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

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.

davetherave wrote:...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.

Sorry, I missed this particular part in the last read through. Are you certain this particular revenue stream counts in determining the salary cap? I would be flabbergasted if it was. While it is income for the owner, it is not hockey-related, so there is no way it should be counting toward the players share.

I am not saying, here, that the owners are losing money. What I am saying is that the hockey side of their operations is not generating as much income as before (in many cases -- not all). And that should have a direct effect on the salary cap.

It should, but it doesn't mean it will.

wprager wrote:

davetherave wrote:...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.

Sorry, I missed this particular part in the last read through. Are you certain this particular revenue stream counts in determining the salary cap? I would be flabbergasted if it was. While it is income for the owner, it is not hockey-related, so there is no way it should be counting toward the players share.

I am not saying, here, that the owners are losing money. What I am saying is that the hockey side of their operations is not generating as much income as before (in many cases -- not all). And that should have a direct effect on the salary cap.

It should, but it doesn't mean it will.

@Prager> the mention of non-hockey revenue streams speaks to your presumption that teams are 'losing money'. Do you know for a fact that these teams are operating at a loss, and which ones specifically?

The salary cap is calculated, according the definition sourced from Wikipedia, thusly:

The actual amount of the cap varies on a year-to-year basis, and is calculated as a percentage of the League's revenue from the previous season; for instance, in 2007-08, the NHL's salary cap was approximately US$50.3 million per team, and for the 2008-09 season it was $56.7 million.

http://en.wikipedia.org/wiki/NHL_Salary_Cap

According to this information, the salary cap has to do with revenues, not profits. And this on an aggregate of league revenues, not a team by team basis.

So what's the basis for your presumption that the salary cap is going down?

wprager wrote:

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 don't play the stock market.

In any case, you make the assumption that consumers are not going to spend as much as they did specifically on NHL hockey games, and you cite no concrete evidence.

wprager wrote: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.

Looking forward to that!


PS don't forget that FoxSports report that underlined season ticket sales this year are equal to last year's.

You may also want to factor in the revenues that may increase on a per consumer basis, as prices for merchandise may rise; and increases in merchandise sales (which you do not mention at all as a potential positive factor) can add significantly to the bottom line, as fans who don't attend the games may still spend considerable amounts.

davetherave wrote:

wprager wrote:

davetherave wrote:...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.

Sorry, I missed this particular part in the last read through. Are you certain this particular revenue stream counts in determining the salary cap? I would be flabbergasted if it was. While it is income for the owner, it is not hockey-related, so there is no way it should be counting toward the players share.

I am not saying, here, that the owners are losing money. What I am saying is that the hockey side of their operations is not generating as much income as before (in many cases -- not all). And that should have a direct effect on the salary cap.

It should, but it doesn't mean it will.

@Prager> the mention of non-hockey revenue streams speaks to your presumption that teams are 'losing money'. Do you know for a fact that these teams are operating at a loss, and which ones specifically?

The salary cap is calculated, according the definition sourced from Wikipedia, thusly:

The actual amount of the cap varies on a year-to-year basis, and is calculated as a percentage of the League's revenue from the previous season; for instance, in 2007-08, the NHL's salary cap was approximately US$50.3 million per team, and for the 2008-09 season it was $56.7 million.

http://en.wikipedia.org/wiki/NHL_Salary_Cap

According to this information, the salary cap has to do with revenues, not profits. And this on an aggregate of league revenues, not a team by team basis.

So what's the basis for your presumption that the salary cap is going down?

I agree. The cap is all about revenue, not profit. A team that's not making enough income (or profit) may resort to not spending to the cap ceiling, but it's not going to affect that ceiling. If I somehow, somewhere made a point that "teams losing money" will affect the salary cap, let's just amend that slightly to "teams losing money because of reduced attendance."

As for the basis of my presumption (not a word I would have chosen) that the salary cap is going down, here are a few numbered points (you can connect the dots, although it's not really necessary):

1. This is a gate driven league. The single biggest source of revenue is ticket sales.
2. The economy is doing very badly. People are losing jobs or at least job security; holdings in stocks have taken a huge hit, leading further to eroding confidence. Many companies are struggling due to lowered sales.
3. When conditions described in #2 happen, both individuals and corporations tend to tighten the belt and reduce discretionary spending.
4. Hockey tickets and merchandise fall into that "discretionary spending" area. Unlike booze and cigarettes (sales of which probably actually go up as the economic conditions go down) hockey tickets are a luxury item; I can see people turning to watching Hockey on TV to cheer up, but not spending $100 on a pair of tickets, $12 for parking and $30 for a couple slice of barely warm pizza and drinks.

Actually, Dave, please re-read my post that you quote in your reply (below). Especially the bolded part. While your reply makes sense and all, it implies I said or meant something I never said (or meant).

I talk about hockey-related income (not profit). I maintain that it is only the hockey-side revenues which are used to calculate the salary cap.

And somehow, from that, you make the leap about my "presumption that teams are 'losing money'".

davetherave wrote:

wprager wrote:

davetherave wrote:...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.

Sorry, I missed this particular part in the last read through. Are you certain this particular revenue stream counts in determining the salary cap? I would be flabbergasted if it was. While it is income for the owner, it is not hockey-related, so there is no way it should be counting toward the players share.

I am not saying, here, that the owners are losing money. What I am saying is that the hockey side of their operations is not generating as much income as before (in many cases -- not all). And that should have a direct effect on the salary cap.

It should, but it doesn't mean it will.

@Prager> the mention of non-hockey revenue streams speaks to your presumption that teams are 'losing money'. Do you know for a fact that these teams are operating at a loss, and which ones specifically?

The salary cap is calculated, according the definition sourced from Wikipedia, thusly:

The actual amount of the cap varies on a year-to-year basis, and is calculated as a percentage of the League's revenue from the previous season; for instance, in 2007-08, the NHL's salary cap was approximately US$50.3 million per team, and for the 2008-09 season it was $56.7 million.

http://en.wikipedia.org/wiki/NHL_Salary_Cap

According to this information, the salary cap has to do with revenues, not profits. And this on an aggregate of league revenues, not a team by team basis.

So what's the basis for your presumption that the salary cap is going down?

davetherave wrote:

wprager wrote:

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 don't play the stock market.

In any case, you make the assumption that consumers are not going to spend as much as they did specifically on NHL hockey games, and you cite no concrete evidence.

Not just hockey, specifically. Sure, there are some people who prioritize hockey above other discretionary items, but the vast majority of people out there consider hockey tickets a luxury item. Especially when hockey is available in fairly large quantities on TV.

davetherave wrote:
Looking forward to that!


PS don't forget that FoxSports report that underlined season ticket sales this year are equal to last year's.

You may also want to factor in the revenues that may increase on a per consumer basis, as prices for merchandise may rise; and increases in merchandise sales (which you do not mention at all as a potential positive factor) can add significantly to the bottom line, as fans who don't attend the games may still spend considerable amounts.

OK, the first data point still has no attendance figure for Montreal -- have they played a home game yet? Anyhow, the average attendance is slightly higher -- by 34, to be precise. I'm not sure if average attendance goes up or down from the start of the season toward the end. My gut says it goes up because more than half of the teams are either locked into a playoff spot or fighting for one (16 of 30 teams make it in, and I'd argue that in each Conference you could have another 4 that are fighting for that last spot -- that;s easily 22 of 30 markets where interest increases (plus Toronto always sells out even if they are out of the playoffs).

Anyhow, we'll see how this goes. I've put a calendar reminder to check attendance every week. I'll keep posting in here.

wprager wrote:

davetherave wrote:
In any case, you make the assumption that consumers are not going to spend as much as they did specifically on NHL hockey games, and you cite no concrete evidence.

Not just hockey, specifically. Sure, there are some people who prioritize hockey above other discretionary items, but the vast majority of people out there consider hockey tickets a luxury item. Especially when hockey is available in fairly large quantities on TV.

Yes, but revenues also come from those who watch TV, such as subscribers to the NHL Center Ice package, and internet subscribers to NHL Gamecenter.

Your assumption "there are some people who prioritize hockey above other discretionary items, but the vast majority of people out there consider hockey tickets a luxury item" is just that. You have no marketing data that supports that statement.

I am not making a case that cap won't go down. I am saying there is insufficient data to suggest that it will, and that the data available, as cited previously from sources like the NHL, Allan Walsh and Fox Sports, suggest it will not.

Market data? Are you serious? The Sens had around 12,000 season ticket holders last year. Ottawa/Gatineau has nearly 1 million people. Assuming 2.5 people per household that's 400,000 households. Many season ticket holders buy tickets in pairs, but the 12,000 is "equivalents" so includes guys who purchase quarter-season tickets. Even if all 12,000 bought quarter season tickets that would be 48,000 households with quarter-season tickets. We know that's no-where the true number (like I said, many buy two seats). But even in that worst, unimaginable case, you'd have 352,000 households not making season tickets a priority. That's 88% -- pretty close to a "vast majority". Montreal is a city three times as big, and I'd say their season ticket sales are less than double that of Ottawa. And I don't believe they have all seats sold as season tickets, so that means there are season tickets available but no buyers. Yes, I am ignoring the fact that there are some people who want season tickets but not in the upper bowl, so they are, perhaps, on a waiting list. Toronto certainly falls into that category in a big way, but even there, in a city of 5 million, I don't believe the waiting list includes anywhere near 1 million households (roughly half -- very roughly, as I don't even know the population of the GTA).

Moving south I would expect those percentages to go way, way higher in some markets.

So when I say the vast majority, I think I am very much correct.

Oh, by the way, I also think that the salary cap will not go down (at least not significantly) next year. As I've mentioned before, there are probably still ways to play with the books a bit more, but I fully expect that this would only continue until the CBA expires. At that point I expect owners to come out and cry a river to prove that the salary cap must be brought lower. Unless, of course, Bettman gets them that big NBC and ESPN contract, then all bets are off.

wprager wrote:Market data? Are you serious? The Sens had around 12,000 season ticket holders last year. Ottawa/Gatineau has nearly 1 million people. Assuming 2.5 people per household that's 400,000 households. Many season ticket holders buy tickets in pairs, but the 12,000 is "equivalents" so includes guys who purchase quarter-season tickets. Even if all 12,000 bought quarter season tickets that would be 48,000 households with quarter-season tickets. We know that's no-where the true number (like I said, many buy two seats). But even in that worst, unimaginable case, you'd have 352,000 households not making season tickets a priority. That's 88% -- pretty close to a "vast majority". Montreal is a city three times as big, and I'd say their season ticket sales are less than double that of Ottawa. And I don't believe they have all seats sold as season tickets, so that means there are season tickets available but no buyers. Yes, I am ignoring the fact that there are some people who want season tickets but not in the upper bowl, so they are, perhaps, on a waiting list. Toronto certainly falls into that category in a big way, but even there, in a city of 5 million, I don't believe the waiting list includes anywhere near 1 million households (roughly half -- very roughly, as I don't even know the population of the GTA).

Moving south I would expect those percentages to go way, way higher in some markets.

So when I say the vast majority, I think I am very much correct.

Well, using "Pragernomics", you have a data resource which is as vast as your ability to make assumptions and express your opinions--which are never less than entertaining.


But you have no hard market data about the 30 NHL markets, nor have you cited any data regarding the spending patterns of hockey fans in North America.

And no, I'm not kidding.

All anyone needs to know is that the Masons and the Bilderbergs will ultimately decide where the economy is headed. Your arguments are futile.

SeawaySensFan wrote:All anyone needs to know is that the Masons and the Bilderbergs will ultimately decide where the economy is headed. Your arguments are futile.

@SSF> thank goodness you showed up to remind us of the utter futility of our ways.

And y'know, I didn't realize Steve and Chris Mason had such influence in the hockey world.

Thanks also for bringing up the Bilderberg Brothers. For our fellow members not as conversant as you in these matters, Buddy and Bertie Bilderberg were the 1930's version of smashmouth defensemen, they of the old Brooklyn Americans, before they began their careers on Wall Street.

Their son, B. Bradley Bilderberg, is a shadowy figure who secretly controlls all thirty NHL teams, from his castle in the mountains of Bavaria.

C'mon... we all know who controls the cap...



Yep. The Stonecutters.