all other things being equal..

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Economics 101 suggests that if costs go down, supply increases, and prices fall, unless demand is totally inelastic (that is if the public doesn't care how much the tix cost and would buy the same number at any price) all other things being equal..

Economics 101 does not work here. If costs go down, supply does not increase....there are still only X players per team. A decrease in costs is not going to increase the number of players on a team and is not going to change the number of games being played.

The public is not going to decide that a game is not worth as much as they were paying before because of a decrease in costs. In fact, you might even consider tickets to be more valuable if costs go down as a result of avoided injuries (i.e. star players playing more often).

They aren't selling widgets here.

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Economics 101 does not work here. If costs go down, supply does not increase....there are still only X players per team. A decrease in costs is not going to increase the number of players on a team and is not going to change the number of games being played.

The public is not going to decide that a game is not worth as much as they were paying before because of a decrease in costs. In fact, you might even consider tickets to be more valuable if costs go down as a result of avoided injuries (i.e. star players playing more often).

They aren't selling widgets here.

As an economist, I am required to tell you that the laws of supply and demand work everywhere and always :)

As they do here. Unless each and every ticket for all 41 home games is already sold out, there IS a way that lower prices may increase the ticket sales, which is what the hockey teams product really is. Tickets is what they sell.

So lower costs increase the willingness of the team to sell tickets (at any given price, since they now make more profit per ticket = ticket price minus now lower average cost), which is known to economists as an increase in supply. And if the team is willing to sell more tickets at any given price, while the public would buy more tix only if the price is lower, then the team will happily lower the price somewhat in order to sell more tickets. Perhaps they will run a promotion for the nosebleed seats or do a volume discount (family night pack) or some such.

P.S. And thank you for the idea, I will probably use this example for my next class on supply and demand :)

Edited by sibiriak

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As an economist, I am required to tell you that the laws of supply and demand work everywhere and always :)

As they do here. Unless each and every ticket for all 41 home games is already sold out, there IS a way that lower prices may increase the ticket sales, which is what the hockey teams product really is. Tickets is what they sell.

So lower costs increase the willingness of the team to sell tickets (at any given price, since they now make more profit per ticket = ticket price minus now lower average cost), which is known to economists as an increase in supply. And if the team is willing to sell more tickets at any given price, while the public would buy more tix only if the price is lower, then the team will happily lower the price somewhat in order to sell more tickets. Perhaps they will run a promotion for the nosebleed seats or do a volume discount (family night pack) or some such.

P.S. And thank you for the idea, I will probably use this example for my next class on supply and demand :)

I would agree to an extent.

1 - the main problem with your argument is that close to 2/3 of the league's teams sells out all of their games (I guess I was looking at it from the majority and you were looking at it from the minority.

2 - looking at it from your perspective, it does make sense, but there is also a potential problem. Will lower prices actually increase attendance for those teams not selling out? Is price the problem? Or their simply not enough demand, no matter what the price.

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I would agree to an extent.

1 - the main problem with your argument is that close to 2/3 of the league's teams sells out all of their games (I guess I was looking at it from the majority and you were looking at it from the minority.

2 - looking at it from your perspective, it does make sense, but there is also a potential problem. Will lower prices actually increase attendance for those teams not selling out? Is price the problem? Or their simply not enough demand, no matter what the price.

You are quite right on the 1st point. My analysis would apply only if the buildings are not sold out every night. Although for an economist, the fact that the building is sold out indicates that the prices may be too low, since there obviously is excess demand for tix.. At higher price, the team might make even more money.

On the 2nd point, answer me this: If you are a casual sports fan in Phoenix or Florida, and the hockey tix are free or something close like $5, would you go? If your answer is yes, then the price IS the determinant of attendance and the only question is what is the level and structure of the ticket prices that will give the team the most revenue.

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You are quite right on the 1st point. My analysis would apply only if the buildings are not sold out every night. Although for an economist, the fact that the building is sold out indicates that the prices may be too low, since there obviously is excess demand for tix.. At higher price, the team might make even more money.

On the 2nd point, answer me this: If you are a casual sports fan in Phoenix or Florida, and the hockey tix are free or something close like $5, would you go? If your answer is yes, then the price IS the determinant of attendance and the only question is what is the level and structure of the ticket prices that will give the team the most revenue.

1 - this is why we do see price increases from teams that always sell out (fans complain, but they continue to pay since there is so much demand) - agree on this for sure

2 - I honestly don't know the answer to the question, that's my point. Is demand simply not there, or is price the issue. The best example I can think of is my personal one. I live in Toronto, I'm a die hard hockey fan, but only a casual fan for the other sports. In Toronto, there is an NHL team, an NBA team, an MLB team a CFL team and an MLS soccer team. I have never been to a CFL game or an MLS game. Has nothing to do with pricing (prices are quite cheap relatively speaking), I just don't have the interest, lowering those prices would mean nothing to me. I have been to the occasional baseball game and basketball game, but only occasional, not because of pricing, just because of my interest level. Again, lower prices are not going to make me go more often. Leaf games is another story. I don't go very often at all, tickets are very expensive, but pricing really isn't the issue for me either, it's more availability of tickets. I suppose I could always find tickets if I really wanted to, but a lot of hassle involved. I will say this though, at $200 a seat, I might go X times a year, if prices were lowered and availability wasn't an issue, I would probably go more often.

So, on point 2, I think in cases where there are not sellouts, lower prices to the general public might induce more to come, but it really depends on why they are not selling out. My gut reaction would be that it has less to do with pricing and more to do with little interest....winning helps take care of that more than pricing I think.

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"Price increases" doesn't necessarily mean tickets only; if it's got the League logo on it, it's fair game for an price hike. Merchandise would be the more subtle area to increase first; "foam fingers" are due for a gigantic price increase very soon.

FireCaptain likes this

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