# League revenues increase to about \$2.33B in '06-07

Discussion in 'The Business of Hockey' started by Irish Blues, May 15, 2007.

1. ### Irish BluesStill on hiatus

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So ... I plugged numbers into the formula that calculates what the midpoint will be:

Midpoint = (Preliminary HRR Revenues * Players Share - Preliminary Benefits) / 30 teams

Assuming that revenues last year were \$2.1 billion, the players got 54% and knowing the midpoint for '06-07 was \$36 million, preliminary benefits would have been \$54 million. The 5% adjustment for revenue growth was waived last year.

If revenues hit \$2.2 billion and assuming preliminary benefits grew at 5%, the players would get 55% and the midpoint would be about \$38.4 million - giving us an Upper Limit of \$46.4 million. If revenues hit \$2.25 billion, then the players share would be 55.25% and the midpoint would be about \$39.55 million - giving us an Upper Limit of \$47.55 million. If the 5% adjustment is not waived this year, then the Midpoint would move to about \$41.5 million, and the Upper Limit would stand at about \$49.5 million.

So for everyone that's asking - if both sides don't waive the 5% adjustment factor, we're probably looking at a \$49.5 million cap; if they waive it again this year, we're probably looking at a \$47.5 million cap.

2. ### WetcoasterGuest

What is the date for the official announcement of the salary cap range?

3. ### bleed_oilRegistered User

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Does anyone know how they consistant increase revenues when US tv dollars are almost completely insignificant?
Is it a result of the additional money from Canadian TV (CBC\TSN), or are they simply increasing ticket prices.
If they plan on consistantly increasing total revenue with increases in ticket price they will eventually hit a wall.

4. ### lions67*Guest

this wont last long. next season will see revenues decline. ya just cant keep GIVING AWAY tickets. you guys can sugar coat it all you want, but its truth. no tv deal, no fans, just how does the league expect to keep this up?.

5. ### mooseOAK*Guest

People have been wondering how the NHL can survive without a TV deal and fans for many, many years.

6. ### Jaded-FanRegistered User

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The point was that the league had no where to go but up. \$2.2 bil is peanuts compared to the other major sports. And who is 'giving away' tickets? My season tickets went up a full 50% from last season to this upcomong one. That means from \$2,580 to \$3,870 for two seats. And the demand is such that they are on the verge of cutting off taking orders for full season ticket plans and only offering partial and individual seating in very sucky areas.

Demand for Penguins' season tickets leads to changes
Some fans lose seat, others take upgrade

Tuesday, May 15, 2007

By Shelly Anderson, Pittsburgh Post-Gazette

A silent seat shuffle at Mellon Arena has sparked mixed emotions among the Penguins and their fans.

Many of those with partial-season ticket plans are being asked to move or upgrade, creating some discontent. The Penguins aren't thrilled about upsetting some of their fan base, but they are pleasantly surprised at the reason for the changes.

"Full-season ticket sales are up 60 percent over this past season," Penguins vice president of communications Tom McMillan said. "We haven't seen anything like this since the [Stanley] Cup years. We anticipated a spike. We didn't know it would be anything like this."

http://www.post-gazette.com/pg/07135/786083-61.stm

I certainly wish they were giving away the tickets, but I can report sadly that is not the case.

And even with this growth the NHL has huge room to grow, as I said, compared to the other major sports. There will be years that are steps backward, but I am pretty confident that overall the trend will be steadily up.

7. ### Irish BluesStill on hiatus

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You ... did actually read the article - right? Or are you supposing the league is making up numbers (arguments for which I've shot down numerous times)?

8. ### kdb209Registered User

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You do know that the "National" US Broadcast deals (\$65M from VS and chicken-feed revenue sharing from NBC) are only a small part of the total US TV revenues. The vast majority of US broadcast revenues are from the collective local cable deals on the teams respective RSN's (MSG, Fox Sports Whatever, etc).

9. ### FuguGuest

Not to single you out, but what would 2004 NHL revenues be if adjusted to include all that's included today?

10. ### FuguGuest

Would there be any reason for a Saskin-less NHLPA to waive the 5% adjustment?

11. ### jamiebezRegistered User

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Good point.

Wasn't the purpose of that adjustment just to reduce the player's escrow payments in the first place? If revenues continue to rise, escrow is increasingly toothless, no?

12. ### MAROONSRoadf/k/a Ghost

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Interesting. According to the article,

2003-04: 2.1 billion
2004-05: Lockout
2005-06: 2.1 billion
2006-07: 2.2 billion to 2.25 billion

Questions: a) what was the rate of inflation from 2003 to 2007? I think it was lower, but an annual inflation rate of about 3% could account for much of that growth. b) since those figures are all in USD, how much of the increase is simply due to the fact that the Canadian dollar has appreciated from 71 cents USD in 2003 to 91 cents USD as of today?

In other words, if you adjust for inflation and account for the appreciation of the Canadian dollar, the NHL's revenues may actually be down over the four year periold.

http://epe.lac-bac.gc.ca/100/205/30...-01-21/www.statcan.ca/english/Pgdb/econ07.htm

GHOST

Last edited: May 15, 2007
13. ### Irish BluesStill on hiatus

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http://hfboards.com/showpost.php?p=5668195&postcount=101

http://hfboards.com/showpost.php?p=5675474&postcount=103

The inflation adjustment kicked in automatically until revenues topped \$2.1 billion and protected the players against stagnant revenues post-lockout; after that, it was an optional thing. Obviously revenues didn't decline below pre-lockout levels. Remember - the players are guaranteed about 55% of league revenues once they top \$2.2 billion (the percentage pro-rates from 55% to 56% as revenues go from \$2.2B to \$2.4B). If the cap goes to \$47.5M and there's a 5% inflation bump, then teams have even more money to spend - which very likely means the players will have even more in contracts than the percentage they're guaranteed, and that means even higher escrow payments than if the Upper Limit was set without the inflation adjustment.

If revenues continue to rise, escrow should be as much or lower as long as player salaries increase at a rate equal to or less than revenues. If they increase faster, it probably means higher escrow payments (as it did this year). So the players have an incentive to disregard the adjustment factor again this year - so they can avoid paying higher escrow payments than they would have without the adjustment.

14. ### kdb209Registered User

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No - escrow is not increasingly toothless. The way teams are spending, it is becoming more of an issue, not less.

The salary cap system in the CBA was NOT designed for all teams to spend to the Upper Limit - it was designed for the average team payroll to be at the cap midpoint. If the average team payroll is over the midpoint, the players will give back money through escrow. A modest increase in revenues and a bump in the Players Share may cushion the effects of escrow, but far from eliminate it. A big unexpected jump in revenues (like was seen in year one of the CBA when the league sandbagged thier revenue estimates in setting the \$39M cap) may nullify escrow, but that was a unique situation that is very unlikely to repeat itself. The lo-ball revenue estimate for '05-'06 amounted to an effective 20+% increase from projected revenues to actual '05-'06 HRR.

This was discussed at great length in this thread:

Also, the trend is for more and more teams to spend closer to the cap.

Cut-and-Pasting from that thread:

15. ### Irish BluesStill on hiatus

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What would league revenues have been in '05-06 and '06-07 without the lockout? Probably higher than \$2.1B and \$2.25B respectively. If we assume revenues had only grown at 3% per year (which is probably a low estimate) and ignoring the appreciation of the Canadian dollar, then the revenue numbers after '03-04 would have been:

'04-05: \$2.163B
'05-06: \$2.228B
'06-07: \$2.295B

After including appreciation, each of those numbers are of course higher. At 7.5% growth (probably closer to reality), the league would have been at \$2.6B this year; throw on appreciation of the \$CN, and it's probably worth another \$100M (maybe more).

So ... really we're starting to get an idea of how much the lockout impacted revenues? The answer: revenues currently are probably \$175M to \$450M lower than they would have been, depending on your assumption for revenue growth pre-lockout.

16. ### bleed_oilRegistered User

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LOL do you know what the ratings for local US hockey games are..... can you say single figures?

17. ### ColoradoHockeyFanRegistered User

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Some of our markets do quite well with local TV revenues, thank you.

18. ### Bear of Bad NewsHFBoards Escape Goat

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LOL can you say "don't know what you're talking about"?

Or "overgeneralization"?

LOL LOL.

19. ### mooseOAK*Guest

Because it isn't just ratings. Hockey fans are a more affluent audience than most and the broadcasts attract advertisers who are targeting them.

20. ### ColoradoHockeyFanRegistered User

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As well as the fact that not all US markets are the same when it comes to local TV ratings for hockey.

21. ### Guy LegendRegistered User

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I have a feeling that revenues see a big jump next year with every team unveiling their new jerseys.

22. ### jamiebezRegistered User

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I guess I was careless in my phrasing...

If revenues rise at a faster rate than salaries (extremely unlikely), escrow becomes toothless. But, I see your point, it doesn't seem like that will be the case again.

23. ### Irish BluesStill on hiatus

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And this affects how much revenue the league gets from its TV contracts .... Hint: the reason the national contract with Versus is only \$65M is because the NHL has generally had low national ratings; local markets have pulled in higher numbers, and thus teams can command more money for their TV rights.

Next?

24. ### kdb209Registered User

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And local cable TV revenues are less directly tied to ratings than the national broadcast and cable deals.

The bulk of RSN revenues come not from commercial advertising, but from per subscriber fees from the cable companies. In turn, the RSNs need programming to fill up their schedule so that they can sell themselves / negotiate subscriber fees with the cable cos. The 70-80+ games of an NHL season do that job very nicely.

In addition, most local cable deals are existing medium to long term deals, with already negotiated rights fees.

The poster child for all this is the New York Islander's mother-of-all-cable-deals - \$17M+/yr through 2030 - a (several times renogotiated) extension of the original cable deal that John Pickett signed with Cablevision/Charles Dolan back in the late 70's.

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