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

[Ted Hoffman]

http://www.sportsbusinessjournal.co...ticle.main&articleId=55148&requestTimeout=900

Such growth would deliver a $100 million to $150 million increase on last year’s revenue of $2.1 billion, which was equal to pre-lockout levels. It also would push the salary cap from $44 million to between $47 million and $49 million this offseason and entitle players to between 55 and 56 percent of revenue in 2007-08.

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.

Click to read more...

 

[Wetcoaster]

http://www.sportsbusinessjournal.co...ticle.main&articleId=55148&requestTimeout=900
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.

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

 

[bleed_oil]

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.

 

[lions67*]

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?.

 

[mooseOAK*]

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?.

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

 

[Jaded-Fan]

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?.

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.

 

[Ted Hoffman]

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?.

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)?

 

[kdb209]

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.

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).

 

[Fugu]

The point was that the league had no where to go but up. $2.2 bil is peanuts compared to the other major sports.

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

 

[Fugu]

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.

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

 

[jamiebez]

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

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?

 

[MAROONSRoad]

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

 

[Ted Hoffman]

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

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?

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.

 

[kdb209]

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?

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:

http://hfboards.com/showthread.php?t=357959

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

Cut-and-Pasting from that thread:

I think the point that you (and some other posters in this thread) are missing is that even growing revenues (at or in excess of the 5% inflation factor) is not necessarily sufficient to avoid escrow.

The system is not designed for every/most teams to spent to or near the cap - it is designed so that the average team spends to the cap midpoint. If, as we are seeing this season, the vast majority (28 out of 30 teams) have projected final cap numbers over the midpoint (only the Caps and Pens are below the $36M midpoint) and a majority are at or near the cap (19 out of 30 are at $42M+), any realsitic revenue growth will be insufficient to avoid significant escrow.

Given that even in the face of robust revenue growth escrow givebacks will still be expected, it benefits the significant majority of NHLPA members who are under contract (and will see zero benefit in a cap increase) to lower the cap to preserve the value of their existing contracts.

It is very unlikely that you will ever again see a situation like last season w.r.t. the cap and escrow. The league intentionally lo balled the revenue estimates - the hardcoded $39M cap / $21.5M floor specified in the CBA calculate out to a revenue estimate of ~$1.8B. The actual reported HRR for last season was $2.178B - 21% higher than the estimate. Barring an NFL style mega-TV deal, it is VERY unlikely the league will ever see 20+% year-over-year revenue growth.

On top of that, average team payrolls were closer to the midpoint last season than this season - more teams were below the midpoint (7 teams below the $30.25M midpoint) and fewer teams were at or near the cap (only 10 teams were within $2M of the $39M cap).

 

[Ted Hoffman]

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

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.

 

[bleed_oil]

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).

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

 

[ColoradoHockeyFan]

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

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

 

[Bear of Bad News]

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

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

Or "overgeneralization"?

LOL LOL.

 

[mooseOAK*]

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

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

 

[ColoradoHockeyFan]

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

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

 

[Guy Legend]

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?.

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

 

[jamiebez]

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

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.

 

[Ted Hoffman]

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

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?

 

[kdb209]

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?

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.

 

[MAROONSRoad]

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.

That may be true, but in the long term it all comes down to the ratings. If hardly anyone is watching, cable companies won't want to pay a lot for the content nor will advertisers for commercials. Who pays a lot for content that isn't in demand?

GHOST