Monday, June 18, 2007

The NHL's Quick Fixes Cost It's Fans

So I’ve been doing some research about the NHL’s CBA and how the salary cap is attached to league revenues. From a fan’s perspective, I must say that there is a lot of unreliable information about there about the CBA. And along the same lines, and more interestingly, there is mixed information about what comprises league revenue.

So when I start putting together an Excel sheet of “% increase/decrease in NHL revenues from the previous season,” and I see that the NHL just experienced the highest percentage of growth (approximately 6.7%) since 01/02 (then 11.5%), I can’t help but wonder how the NHL is growing and how it plans to sustain its growth.

And before I go any further, I will fully admit that league revenues have not decreased in the last 12 years with the exception of the 94/95 when a strike made it a bit difficult to bring in funds. I will say, however, that numbers are only half the picture.

Let’s start with the question, what exactly does the NHL consider revenue? According to a “high-up NHL team official” (that is so Eklund) league revenues come from ticket sales, merchandise sales, and sponsorship sales. After doing some more research, I will say that this definition isn’t as inclusive as it should be. But we’ll take it to start out.

Now let’s take a quick glance at ticket sales. According to the Sports Business Journal:

The [06/07] revenue growth is largely attributable to increased ticket prices. Ticket revenue rose 5.7 percent this season largely due to a 5.9 percent increase in ticket prices. Paid attendance rose only 0.2 percent across the league.
So it’s not exactly ticket sales as it is ticket prices. It says it right there folks… ticket prices were up 5.7% while actual ticket sales were only up .2%. Hmm. Makes you wonder who is paying for the increase in the cap and player salaries, doesn’t it? And back to my original question, how long before fans stop paying to see what the Commissioner himself has characterized as a niche/regional sport, especially when average tickets are going up some 6%?

On to merchandise sales – our first quick fix. While Gary Bettman thought it would be a grand idea to implement the first complete team jersey overhaul in major sports history, how many NHL fans are going to feel the same way when asked to pay some $300 for a new streamlined jersey? Streamlined, by the way, means that the beer, dog, and fries guy won’t be looking to good in the newbies. Nonetheless, a quick fix that the fans pay for.

Sponsorship sales? I ask you, who exactly would want to sponsor a sport that has netted Neilson ratings that barely register? I won’t go into ratings as you could search my blog and find some fifty entries on the NHL’s declining ratings.

And what about the other quick fixes?

One that you might have noticed this year (or not have noticed depending on how you want to look at it) is the NHL’s new schedule that was “designed to promote more conference rivalries.” That is depending on who you ask. Those of us the follow the league’s business side all know that the new schedule cuts back big time on travel costs and saves teams money. But in the end, the NHL fans pay the price as they now only get to see their favorite player once every two and three years. Thank you fan friendly “This is OUR game” NHL.

And the rise in the Canadian dollar? Not exactly one Gary Bettman had hidden up his sleeve? But you can't count on the Canadian dollar to increase like it did this past year every year. A tidbit from that article:

While the NHL trumpets attendance increases as the main reason for revenues climbing, Nill feels that's slightly misleading.

"A big reason for the increase in revenues has been the strengthening of the Canadian dollar," Nill said. "That has got a lot to do with this.

"Over the last few years, the revenue of the Canadian teams is up 20 per cent because the Canadian dollar is up. That's a big part of the cap."

The impact of the soaring dollar was seen in last year's financial figures. The six Canadian-based teams produce one-third of the NHL's overall revenues.

Did I miss anything?

The next question is, how will the league sustain the revenue growth? What is the next quick fix?

The league sustained some of it largest years of growth in three consecutive years, from the 98/99 season to the 00/01 season. During those three years, the league also expanded in each year. The three years following saw the league’s revenue cut in half and then start declining as well, of course, followed by a year long lockout and the new CBA.

That being said, the answer is simple – expansion. And with expansion, the fans again pay the price as we get to watch two more teams with diluted talent.

But folks, in case you haven't noticed, this isn’t about the fans… this is a business first. And that is why Gary remains where he is. The quick fixes have worked for years now.

But how long will they work? The league has to lean on its fans to make their business run. And how long before the fans stop paying for that increase in ticket prices to see teams that have diluted talent all while their wearing their new streamlined $300 jerseys?

I’m guessing a few years before Gary has drained the league and its fans… a few years before he has skipped town all the while counting his $2 million bonuses.

You see, quick fixes don’t solve an organization’s problems… they merely postpone them.

No comments: