Revenue disparities are still a major problem

[GSC2k2*]

No, that wouldn't surprise me, but I think it would be a fairly representative proportional figure for most teams' total revenues.

Besides, having reasonably high ticket revenue (even if it's less than half.. which would be incredibly high) still makes the NHL a gate-driven league in my mind.

"Incredibly" high based on what? The NFL, a league that is like no other? Do you have NBA and MLB data? That is, of course, putting aside the idea of how something can be "driven" when less than half its revenues come from tickets.

As for your assumption of the numbers being "fairly representative", see my post above.

The NHL is a corporate money driven league - just like every other pro sports league of any substance. People use the old hoary "gate-driven" moniker IMO to suggest that the regular paying fan is driving the bus. Hah! Assuming it ever was true, that has not been the case for many many years.

 

[coolguy21415]

The sentence was meant to imply that 50% revenue from the gate would be incredibly high. It's a very high reliance upon drawing fans.

You're turning what I had intended to be a discussion into an argument, which I have no interest in pursuing. And won't.

 

[Foy]

I was aware that some was already written in. I was just thinking of ways that the league could generate sharing without going at the bottom line of individual clubs.

The playoff revs was off the top of my head. I know there are central revs for VS, and NBC but they are hardly enough to cover league overhead like ref pay and league office salaries. I was fairly surprised by the total number on ref expenses (pay plus travel, etc.).

The only other item I could figure would be for the league to have a league tax on merchandise sales but that would be edging close to the bottom line of individual teams.

Are there central revenue items other than broadcasts?

According to the owner of the Caps, NHL teams do share revenue from merchandise.

Owner's Corner:

Selling merchandise is not the reason why we made the change [in logos] – all 30 teams share revenue from merchandise sales, so there’s no reason for that to be a motivating factor.

 

[likea]

This is just a dumb article as the system in place now is working GREAT!!!

Teams are losing money because one of two reasons, either they are playing in an old building (the Penguins, Devils, and maybe the Isles) or their franchise has not done enough from either the marketing or hockey side to attract the attendence needed (Blackhawks, Caps, Blues, Isles, Preds, Atlanta)

This system is very fair for everyone involved, even the small martket teams. Look at cities like Pittsburgh, Carolinia, Tampa and many other who are going to have a 40 million dollar cap hit because they have been able to keep their young stars and build fans to watch them play and win because they can be surrounding by better than average players.

Hell, Detroit and the Avs had a third line better than most 2nd lines on others teams in some years because they spent double the money others did. Fans lose interest in the game when that happens.

Look at baseballs national ratings, do you think people in Pittsburgh give two ***** about the Yankees (200 million payroll) and the Red Sox (140 million payroll) every single year. But Pittsburgh is one of the best TV markets for the NHL. Do you think Marlin fans like selling off their players every 3 years??? They have been lucky and won a couple championships but that is no way to establish a fan base.

With all that said the owners need to share more revenue and realize do what the NFL does. Worry about the league as a whole, that is how their game grew. If the owners can keep stars and give every team a chance to make the playoffs before the season starts then they will see a big return just like the NFL does.

The system isn't broke between the owners and the players anymore, it is broke between the owners and the owners. That will be the next major battle. Gary Bettman did an amazing job and the lock-out was well worth it for the NHL.

Sorry, but I was 100% behind the NHL and lockout and I didn't mind losing a season because teams now have a chance to compete. Most teams are only 10 million away from the cap instead of the 30-40 million it was before.

Don Waddell should shut up and try and put together a couple good season and some good teams that make the playoffs and raise revenues.

 

[kdb209]

According to the owner of the Caps, NHL teams do share revenue from merchandise.

Owner's Corner:

Selling merchandise is not the reason why we made the change [in logos] – all 30 teams share revenue from merchandise sales, so there’s no reason for that to be a motivating factor.

All licensing fees paid by manufacturers of merchandise are considered Centrally Generated League Revenues - paid through NHL Enterprises L.P. - as are the retail revenues of merchandise sold by the league itself (www.nhlshop.com).

Revenues from merchandise sales (net costs) at arenas or other club affiliated outlets are considered part of that clubs HRR and are not shared.

 

[mouser]

Teams are losing money because one of two reasons, either they are playing in an old building (the Penguins, Devils, and maybe the Isles) or their franchise has not done enough from either the marketing or hockey side to attract the attendence needed (Blackhawks, Caps, Blues, Isles, Preds, Atlanta)

If you believe Forbes then the Blackhawks have been consistently making money year after year and the Caps and Blues were in the black for 05-06.

 

[likea]

If you believe Forbes then the Blackhawks have been consistently making money year after year and the Caps and Blues were in the black for 05-06.

sorry, I don't believe Forbes. Chicago played in front of an average of 12,727 with a payroll of at least 34 million. Unless they have one hell of a Tv deal...oh wait, they don't even televise home game...how can they make money??? they don't get revenue sharing.

 

[GSC2k2*]

sorry, I don't believe Forbes. Chicago played in front of an average of 12,727 with a payroll of at least 34 million. Unless they have one hell of a Tv deal...oh wait, they don't even televise home game...how can they make money??? they don't get revenue sharing.

Several reasons:

1. Because their boxes are sold out (more due to the Bulls than the Hawks, but sold out none the less).

2. Because Chicago'a arena is home to the Bulls and a host of bigtime events, their concessions deals are probably among the league's most lucrative.

3. For the same reasons as #1 and 2 above, their signage deals and arena sponsorships are also very likely among the league's most lucrative.

 

[likea]

Several reasons:

1. Because their boxes are sold out (more due to the Bulls than the Hawks, but sold out none the less).

2. Because Chicago'a arena is home to the Bulls and a host of bigtime events, their concessions deals are probably among the league's most lucrative.

3. For the same reasons as #1 and 2 above, their signage deals and arena sponsorships are also very likely among the league's most lucrative.

but they split all that revenue right??? my guess is the split it at least 50/50 with the Bulls.

not buying it.

 

[GSC2k2*]

but they split all that revenue right??? my guess is the split it at least 50/50 with the Bulls.

not buying it.

Even split with the Bulls (the CBA prescribes a split), those revenues are huge, I would believe, and they account for over half of an average NHL team. In the Hawks' case, you can bet that it would be well over half. They would almost surely dwarf revenues from a lot of other teams who would be well ahead of them in gate revenue. If somone told me that Chicago is in the upper quartile of NHL teams in non-gate revenue, it would not surprise me at all. They are a lot better off financially than people would probably assume. Part of the problem is this fixation on the NHL being a supposedly "gate-driven" league; people assume that if a team is doing poorly at the gate, they are doing poorly. Far, far from it.

 

[mouser]

but they split all that revenue right??? my guess is the split it at least 50/50 with the Bulls.

not buying it.

Returning again to Forbes, for the 05-06 NBA season they rank the Bulls #1 in league operating income and #3 in overall revenue behind only the Knicks and Lakers.

There's quite a bit of $ to go around there.

 

[likea]

Even split with the Bulls (the CBA prescribes a split), those revenues are huge, I would believe, and they account for over half of an average NHL team. In the Hawks' case, you can bet that it would be well over half. They would almost surely dwarf revenues from a lot of other teams who would be well ahead of them in gate revenue. If somone told me that Chicago is in the upper quartile of NHL teams in non-gate revenue, it would not surprise me at all. They are a lot better off financially than people would probably assume. Part of the problem is this fixation on the NHL being a supposedly "gate-driven" league; people assume that if a team is doing poorly at the gate, they are doing poorly. Far, far from it.

but again my guess is they make 100% of what the sell at hime games and parking and such. thats alot of missing revenue. 12,000 is nothing. I realize they might make a good chunk of money on luxury suites and food and other event kind of stuff but that is still split between 2 teams plus don't the minor league team play there also?? I'm sure they keep alot of their own revenue.

they ran that club into the ground, I hope they are not making money.

 

[likea]

Returning again to Forbes, for the 05-06 NBA season they rank the Bulls #1 in league operating income and #3 in overall revenue behind only the Knicks and Lakers.

There's quite a bit of $ to go around there.

and the Bulls almost double the Hawks attendence numbers per game plus playoff revenue

22,160 vs. 12, 727

908,600 vs. 521,809


almost 400,000 more tickets at 50$ is an extra 20,000,000

add parking and a hotdog and cokefor just half....15$ is another 6,000,000.

and 15$ for parking plus concessions is on the very safe side.

I also have no idea what NBA tickets cost.

 

[GSC2k2*]

and the Bulls almost double the Hawks attendence numbers per game plus playoff revenue

22,160 vs. 12, 727

908,600 vs. 521,809


almost 400,000 more tickets at 50$ is an extra 20,000,000

add parking and a hotdog and cokefor just half....15$ is another 6,000,000.

and 15$ for parking plus concessions is on the very safe side.

I also have no idea what NBA tickets cost.

Attendance matters little in this context.

Although I do not blame you, you probably do not know how the great majority of concessions contracts work. They are pretty well standard leases with two rent components - a fixed portion which forms the vast majority of the rent, and a much smaller portion based on percentages of sales.

The common misperception is that teams are out there selling hot dogs and cokes; they almost never do. They license these concessions to concessionaires, who pay rent.

As a major building with a goldplated tenant in the Bulls, a less successful one in the Hawks, and a series of concert attractions by virtue of being in Chicago, Chicago has an excellent arena which draws big rent from concessionaires. Those concessionaires base their offerings of rent on what they can sell year round, not just at Hawks games.

Accordingly, what a coke and a hotdog costs is relatively irrelevant. The Hawks' concessions revenue is really based on being part of an entire package that includes the Bulls and a host of attractive events.

These concession rents get divvied up in accordance with the CBA. The Hawks get their share.

The same story applies for the boxes. THeir demand and the prices paid for them may very well be due to the presence of the Bulls, but the Hawks get the financial credit.

As for parking, I don't know about Chicago but most arenas have a relatively limited number of spots, and they get filled up unless attendance is really low.

Certainly a team with lower attendance will make less at its team operated concessions (like a team merch store, or programs and the like), but that is about it.

 

[GSC2k2*]

but again my guess is they make 100% of what the sell at hime games and parking and such. thats alot of missing revenue. 12,000 is nothing. I realize they might make a good chunk of money on luxury suites and food and other event kind of stuff but that is still split between 2 teams plus don't the minor league team play there also?? I'm sure they keep alot of their own revenue.

they ran that club into the ground, I hope they are not making money.

You think so? I am pretty sure they do not.

Does Wirtz own them?

 

[likea]

Attendance matters little in this context.

Although I do not blame you, you probably do not know how the great majority of concessions contracts work. They are pretty well standard leases with two rent components - a fixed portion which forms the vast majority of the rent, and a much smaller portion based on percentages of sales.

The common misperception is that teams are out there selling hot dogs and cokes; they almost never do. They license these concessions to concessionaires, who pay rent.

As a major building with a goldplated tenant in the Bulls, a less successful one in the Hawks, and a series of concert attractions by virtue of being in Chicago, Chicago has an excellent arena which draws big rent from concessionaires. Those concessionaires base their offerings of rent on what they can sell year round, not just at Hawks games.

Accordingly, what a coke and a hotdog costs is relatively irrelevant. The Hawks' concessions revenue is really based on being part of an entire package that includes the Bulls and a host of attractive events.

These concession rents get divvied up in accordance with the CBA. The Hawks get their share.

The same story applies for the boxes. THeir demand and the prices paid for them may very well be due to the presence of the Bulls, but the Hawks get the financial credit.

As for parking, I don't know about Chicago but most arenas have a relatively limited number of spots, and they get filled up unless attendance is really low.

Certainly a team with lower attendance will make less at its team operated concessions (like a team merch store, or programs and the like), but that is about it.

actually I am pretty sure you are wrong in this.

I had a presentation by ARAMARK in one of my classes by one of their regional managers and he was asked why hotdogs at games are so expensive. He blamed the marks up in price on the team and he used the hotdog as an example. I'm sorry but they may get a certian amount of money up front but he said the team gets a large percentage of every hotdog sold, every coke sold...ect..ect...

this is first hand knowledge from his mouth. Why do you think they refuse to sell at a discount or even give anything away that they are throwing out. It is all counted and the team gets its percentage. That is how that works. I am 200% certain on that, i heard it with my own ears.

 

[mouser]

Did the manager differentiate between fixed concession fees vs. variable fees? Was this an ARAMARK facilities operation contract or a full concession contract? What were the specific numbers he talked about?


Forbes operating income $'s for NBA teams in 05-06:
1. Chicago, $48.5mil
2. Phoenix, $34.5mil
3. LA Lakers, $33.3mil
4. Cleveland, $23.9mil
5. Detroit, $21.8mil
...
29. Dallas, -$24.4mil
30. NY Knicks, -$39.0mil

The 'House that Jordan Built' is one of the most profitable venues in the world. The Forbes #'s for 05-06 break down as:

Blackhawks: $67mil revenue, $3.1mil operating income.
Bulls: $149mil revenue, $48.5mil operating income.

The 03-04 numbers for the Blackhawks were 31% gate revenue and 69% other revenue ($22mil/$49mil).


I completely understand distrusting Forbes, or anyone who wants to authoritatively tell you something (myself included). At the same time, Forbes has a professional reputation to uphold that requires a high level of impartiality. I'm not even aware that Wirtz has repudiated Forbes' numbers in a significant way?

 

[likea]

Did the manager differentiate between fixed concession fees vs. variable fees? Was this an ARAMARK facilities operation contract or a full concession contract? What were the specific numbers he talked about?


I completely understand distrusting Forbes, or anyone who wants to authoritatively tell you something (myself included). At the same time, Forbes has a professional reputation to uphold that requires a high level of impartiality. I'm not even aware that Wirtz has repudiated Forbes' numbers in a significant way?

This was 4-5 years ago when I was getting my masters degree in sport management. I would have to go back and look at the notes to give you specifics but I remember this question above all else. Aramark only had the concessions contract (we were discussing Mellon Arena and PNC and Heinz Field) and he said they give the team the price that they charge and the teams decide the price above that and they get that portion of the price.

so lets say Aramark would charge 1$ for a hotdog and the Steelers want to make a 1.50 per dog. then the dog is 2.50.

In regards to forbes, every owner I have ever heard asked about the Forbes numbers has laughed their ***** off at them.

 

[GSC2k2*]

actually I am pretty sure you are wrong in this.

I had a presentation by ARAMARK in one of my classes by one of their regional managers and he was asked why hotdogs at games are so expensive. He blamed the marks up in price on the team and he used the hotdog as an example. I'm sorry but they may get a certian amount of money up front but he said the team gets a large percentage of every hotdog sold, every coke sold...ect..ect...

this is first hand knowledge from his mouth. Why do you think they refuse to sell at a discount or even give anything away that they are throwing out. It is all counted and the team gets its percentage. That is how that works. I am 200% certain on that, i heard it with my own ears.

I am sorry, but did anything you say contradict what I said?

As I indicated, a component of any concessions contract is the variable rent component based on sales. As to what percentage that is, I am sure that an ARAMARK rep would tell you it is huge. What is he supposed to say - that it is a result of ARAMARK gouging you? I am sure that, in ARAMARK's view, any percentage of rent based on sales is too much. "Large percentage" is in the eye of the beholder, as I am sure you can appreciate. Either way, it is dwarfed by the millions of dollars in base rent that is charged.

Incidentally, I am not working from information that I was told in a class. I am working from seeing actual leases of this type. Take that for what it is worth.

 

[Fourier]

...
The NHL is a corporate money driven league - just like every other pro sports league of any substance. People use the old hoary "gate-driven" moniker IMO to suggest that the regular paying fan is driving the bus. Hah! Assuming it ever was true, that has not been the case for many many years.

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.

 

[GKJ]

As I've been saying for a while, this league will not have 30 healthy franchises until the vast revenue disparities between big and small markets is addressed. Don Waddell mentioned that in an interview last week, now it seems more a catching on:

http://www.globesports.com/servlet/story/RTGAM.20070711.wsptmilner11/GSStory/GlobeSportsHockey/home

It was addressed.


It is called the 2004-05 lockout.


The NHL should no longer have the patience, nor do they feel like they have the time for smaller markets to catch up. As we saw with the Oilers in the 2 years since the lockout ended, starting with the Pronger contract and then the Vanek offer sheet, they weren't as poor as they said they were.


It's sink or swim for smaller markets now, if they can't keep up they need to get out. Dallas and Tampa are proving that southern and southeast markets can work. It was about managing your franchise before the lockout even though no one wanted to admit it. Lo and behold it's still the #1 issue after the lockout too.

 

[NYR469]

the disparities in revenue combined with no significant revenue sharing is the biggest problem/potential problem with the current system. and will potentially be a huge problem for some teams if the cap keeps going up. the league reports everything in terms of league-wide revenue which can be very misleading. they say $50.3 mil/team is 55% of league-wide revenue but it is NOT 55% of revenue for each individual team. that is gonna account for a far bigger % for a team like carolina then a team like toronto. of course a team like carolina doesn't have to spend to the max so they can still come in closer to 55% of their own revenue...

before the lockout there were teams spending $15-17 mil, now the MINIMUM payroll is $34 mil (and could keep going up). so those teams are spending DOUBLE on salaries, are you telling me that the revenue for those teams has doubled too?? cause if it hasn't doubled then i'd suspect that those teams are worse off...and probably the biggest problem is that the only way teams have figured out how to raise revenue is to raise ticket prices (remember the bs promise from bettman for 'affordable ticket prices?) only problem is there is a limit to how much you can raise prices before people stop coming.

obviously there are lots of factors that can be addressed such as new arenas that will help solve lots of problems and i'm in no way trying to say that teams are about to go under. and i'll also say that its currently MUCH better then it was before, but it also clearly isn't a 'perfect' situation where everyone is guaranteed to make $$. there are still things that need improving to truly level the playing field, but i'm not sure what can be done unless league revenue sharing increases

 

[nyr7andcounting]

I always felt like revenue sharing was one of the most important things the NHL needed to implement during the lockout and it's unfortunate they didn't do it to the extent they should have. The NHL wanted to put all 30 franchises on even ground, well the easiest way to do that is to increase revenue sharing. Instead, during the lockout owners were more interested in what they could get from the players than what they could get from each other.

But really I'm kind of glad there isn't as much revenue sharing as needed. In the end this is the CBA the owners wanted and said could work. Any small market teams who can't make it work have nothing to do but look in the mirror.

 

[Sotnos]

Any small market teams who can't make it work have nothing to do but look in the mirror.

Explain why this is, exactly.

 

[GSC2k2*]

the disparities in revenue combined with no significant revenue sharing is the biggest problem/potential problem with the current system. and will potentially be a huge problem for some teams if the cap keeps going up. the league reports everything in terms of league-wide revenue which can be very misleading. they say $50.3 mil/team is 55% of league-wide revenue but it is NOT 55% of revenue for each individual team. that is gonna account for a far bigger % for a team like carolina then a team like toronto. of course a team like carolina doesn't have to spend to the max so they can still come in closer to 55% of their own revenue...

before the lockout there were teams spending $15-17 mil, now the MINIMUM payroll is $34 mil (and could keep going up). so those teams are spending DOUBLE on salaries, are you telling me that the revenue for those teams has doubled too?? cause if it hasn't doubled then i'd suspect that those teams are worse off...and probably the biggest problem is that the only way teams have figured out how to raise revenue is to raise ticket prices (remember the bs promise from bettman for 'affordable ticket prices?) only problem is there is a limit to how much you can raise prices before people stop coming.

NYR, the revenue sharing mechanism is constructed so as to addressed exactly the issue you point out. While there is a specified minimum revenue sharing amount (4.5% of HRR), it is subject to the requirement that it not be less than such as is required to get teams up to - at the very least - an amount $4 million above the minimum, and (if the revenue sharing collected is sufficient - up to the midpoint (a "Targeted Team Player Payroll"). The NHL chooses whatever number it deems appropriate between those two numbers, provided that if there is sufficient revenue sharing (ie the amount required is at least the 4.5% minimum), the Targeted Team Player Payroll must be the midpoint. If, say, Team A has $50 million in revenues, they are deemed to have available payroll of their own revenue times whatever the particular percentage is representing the players' share for that League Year (probably around 55% and change this year). According, that team will have $27.5 million in available compensation. This upcoming season, the Targeted Team Player Payroll will be not less than $38.3 million. Team A then would get $10.8 million in revenue sharing at the least. That is, assuming they are a team that qualifies for revenue sharing (ie, NYI and CHI do not).

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%