Canada's Competition Bureau investigating the NHL's franchise relocation policies?

[SoCalPredFan]

250% may be an exaggeration but a big price increase is certainly not out of the question. If I wanted to move the team this is the first think I would do.If the fans step up you do great things for your immediate cash flow. If not there is your out.
Nashvilles prices are not the highest in the league. He would have a fair bit of
room before you could argue bad faith if the team was losing money.

True, though season ticket prices (and partials) are already out. I believe individual prices are out as well. Not sure what he can do for the upcoming season as far as prices are concerned. Looking down the road, though, that could certainly be an option.

I fully predict Nashville will cover the 14k+ to keep the team. If we lose this team, it'll be b/c Balsillie has some other, unknown, way out of the lease.

-t

 

[GSC2k2*]

250% may be an exaggeration but a big price increase is certainly not out of the question. If I wanted to move the team this is the first think I would do.If the fans step up you do great things for your immediate cash flow. If not there is your out.
Nashvilles prices are not the highest in the league. He would have a fair bit of
room before you could argue bad faith if the team was losing money.

For the information of all, the recent disclosure on NHL gate revenue showed that Nashville in fact sustained a 16.1% average ticket price increase, and they increased their gate revenues DESPITE that increase. What's more, they also increased their paid attendance in spite of that increase.

Accordingly, why in the world would anyone automatically come to the conclusion that Nashville attendance would plummet if they increased ticket prices?

Actually, I do know why - because most people are too d**n lazy to check their assumptions, even when the numbers are readily available.

As a further FYI, it would have been approximately a 28% increase to get Pred tickets to the league average based on last year's numbers. Assuming at least a nominal increase in ticket prices league-wide next year, that would entail an increase of well over 30% to get to the league average.

For those of you who suggest with such certainty that raising ticket prices to the league average (over 30%) in one shot would not constitute "bad faith", well, simply allow me to say that if I am the city of Nashville's counsel I would feel pretty comfortable with my position were Balsillie to do so (which he would never do, unless he has completely lost all business sense). Do you think judges are complete idiots? Does anyone understand how judges operate? Do you not think that the city of Nasville could trot out an economist or ten to provide evidence regarding price elasticity and demonstrate that such a move would be patently bad business (assuming a judge would even need such evidence to see trough such a transparent charade)? Honestly, folks, that is a completely kiddy stuff. This is not the movies.

 

[GSC2k2*]

Umm, my argument had nothing to do with the paying of fees. It was a challenge to the argument that the BoG wouldnt support the sale to Balsillie given how obvious it is he is looking to get into Hamilton/K-W. This isn't even at the point of relocation yet, just sale of the team.

AGAIN with this. Can anyone refresh me exactly as to the mountain of evidence that exists? As I see it, the "mountain" consists of the following:

1. He lives in southern Ontario.

2. He has an agreement with the city of Hamilton to discuss potential opportunities regarding Copps and additional facilities.

3. He lives in southern Ontario.

4. THe southern Ontario media are dying for another team to cover.

5. He lives in southern Ontario.

It goes without saying that Balsillie would likely end up paying territorial rights fees to get into the market. At no point have I challenged this. I merely challenged that the BoG will see Balsillie's attempt to put another team in the Golden Horseshoe as being a bad thing.

Also, at no point did I state the vote would be 28-2 either. I stated that the only two teams that would have a major problem with moving into Hamilton would be Toronto and Buffalo. The other 27 voting governors would likely be voting for or against based on other concerns.

Res, I still have seen not a whit of reply to my earlier post, which raised the following point:

Why would the BOG refuse Balsillie's move? They would reject it because of two reasons:

1. Another team in Toronto proper (not KW or Hamilton or other far-way place) is the biggest expansion asset that they have. It is probably worth $200-250 million to the existing owners as an expansion fee. Balsillie moving into the are gives the other NHL owners nothing in their own pants.

2. The specter of an extra team moving to Toronto is the single best piece of leverage that all NHL teams (other than the Leafs) can employ to their advantage in squeezing the governments in their own market to provide them with more concessions to avoid moving. Some teams like NYR and DET do not need such leverage, but many teams can definitely use it.

Southern Ontario is BY FAR the most valuable of all expansion markets. Toronto has a piece, but it also belongs to the league as a whole. And yet people think the NHL would simply give it away. Simply astounding.

 

[Northern Dancer]

Southern Ontario is BY FAR the most valuable of all expansion markets. Toronto has a piece, but it also belongs to the league as a whole. And yet people think the NHL would simply give it away. Simply astounding.

 

[Fourier]

For the information of all, the recent disclosure on NHL gate revenue showed that Nashville in fact sustained a 16.1% average ticket price increase, and they increased their gate revenues DESPITE that increase. What's more, they also increased their paid attendance in spite of that increase.

Accordingly, why in the world would anyone automatically come to the conclusion that Nashville attendance would plummet if they increased ticket prices?

Actually, I do know why - because most people are too d**n lazy to check their assumptions, even when the numbers are readily available.

As a further FYI, it would have been approximately a 28% increase to get Pred tickets to the league average based on last year's numbers. Assuming at least a nominal increase in ticket prices league-wide next year, that would entail an increase of well over 30% to get to the league average.

For those of you who suggest with such certainty that raising ticket prices to the league average (over 30%) in one shot would not constitute "bad faith", well, simply allow me to say that if I am the city of Nashville's counsel I would feel pretty comfortable with my position were Balsillie to do so (which he would never do, unless he has completely lost all business sense). Do you think judges are complete idiots? Does anyone understand how judges operate? Do you not think that the city of Nasville could trot out an economist or ten to provide evidence regarding price elasticity and demonstrate that such a move would be patently bad business (assuming a judge would even need such evidence to see trough such a transparent charade)? Honestly, folks, that is a completely kiddy stuff. This is not the movies.

You seem to be arguing against your own case. On one hand you quote a 16.1% price increase wth increased revenue as a positive for the franchise. (Based on inflation this looks like a pretty big increase to me.) It seems to me that this would not provide an economist too much evidence in support of an elastic demand curve.

Indeed, you then say ...

"Accordingly, why in the world would anyone automatically come to the conclusion that Nashville attendance would plummet if they increased ticket prices?[/B][/U]

Actually, I do know why - because most people are too d**n lazy to check their assumptions, even when the numbers are readily available."


I would agree. Where is the evidence that a 16.1% increase in each of the next two years would automatically be considered in bad faith by anyone but an idiot as you later claim. (By the way no one actually said it would be in one shot. In fact, prices would be set for this year. Moreover, if Balsillie wants to move to KW for example, I would bet he would need at least three to fiver years to make this happen.)


You have argued in previous posts that Balsillie needs to generate a substantial positive cash flow to cover the carrying costs of his purchase. By all reports the team has lost money over the last few years. An increase of even 2000 fans at
the average ticket price would generate less than 5 million dollars in additional revenue. This represents a fifteen percent increase in paid support so it would be
a very substantial gain. Increasing revenue on the corporate side is unlikely to happen quickly especially with all of the uncertainty surrounding the purchase.
This leaves price increases as the most direct way of moving revenues up.

The NHL is a gate driven business. The long term success of the franchise is not
based on the ability to attract 14000 paid fans but rather on the revenues that
these customers and the corporate community of Nashville can generate. If the people of Nashville will pay a price consistent with making a profit then I hope that
the franchise will have a long stay in the city. If this is not the case, the team will be gone.

 

[Proboscis]

AGAIN with this. Can anyone refresh me exactly as to the mountain of evidence that exists? As I see it, the "mountain" consists of the following:

1. He lives in southern Ontario.

2. He has an agreement with the city of Hamilton to discuss potential opportunities regarding Copps and additional facilities.

3. He lives in southern Ontario.

4. THe southern Ontario media are dying for another team to cover.

5. He lives in southern Ontario.



Res, I still have seen not a whit of reply to my earlier post, which raised the following point:



Southern Ontario is BY FAR the most valuable of all expansion markets. Toronto has a piece, but it also belongs to the league as a whole. And yet people think the NHL would simply give it away. Simply astounding.

These are in no particular order and there is probably some overlap:
1. Jim Balsillie lives in southern Ontario.
2. Jim Balsillie's group (acting as HHC Acquisition Corp., with lawyer Richard Rodier as the public face) previously had an agreement with Hamilton to discuss an NHL lease option for Copps.
3. Jim Balsillie's group currently has such an agreement with Hamilton and is pushing forward to have negotiations complete for lease arrangements for Copps Coliseum, Hamilton Place, and the Hamilton Convention Centre by next Wednesday.
4. Jim Balsillie's group attempted to purchase the Ottawa Senators in 2003 or 2004 in order to move them to Hamilton before Eugene Melnyk came onto the scene.
5. Jim Balsillie's group may have looked at purchasing the Buffalo Sabres.
6. Jim Balsillie lives in southern Ontario.
7. Jim Balsillie's wife is from Hamilton.
8. Jim Balsillie's group nearly purchased the Pittsburgh Penguins last year, but backed away, ostensibly because it proved too difficult to move the team.
9. Jim Balsillie's lawyers have looked long and hard at the NHL's territorial rights rules.
10. Richard Rodier went on sports radio last week and made it very clear that the group knew all of the details that would surround a potential move of the Predators from Nashville to Hamilton. The implications were clear.
11. Jim Balsillie lives in southern Ontario.
12. Somebody got Canada's Competition Bureau involved. I have a hunch as to who it may have been that made the phone call.
13. After speaking with Jim Balsillie, the mayor of Hamilton seems to believe that JB wants to move a team into Copps.
14. Jim Balsillie's group is prepared to pay much more for the Nashville Predators than they would otherwise command on the open market. Something must be up.

As for the league giving away expansion rights for the Toronto market, they did as much when they allowed teams to move into Phoenix, Dallas, and North Carolina. Such markets may not have commanded the same kind of expansion fees that the Toronto market may have, but these moves certainly eliminated the possibility of expansion dollars coming from these regions.

 

[GSC2k2*]

You seem to be arguing against your own case. On one hand you quote a 16.1% price increase wth increased revenue as a positive for the franchise. (Based on inflation this looks like a pretty big increase to me.) It seems to me that this would not provide an economist too much evidence in support of an elastic demand curve.

I am not arguing against my own case. Clearly, I was responding to the geniuses who suggest that ticket prices be doubled or some such thing to drive down ticket sales. Certainly, if the team were to raise ticket prices by a commensurate amount as last year, at least initially, it would be a harder case. That being said, price elasticity is not a straight line. One would have to study more numbers which we do not have. Furthermore, the suggestion of increasing ticket prices over 30% to the NHL average is a far cry from a 16% increase.

I would agree. Where is the evidence that a 16.1% increase in each of the next two years would automatically be considered in bad faith by anyone but an idiot as you later claim. (By the way no one actually said it would be in one shot. In fact, prices would be set for this year. Moreover, if Balsillie wants to move to KW for example, I would bet he would need at least three to fiver years to make this happen.)

Actually, if you read this thread, you would find several people suggesting that it be done in one shot, in order to terminate the lease.

As stated above, the point is in reference to suggested huge increases.

I agree with you regarding the timing of a move. For that same reason, it is preposterous that he would effectively raze the market.

You have argued in previous posts that Balsillie needs to generate a substantial positive cash flow to cover the carrying costs of his purchase. By all reports the team has lost money over the last few years. An increase of even 2000 fans at the average ticket price would generate less than 5 million dollars in additional revenue. This represents a fifteen percent increase in paid support so it would be a very substantial gain. Increasing revenue on the corporate side is unlikely to happen quickly especially with all of the uncertainty surrounding the purchase.
This leaves price increases as the most direct way of moving revenues up.

Actually, the average Preds ticket is $40.33. That equals $8 million and change. Also, assuming that Preds fans are truthful in suggesting that it is the lower bowl that goes unsold, it is safe to assume that incremental gains would occur at a significantly higher than average price.

If it means more sold suites, that is considerably more revenue.

In addition, additional attendance translates to improved concessions revenue.

The NHL is a gate driven business. The long term success of the franchise is not based on the ability to attract 14000 paid fans but rather on the revenues that
these customers and the corporate community of Nashville can generate. If the people of Nashville will pay a price consistent with making a profit then I hope that
the franchise will have a long stay in the city. If this is not the case, the team will be gone.

Would it surprise you to know that the NHL's publicly released numbers for 2002-03 indicate that slightly less than 50% of revenues come from gate receipts (which percentage is probably less now, IMO, given that the NHL has considerably more corporate partners now)? I am willing to bet that it does surprise you. My suspicion is that people think that it is closer to 80-90%.

 

[Fourier]

I think that we are converging. However two small points.

At $40 per ticket the increase is actually about $3.6 million (45 games X $40 per game x 2000=3.6 mil)
(Remember, I told you I was math literate)

Secondly, it does not surprise me that gate receipts average about 50%.
Even at $1 million per game a team would only generate $45 mil.
This would barely cover salaries. However, many other forms of revenue
are either out of control of the individual franchise or would be very diificult to
affect an increase. Ticket prices are the big hammer.

 

[Resolute]

AGAIN with this. Can anyone refresh me exactly as to the mountain of evidence that exists? As I see it, the "mountain" consists of the following:

This isn't a courtroom. Yes, it is obviously speculation, however Balsillie doesnt gain rights to Copps Coliseum twice without having any interest. He and his lawyers don't balk at every question of his plans. He doesn't spend double what the team is worth to keep it in a losing situation.

He has two options: Keep the Preds in Nashville and see if he can make it work, or look for a replacement market. If he is interested in the former, then best of luck to him. If he is after the latter, he seems to be focussing his attempts on markets with a very tenuous hold on their teams.

It is obviously speculation. Nobody is denying that.

Res, I still have seen not a whit of reply to my earlier post, which raised the following point:



Southern Ontario is BY FAR the most valuable of all expansion markets. Toronto has a piece, but it also belongs to the league as a whole. And yet people think the NHL would simply give it away. Simply astounding.

I must have missed that the first time, apologies.

The NHL has stated an interest in going to 32 teams. All of the signs are pointing in this direction. There is already expressed interest from people representing Kansas City and Las Vegas. Mark Cuban has also stated an interest. Houston, Portland, and Seattle (assuming the powerplay for a new arena is successful) all remain options, though all three currently lack an individual or group that has expressed interest in an NHL franchise at this point.

There are plenty of expansion options.

The question begs itself: does the NHL lose anything by moving the Preds to Hamilton/K-W and expanding to Las Vegas and Kansas City, as opposed to expanding to Hamilton/K-W and Kansas City and possibly moving the Preds elsewhere?

It is a case of shuffling the deck chairs, nothing more. The NHL is not at great risk of throwing away $250 million in expansion fees by allowing Balsillie to relocate there.

 

[SoCalPredFan]

You all continue to ignore Powers Mgmt --- the other entity that Balsillie is buying from Leopold. Yes my source is wafer thin, but supposedly Powers Mgmt has MADE a profit of 43mil over the Preds existence.

Powers Mgmt deals with the Arena and its concessions, etc.

That entity certainly has value and should be considered when evaluating Balsillie's profitability in the Nashville market.

-t

 

[Ted Hoffman]

As for the league giving away expansion rights for the Toronto market, they did as much when they allowed teams to move into Phoenix, Dallas, and North Carolina. Such markets may not have commanded the same kind of expansion fees that the Toronto market may have, but these moves certainly eliminated the possibility of expansion dollars coming from these regions.

I don't exactly recall chants from the masses for a team in either Phoenix or North Carolina - certainly not on the level of the chants for a team in [insert Canadian city here]. The move to Dallas came really early in the Bettman era or really late in the Gil Stein reign of error - either way, Dallas wasn't being looked at as a potential expansion market when either San Jose, Tampa Bay, or Ottawa joined the league.

The NHL has never asked for a fee to pay for moving into a potential expansion market like the NFL did with the Los Angeles Rams and St. Louis Cardinals (but didn't do with the original Cleveland Browns or Los Angeles Raiders - hmmm ... wonder why not?) so I doubt they'll be asking for money for moving into a "potential expansion market".

It's that "infringing on the Toronto market" thing that's going to be a problem, though. Again, the owners are going to protect the idea of territorial rights; if they decide to just let a team plop down in Hamilton without the Leafs being compensated in any way, it sets a precedent for teams to drop into any other market where an existing team is located, with the existing team having no recourse to collect for lost revenues as a result of the move.

 

[Wetcoaster]

The NHL has never asked for a fee to pay for moving into a potential expansion market like the NFL did with the Los Angeles Rams and St. Louis Cardinals (but didn't do with the original Cleveland Browns or Los Angeles Raiders - hmmm ... wonder why not?) so I doubt they'll be asking for money for moving into a "potential expansion market".

Did the Mighty Ducks not have to pay the Kings and did the Devils not pay the Rangers and Isles for territorial infringement? Or is this not considered "potential expansion market(s)?

The birth of the Ducks was the product of some complicated group back-scratching. Anaheim wanted an arena, the arena needed tenants, the Clippers weren't budging, Eisner wanted a new plaything, McNall's financial house of cards was teetering and he needed a quick cash infusion. So all of their people called everybody else's people, they did lunch, they ran it up the flagpole, and they reached what we shall call a "mutually beneficial arrangement." McNall agreed to back Eisner's NHL expansion bid in exchange for a large territorial rights fee. The promise of the expansion team contributed to the arena, located next to the 57 Freeway, that looked more like a shopping mall — "North Coast Plaza," we initially called it. Eisner had a kiddie movie franchise to promote, so his very new, very expensive toy would be called "The Mighty Ducks," after the Disney comedy of the same name.

http://www.latimes.com/wireless/avantgo/la-spw-dayinla7jun08,0,6036520.story

For example, the owners of the New York Rangers and New York Islanders were paid US$35-million in 1982 when the Colorado Rockies relocated to New Jersey. In 1993, the Los Angeles Kings were paid US$25-million over 10 years by the Anaheim Ducks.

http://www.canada.com/nationalpost/news/story.html?id=2ee34bd7-d43a-4cf5-bd9c-4aa1ccdbecf7

 

[Wetcoaster]

It's that "infringing on the Toronto market" thing that's going to be a problem, though. Again, the owners are going to protect the idea of territorial rights; if they decide to just let a team plop down in Hamilton without the Leafs being compensated in any way, it sets a precedent for teams to drop into any other market where an existing team is located, with the existing team having no recourse to collect for lost revenues as a result of the move.

The problem MLSE faces under the Competition Act is that the CCB balances competiton with the magnitude of the potential loss to be suffered. Given the size of the Southern Ontario market that could prove problematical for the Leafs claim.