Bettman: "Salary Cap will NOT go down next year"; and GMHockey investigates NHL attendance

Oops, forgot that link I promised:

http://sports.espn.go.com/nhl/attendance?year=2010

wprager wrote:Oops, forgot that link I promised:

http://sports.espn.go.com/nhl/attendance?year=2010

Thanks for your thoughtful reply.

As you say, the numbers you cite are hardly conclusive.

FYI, the Blackhawks did sell out both their home opener and the current home game. ESPN's numbers might be skewed because of the 'home game' in Finland which had a much smaller capacity. Additionally, the renovations to the United Center have reduced seating capacity while increasing concession revenues.

Bear in mind, ticket sales, concession sales, merchandise and licensing agreements all factor into the equation...as well as revenue to the teams from other events in their buildings, as many of the teams are part of a larger entertainment and facilities corporation and/or holding company.

I look forward to your further thoughts on the aformentioned questions.

What questions?

It's been drilled into me that this is a gate-drive league. So far the average attendance is down. I'll keep monitoring as the season progresses.

wprager wrote:What questions?

It's been drilled into me that this is a gate-drive league. So far the average attendance is down. I'll keep monitoring as the season progresses.

As posted above:

These are the questions that one needs to consider when discussing this very complex subject:

Have the revenues from NHL ticket sales and merchandise declined, flatlined or risen over last year?

Are there indicators that these revenues will decline, flatline or rise in the next 10-12 months (the decision on salary cap being, logically, be made as a result of financial analysis and forecasting by the league's accountants)?

Does the lowering of the salary cap benefit the players and the NHLPA? Would they fight a further lowering of the cap, given the impact on players who lost both jobs and revenue as a result in the past few months?

Do the owners, having 'cleaned house' as it were by the attrition of a significant number of mid-range salaries, now consider that further attrition is unnecessary?

Who are the influential voices on the Board of Governors, who ultimately decide--NOT Gary Bettman--whether the cap will stay the same, go down or even rise?

With 21 of the 30 teams currently over the $54MM level, why would any of this majority lobby for a lowering of the cap, which only makes it more difficult to retain their talent and/or acquire new talent in order to field the most competitive possible product?

And when influential owners like Ed Snider, Jeremy Jacobs, Ted Leonsis, Rocky Wirtz, Mario Lemieux, Francesco Aquilini, and Mike Illitch, to name a few, are all spending close to the cap in order to maintain their box office success, why would they support a lowering of the cap?

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By the way, your attendance figures may be incorrect.

Considering the economic trend the world is experiencing, it's natural to assume the cap will go down... but the calculation is likely highly complex and can probably be manipulated to ensure that they can control the swing to ensure the cap moves according to their "plan". Call me a skeptic... but that's how I see it.

Sorry, I was looking for questions in the later post.

davetherave wrote:

wprager wrote:What questions?

It's been drilled into me that this is a gate-drive league. So far the average attendance is down. I'll keep monitoring as the season progresses.

As posted above:

These are the questions that one needs to consider when discussing this very complex subject:

davetherave wrote:Have the revenues from NHL ticket sales and merchandise declined, flatlined or risen over last year?

Impossible to tell at this point. More people out of work or worried about their job security definitely will reduce the cash people spend on frivolous items like the latest third jersey or season tickets. Evidence exists of lower season-ticket sales for the Senators.

davetherave wrote:Are there indicators that these revenues will decline, flatline or rise in the next 10-12 months (the decision on salary cap being, logically, be made as a result of financial analysis and forecasting by the league's accountants)?

There is evidence that attendance has declined, but it is very early. There is evidence in at least one market experiencing a decline in season ticket sales. My gut tells me many others are facing the same music -- but I have not bothered googling for evidence. Maybe I will when I get a little more free time.

The glass-half-full guys can always argue that season tickets are sold at a discount over walk-up sales, so as long as attendance figures rebound, this could actually lead to higher gate revenues. To that I say "Bah!"

davetherave wrote:Does the lowering of the salary cap benefit the players and the NHLPA? Would they fight a further lowering of the cap, given the impact on players who lost both jobs and revenue as a result in the past few months?

It doesn't benefit the players. It does not benefit the owners (their income is 45%, so if the players' share of the pie goes down, so does the owners' -- I have not bothered looking into the slight variations in the relative size of the pie as the revenues slide down, but that's something else to consider).

davetherave wrote:Do the owners, having 'cleaned house' as it were by the attrition of a significant number of mid-range salaries, now consider that further attrition is unnecessary?

That's just a re-structuring of the salary tiers. It does not change the cap limits.

davetherave wrote:Who are the influential voices on the Board of Governors, who ultimately decide--NOT Gary Bettman--whether the cap will stay the same, go down or even rise?

Bettman has enough influence to reject an infusion of $241M (plus relocation expenses) versus an outlay of roughly $5M from each owner in the Phoenix fiasco. Whatever he must have offered them in return (such as profits from expansion fees) must have worked. It goes to show that he is a master manipulator. Why would he not have influence over matters such as the salary cap?

In my opinion, the reason for not lowering the cap has as much to do with showing to the outside world (including NBC and advertisers) that the NHL is a strong league, and not likely to suffer through another work stoppage, as it has to do with actual economic forecasts. Some number manipulation may be taking place behind the scenes in order to make this happen. Or not.

davetherave wrote:With 21 of the 30 teams currently over the $54MM level, why would any of this majority lobby for a lowering of the cap, which only makes it more difficult to retain their talent and/or acquire new talent in order to field the most competitive possible product?

Why do you think this has anything to do with lobbying? The cap is calculated strictly as a percentage of league-wide revenues. If revenues go down, then so does the cap. Unless, of course, the suspected "hidden" revenues come into play. In that case, yes, some input from the owners will be required. Do they claim reduced revenues and risk a work stoppage, or do they open their books just a little bit wider (and once opened, there's no way in hell to close them).

[quote="davetherave"]And when influential owners like Ed Snider, Jeremy Jacobs, Ted Leonsis, Rocky Wirtz, Mario Lemieux, Francesco Aquilini, and Mike Illitch, to name a few, are all spending close to the cap in order to maintain their box office success, why would they support a lowering of the cap?

Again, it may not have anything to do with choice or influence. Then again, it may.

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davetherave wrote:By the way, your attendance figures may be incorrect.

Huh? Does that mean they *may be* correct?

@Prager> excellent and very thoughtful answers, sir...that I will consider carefully...and return with an appropriate response.

Ottawa's only sold out once, yet Bettman says the cap will not decline.

Hmmm.... :??:

Meh, not selling out in Ottawa isnt a big deal, we hold over 20 000 people. It's relative. Edmonton sells out every game but they only hold 16 000 so...

Thank you Canadian dollar! That's why Quebec will be getting a team VERY soon. Pretty sure it will be The Thrashers anyways.

SpezDispenser wrote:Ottawa's only sold out once, yet Bettman says the cap will not decline.

Hmmm....

What was with that home opener not selling out? Very strange. We were close though... vs Isles: 18,075 (97.7% full); vs Thrashers: 19,360 (104.6% full) and then vs Pens: 17,014 (92.0% full). Saturday games are easier to sell I guess.

N4L wrote:Meh, not selling out in Ottawa isnt a big deal, we hold over 20 000 people. It's relative. Edmonton sells out every game but they only hold 16 000 so...

Thank you Canadian dollar! That's why Quebec will be getting a team VERY soon. Pretty sure it will be The Thrashers anyways.

They already have those blue jerseys. Rip off that orange/black logo and replace with the old Nordiques one, then add a couple of fleurs de lys and you're good.

That Pittsburgh game was on Thanksgiving Monday. Days like that is when walk-up sales will really suffer. We need more season ticket holders, but that's been a problem.

wprager wrote:That Pittsburgh game was on Thanksgiving Monday. Days like that is when walk-up sales will really suffer. We need more season ticket holders, but that's been a problem.

Comrade Prager, with your focus on single game attendance, and attempts to draw conclusions from the first few weeks of the season, it will indeed be interesting to see how you develop your arguments supporting your contention that the salary cap WILL drop.

From the NHL, for your information, dated April 12 of this year:

The National Hockey League has set an overall attendance record for the fourth consecutive season. Total attendance of 21,475,223 and the per-game average of 17,460 were 1.1% higher than the corresponding record figures of 21,236,255 and 17,265 from 2007-08...including the full Winter Classic attendance of 40,818, the aggregate NHL attendance increases to 21,495,541, and the per-game increases to 17,476.

Further detail here:
http://www.nhl.com/ice/news.htm?id=417969

The salary cap rising from $39 to almost $57MM--a 47% increase--since the lockout mirrors that upward trend; so assuming that a downturn is 'inevitable' is presumptuous.

Corporate financial planning is, per standard practice, done with a 12 to 24 month projection. Multi-billion dollar conglomerates like the NHL normally operate on three to five year plans, if not longer.

The idea that the salary cap would fall. because of what you see as declines in individual team attendance after just two weeks, has little relationship to business realities.

Furthermore, you ignore the fact that attendance alone does not determine revenue. Total aggregate income, including that from concessions, merchandising, sponsorships, and--most importantly--other sports, entertainment and/or convention events at the facilities, all augment the bottom line of the companies that own NHL hockey teams.

You may wish to read Forbes' excellent analysis of the NHL as a business entity, "The Business of Hockey" that provides insights into how these companies work.

This link takes you to last October's edition:
http://www.forbes.com/2008/10/29/nhl-team-values-biz-sports-nhl08_cz_mo_kb_1029nhl_land.html

From this article:

The 2007-08 season was the National Hockey League's most successful since Forbes began tracking team values 10 years ago. Fueled by higher ticket prices and a stronger Canadian dollar, revenue increased 13%, to an average of $92 million per team, while operating income (earnings before interest, taxes, depreciation and amortization) rose 48%, to $4.7 million per team.

The recap of the current state of affairs in the NHL by Forbes should be available sometime this month.

The uptrend in income for the NHL appears to contradict the doomsayers who say the economy is 'tanking'. One can make the argument that even in difficult economic conditions, while consumers may reduce their overall spending, they will continue to spend 'discretionary dollars' to make themselves feel better.

@Comrade Prager> as reported by Lyle Richardson at FoxSports.com, season ticket renewals this year are about the same as last, and that NHL player agent Alan Walsh states that the NHL's revenue projections being flat or slightly increasing for the coming year, no significant decline in the salary cap is expected.

Article here:
http://community.foxsports.com/spector/blog/2009/10/13/no_significant_decline_in_nhl_salary_cap

davetherave wrote:
The salary cap rising from $39 to almost $57MM--a 47% increase--since
the lockout mirrors that upward trend; so assuming that a downturn is
'inevitable' is presumptuous.

Tell me, did you buy any Nortel stock when it hit $120 and was still climbing?

Assuming a downturn is inevitable is simple mathematics. In the case of the NHL there are strict physical limits (number of seats) and, although that can be overcome a bit by raising ticket prices, the simple truth is that people's (and companies') discretionary spending cash is not going up every year.

I'm going to have to tackle this in parts, sorry (just fluffing):

davetherave wrote:[
Comrade Prager, with your focus on single game attendance, and attempts to draw conclusions from the first few weeks of the season, it will indeed be interesting to see how you develop your arguments supporting your contention that the salary cap WILL drop.

From the NHL, for your information, dated April 12 of this year:

The National Hockey League has set an overall attendance record for the fourth consecutive season. Total attendance of 21,475,223 and the per-game average of 17,460 were 1.1% higher than the corresponding record figures of 21,236,255 and 17,265 from 2007-08...including the full Winter Classic attendance of 40,818, the aggregate NHL attendance increases to 21,495,541, and the per-game increases to 17,476.

I believe I referred to those results in my post. It's been a 4-year steady climb. However the economy went into the dumper last year. Because of season ticket sales, and contracts with the likes of Versus and NBC, much of the NHL's income was "guaranteed". The full effects of the economic downturn won't be felt until this year.

At this point, this is just an opinion (an informed one, I think). I will monitor the attendance averages and report my findings.

davetherave wrote:
Corporate financial planning is, per standard practice, done with a 12 to 24 month projection. Multi-billion dollar conglomerates like the NHL normally operate on three to five year plans, if not longer.

The idea that the salary cap would fall. because of what you see as declines in individual team attendance after just two weeks, has little relationship to business realities.

Season tickets are renewed on a year-by-year basis. That is *also* a business reality. Alcatel (where I *used to work*) used to have a 400-level double suite, at least one more suite in the 200s, plus some season tickets. At least one of those suites is gone (maybe both of them, since I left). Do you think Nortel still has theirs? How many other, smaller companies that had suites or season tickets are no longer swimming in cash?

Quick poll, did anyone who had season tickets last year *not* renew this year because of economic concerns? I remember Neely saying he won't renew, or at least threatening to do so, but in his case it may have been simply dissatisfaction with the team direction. In any case, since he mentioned buying tickets to the Saturday game, I am assuming he followed through and did not renew. Overall, season ticket sales were down fairly significantly.

davetherave wrote:
Furthermore, you ignore the fact that attendance alone does not determine revenue. Total aggregate income, including that from concessions, merchandising, sponsorships, and--most importantly--other sports, entertainment and/or convention events at the facilities, all augment the bottom line of the companies that own NHL hockey teams.

No, I do not ignore that at all. Simply, this is a gate driven league. Until we get $500-miliion contracts with NBC, ESPN, CBS and so on to televise games throughout the season, or that little phenomenon called the Internet drives *significant* revenues via Game Center and other initiatives, until the sport of hockey (or, at least, watching it on TV) takes off in India and China -- the league will continue to derive most of its revenues from ticket sales.

Think of it this way. Last year I bought that Emery practice jersey for $50. Prior to that, I'd bought a Sens 3rd jersey for $50 (I knew a guy). I've bought a couple of shirts with a logo for the girls ($19.95 each) and one for my other kid ($24.95). My wife and oldest son each bought a tee-shirt, totaling something like $35. My kid bought two hats for a total of another $30. Plus various miscellaneous trinkets that didn't add up to very much. So let's say I spent $300 over the course of 6 years on merchandise. Then my wife got me tickets for my birthday and it cost $150 for the pair, plus parking and concessions.

One game and I spent half of my "other merchandise" spending for six years. I know there are other revenue sources, but let's face it, they are not getting much from NBC (if anything at all)

You may wish to read Forbes' excellent analysis of the NHL as a business entity, "The Business of Hockey" that provides insights into how these companies work.