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The Business of Hockey Discuss the financial and business aspects of the NHL. Topics may include the CBA, work stoppages, broadcast contracts, franchise sales, NHL revenues, relocation and expansion.

Contraction a necessary evil for survival of NHL says economist

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Old
12-02-2012, 06:26 PM
  #201
Legionnaire11
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Originally Posted by sandysan View Post
You sure seem to have a lot of suggestions on how best to grow the game without having any real skin in the game.
Season tickets for the last 8 years, and a house full of NHL merchandise would say differently. But thanks for playing.

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12-02-2012, 06:35 PM
  #202
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Originally Posted by Legionnaire11 View Post
Season tickets for the last 8 years, and a house full of NHL merchandise would say differently. But thanks for playing.
supporting a team and supporting the league are fundamentally two different things ( as I suspect you know).

You could be the worlds greatest fan, but if there are not enough like minded people in your market, then you might be out of luck. This does not speak to your level of passion but the reality of the economics. The notion that the league should help keep the preds afloat for 50 years is lunacy. I can see how it would benefit you, but I cant think of any other industry that would prop something up for 50 years knowing they will never recover the money back. can you ?

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12-02-2012, 06:41 PM
  #203
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Originally Posted by sandysan View Post
supporting a team and supporting the league are fundamentally two different things ( as I suspect you know).

You could be the worlds greatest fan, but if there are not enough like minded people in your market, then you might be out of luck. This does not speak to your level of passion but the reality of the economics. The notion that the league should help keep the preds afloat for 50 years is lunacy. I can see how it would benefit you, but I cant think of any other industry that would prop something up for 50 years knowing they will never recover the money back. can you ?
This is your opinion. My opinion is that there has to be at least two generations of ticket buying fans before you can truly call a market failed, but you will more likely have a stable fanbase at that point and be able to start turning a profit. Who knows how long the league will be around, another 100, 200, 300 years? 50 years of establishing your markets isn't so long compared to that.

It also benefits more than just myself and the Predators, it benefits the league as a whole. If your solution to the worst markets is always contraction, then you're looking at a 10 team league in the long run. That league would have no national television deal or sponsors, the revenue would be a lot less than the $3.3B these morons are fighting over now. They probably wouldn't have the best players (if the KHL stands by it's expansion efforts) either which would further damage their standing.

So the pain of growing 30-32 markets across the country is a mutual benefit to the expansion markets and the traditional markets.

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12-02-2012, 06:43 PM
  #204
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Originally Posted by sandysan View Post
....there is nothing wrong with trying to expand the game provided that you acknowledge that at some point you have to make specific advances, saying " but we are a small market" is not a panacea especially after decades.
Yes, good points and this last one is quite true. Most unfortunate in retrospect that the NHL itself wasnt enlightened enough right out of the box with its expansionary visions to have employed such programs with the incoming teams in non-traditional markets.

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... it was playing outside with my friends at the rink behind jean coutu where we had to walk to the rink and lace them up on chairs because the city shack wasn't unlocked yet. Seeing the older kids play and getting picked to play with them when I knew I probably wasnt ready but I was willing.

If you need to promote the game to get these fans, then why does nashville have two rinks ( essentially making hockey a country club sport) ? Yeah if they went crazy and built a dozen sheets it would help, but they havent and I suspect they wont because it would need private investment and people see that the market there is not clamoring for more hockey.
Considering the intransigent nature of the Preds ownership over the past decade its hardly surprising. Thats really a big part of the problem. A lot of the newbies are or were running real estate plays or whatever, the franchise itself simply the hook in seeking municipal tax breaks, cheap land, subsidies or whatever. Again however, I think it behooves the NHL to be responsible & prudent in its dealings with applicants, and as you suggest, a time-line, critical path establish.

and hey, fun story about Jean Coutu. My experience similar, though in Toronto.

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12-02-2012, 07:01 PM
  #205
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Originally Posted by Legionnaire11 View Post

It also benefits more than just myself and the Predators, it benefits the league as a whole. If your solution to the worst markets is always contraction, then you're looking at a 10 team league in the long run. That league would have no national television deal or sponsors, the revenue would be a lot less than the $3.3B these morons are fighting over now. They probably wouldn't have the best players (if the KHL stands by it's expansion efforts) either which would further damage their standing.
If you are going to willfully misinterpret my position, then I'm done. I've never advocated contraction as a first resort and I completely understand that it takes time to build a market, but 50-60 years is lunacy. What I am saying, and have said from the beginning that if you go into new markets it will be rough, but after a certain point you HAVE to show improvement. Using the crutch of " we are a small market" year after year after year is not the answer to EVERYTHING.

And the league wont go down to 10 teams ( and there are still untapped markets in canada). The league has done fine prior to the comcast deal ( when they were on versus for X-sake) and lived through getting the boot from both ESPN and fox. Trust me the leagues long term viability is not contingent on some NBA like national US TV deal, even if it means that some non traditional markets go away.

I wish the KHL well but they are not going to challenge for fans in traditional NHL markets any time soon. Perhaps if you live in a market with no history you might get distracted by shiny beads and other baubles to switch allegiances.

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12-02-2012, 08:06 PM
  #206
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Originally Posted by Legionnaire11 View Post
Season tickets for the last 8 years, and a house full of NHL merchandise would say differently. But thanks for playing.
That would not be considered skin in the game. That phrase refers to capital at risk in an investment or business.

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12-02-2012, 08:10 PM
  #207
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Originally Posted by Melrose Munch View Post
Nashville is fine. People see Phoenix and think that is everyone. That's not the case.
I read an article a while ago that the state & city governments had given the 'team' more than $115m over the yrs. I guess most businesses would be 'fine' if they had received similar treatment. Dont be fooled in most recent data, the teams have to function in peak & trough periods. Whats the cumulative net income status of that franchise excluding govt or league assistance?

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12-02-2012, 08:27 PM
  #208
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I read an article a while ago that the state & city governments had given the 'team' more than $115m over the yrs. I guess most businesses would be 'fine' if they had received similar treatment. Dont be fooled in most recent data, the teams have to function in peak & trough periods. Whats the cumulative net income status of that franchise excluding govt or league assistance?
I think they got 10 million fom the city last year. I also think that one of the people running for nashville mayor was intent on ending this subsidy. They are already at 97 percent capacity, making up that 10 mil will be tough. If the political winds shift in Nashville, are the preds still doing fine ?

The preds may be profitable but hey hey are living paycheck to paycheck, one or two unepected things and they could be back in the red.

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12-02-2012, 08:29 PM
  #209
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Originally Posted by DuklaNation View Post
I read an article a while ago that the state & city governments had given the 'team' more than $115m over the yrs. I guess most businesses would be 'fine' if they had received similar treatment. Dont be fooled in most recent data, the teams have to function in peak & trough periods. Whats the cumulative net income status of that franchise excluding govt or league assistance?
That's absolutely correct that they did receive that money from the city. It was an agreed upon amount for the team to operate the arena and a little bit back from taxes on ticket sales. In other words, it's not money that the city is digging up to kick in to the Preds, it's money that would never exist without the Predators in the first place. The city makes a lot more from having the team than what they kick back to them, that's why these types of agreements exist.

At least know what the money is and where it comes from before you jump to conclusions.

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12-02-2012, 08:32 PM
  #210
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You're WAAAAAAAAAAAAY mistaken when you refer to the CFL as a major football league and goes to show what kind of misguided views some fans have when they believe that a smaller or Canadian/Regional US only NHL can be competitive.
Really. The top conferences in the NCAA are probably better football than the CFL.

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12-02-2012, 08:39 PM
  #211
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but it is not the NHL's job to create markets, they can nurture them as they see fit but they dont create markets where none existed previously.
How do you figure? Creating new markets for your product is one of the most fundamental jobs of any business looking to, you know, not die.

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12-02-2012, 08:44 PM
  #212
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Originally Posted by DuklaNation View Post
I read an article a while ago that the state & city governments had given the 'team' more than $115m over the yrs. I guess most businesses would be 'fine' if they had received similar treatment. Dont be fooled in most recent data, the teams have to function in peak & trough periods. Whats the cumulative net income status of that franchise excluding govt or league assistance?
There's a reason they're paying that money. As Legion said, the city makes tons of money on taxes and tourism through the Predators, so really, they're just paying them back. As a Nashvillian, I don't mind, because losing the Preds would cost the city money, even if we stop paying them that sum.

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12-02-2012, 08:53 PM
  #213
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Originally Posted by Top 6 Spaling View Post
There's a reason they're paying that money. As Legion said, the city makes tons of money on taxes and tourism through the Predators, so really, they're just paying them back. As a Nashvillian, I don't mind, because losing the Preds would cost the city money, even if we stop paying them that sum.
Then let the businesses in the central business district pay special taxes since they are doing so fantastically well when the predators play.

The preds also get concessions and money fom non hockey events like concerts, that's money the city is giving away. But I am sure that these concerts are also dependent on the preds.

Since you have no problems with taking local subsidies from the city and money from real markets, when the preds don't play because of the lockout, are you okay with he city still being on the hook for these payments ( its 8.7 million not 10 as I said previously). I wonder how much the city of Montreal gives the habs for bringing all those tax dollars to the area around the bell center.

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12-02-2012, 09:01 PM
  #214
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Houston, Dallas , Miami are bad sports markets to begin with and Phoenix is a lost cause. The reality is it has not been 5 years but getting close to 15-20 as many of these franchises were from the 90's. Some markets have failed some have not. You can't keep demanding players cut salary or that NYC, TOR, etc keep funding the south. At some point, you stand on your own.In any other business, it does not take 5 years to cut losses.


The NHL is not surviving now. It's shut down. There is a very real chance Fehr wins. What then?
I don't think it's possible, but suppose the worst happens and Fehr does "win", the NHL will not be recognizable. Hundreds of players will have lost their jobs as well, not sure how the NHLPA calls that a "win".

BTW, the players are not funding southern markets. They are the beneficiaries of additional jobs that do not exist without those markets. I seriously doubt that there are more than 2 or 3 additional locations in Canada that could support an NHL team.

There is nothing wrong with revenue sharing for the good of the entire league. The NFL does it and it works great. The only difference being they have a huge TV deal. They also have 40 players per team and some big stars that get paid big money. Many NFL teams go through highs and lows when it comes to revenue from gate receipts based on the on-field success of the team.

NHL revenues are driven by gate receipts. This means the players will have to take less money unless and until the NHL can get more revenue from TV. It's an economic fact that Fehr refuses to address.

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12-02-2012, 09:07 PM
  #215
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How do you figure? Creating new markets for your product is one of the most fundamental jobs of any business looking to, you know, not die.
The NHL does not run like a traditional business and failed expansion into unproven markets does more damage to the league than not risking it.

The NHL is and will be a niche sport in the majority of the US. Chasing that lucrative national tv market to become he nba lite is not simply a benign fairy tale, it does the legue harm when markets that were expected to grow fail to do so. If growth is so good, let's expand to 50 teams, because 50 markets is surely better than 32. To hell with the product, bigger is always better, right ?

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12-02-2012, 09:11 PM
  #216
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Then let the businesses in the central business district pay special taxes since they are doing so fantastically well when the predators play.

The preds also get concessions and money fom non hockey events like concerts, that's money the city is giving away. But I am sure that these concerts are also dependent on the preds.

Since you have no problems with taking local subsidies from the city and money from real markets, when the preds don't play because of the lockout, are you okay with he city still being on the hook for these payments ( its 8.7 million not 10 as I said previously). I wonder how much the city of Montreal gives the habs for bringing all those tax dollars to the area around the bell center.
I'm not ok with the lockout in general...

No, the city should not be paying the Preds in a lockout. I don't deny that.

I am not saying Nashville will ever be as hockey-crazed as Montreal. That would just be stupid of me. But I do believe Nashville can be a viable market, it just requires time. Will it cost money? Yes. Do I think that it's worth it to bring NHL hockey to an area, which grows the game and youth hockey in an area? Of course. Money is important, but there is more impact from an NHL team than just dollar signs.

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12-02-2012, 09:20 PM
  #217
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I'm not ok with the lockout in general...

No, the city should not be paying the Preds in a lockout. I don't deny that.

I am not saying Nashville will ever be as hockey-crazed as Montreal. That would just be stupid of me. But I do believe Nashville can be a viable market, it just requires time. Will it cost money? Yes. Do I think that it's worth it to bring NHL hockey to an area, which grows the game and youth hockey in an area? Of course. Money is important, but there is more impact from an NHL team than just dollar signs.
15 years and apparently two rinks in the city. Nice job growing the game and promoting youth hockey.
And it's true that money is not the most important thing, especially when it is other peoples money at risk.

You know how you feel that the city of Nashville should not have to pay the preds during a lockout ( they most certainly are) because the city is not getting anything for this investment ? Welcome to how fans of real hockey markets feel propping up persistently weak makets. The difference is that the coffers will fill when the lockout ends, money coming from ml and Toronto is expected in perpetuity.

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12-02-2012, 09:22 PM
  #218
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Money is important, but there is more impact from an NHL team than just dollar signs.
Such as increasing the overall prestige of a city, which helps draw new residents (20% growth city/61% growth metro) and businesses (Dell, Nissan, 350 total business relocated to Nashville between 2000-2005), which helps draw other events such as concerts and sporting events (World Cup Qualifiers, Music City Bowl)...

I am in NO WAY claiming that the Predators are the sole driver behind those statistics. Only that they are part of the appeal when individuals, businesses and events are considering Nashville.

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12-02-2012, 09:24 PM
  #219
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You know how you feel that the city of Nashville should not have to pay the preds during a lockout ( they most certainly are) because the city is not getting anything for this investment ? Welcome to how fans of real hockey markets feel propping up persistently weak makets.
This is only because you don't realize the value of having these teams in the league. Unless you want the leafs to play a schedule of 41 games vs Montreal and 41 games vs NY Rangers. I'm sure that league will draw well.

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12-02-2012, 09:30 PM
  #220
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The NHL is and will be a niche sport in the majority of the US.
It's even a niche sport in big market eastern cities, probably including Canada. NHL fans in those cities, where most NHL fans live, barely watch any other team but their own. They might watch another O6 team, but that's it. All the blame for a small TV contract doesn't go to just the non-traditional hockey markets.

If more NHL fans in the northeast corridor watched NHL hockey, there would probably be a bigger TV contract. But they don't, so there isn't much reason to have any teams west of Chicago(lucky enough to be O6, because if they weren't, a central time zone team doesn't count) or south of Philly once Washington doesn't have Ovechkin.

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12-02-2012, 09:31 PM
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Sounds like a subsidy and given your description it is a subsidy (a refund of sales tax remittances?). EVERY business can make the same claim as the Preds. Are they given money too? How much does from FedEx to all small businesses getting out of similar arrangements? What about hotels? If you're fine with that so be it. But just accept the fact they are not operating on a level playing field. If their model relies on that aspect, that team is not viable on a stand alone basis. In accounting, they would call this a going concern.

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12-02-2012, 09:32 PM
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15 years and apparently two rinks in the city. Nice job growing the game and promoting youth hockey.
And it's true that money is not the most important thing, especially when it is other peoples money at risk.

You know how you feel that the city of Nashville should not have to pay the preds during a lockout ( they most certainly are) because the city is not getting anything for this investment ? Welcome to how fans of real hockey markets feel propping up persistently weak makets. The difference is that the coffers will fill when the lockout ends, money coming from ml and Toronto is expected in perpetuity.
To be fair, 2 other rinks were being planned right before the big recession, and both had to be scrapped. Believe me, we all wish that was different, but it's the best we can do. Still....

http://unitedstatesofhockey.com/2012...up-in-2011-12/

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The Nashville Predators have ignited a lot more interest in the team and the game of hockey in their home state thanks to back-to-back exciting seasons. With the best D pairing in hockey (for now), one of the best goalies in the NHL and a young team with a lot of promise, ticket sales have picked up. So too has hockey participation in Tennessee.

The Volunteer State experienced 11.9 percent membership growth from the previous year in 2011-12. A record 2,880 players were registered with USA Hockey. Encouragingly, youth hockey grew across the board.

Since the Predators arrived in 1998, hockey participation has increased by 144.9 percent in Tennessee.
I would say the Preds are helping. Are they as high as Montreal? No. But growing at 12% per year...good things will happen sooner rather than later.

I regard the city paying the Preds as a necessary evil. Just like I assume your owners regard revenue sharing.

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12-02-2012, 09:40 PM
  #223
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This is only because you don't realize the value of having these teams in the league. Unless you want the leafs to play a schedule of 41 games vs Montreal and 41 games vs NY Rangers. I'm sure that league will draw well.
Exaggerate much? It would never be 2 or 10 teams and there are still untapped markets in places that give a damn about the game.

And to think that having a big leage team drives population increases is completely unsupported by pretty much every study ever done. You see all those people around Bridgestone when the preds play, how many are people coming specifically for that attraction and how many are simply cannibalizing other events from other areas of the city ? That if the preds left all these people would sit on their hands in the dark with visions of a weber slap shot to keep them warm.

If you have some sort of deficiency that you need to prove to others that you are big league, buy a red convertible and stop asking other people in the city ( the vast majority who dont care a wit about hokey) to subsidize your vanity.

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12-02-2012, 09:47 PM
  #224
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NHL revenues are driven by gate receipts. This means the players will have to take less money unless and until the NHL can get more revenue from TV. It's an economic fact that Fehr refuses to address.
The PAs position is clear... Relocate failing franchises.
-If NHL insists staying put in money-losing markets, NHL pays for them.
-If NHL insists in pursuing it's Southern Strategy for an elusive big-money deal in 5, 10, 15 years, NHL pays for it.

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12-02-2012, 09:49 PM
  #225
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Even these guys call it a subsidy. They pay it even though there are no games which makes it even worse. I could easily clear it up for everyone if had 1 minute to look at their financials but oh well.

http://www.knoxnews.com/news/2012/se...er-or/?print=1

Last figures I saw were $7.1m for tax subsidy and $2m for mgmt fee but was about to be revised somewhat. Some of the articles conflict a little.

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