Revenue disparities are still a major problem

[Ted Hoffman]

The lockout was never going to fix the huge revenue disparities between markets - because to do that, effectively all teams would have to pool all of their revenues. Do you think the Leafs, Red Wings, and Rangers were going to go for that? The only other way team revenues get leveled out is if the NHL suddenly gets a $900 million per year contract which helps significantly fund the amount teams must spend for salary cap purposes. No, I don't see that coming anytime soon either - especially considering the league has never had that kind of a contract get offered to them.

There's no way a team like the Coyotes will ever be able to generate revenues like the Maple Leafs (through MLSE) do. However, there's now a mechanism in place to better smooth out the disparity that exists (revenue sharing) which, coupled with the salary cap system, allows all teams the chance to compete on an even playing field and actually consider the possibility of on-ice success, instead of looking around before the season ever starts and knowing, "Well - we can start planning for next year, we're not making the playoffs this year either."

 

[nyr7andcounting]

Explain why this is, exactly.

As I said in the previous sentence, this is the CBA the owners wanted and said they needed in order to create a system where 30 healthy franchises could survive. If some small markets aren't making enough money and end up not surviving, then they're doing something wrong OR they should have spoken up 2 years ago and demanded more revenue sharing in the new CBA.

 

[Fugu]

The lockout was never going to fix the huge revenue disparities between markets - because to do that, effectively all teams would have to pool all of their revenues. Do you think the Leafs, Red Wings, and Rangers were going to go for that? The only other way team revenues get leveled out is if the NHL suddenly gets a $900 million per year contract which helps significantly fund the amount teams must spend for salary cap purposes. No, I don't see that coming anytime soon either - especially considering the league has never had that kind of a contract get offered to them.

There's no way a team like the Coyotes will ever be able to generate revenues like the Maple Leafs (through MLSE) do. However, there's now a mechanism in place to better smooth out the disparity that exists (revenue sharing) which, coupled with the salary cap system, allows all teams the chance to compete on an even playing field and actually consider the possibility of on-ice success, instead of looking around before the season ever starts and knowing, "Well - we can start planning for next year, we're not making the playoffs this year either."

Ahhhhhh, but look at those incredible growth rates GC has kindly provided us with (again). Surely that indicates that their future is oh so much brighter than you're allowing for here....


That level playing field stuff? Sounds like something the PR department generated.

 

[Fugu]

Historically, the NHL has been a gate driven league. I was a season ticket holder
for the Oilers from their WHA days until I moved out to Ontario in 1989. I paid between $8 and $16 dollars for my tickets (no discount for season ticket holders in those days.) In about 1980 the average NHL salary was about $100K give or take a few bucks. This means a total payroll of under $3 million. Remember also that
in those days players in Canada were paid in Canadian dollars. My tickets would have
been $10 at that time and I would guess that the average price would have been
about $12-14. At about 16000 paid attendence per game this would mean
gate receipts of between 8.5 and 10 million dollars. There were no luxury boxes
or adverstising on the boards to generate extra revenue. At that time I would bet
that very few of the seats were corporate. In Edmonton, the move to install
luxury boxes happened in about 1994. This was becasue it was deemd no longer
possible to pay the bill without corporate dollars. Around that same time the decison
was made to target the lower bowl of the Coliseum to high rollers. It became
impossible for someone with a ticket in the upper bowl to go down to ice level to
before the game to get an autograph etc. Since then the individual ticket holder
seems to have been a much less significant part of the equation in the Edmonton
Oiler business plan. Moreover, even with a sold out building and some of the
highest ticket prices in the league the Oilers gate receipts would barely match
their payroll.

In todays NHL substantial corporate support is necessary for survival. However, because of the huge difference between the levels of such support in various markets the degree to which attendence influences the success of a franchise seems to vary greatly from team to team.

Yes, but.... the league is STILL gate-driven. Even Carpenter is getting gate revenue and receipts mixed up. There are gate receipts (tickets) and there are "in-arena revenues" that seem to be 40-50% of what gate receipts run (Levitt)... Which also means that you have to be IN the arena to spend the money, ergo you contributed to the gate receipt........... And after all that, we summarize by saying it is a GATE DRIVEN industry since clearly a majority of the revenue comes from butts in the seats and in the arena.

 

[Fugu]

NYR, the revenue sharing mechanism is constructed so as to addressed exactly the issue you

That other guy and you are going to ruin my summer. I'm 'this' close to reading that damn document and opening up a spreadsheet........ There's percentage of this and that. There are total dollars, and the pie can only get cup in a certain number of ways.

 

[FlyerFan]

The lockout was never going to fix the huge revenue disparities between markets

You're right, I guess we're going to need a THIRD lockout to blame the NHLPA and player salaries for Gary Bettman & Company's inability to effectively address the huge revenue disparities between markets.

However, there's now a mechanism in place to better smooth out the disparity that exists (revenue sharing) which, coupled with the salary cap system, allows all teams the chance to compete on an even playing field and actually consider the possibility of on-ice success, instead of looking around before the season ever starts and knowing, "Well - we can start planning for next year, we're not making the playoffs this year either."

You're waffling, does this "mechanism" effectively address the huge revenue disparities between markets or not?

 

[Bear of Bad News]

You're right, I guess we're going to need a THIRD lockout to blame the NHLPA and player salaries for Gary Bettman & Company's inability to effectively address the huge revenue disparities between markets.

Third lockout = socialism?

 

[Crazy_Ike]

Clearly the only way this debate will get settled is if someone would call up the League office and talk to one of their highly knowledgable secretaries. If only we knew someone who would be willing to take the plunge...

 

[kdb209]

That other guy and you are going to ruin my summer. I'm 'this' close to reading that damn document and opening up a spreadsheet........ There's percentage of this and that. There are total dollars, and the pie can only get cup in a certain number of ways.

NOOOO - don't do it.

Besides, the league has kept the numbers to plug into that spreadsheet pretty close to their chest.

They haven't officially announced anything as basic as revenue sharing distributions - let alone the details of funding sources, targeted team payroll, or the myriad of different funding phases.

 

[Sens Rule]

Ahhhhhh, but look at those incredible growth rates GC has kindly provided us with (again). Surely that indicates that their future is oh so much brighter than you're allowing for here....


That level playing field stuff? Sounds like something the PR department generated.

He isn't saying the future is bright or bleek. He is saying the NHL wasn't trying to make every team equal in revenue and profitability. What it did do is make every team RELATIVELY equal in the ability to ice a competitive team. You can't have a team like the Yankees or Sox doubling the spending of the other high payroll teams nor the Marlins having a payroll 1/10 or 1/9 of the top payroll.

 

[Fourier]

Yes, but.... the league is STILL gate-driven. Even Carpenter is getting gate revenue and receipts mixed up. There are gate receipts (tickets) and there are "in-arena revenues" that seem to be 40-50% of what gate receipts run (Levitt)... Which also means that you have to be IN the arena to spend the money, ergo you contributed to the gate receipt........... And after all that, we summarize by saying it is a GATE DRIVEN industry since clearly a majority of the revenue comes from butts in the seats and in the arena.

I don't think anything I said contradicts your statement above. In fact, even though
corporate dollars are necessary, in the majority of the franchise these would also
be strongly influenced by the demand for tickets. The level of cache attached to a seat in a luxury box or a premium seat in the arena is directly proportional to how in demand access to the event is. My point was that a healthy attendence rate alone no longer means a franchise will have a healthy balance sheet. Nashville is one example that we may have noticed in the news these days. Increasing attendance to the 14000 level will give the city a legal hold on the franchise, but to their credit
even some of the teams biggest boosters acknowledge that this is just the first
and possibly the easiest step in addressing the franchise's financial woes. Conversely though, it is hard to imagine that in the MAJORITY of NHL cities a franchise could have long-term financial stability without a strong stable fan base that is willing
to fork over a considerable chunk of change to attend the games and buy the beer.

 

[Fourier]

Incidentally, revenue growth (or at least ticket revenue growth) appears to be coming more from the smaller markets than the large markets. Here are the top five in ticket revenue growth last year (figures as of Jan 31):

Carolina 40.3%
Buffalo 22.3%
Edmonton 22.1%
Nashville 19.9%
NY Rangers 18.6%

You are using the wrong numbers to justify your statement above. You need
to look at each teams percentage of the leagues total increase.

 

[mouser]

You're right, I guess we're going to need a THIRD lockout to blame the NHLPA and player salaries for Gary Bettman & Company's inability to effectively address the huge revenue disparities between markets.

Revenue and payroll gaps between top and bottom teams in each league
NHL ~2.1x revenue, ~1.5x payroll (capped for 07-08)
MLB ~2.4x revenue, ~7.9x payroll
NBA ~2.4x revenue, ~2.5x payroll
NFL ~1.9x revenue, ~1.8x payroll

Compared to its brethern, the NHL's situation isn't that bad from a competitive standpoint.

You're waffling, does this "mechanism" effectively address the huge revenue disparities between markets or not?

Yes it does--it handcuffs the large revenue teams from dominating the NHL through sheer payroll size. The lockout was never about distributing the revenue equally through the league.

 

[Fugu]

NOOOO - don't do it.

Besides, the league has kept the numbers to plug into that spreadsheet pretty close to their chest.

They haven't officially announced anything as basic as revenue sharing distributions - let alone the details of funding sources, targeted team payroll, or the myriad of different funding phases.

Ah, but there's scenario playing! I could come up with a matrix of assumptions, assign myriad boundary conditions and plug and chug to my little heart's desire! Or I suppose I could wait for monsoon season?

On second thought, you're probably right..

 

[coolguy21415]

You're right, I guess we're going to need a THIRD lockout to blame the NHLPA and player salaries for Gary Bettman & Company's inability to effectively address the huge revenue disparities between markets.



You're waffling, does this "mechanism" effectively address the huge revenue disparities between markets or not?

Sorry if I misunderstood, but why would it take a third lockout for the owners to agree upon revenue sharing? The NHLPA doesn't care, because the cap pool remains the same with or without it. It wouldn't require a lockout. It would be between the owners, not them and the NHLPA.

 

[Ted Hoffman]

I could come up with a matrix of assumptions, assign myriad boundary conditions and plug and chug to my little heart's desire!

Of course, if you come up with the trivial solution then it won't do any good ... and if you come up with more than one answer and we're talking about an n-space dimension, Doctor No will probably drop in to explain the errors of your ways.

Or I suppose I could wait for monsoon season?

Why ... do you feel the need to rain on someone's parade?

 

[Fugu]

Sorry if I misunderstood, but why would it take a third lockout for the owners to agree upon revenue sharing? The NHLPA doesn't care, because the cap pool remains the same with or without it. It wouldn't require a lockout. It would be between the owners, not them and the NHLPA.

Antitrust. The NHL as a collective has to have NHLPA approval on any limits placed on player salaries. Otherwise it is collusion. Revenue sharing, agreed to solely by owners, could be used as an excuse by teams as to why limits are necessary.

Secondly, the NHL revenue sharing plan moves money from individual teams in addition to funds gained collectively (I'd include escrow funds that revert to NHL teams). There is nothing in the league agreement that gives another team or the league overall a right to claim individual franchise's revenues and earnings. This gets right to the basis of ownership-- you put 100% of the capital, and you retain a right to 100% of the return (or losses) unless you agree to an alternate arrangement. It's rather easy for the NFL teams to "share" revenue when a huge chunk of it comes from a TV contract.

 

[Fugu]

Of course, if you come up with the trivial solution then it won't do any good ... and if you come up with more than one answer and we're talking about an n-space dimension, Doctor No will probably drop in to explain the errors of your ways.


Why ... do you feel the need to rain on someone's parade?

I call it the "ballpark" estimate. With an error of say 10-20%, it would just have to be good enough. If you give the error factor allowed, doesn't that make it acceptable?

(while humming: I'm just a little black raincloud.....)

 

[Bear of Bad News]

Of course, if you come up with the trivial solution then it won't do any good ... and if you come up with more than one answer and we're talking about an n-space dimension, Doctor No will probably drop in to explain the errors of your ways.

As long as the solution is both feasible and optimal, I'm pretty much happy. The problem is that most people tend to forget the first part.

 

[Fugu]

He isn't saying the future is bright or bleek. He is saying the NHL wasn't trying to make every team equal in revenue and profitability. What it did do is make every team RELATIVELY equal in the ability to ice a competitive team. You can't have a team like the Yankees or Sox doubling the spending of the other high payroll teams nor the Marlins having a payroll 1/10 or 1/9 of the top payroll.

Oh, I do know what GC is trying to say! We go back a ways.

Maybe you limit the league size to teams that actually have a chance of being competitive with each other UNTIL you get an outside source of revenue to share? I call this the Cart Before the Horse road to expansion. Oh well, it's done now, but let's not be surprised that revenue disparities remain a huge factor in what the league is trying to do. I can't blame them for trying, but my own opinion is that the fundamental economics at play here are difficult to circumvent. Someone joked about socialism. Well, yes, that is what it would take but that removes all incentive for individuals to continue owning the teams in which they have invested. That's why the franchise values differ by 2-3X from the bottom to the top.

GC is of the opinion Nashville, for example, has a higher growth potential than Detroit, because the latter is maxed out, more or less. I insist that we look at that factor in addition to the theoretical amount possible if both achieve their full potential. There are markets that will never reach Toronto or NY, so in my opinion you have to look at all these factors. I also disagree with GC in that growth for a league has to be somewhat limited to what makes sense.... you can't just keep adding teams forever and expect that they can operate as a "league" where all members compete with each other. There is a limit to what you can still consider a league.

 

[Fugu]

As long as the solution is both feasible and optimal, I'm pretty much happy. The problem is that most people tend to forget the first part.

That's engineer talk. They're the pragmatic (applied) folk, while you get to be more esoteric.

 

[Fugu]

I don't think anything I said contradicts your statement above. In fact, even though
corporate dollars are necessary, in the majority of the franchise these would also
be strongly influenced by the demand for tickets. The level of cache attached to a seat in a luxury box or a premium seat in the arena is directly proportional to how in demand access to the event is. My point was that a healthy attendence rate alone no longer means a franchise will have a healthy balance sheet. Nashville is one example that we may have noticed in the news these days. Increasing attendance to the 14000 level will give the city a legal hold on the franchise, but to their credit
even some of the teams biggest boosters acknowledge that this is just the first
and possibly the easiest step in addressing the franchise's financial woes. Conversely though, it is hard to imagine that in the MAJORITY of NHL cities a franchise could have long-term financial stability without a strong stable fan base that is willing
to fork over a considerable chunk of change to attend the games and buy the beer.

I agree with this, and am certain I insisted in some other thread, a long time ago that general interest and demand precedes the business interest. However, yes the former alone is no longer sufficient to assure financial health given the current NHL economic landscape. In general, very high demand from all segments is the guarantee networks need to agree to broadcast contracts. I think we're both saying that these are dependent variables.

 

[kdb209]

Antitrust. The NHL as a collective has to have NHLPA approval on any limits placed on player salaries. Otherwise it is collusion. Revenue sharing, agreed to solely by owners, could be used as an excuse by teams as to why limits are necessary.

Secondly, the NHL revenue sharing plan moves money from individual teams in addition to funds gained collectively (I'd include escrow funds that revert to NHL teams). There is nothing in the league agreement that gives another team or the league overall a right to claim individual franchise's revenues and earnings. This gets right to the basis of ownership-- you put 100% of the capital, and you retain a right to 100% of the return (or losses) unless you agree to an alternate arrangement. It's rather easy for the NFL teams to "share" revenue when a huge chunk of it comes from a TV contract.

Firstly - Revenue sharing in and of itself is an internal matter of the league and it's teams - it is not a limit placed on player salaries.

In theory a league could agree to additional revenue sharing and, as long as it otherwise abided by the terms of it's CBA and the PA could not argue that it was deflationary on salaries, it would not have to be agreed to by the PA.

In practice, given the current beast of a CBA, some buy in of the NHLPA would be necessary because there would need to be some amendments to define the treatment of any transfered revenues under Articles 49 (Revenue Sharing) and 50 (Salary Cap).

Secondly - There are no mechanisms in the current league rules concerning revenue transfers, but those rules can be changed by a vote of the BOG. If there is no prohibition in the franchise agreement between a team and the league and in that agreement the team agrees to be bound by league rules, then if a majority (or supermajority) agrees to rules that specify the sharing of revenues, a team could be forced to contribute whether it agreed or not.

 

[coolguy21415]

This is kind of an aside, but what would be an interesting amendment to the current revenue sharing procedures could be that any moneys received from revenue sharing must be spent on hockey expenses. So if you received $3 million in revenue sharing, then you must demonstrate that you spend it (over and above your previous expenditures) on additional marketing, player salaries, promotions (bobbleheads for everyone!!!) or building upgrades (maybe that's not a hockey expense).
It would force owners to spend the money to improve their fanbase (or at the very least make them do creative accounting) instead of pocketing that money.

 

[Fugu]

Secondly - There are no mechanisms in the current league rules concerning revenue transfers, but those rules can be changed by a vote of the BOG. If there is no prohibition in the franchise agreement between a team and the league and in that agreement the team agrees to be bound by league rules, then if a majority (or supermajority) agrees to rules that specify the sharing of revenues, a team could be forced to contribute whether it agreed or not.

I would find this quite difficult to believe. The absence of specific clauses alone does not mean property rights can be suspended or subrogated. I guess I'll extend this to say, just because a rule doesn't exist defining certain relationship doesn't mean that things can be made up just because a majority wants to change something. In all matters of law (and I guess I mean the society in which we live) a balance must be found between protecting individual rights and collective rights.