NHL teams making money will mean...?

Discussion in 'Fugu's Business of Hockey Forum' started by FanSince2014, Jun 10, 2005.

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  1. FanSince2014

    FanSince2014 What'd He Say?

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    If the CBA is ever finalized, it seems certain that NHL teams will be making money rather than losing it as many of them have over the years.

    I'm thinking that will be very good for the NHL and the state of hockey in general.

    I'm thinking that the NHL teams will put the profit they are making back into the team rather than pay the capital gains taxes on it. Money going to high salaries for the players meant an immediate big income tax hit to the players that the owners can overcome by putting money into the team.

    I'm also thinking that will mean more money spent on promoting the sport, etc.

    These are just a couple not well-thought out thoughts that I had as to why the sport of hockey will be much better off with a CBA which allows the teams to make money rather than losing it to payroll as they have over the years.

    If you have more thoughts on the subject please post them here.
     
  2. Traitor8

    Traitor8 Registered User

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    Doubt it will happen but hopefully lower ticket prices by a bit...
     
  3. MarkZackKarl

    MarkZackKarl Registered User

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    Tsk Tsk, you know t hat ticket prices have no correlation to payrolls right. So instead of the money you generate going to keep players, because of the artificial cap, it will either go to another owner in luxury tax money, or to your own owner who wont use it to reinvest in the team. What a stupid system that is, and one that no logical fan should want.
     
  4. bbad

    bbad Registered User

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    Let's hope it'll go towards building some new arena's as in the long run this will help the teams even further.
     
  5. mackdogs*

    mackdogs* Guest

    Explain then how things improve with no luxury tax.
     
  6. HockeyCritter

    HockeyCritter Registered User

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    Well thank goodness we’re all rather illogical then. :)
     
  7. Pepper

    Pepper Registered User

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    Owners will always maximize the revenues meaning that the ticket prices will always be near the optimal point on the supply-demand curve. The owners might however look in to the future so lower ticket prices now might maximize their revunues in the long term.

    So, low hard cap will most likely mean that ticket prices won't go up in the near future, it could lower the prices in some cases.
     
  8. Levitate

    Levitate Registered User

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    erm, i'd say that would have much more to do with the lockout and probably loss of viewership for next season or so than it would with the CBA. teams might lower ticket prices some in order to get more people to come back to the games if it turns out they're having trouble drawing because of the effects of the lockout. but those prices will go up too whenever they can afford to charge more and still draw a sellout crowd
     
  9. Traitor8

    Traitor8 Registered User

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    owner won't use it to reinvest in the team??!

    More Revenues per team = More NHL revenues = Higher CAP!

    Higher Cap = HIGHER CEILING = but also a HIGHER FLOOR! meaning

    Higher floor = more spending
    Higher ceiling = more spending

    And if you don't like that, i'm sure they will use the money to promote the game and make it more available to a lot of people in the US.

    And if you still don't like it, it's the owner's money..they get to do whatever they want with it.
     
  10. Pepper

    Pepper Registered User

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    Yes but that will happen regardless of the CBA.
     
  11. Spungo*

    Spungo* Guest

    No logical fan would want an equal opportunity to compete evry year. All logical fans want their best players raided year after year.

    Ask any Edmonton fan. Mark Messier, Paul Coffey, Doug Weight, Jason Arnott, Curtis Joseph, and Bill Guerin all say hi.
     
  12. GSC2k2*

    GSC2k2* Guest

    you know, I have heard player unions say that. However, I have never heard anything to back up that rather patently absurd statement.

    Accordingly, here is a little test for you, scaredsensfan. Tell us whether (a) you are simply spouting the nonsense stated by Ted Saskin and other paid sycophants as gospel ("If the PA says it, it must be true.") or (b) you have come to this conclusion on your own, based on unbiased empirical evidence.

    If (a), please keep your nonsense to yourself.

    If (b), please provide said evidence.

    Oh, and as for "tsk, tsk", either way keep your cocky attitude to yourself. This board is populated by tons of people with knowledge, education and experience to back their opinions. You have all but three of those credentials, apparently.
     
  13. Motown Beatdown

    Motown Beatdown Need a slump buster

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    Ticket prices is and always will be a product of supply and demand. If Mike litch can get 300 bucks for tickets he'll charge that much. If people stop paying that much then he'll lower the price to the point where people start buying.

    Lets not forget the whole linkage issue. More revenue means more money for both sides. And where does most of the NHL revenue come from? Thats right ticket prices. Now we'll see a dip in prices in markets that need to woo fans back. But after the owners feel they can increase them again without effecting attendance they'll peak back up.
     
  14. Jester

    Jester Registered User

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    as much as i hate to say it... he's right on this one, read the post above. ticket prices are a product of the supply and demand curve. there is some supply of tickets X, and some demand threshold for those tickets Y (price). where X and Y equal the highest return on the tickets is where the ticket price should theoretically be set... thus, not related to what the team is paying the players in any way.
     
  15. Jester

    Jester Registered User

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    i defended you... on the price correlation... but now i'm going to call you out on not exactly representing the situation.

    they are negotiationg a LINKAGE based cap, with a LINKAGE based floor... basically guaranteeing the players 54% or whatever of the revenue. so think about that for a moment... if revenues rise, then the players will recieve more... if revenues fall, the players will recieve less...

    will the owners make more money if they run a successful business? yes, and why shouldn't they? it's their business, they are in it to make money, they should be allowed to make money off of it... just like the guy with the corner shop.

    not sure why you hating on the owners so much, unless you just hate all business owners?
     
  16. King_Brown

    King_Brown Guest

    Unless the NHL lands a large contract via TV revenues, don't look for lower ticket prices.
     
  17. Jester

    Jester Registered User

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    large tv contract will have ZERO effect on ticket prices... you not willing to pay the price they set will have an effect on ticket prices.
     
  18. GSC2k2*

    GSC2k2* Guest

    Well, actually, he is not. I do not have the time to get into the misapplication of economic theory that is inherent in any discussions of this kind, since I actually have some gainful employment to attend to since lunch is over, but I will promise to respond later tonight.

    Suffice to say that the above is the commonly spouted nonsense of player unions the world over and does not reflect an actual understanding of economics. The economics of sports, where the pricing of commodities occurs once a year and often lags behind a capable assessment of demand, and where such pricing is affected by a number of unpredictable intervening factors such as team performance, is different from buying a loaf of bread at the corner store, or pricing natural resource prices in the stock market, for that matter.

    To be continued later...
     
  19. Pepper

    Pepper Registered User

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    Actually, in general the same supply & demand -theory applies to NHL ticket prices as well. There are lots of special variables involved but the general theorema is the same as in any business. The owners are there to maximize revenues, regardless of their cost structure which is affected by CBA.

    So if demand for tickets goes up, the ticket prices will go up in the long run in a ceteris paribus conditions.

    And I'm strongly in the pro-owner group.
     
  20. Gee Wally

    Gee Wally Grumpy

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    not entirely accurate....the monies received from season ticket holders in advance to general population does provide a gauge to the demand.
    And while it's true that the Max price for tix are set at that time - general public- the tix can and do go down in price throughout the season if demand is low.
    Also if the team performs remarkably well during the season and demand has been high..the Playoff tix skyrocket in price.

    There definately is a supply - demand correlation.
     
  21. Jester

    Jester Registered User

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    maybe the most useless thing i've ever read. obviously it is more complicated than the theoretical application of supply and demand, EVERYTHING is, even the breadshop. it is rare to impossible to achieve a perfect balance in the supply/demand relationship outside of a piece of paper w/ a graph on it.

    1) obviously they set ticket prices at the beginning of the season.

    2) that decision is based on what they feel will maximize their revenue for the upcoming season based on the demand they expect for their tickets.

    - this is why ticket prices go up for new stadiums.
    - this is why ticket prices go up when a team is good and expectations are high.
    - this is why ticket prices tend to remain the same or go down when a team is horrible and no one wants to see them. (& they think they can make more money in total by lowering the ticket price)

    3) supply and demand is the most simple aspect of economics and a purchased item like a ticket is a classic example of it. if ticket price is too high for demand for the ticket, fans won't buy it. if ticket price is too low, then lots of people will buy the ticket... but the team won't make as much as they could if they had a perfectly set price.

    4) read my posts... i'm ridiculously pro-owner.
     
  22. GSC2k2*

    GSC2k2* Guest

    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.
     
  23. MHA

    MHA Registered User

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    that's the brilliant argument that Messenger uses. He convinced me that hockey is only about the superstars and not about the team. Also, only big-market teams should win because they have a bigger market.
     
  24. London Knights

    London Knights Registered User

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    Not that I don't disagree with most of this, but to say that the ownes are in it to make money isn't the whole truth. They are in it to get off on their ego trip. The majority of sports franchise owners are the guys who aren't high profile richies. You don't see Donald Trump or Bill Gates as the owner of a sports franchise. This is a way for them to get their name in the media as much as a way to make extra money.

    If you are using the NHL to make money, you shouldn't be an owner (see Bryden) because for the most part you can't sustain yourself off the income of a franchise and if it is making more than 5-10% of your annual income you have issues (unless you are one of the enigma teams like the Yankees, Leafs, etc).

    As for ticket prices, a lot of teams can't go much lower on ticket prices as is. Others won't want to go lower because they will still get pretty much full buildings after maybe a 5-10 home game backlash from the fans.
    Unless ticket prices are capped (which the owners would refuse to do. Cap their expenditures and they are all for it, but cap their revenue stream and they will refuse) there is little reason for them to drop ticket prices providing the arenas are absolutely vacant when the game comes back, or seasons ticket sales are severly low.
     
  25. PecaFan

    PecaFan Registered User

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    Nicely said. +5 Insightful.
     
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