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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, and NHL revenues.

Contraction a necessary evil for survival of NHL says economist

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Old
12-13-2012, 07:41 PM
  #426
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Originally Posted by Jossipov View Post
Not for nothing, but that is (minus the hyperbole) how companies became major international corporations. Companies, like apple, may subsidize stores in certain locations in order to keep a footprint in that market, hoping for a long term return on investment by expanding the brand.
Does the new store charge its customers 10% of what the established stores customers pay though?

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12-13-2012, 07:44 PM
  #427
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Originally Posted by jumptheshark View Post
i remember playoff games against the oilers back in the day not being sold out.
That's because they had Gretzky and we knew we were gonna lose.

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12-13-2012, 07:50 PM
  #428
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Originally Posted by jumptheshark View Post
i remember playoff games against the oilers back in the day not being sold out.
Different situation than 15-20 years ago. Vancouver had lousy attendance in the mid 90s and no one is questioning it today. Hockey has grown in popularity in Canada from those days. Winnipegers know what it is like to be without an NHL team, they won't let it happen again, IMO. The long term scenario has yet to be played out but I am confident in continued fan support regardless of the competitiveness of the team.

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12-13-2012, 07:52 PM
  #429
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Originally Posted by jumptheshark View Post
i remember playoff games against the oilers back in the day not being sold out.
I also remember many games where Edmonton also didn't sell out at Rexall. Same holds true for Calgary and Vancouver. What is your point?

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12-13-2012, 07:54 PM
  #430
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Originally Posted by sunnyvale420 View Post
Does the new store charge its customers 10% of what the established stores customers pay though?
Sometimes, for example a big mac is typically more expensive in the airport.....but I dont see what that has to do with anything, since I dont think the NHL sets ticket prices. I'm not sure what team you are buying tickets for, but the reason the prices are what they are has little to do with the ticket prices somewhere else


Last edited by Jossipov: 12-13-2012 at 08:03 PM.
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12-13-2012, 08:14 PM
  #431
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Originally Posted by Jossipov View Post
Sometimes, for example a big mac is typically more expensive in the airport.....but I dont see what that has to do with anything, since I dont think the NHL sets ticket prices. I'm not sure what team you are buying tickets for, but the reason the prices are what they are has little to do with the ticket prices somewhere else
But but people dont go to airports for mcdinks. Is the NHL a mom and pop restaurant where they start small in a mall with low prices, slowly building with better food more clients and then able to build a locale and charge accordingly? Or is the NHL like an arbys or harveys where they build right near existing food giants and wonder why they struggle?

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12-14-2012, 12:55 AM
  #432
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http://sports.yahoo.com/blogs/nhl-pu...1197--nhl.html

Puck Daddy's take on the idea from Forbes on contracting to 20 teams.

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12-14-2012, 01:26 AM
  #433
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Originally Posted by LadyStanley View Post
http://sports.yahoo.com/blogs/nhl-pu...1197--nhl.html

Puck Daddy's take on the idea from Forbes on contracting to 20 teams.
The nhl is not going to contract 10 teams...it is going to expand by 2 teams in the next year or two. Why else do you think the nhl advocated to go to uneven divisions of 8-8-7-7 teams?

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12-14-2012, 11:16 AM
  #434
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When you think about it this is simple math the league will spend a minimum of 300 Million a year in revenue sharing during the next CBA. Buying out and contracting five franchise would cost less than half that.

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12-14-2012, 11:47 AM
  #435
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I don't like contraction as a first option but it would certainly help the situation.

The NHL business model is broken on several different levels so the idea of a single step fix it all solution is quite silly and that includes the idea of contracting 10 teams.

Reality is, and the players would no doubt disagree vigorously, the closet thing to fixing the league's problems in one single step is drastically reducing their share of the revenue.

Their salaries remain the largest single contributor to the problem as a whole.

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12-14-2012, 11:57 AM
  #436
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Originally Posted by madhi19 View Post
When you think about it this is simple math the league will spend a minimum of 300 Million a year in revenue sharing during the next CBA. Buying out and contracting five franchise would cost less than half that.
Oversimplistic. You're neglecting several different opportunity costs.

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12-14-2012, 12:01 PM
  #437
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Originally Posted by madhi19 View Post
When you think about it this is simple math the league will spend a minimum of 300 Million a year in revenue sharing during the next CBA. Buying out and contracting five franchise would cost less than half that.
I don't see why the league would have to buyout the contracting team. Just let the current owners operate it until they throw in the towel. No need to buyout anyone.

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12-14-2012, 01:09 PM
  #438
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I think contraction is generally bad for a business of any kind, although special circumstances may sometimes make it the right option.

If a business expands too rapidly to control, and assets are depreciated via internal issues, then trimming the fat would be a good option to then regroup and plan the next expansion.

But that last point should be the forefront of thought on the matter.

A successful business model is one that is bent on expansion.



My thoughts on the article are, foremost, that it is subjectively written to draw support from popularist thought that the NHL doesn't need the "Sunbelt" teams and that Cherry-esque mentality that hockey is Canadian and belongs in Canada (and perhaps the northern-most States).

Saying that there is "...weak nationwide interest in hockey in the U.S." may be true, but the conclusion that the author tries to force on the reader is that this means that contraction would be a good idea.

While it would be esthetically pleasing to see percentile profitability among the NHL clubs increase, it would do nothing for the actual growth of the NHL. That's the only thing that contraction would achieve. Removing the least profitable franchises would make the NHL seem like each team is proportionately more successful, but the League itself would not actually be more successful.


The important point I want to make here is that Sunbelt teams are integral components to the long-term success of the NHL. While initial interest is low (and may remain low for some time), the mere presence of hockey, along with proper marketing and promotion of hockey among the youth leagues will eventually cause an upswing in interest and allow the NHL to make notable progress in the Sports Entertainment Industry.

It's not something that will happen overnight.

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12-14-2012, 01:44 PM
  #439
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If you contracted 10 teams than the 18th, 19th, and 20th teams in the league would be on verge of bankruptcy as they would have to pay more money for players. And eventually you will just have 2 teams with this logic.

There is no reason for contraction. even the smallest revenue teams make plenty enough money to be successful with proper salary constraints.

Do players strike in the AHL? Do they strike in the Swedish or Swiss leagues? Players get fraction of the salaries in these leagues and they still exist.

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12-14-2012, 03:00 PM
  #440
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Quote:
Originally Posted by indigobuffalo View Post
I think contraction is generally bad for a business of any kind, although special circumstances may sometimes make it the right option.

If a business expands too rapidly to control, and assets are depreciated via internal issues, then trimming the fat would be a good option to then regroup and plan the next expansion.

But that last point should be the forefront of thought on the matter.

A successful business model is one that is bent on expansion.



My thoughts on the article are, foremost, that it is subjectively written to draw support from popularist thought that the NHL doesn't need the "Sunbelt" teams and that Cherry-esque mentality that hockey is Canadian and belongs in Canada (and perhaps the northern-most States).

Saying that there is "...weak nationwide interest in hockey in the U.S." may be true, but the conclusion that the author tries to force on the reader is that this means that contraction would be a good idea.

While it would be esthetically pleasing to see percentile profitability among the NHL clubs increase, it would do nothing for the actual growth of the NHL. That's the only thing that contraction would achieve. Removing the least profitable franchises would make the NHL seem like each team is proportionately more successful, but the League itself would not actually be more successful.


The important point I want to make here is that Sunbelt teams are integral components to the long-term success of the NHL. While initial interest is low (and may remain low for some time), the mere presence of hockey, along with proper marketing and promotion of hockey among the youth leagues will eventually cause an upswing in interest and allow the NHL to make notable progress in the Sports Entertainment Industry.

It's not something that will happen overnight.
Why is that? The league has been around for a 100 years without the sunbelt. My how did they ever accomplish that? No big TV contract no big payday for players. The league will do just fine with any number over 12.

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12-14-2012, 04:21 PM
  #441
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Originally Posted by atomic View Post
If you contracted 10 teams than the 18th, 19th, and 20th teams in the league would be on verge of bankruptcy as they would have to pay more money for players. And eventually you will just have 2 teams with this logic.
The reason contraction isn't an option today is because the NHL system is broken. And as you say... getting rid of the bottom 5 teams just means you end up with 5 new bottom teams that end up struggling.

If the NHL actually had a system in place to make the majority of the teams healthy and was fair to all teams, then yes you could contract a couple that just aren't working out, and it wouldn't hurt the other teams.

The authors' point was to contract 10 teams because it looks like the NHL and NHLPA will never come up with a system that can make anymore than 20 teams financially viable, so you might as well cut down to the number that does work. The thing that most people are missing is the point that no matter what the NHL league does, no matter how much the players give, it just may not be possible to be a 30 team league. And there is nothing wrong with that. Even when the NHL only had 21 teams, there were teams still losing money every year.

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12-14-2012, 04:25 PM
  #442
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Originally Posted by indigobuffalo View Post
The important point I want to make here is that Sunbelt teams are integral components to the long-term success of the NHL.
Only because the NHL believes that by having teams in these markets, they will somehow get a TV deal like the NFL that will give them enough money to never have to worry about anything anymore.

42 years and counting since the NHL started down the "BIG" TV contract dream.

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12-14-2012, 05:30 PM
  #443
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contracting is an awful idea, just creates new teams to struggle with the cap. cutting the cap down to 50/50 is the best thing and easiest thing to do for now. with lower profit teams now being able to spend as much as the other teams maybe they can compete and earn loyal long-term fans.

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12-14-2012, 06:06 PM
  #444
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The devils being mentioned is interesting in that they are coming off a 17 run of great success including 3cups but they still couldnt build a significant fanbase and are teetering on the brink of bankruptcy even coming off that sustained run!!!

And that is with a brand spanking new building in the middle of a huge transit hub!

They are in huge trouble once all their already amoung the oldest players in the nhl in Elias and Broduer retire and a prospect pipeline that has been in the bottom 5 in the nhl for about a decade now.


If Zajac follows Zachs lead and bolts which is highly likely then the Devils will really be in dire straits financially with even less people showing up and paying less $$ for tickets due to their lack of demand

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12-15-2012, 05:41 PM
  #445
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Originally Posted by JA#11 View Post
The devils being mentioned is interesting in that they are coming off a 17 run of great success including 3cups but they still couldnt build a significant fanbase and are teetering on the brink of bankruptcy even coming off that sustained run!!!

And that is with a brand spanking new building in the middle of a huge transit hub!
They were in the black and made a profit with hockey.
You are aware that the debt issue is the result of Lehman Bros and the financial crisis, while investing a ton of money into a new arena. They brought in more revenue last season then the Pens are Senators, and the season before that while being awful still pulled decant revenue without making the playoffs.
What sense would it make to contract a team that is profitable and growing (as opposed to losing money and shrinking), is normally in the top ten in revenue with a + operating income, when their financial problem is too much money tied to an new arena and ownership issues? That would just mean the NHL would have to put up the money anyway, and would never get anything in return.
If anything it would make far more sense to contract the Islanders, and even that does not seem necessary given that they arent a burden on revenue sharing anyway.



*I'm guessing you're still upset about the playoffs*


Last edited by Jossipov: 12-15-2012 at 06:09 PM.
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12-16-2012, 10:33 PM
  #446
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Originally Posted by Jossipov View Post
They were in the black and made a profit with hockey.
You are aware that the debt issue is the result of Lehman Bros and the financial crisis, while investing a ton of money into a new arena. They brought in more revenue last season then the Pens are Senators, and the season before that while being awful still pulled decant revenue without making the playoffs.
What sense would it make to contract a team that is profitable and growing (as opposed to losing money and shrinking), is normally in the top ten in revenue with a + operating income, when their financial problem is too much money tied to an new arena and ownership issues? That would just mean the NHL would have to put up the money anyway, and would never get anything in return.
If anything it would make far more sense to contract the Islanders, and even that does not seem necessary given that they arent a burden on revenue sharing anyway.



*I'm guessing you're still upset about the playoffs*
What a joke....debt is not an issue on a brand new state of the art arena unless people aren't showing up the way that is expected and devil fans still don't fill the arena the way they should.

For years all we heard was the location of the old arena was the reason for their pathetic attendance, even with all the success in the mid 90s until 2003, but now with a beautiful arena right smack in the middle of a huge transit hub and people are now whining about said arena debt as the cause of the devils problems....which is it???

And with the financial woes coupled with the face of the franchise and captain Parise bolting and Zajac likely to do the same it makes for dicey times to see how NJ is able to emerge from this as a viable business going forward.

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12-16-2012, 11:15 PM
  #447
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Fully support reducing the league to 20 teams.

At the same time, expand the AHL into A and B leagues of 20 teams each. Allow promotion/relegation between all three levels.

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12-16-2012, 11:54 PM
  #448
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What a joke....debt is not an issue on a brand new state of the art arena
It is if you paid a lot of money into it, and then lost money on other investments, meaning you need to refinance, which is already done this summer.

Quote:
Originally Posted by JA#11 View Post
And with the financial woes coupled with the face of the franchise and captain Parise bolting and Zajac likely to do the same it makes for dicey times to see how NJ is able to emerge from this as a viable business going forward.
They are in the black operating income, top ten in revenue, have a younger growing fan base, and arent a burden on revenue sharing. You cant find a different team to worry about? I mean, why exactly would the NHL move or contract a team that is making profit, has its own arena that it's tied directly to and operating, and is in a large market with more potential for growth?
As far as "faces of the franchises go", Marty is the face of the Franchise and aside from Kovy there is also a future possibility of a Henrique era in the future.....you never know...I mean, I hear he's pretty clutch

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12-17-2012, 01:55 AM
  #449
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Originally Posted by madhi19 View Post
When you think about it this is simple math the league will spend a minimum of 300 Million a year in revenue sharing during the next CBA. Buying out and contracting five franchise would cost less than half that.
and as an added, awesome, bonus... over 100 players would lose their NHL jobs. I like it.

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12-17-2012, 04:12 PM
  #450
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Fully support reducing the league to 20 teams.

At the same time, expand the AHL into A and B leagues of 20 teams each. Allow promotion/relegation between all three levels.
Promotion/Relegation will not work in North America

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