Speculation: Ownership/Management negotiates in bad faith?

[Sens]

So lets say the Senators are relocated to Milwaukee, and there is no NHL franchise in Ottawa.

“People of Milwaukee I bring you a nhl franchise... you should feel honoured

Now I need you to sell out the stadium for me if you want this club to do anything above bargain basement

If you don’t, imma just move the team again”

Somehow I don’t think the nhl is going to get behind that

 

[BonkTastic]

So lets say the Senators are relocated to Milwaukee, and there is no NHL franchise in Ottawa.

Why are we discussing hypothetical scenarios that will never happen?

We might as well be talking about strategies to avoid going outside when it's raining out of a fear of getting struck by lightning.

 

[Pierre from Orleans]

Why are people still talking about a few empty seats in that playoff run?

Did any of you watch the playoffs this season? Every playoff series had game in both cities where you could see empty seats. Every damned arena this year. And don't anyone try to tell me every game was a sellout and people magically decided not to show up to a playoff game.

1500 empty seats is significant for a playoff game

 

[Sens]

1500 empty seats is significant for a playoff game

And still 3K more then the Jets average...

 

[Micklebot]

When they stopped papering.

Doesn’t the following scenario sound plausible:

- 2013: EM is ride high from a high Canadian dollar
- dollar drops but at the same time local tv deals kick-in
- Still, EM wants to halve his fake and eat it too
- tells team to stop giving away free tickets because we need to sell more to make up for the lost exchange rate revenue
- fans don’t meet the call
- em gets pissed and thinks the team might be better in another market...where he could sell the extra tickets

Chaos ensues.


The exchange rate was bad luck, but the reaction if the above is true was not great either. You can’t just change pricing and expect demand to follow. The product really hadn’t changed much to support higher prices and/or greater supply.

Again, I agree that this is just one issue among several and not all EM related. I bumped my list of revenue issues above.

Technically, we started cutting off the papering as far back as 2014, at least that's around the first reference I saw, though you could argue it started as far back as 2009 when league changed how they defined "paid attendance" to not include free tickets as incentives given to season ticket holders to renew early though that was less an unwillingness and more a change in accounting.

We also don't know how much other teams paper their arenas. Obviously, some teams really don't need to, but others are absolutely notorious for it.

 

[Micklebot]

1500 empty seats is significant for a playoff game

I agree. But, you look at the other 8 home games and it becomes pretty clear that game was a bit of an outlier. You then have wonder why that game had so much trouble when the others were all above 18k. Truth is any team can set the variables so that they sell out, or so that they come short. They can change pricing, they can reserve too many tickets back for late release (they typically hold a number for friends and family only to release them a day or two before games when they know how many they need) they can choose to paper or not to paper, ect. Teams want to maximize their revenues which is totally fair, but not selling out means they either misread the market, or external factors caused the market not to react in a predictable manner. Either way, it was embarrassing for the team, and probably did more damage than quietly papering the remaining tickets would have.

 

[NorthCoast]

When the previous owner (Bryden) owned the team, and when the current owner bought the franchise, there was less competition for the sports fans discretionary spending budget. There was no CFL franchise in town, and the average ticket price and salary cap was much lower.

In the last few years, as the salary cap has risen, and the Redblacks were an option for sport fans, attendance at the Sens games dropped.

Were these the only reasons NO, don't say that is what I'm saying.

There are a number of reasons, with the location being one of them for many people, but add on the Phoenix pay system, for the regions largest employer (about 40% of the work force either works for the PS or works indirectly for them) and the fact that the Feds can't buy and comp tickets for themselves, their clients of employees.

Yes, poor play/record also discouraged people from attending games.

I think everyone agrees that moving to a central location, like Lebreton Flats, would be the biggest thing that would help the attendance issues. For those who think a new owner will translate into sellouts for 41 games,at the current location and the on going issues that affect attendance (cost/ small market / US vs CDN $ / increasing salary caps ) are delusional.

I agree with everything you said. Only thing I would tweak is just the impact of new ownership. Yes, they will not fix everything. And whatever they do will not be enough for FYOUS without other things out of team control breaking our way. Lets say they can only improve the stuff they can control/influence (marketing, Rev Share in new CBA, Game-Experience) by 10-15%.

Now what if the stuff outside of team control does break our way a bit...bringing us close to middle of the pack, and it's that extra 10-15% uplift in team controlled revenue that puts us over the top.

IMO The 3 primary areas where the team is hurting in order are clearly:

1) Location
2) Debt (see my debt story above)
3) Management

And I agree with you that 2 & 3 don't matter if you don't nail #1. Who knows if new ownership can fix all of them, but I have so little confidence in Melnyk on these three issues at this point that I am willing to roll the dice.

 

[Pierre from Orleans]

And still 3K more then the Jets average...

I would bet they would have filled the barn had they had 3k more seats in the arena.

 

[Pierre from Orleans]

I agree. But, you look at the other 8 home games and it becomes pretty clear that game was a bit of an outlier. You then have wonder why that game had so much trouble when the others were all above 18k. Truth is any team can set the variables so that they sell out, or so that they come short. They can change pricing, they can reserve too many tickets back for late release (they typically hold a number for friends and family only to release them a day or two before games when they know how many they need) they can choose to paper or not to paper, ect. Teams want to maximize their revenues which is totally fair, but not selling out means they either misread the market, or external factors caused the market not to react in a predictable manner. Either way, it was embarrassing for the team, and probably did more damage than quietly papering the remaining tickets would have.

Good post.

For the record I never lambaste this fanbase for being terrible. I actually think the opposite given our unique circumstances. I just found that instance embarrassing

 

[Micklebot]

I agree with everything you said. Only thing I would tweak is just the impact of new ownership. Yes, they will not fix everything. And whatever they do will not be enough for FYOUS without other things out of team control breaking our way. Lets say they can only improve the stuff they can control/influence (marketing, Rev Share in new CBA, Game-Experience) by 10-15%.

Now what if the stuff outside of team control does break our way a bit...bringing us close to middle of the pack, and it's that extra 10-15% uplift in team controlled revenue that puts us over the top.

IMO The 3 primary areas where the team is hurting in order are clearly:

1) Location
2) Debt (see my debt story above)
3) Management

And I agree with you that 2 & 3 don't matter if you don't nail #1. Who knows if new ownership can fix all of them, but I have so little confidence in Melnyk on these three issues at this point that I am willing to roll the dice.

WRT location; initial estimates when the Sens were gunning for Lebreton was an extra 30 non hockey events per year, and the ability to drop an extra 10 mil in player payroll per year as a result of the change. Those may have been optimistic, and for public consumption. They also may have been dependent on some things falling their way (the initial plan was for public dollars to go into Lebreton by way of existing programs like Brownfields.

 

[BondraTime]

I would bet they would have filled the barn had they had 3k more seats in the arena.

They had trouble selling out their 15,500 seat arena some games in the playoffs, not sure they'd fill another 3k seats

 

[Micklebot]

They had trouble selling out their 15,500 seat arena some games in the playoffs, not sure they'd fill another 3k seats

Having trouble but still succeeding is ideal (although ideally you wouldn't let that become public knowledge). Team's goal should be to set pricing at a level where they still have to work to get that sell out, it's how you maximize profit.

I think if they had an extra 3k seats, we'd just see pricing drop. There are definitely enough fans of hockey in both cities to fill a 18k arena every night in the playoffs. The issue is making the value proposition such that they choose to come out to the arena rather than go to the bar or stay home and watch on their big screen.

 

[BondraTime]

Having trouble but still succeeding is ideal (although ideally you wouldn't let that become public knowledge). Team's goal should be to set pricing at a level where they still have to work to get that sell out, it's how you maximize profit.

I think if they had an extra 3k seats, we'd just see pricing drop. There are definitely enough fans of hockey in both cities to fill a 18k arena every night in the playoffs. The issue is making the value proposition such that they choose to come out to the arena rather than go to the bar or stay home and watch on their big screen.

That's true.

I'm an extreme laymen with the business side of the NHL not involving hockey

 

[NorthCoast]

Technically, we started cutting off the papering as far back as 2014, at least that's around the first reference I saw, though you could argue it started as far back as 2009 when league changed how they defined "paid attendance" to not include free tickets as incentives given to season ticket holders to renew early though that was less an unwillingness and more a change in accounting.

We also don't know how much other teams paper their arenas. Obviously, some teams really don't need to, but others are absolutely notorious for it.

Good points. I'll expand a little on this because I keep here attendance debates like @BondraTime post above and it drives me nuts (sorry bondra, no offence you were just the latest to do it) because attendance, and even more so % attendance, figures are pretty much meaningless in comparison to gate revenue figures.

Papering is a very loose term and it should not be taken literally to say free tickets. It's more of a sales strategy approach where you decide the priority is to fill the building rather than maximize gate revenue.

Papering:
With papering you set the ticket prices to sell every ticket. Maybe that means you have to even give some away, or maybe you have sell some at $5 or $10, or include more in packs, or pay for the tickets yourself and give to charities as a donation, etc. etc.

Benefits of Papering:
- Fills arena
- Maximizes concessions
- Creates new fans who could not afford tickets otherwise

Cons:
- Leaves gate revenue money on the table

Gate Rev Maximizing:
With Gate Rev Max strategy you are setting the prices higher to drive more revenue from the fans that do attend the game, even if that means you price so many fans out that the arena never sells out.

Which is better purely in terms of gate revenue:

18500 ticket @ $50 per ticket
16000 tickets @ $60 per ticket

(hint: it's the 16000 option)

This is pretty much what the team tried to shift from the past 4-5 years, until last year when demand in the market simply tanked and now who knows what they are doing.

Benefits of Max Gat Rev:
- Higher gate revenue (Melnyk himself inferred in 2016 or 2017 that even with less they were making more)
- Supports the value of the product more. (You value going to a game more when you spend $60 vs when you get a ticket for $25 including a $10 concession voucher - yes that's a real deal I got during papering years)

Cons:
- Almost impossible to fill the arena on a nightly basis. Just simply too hard to hit the exact pricing where nobody would be willing to pay more for the tickets AND you sell out.
- Diminishes fanbase growth over time since the papering was a way for many young or lower income fans to experience a game.


Attendance: No.
Max Rev / Fan Growth: Yes

This is why I don't put much value in attendance because the team is clearly playing with the pricing strategy to try and maximize revenue, while still having some papering to help bring more fans into games. In other words, when attendance dips is it because fans didn't show up, or is it because the team raised prices intentionally to get less fans but at a higher price. In an extreme version of this they might even decide to take away seats to further limit the supply...oh wait.


Just to be clear. Obviously the last years attendance dip is not because of sens pricing strategy. That's due to foot in mouth strategy and pheonix, and Redblacks, and just go read @Tnuoc Alucard post above.

 

[GrantLemons]

Having trouble but still succeeding is ideal (although ideally you wouldn't let that become public knowledge). Team's goal should be to set pricing at a level where they still have to work to get that sell out, it's how you maximize profit.

I think if they had an extra 3k seats, we'd just see pricing drop. There are definitely enough fans of hockey in both cities to fill a 18k arena every night in the playoffs. The issue is making the value proposition such that they choose to come out to the arena rather than go to the bar or stay home and watch on their big screen.

I'm not sure Eugene would understand those kind of big words tbh

 

[PeterSidorkiewicz]

I would bet they would have filled the barn had they had 3k more seats in the arena.

I am not sure about that and here is my reasoning.

The ownership group put a lot of effort in getting a team there, building the arena, etc. I would be pretty confident in their analysis of building an arena with the right amount of seats to maximize their money, and not over saturate anything.

 

[DaveMatthew]

Yes it's different than owning a McDonalds......... because if there was only one McDonalds in each NHL City, you could choose to locate it anywhere in the City, and downtown is where you would locate it.

Also, if you've traveled, in Canada or other countries, the Menu reflects the market, and it's not the same everywhere.

You didn't understand my example. My point was that the franchise owner of the McDonald's isn't able to unilaterally decide where his location is. McDonald's Corporate Office has control. For example, if I bought the McDonald's on Rideau, I could not close up shop and move it to Toronto because I think I could make more money, without first getting the permission of McDonald's.

If I didn't like the location but McDonald's did? Well, they'd find another franchisee.

And with the menu, again, those are decisions made at the corporate level, not the franchise level. An individual franchise owner can't decide to start selling schnitzel.

The same goes for Melnyk. He has to operate within the bylaws of the NHL, so he cannot move the team to Milwaukee, unless the NHL allows him to do it. And there's nothing that indicates that Bettman and the owners would be willing to pass up future expansion fees to move an existing team into a new market.

 

[DaveMatthew]

So lets say the Senators are relocated to Milwaukee, and there is no NHL franchise in Ottawa.

What would you place the odds at, for Devcore spending $500 million to build an NHL arena, and then and additional $800 million(?) in an expansion fee ............. while knowing Ottawa is a small market to begin with?????

I'd say the odds are in single digits.

That's not how it would work, and you know it.

1. Eugene Melnyk will not be able to move the team and retain ownership (quite frankly, he can't afford to pay the relocation fee or build an arena in a new city)
2. The only way the team would move is if he puts it up for sale, and a local buyer is not interested
3. Devcore has already indicated that they are more than willing to plan for an arena at Lebreton, which leads one to believe that they would be a very interested local buyer

So sure, if Melnyk moves the team to Milwaukee in the middle of the night, they wouldn't build a rink. But there's a 0% chance of that happening.

 

[PeterSidorkiewicz]

So lets say the Senators are relocated to the moon.

Would the NHL subsidize gravity skates?
Would they have the best ice in the league?
Parking and shuttle space could be a legit issue.
Would Elon Musk spend to the cap?

 

[Gil Gunderson]

Lol nope its not devcores

So Melnyk would continue owning CTC (a depreciating asset) with no major tenant, while blocking a major revenue source?

Actually that sounds believable, never mind.

 

[Qward]

Good points. I'll expand a little on this because I keep here attendance debates like @BondraTime post above and it drives me nuts (sorry bondra, no offence you were just the latest to do it) because attendance, and even more so % attendance, figures are pretty much meaningless in comparison to gate revenue figures.

Papering is a very loose term and it should not be taken literally to say free tickets. It's more of a sales strategy approach where you decide the priority is to fill the building rather than maximize gate revenue.

Papering:
With papering you set the ticket prices to sell every ticket. Maybe that means you have to even give some away, or maybe you have sell some at $5 or $10, or include more in packs, or pay for the tickets yourself and give to charities as a donation, etc. etc.

Benefits of Papering:
- Fills arena
- Maximizes concessions
- Creates new fans who could not afford tickets otherwise

Cons:
- Leaves gate revenue money on the table

Gate Rev Maximizing:
With Gate Rev Max strategy you are setting the prices higher to drive more revenue from the fans that do attend the game, even if that means you price so many fans out that the arena never sells out.

Which is better purely in terms of gate revenue:

18500 ticket @ $50 per ticket
16000 tickets @ $60 per ticket

(hint: it's the 16000 option)

This is pretty much what the team tried to shift from the past 4-5 years, until last year when demand in the market simply tanked and now who knows what they are doing.

Benefits of Max Gat Rev:
- Higher gate revenue (Melnyk himself inferred in 2016 or 2017 that even with less they were making more)
- Supports the value of the product more. (You value going to a game more when you spend $60 vs when you get a ticket for $25 including a $10 concession voucher - yes that's a real deal I got during papering years)

Cons:
- Almost impossible to fill the arena on a nightly basis. Just simply too hard to hit the exact pricing where nobody would be willing to pay more for the tickets AND you sell out.
- Diminishes fanbase growth over time since the papering was a way for many young or lower income fans to experience a game.


Attendance: No.
Max Rev / Fan Growth: Yes

This is why I don't put much value in attendance because the team is clearly playing with the pricing strategy to try and maximize revenue, while still having some papering to help bring more fans into games. In other words, when attendance dips is it because fans didn't show up, or is it because the team raised prices intentionally to get less fans but at a higher price. In an extreme version of this they might even decide to take away seats to further limit the supply...oh wait.


Just to be clear. Obviously the last years attendance dip is not because of sens pricing strategy. That's due to foot in mouth strategy and pheonix, and Redblacks, and just go read @Tnuoc Alucard post above.

When tickets were structured silver, gold, platinum (teams like Toronto and the past Stanley Cup Champions were Platinum while silver games were Buffalo and Florida) I would go to a lot of games. So many times I would call up a friend and say "Hey, want to go see the Sens and Islanders tonight? Tickets are cheap." And we would drive the 2 hours and pay $20 for parking."

Then parking went through the roof and they started packaging tickets. Want to go see Edmonton in October? Sure, you just have to buy tickets to the Yotes that will be here on a Wednesday in February. WTF?

Add that to Melnyk and his shenanigans and I stopped going. I go once, maybe twice a year now. I take my son to an afternoon game and I may go up if a friend that I rarely see is there on business.

 

[AchtzehnBaby]

And still 3K more then the Jets average...

To clarify: The MTS Centre constructed at a cost of $133.5 million CAD. It opened on November 16, 2004, replacing the since-demolished Winnipeg Arena. It has a capacity of 15,321 for hockey

I believe it was sold out... and CTC has a ~18,000

Scotiabank Place new home to Ottawa Senators Hockey

 

[stempniaksen]

To clarify: The MTS Centre constructed at a cost of $133.5 million CAD. It opened on November 16, 2004, replacing the since-demolished Winnipeg Arena. It has a capacity of 15,321 for hockey

I believe it was sold out... and CTC has a ~18,000

Scotiabank Place new home to Ottawa Senators Hockey

The Senators should have had the foresight to align the capacity of the arena with the market.

There was no need to add seats (weren't we the 2nd biggest building in the league at one point?) and then tarp over them. They should have just left well enough alone and bumped up the prices slightly to adjust.

I'm sure whenever the team inevitably moves downtown the rink will have a more manageable number of seats, eliminating some of the issues caused by having almost 20k capacity (at it's peak).

 

[AchtzehnBaby]

The corporate base is strong enough, Senators do a horrible job of accessing it building relations into the growing industries in the city. Another reason they aren't doing well.

There's a million reasons NHL hockey should thrive in Ottawa, but you still have to be passionate and diligent and have friends in the community who will support you. Melnyck has the opposite of friends in Ottawa, he's insuled the political circles, the leading business community, the fans, the media and his own staff and players. If there was a group he hasn't insulted yet that he needs to build a blue chip brand, he'll get to it

Good points.

This all leads to the organisation needing a new face to represent the organisation (And hiding the old face)

So easy to see. Hurts to think that they can’t see it.

 

[harrisb]

When your front office consists of the owner (a narcissist) and Dorion who is either A) a yes man or B) incompetent it's quite explainable why they can't see the problem.