NHL teams making money will mean...?

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jratelle19

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Jul 3, 2004
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We don't know if this CBA will guarantee profits for owners, we only know that it will guarantee salary costs. How they choose to run and market their team will be the ultimate factor in whether they finish in the red or in the black. That said, since we all know that the ticket price thing wouldn't even be considered by most owners, especially those who are selling out their arenas, here's what I would like to see, mostly in "non-traditional" hockey markets, IF they turn a decent profit:

Take a decent portion of these revenues and invest it into youth hockey programs in the area your team represents. I know that a lot of NHL teams do stuff like that already, but it is not enough. What teams like Nashville, Carolina, Florida, Phoenix, etc should do is invest heavily into it in order to build up future generations of diehard hockey fans who, and get this, KNOW AND LOVE THE GAME!!! Have players from the team make appearances at practices and host mini-clinics for these kids. Have the team hold fundraisers with major companies in the area to help subsidize these programs. Try to get city and perhaps state government involved as well. All of us who have played know the cost of equipment and rink fees. I was always against the idea of expanding or relocating into these markets, but what's done is done. They may as well make the best of it, and IF this CBA can help teams in these markets turn some decent profits down the road, I feel that a large investment into youth hockey programs would be a prudent choice that could pay off for years to come.
 
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Pepper

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Aug 30, 2004
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gscarpenter2002 said:
To summarize:

(a) strong markets can charge their markets whatever they feel like, so long as they are not perceived to be pigs about it, and the decision is driven by their need to maintain a profit margin after escalating costs. In that equation, player costs drives ticket prices.

(b) weak markets can also charge their dedicated fans and corporate customers what they liek, so long as they maintain their cachet as a desired luxury commodity in their marketplace. To do so, they must achieve a certain quality of player and team, which correlates to salaris, which is what drives ticket prices.

Sorry for the lengthy response. I just get a little tired of all the hoary old pat answers that people put out there when they don't actually want to think about stuff.

I have a master's degree in international business/marketing and I see your point, you are probably right in regards to the price elasticity but in general the supply & demand -theorema works pretty well even with NHL business. Even at strong markets there's a point at which point people stop buying tickets if the prices go higher & higher. Player costs do not directly affect ticket prices because owners will maximize their revenues regardless of the costs, raising ticket prices will not necessarily bring you more revenues if you have reached the point where demand (=attendance) drops faster than the price hike per paid ticket brings more money.

I don't think your b) is true in any NHL city at the moment, NHL is not considered a luxury item in any current NHL city and increase in prices doesn't make it any more attractive, quite the contrary.
 

codswallop

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Aug 20, 2002
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gscarpenter2002 said:
I realize you are pro-owner, Jester, which is why I am trying not to debate you but scaredsens instead.

What I find bothersome is when people throw out these platitudes of supply and demand as if they are "received wisdom" that has been passed down justbecause they have heard them debated by either no-brain sportscasters and hockey writers or guys like Saskin (or Fehr in MLB) and think "oh yeah, i remember something about that, yeah that's probably right."

At the risk of turning this thread into one that should be in a board about economics populated by propellorheads with slide rules in their shirt pockets ...

Anyone who knows anything about economics knows at least two things: (a) price elasticity (which is actually what we are talking about in economic terms) varies greatly depending on the commodity; and (b) as a result of that difference in elasticity, price increases will have a dramatically different impact on demand. Contrary to your statement that "Supply and demand is the most simple part of economics", that is pretty far from the truth. It IS arguably one of the most important parts, but it is not simple. You may be surprised to know, but there are actually classes of goods where demand actually goes UP as prices increase.

Of course, in the case of NHL ticket prices, it is complicated by the extreme variances across marketplaces, and the segmentation of the market into corporate ticket purchases and consumer ticket prices. Arguably price elasticity varies between each of those segments. In the corporate sector, for example, it is arguable that price has no relation to demand. If the ticket is perceived as a desired commodity for its purposes (ie sales), price will not enter into it. In fact, it may arguably constitute a "Veblen" form of goods, which is a class of goods for which demand would decrease if it were priced lower (as is the case for many luxury goods). For the consumer ticket market, while price will play a factor, there is a segment of THAT market - the diehard fan - for which money is not that much of an object, outside of extreme pricing scenarios.

The fact is that there are several teams, suich as Toronto and Montreal and others, where supply and demand has no impact on ticket pricing. The only thing that affects ticket pricing in those markets is the desire to avoid fan revolts if they jacked prices up to the point where actual supply/demand forces kicked in (since we are dealing with actual people with emotions invested) and the needs of the team to cover player and other costs.

In other less successful markets, the issue of pricing is still not based on supply and demand, at least in the simplistic manner it is addressed by scaredsensfan. Even in the worst markets, there remains the dedicated fan (you actually only need 15,000 or so) and the corporate customer looking for something with cachet. What keeps them that way is the quality of the team and its constituent players, which we can all agree is related largely to salary.

To summarize:

(a) strong markets can charge their markets whatever they feel like, so long as they are not perceived to be pigs about it, and the decision is driven by their need to maintain a profit margin after escalating costs. In that equation, player costs drives ticket prices.

(b) weak markets can also charge their dedicated fans and corporate customers what they liek, so long as they maintain their cachet as a desired luxury commodity in their marketplace. To do so, they must achieve a certain quality of player and team, which correlates to salaris, which is what drives ticket prices.

Sorry for the lengthy response. I just get a little tired of all the hoary old pat answers that people put out there when they don't actually want to think about stuff.

I don't think you have to worry much that this will turn into a discussion amongst eggheads about economics and economic theory. I've tried it before, and you have already got more responses to your economics-laden post than I did from a couple dozen attempts at it.

I do like the fact that most around here do understand the basic dynamic of supply and demand. But you're right about it being more complicated that two lines intersecting on a graph. Especially when those lines are actually curves, and there are a host of factors that give shape to and influence said curves. But it is incredibly boring to learn such things, in school or in the real world (trust me, I know of where I speak).

Compliments, supplements, superior goods, inferior goods, price elasticity in a micro environment, price elasticity in a macro environment, etc, etc, etc (and continuing to a point of tedium where you require several adult beverages or a very hard boot to the head). It is a simple concept, but the actual applications are far from that. You're a better man that I for trying to explain this, more power to you if it works.
 

Pepper

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Aug 30, 2004
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Easiest way to illustrate the point of price elasticity (not the factors behind it mind you) is the formula for it which is % change in quantity demanded / % change in price. As soon as that ratio goes over 1, the ticket prices will stop increasing.

That's the oversimplified way of explaining it to those who haven't had to go through dozens of lectures about microeconomics...
 

thinkwild

Veni Vidi Toga
Jul 29, 2003
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Once you get sellouts, getting a ticket becomes a scarce commodity and thus much more valuable for corporations which is really the gold mine for owners. Once there is a sellout, now ticket prices can be jacked,even moreso in the playoffs. To get these sellouts, unless you are Toronto, you will have to put a together a winning team.

A team that is selling out every game, is probably pricing too low. The goal for the owners would be to always be 1 ticket short of a sellout. Then they will know they are priced right. Once they are always selling out, scalpers start making their money.
 

NHLFanSince2020

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Feb 22, 2003
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Long term, what are the prospects for hockey with teams making money?

Will it help player development?

Will teams contribute towards youth hockey making it possible for more kids to be able to play hockey?

How will it affect the minor league system?
 

John Flyers Fan

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DownFromNJ said:
Profits = reinvestment back into the sport.


aka Marketing, lower prices, etc


...and what the hell would make you believe that the profits will be put back into their sport instead of stuck in thw owners pockets??

Yes some owners will reinvest ... but quite a few will pocket the cash.
 

NHLFanSince2020

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John Flyers Fan said:
...and what the hell would make you believe that the profits will be put back into their sport instead of stuck in thw owners pockets??

Yes some owners will reinvest ... but quite a few will pocket the cash.
Considering capital gains taxes that doesn't make very good business sense, and considering that probably all the owners are good businessmen which allowed them to become NHL team owners to begin with, I don't think that is going to be the case. I'm thinking they will use the profit to further grow the sport and their business, not just pocket the cash.

I am also wondering if what the teams will do with profits is being discussed in CBA discussions.
 

Mess

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Feb 27, 2002
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getnziggywidit said:
Long term, what are the prospects for hockey with teams making money?

Will it help player development?

Will teams contribute towards youth hockey making it possible for more kids to be able to play hockey?

How will it affect the minor league system?
24 of the 30 NHL teams reside in the USA ..

Yet the USA as a whole produces the less talent in quantity for the NHL to fill those 30 teams, relying on Canada and Europe to supply the majority of the players ..

Meaning most players will be foreigners that play in the NHL in the USA .. That is contributing to the lack of TV deals, and the game falling off in popularity..

Not sure if its the teams responsibility, as you mentioned " youth hockey" above but it certainly is a league issue IMO ..

If you are going to grow the game then where the game resides should be the leader in supplying players, otherwise getting diehard fans in some markets will be forever impossible if they never really had exposure to the game as they are growing up.

If the conclusion is that Hockey is really not a popular sport in the USA, because of climate or lack of facilities for young players or even cost prohibitive to get into the game as youngsters then you have to look at the NHL as a whole and see if the plan is really going to work LONG-TERM...

The NHL at the same time it did the Levitt report should also have done a market study on Hockey in the USA, measuring growth potential, popularity, availability and other factors.. As well as attempting to change the game to make it more exciting , they should have invested time and money into getting it played by more youngsters, and development as a whole ..
 
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