In 03-04 I counted 13 teams that spent more than 44M so I stand corrected on those, that doesn't change my point at all however.
The main point of the whole new CBA is this:
Old CBA: payrolls from 25M to 80M. Huge disparency in both finances and competiviness. Low payroll teams had low revenues because their teams were not succesfull enough to attract more fans.
The main point to the new CBA was cost certainty.
Furthermore, there were plenty of exceptions to your rule- several low payroll (or lower than Toronto) teams were successful, and there are examples of high payroll teams that while drawing lots of fans, had little on ice success. What you are confusing here with regard to payrolls and success is that under the old CBA teams that were consistently successful on the ice (Cups, winning records) had to spend more than those in the cellars. Obviously, the NY Rangers and to a lesser extent Toronto, are good examples of less on ice success yet little loss of revenues.
If you look at last year’s success stories, they will have to pay more for (a) the same level of talent, or (b) more for even less talent… which seems to be the most likely scenario, old or new CBA.
Let me introduce you to another concept used in economics and market assessment: market potential. It incorporates things like supply and demand, elasticity in demand, and pricing at a level that the market bears… explanations to follow below.
New CBA: Payrolls from 32M to 44M. Small disparency in finances, very small disparency in competiviness. Low payroll teams can be successful to attract more fans to bring more revenues.
I don’t call $16 MM a “small†discrepancy. That would buy me a Luongo and a Chara, or Lecavalier, Richards and Modin or Gomez, Gionta and Brodeur. Sure, it reels in what could’ve been spent under the old CBA by a handful of teams spending >$50 MM, but to say the discrepancy is not significant is erroneous. Furthermore, these players’ prices could not be bid upon until they were 31. It was a classic case of overpaying for depreciating assets.
If Nashville wins the Cup for the next 3 years, their revenues will no doubt increase (I hope) but they will not be anywhere near Toronto’s revenues. That’s where market potential comes into play. The CBA does offer hope to fans of teams everywhere that “on any given Sunday†they get a ride in the pumpkin coach, however at midnight they still won’t wake up in Toronto revenue-wise!
Everything else is a direct/non-direct result of the above.
Average ticket prices will keep rising in the future, NO MATTER WHAT LEAGUE we're talking about. Why? Because of inflation, all prices keep rising in general whether it's the price of movie ticket or a can of beer.
New CBA will allow teams to curb the pressure to increase ticket prices and thus they will become more affordable to fans as the average yearly income per capita keeps rising as well (in microeconomics it's called 'purchasing power').
I understand inflation. However you contradicted yourself without realizing you did so. “All prices keep rising.†Teams just got a 24% price (player cost) decrease with the new CBA. Furthermore the average salary went from $1.8 to $1.2 MM. And finally, the total that was allowed to be spent was capped. So “prices†as you use the term here decreased. Teams did not reduce their ticket prices to a level commensurate with their cost reduction last year—and I don’t blame them. Purchasing power is a measure used in economics to determine cost-of-living relative to time (and thus a measure of inflation) and to other regions. It measures how much you have to spend on a basic basket of goods. In fact, purchasing power in the US has been steadily decreasing for many years now due to inflation (which in turn is driven by the cost of energy, current account balances and trade balances… which also affect exchange rates, etc.). What has also decreased is the level of disposable income Americans have (I’ll assume Canadians have seen some reduction too). Inflation will drive prices up in any economy where energy costs are increasing and other account imbalances exist, even at higher rates than we have seen thus far, further eroding purchasing power.
So, yes each year if one is to adjust for inflation, prices would increase by the rate of inflation (2-4 or 5% range). This does not explain the lack of a price reduction nor the price increases being introduced. Why? It is called pricing at what the market will bear. Pricing at cost plus is an outdated system that has several flaws, the two most notable being (a) you leave money on the table because the market may actually be willing to pay more than what it costs, plus your mark-up, or (b) the market is not willing to pay at a level equal to your break-even point at which point you should know you can’t run a profitable business given the existing costs.
And by the way, US household income is stagnant or declining according to the latest figures, so things are not always in step with inflation either.
Demand, which will set ticket prices, will be driven by the levels of disposable income in a particular market and its willingness/desire to buy that product. When these factors are too apart in markets (teams) competing for the same resources (players), you get what we have in the NHL right now.
The term 'more affordable' does NOT mean the nominal ticket prices dropping, it means ticket prices will not rise as much as they would under the old CBA.
And also you simply have to understand the differences between different NHL markets. Toronto and Nashville simply don't have the same economics when it comes to hockey business. When Bettman talks about 'more affordable', he's talking about league in general, not individual teams which can and which WILL behave totally differently when it comes to ticket pricing.
Again, see pricing at what the market will bear. Ticket prices should always be based on market supply and demand and no CBA can alter the economic reality that Toronto has greater demand for tickets and thus can charge a greater price. There is a theoretical price point where demand drops of significantly even in Toronto, but the truth is that this point is much higher in Toronto than Nashville. What nobody wants to admit is this. Nashville’s market potential is lower and always will be lower. The only thing that can close the gap is revenue redistribution or a large influx of cash from an outside source (e.g., TV contract). The economic reality unfortunately is that Nashville and Toronto do not belong on the same economic playing field. The two options for closing the gap are the only way this ‘reality’ is circumvented.
What the CBA does try to do is to offer cost certainty. Given that each city has a market potential (relatively fixed), a maximum amount of revenue that it can expect to get from ticket sales, sponsorship, media and related deals, teams were spending too much of this on player costs (as a % of all team revenues and costs). As a group, they now can no longer spend more than 54% of league revenues, up to $2.2 billion, on player costs. Market potential and the revenue/cost ratio affect the most important financial principle here - franchise value. The real need for the NHL to act was to stem the erosion seen in franchise values. The very fact that some franchises are worth 2-3 times as much as others is the best indicator that economically speaking, we are talking about apples and oranges.
Ticket prices remain a function of something outside the control of the CBA. The NHL can devise a way to deal with the symptoms that result from the economic disparities amongst its 30 markets, but that does not mean we shouldn’t recognize which economics fundamentals are in the driver’s seat.
Finally which team you happen to be a fan of is no excuse to ignore market realities and fundamentals. Overall I want NHL success. I don't want to see teams fold. Too many of you have allowed these discussions to become about team allegiances and not about honest discourse on what the financial obstacles are that teams are facing in every market. Something that protects teams that have no business being in the NHL is not good for the NHL. Something that does not recognize that the weakest teams relative to the stronger ones need some protection is equally bad if the commitment is to a league that has "X" number of members. Once that number is set, then the entire collective must do what is best for all members.
