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08-22-2012, 11:18 AM
  #1
surge1979
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Business of Hockey: Jets Edition

With all the CBA talk going on I decided to put together a projection of the Jet's revenues. I wanted to know what the implications of a new CBA could have on the team. I think these numbers provide a good ballpark but obviously they aren't going to be exact.

I basically used public information about their ticket and suite revenues and a mixture of Coyotes bankrupcty information and other leaked information over the years (i.e. the value of arena naming rights, local TV contracts in similar markets, etc). The Coyotes information was obviously adjusted for differences in attendace, etc. Without further ado:

Ticket Revenues
Season Tickets $48,708,000
Game Day Seats $2,156,000
Club Seats Fee $500,000

Corporate Revenues
Luxury Boxes $9,000,000
Advertising $10,000,000
TSN Jets Contract $10,000,000
Naming Rights $3,500,000
Merchandise $2,500,000

In-Game Revenues
Parking $387,200
Concessions $3,000,000

Revenue Sharing
Central Revenues $10,000,000
Bottom 15 Share $0

Other Revenues
Waiting List Fee $525,000
Seat Deposit Int. $300,000
Seat Transfer Fee $250,000
15% Suite Fees $228,000

Direct Subsidies
City Ent. Tax Ref. $5,800,000
City Bus. Tax Ref. $250,000
City Tax Assess. $841,000
Prov. VLT Rev. $4,000,000

Total $111,945,200

-------------------------------------

If you accept that the non-player costs of running a hockey team are ~$35M per year, and add in their payroll of $53M - it looks like the Jets ran an operating profit of $25M (before interest, taxes and amortization).

So the present situation looks really good. A couple of risk factors:

1. The market is basically running at capacity. There is room for more revenues from the annual increases is ticket prices (3%) and from playoff games (YES!) but there won't be any new $35M / year TV contracts - we simply don't have the population to support it.

2. The CAD at par is awesome for the Jets but a slip back down to 85 cents is a fairly big hit - could probably still run at a break even or small profits; a fall to 70 cents would likely put them into a loss position - especially down the road when the floor on players salaries is in the $70M USD range.

Discuss.

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08-22-2012, 11:52 AM
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Gm0ney
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That looks pretty solid. Nice analysis. A couple of things:

What's the deal with parking? How many spots does TNSE currently own/control? I know they're building a 400 stall parkade as part of that new development on the north side of Portage across from MTSC. That will probably be worth $200,000 / season by itself (400 x $12 x 44 games). But what spots were they selling last year?

Does $35 million cover non-player salaries/costs? There's travel, rookie camp, front office salaries, coaches, AHL costs, scouting department, medical & rehab, marketing, game-day staff (ushers, security, cleaners, etc.), facility improvements, insurance...?

That 3% increase in ticket prices is an extra $1.5 million for 2012-2013 and compounds in future years (ticket prices will double every 24 years at 3%).

Assuming the $35 million in non-player-salary costs, even spending to the cap, they'd still be netting $8,000,000.

Each playoff home game would generate about $2.5 million in revenue (based on the playoff ticket costs the sent around to STH's in the spring). So a playoff appearance is worth $5 million minimum (2 home games) and about $40 million at the top end (16 home games).

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08-22-2012, 12:08 PM
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$3,000,000 on concessions would work out to $4.76 per person per game.

Seems a little soft.

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08-22-2012, 12:11 PM
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Quote:
Originally Posted by truck View Post
$3,000,000 on concessions would work out to $4.76 per person per game.

Seems a little soft.
I would at least double that
If not triple

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08-22-2012, 12:19 PM
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Hank Chinaski
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Quote:
Originally Posted by truck View Post
$3,000,000 on concessions would work out to $4.76 per person per game.

Seems a little soft.
Centerplate (MTSC concessionaire) is going to take its cut, or more specifically provide TNSE with a fixed percentage or sum from its revenue. Even still, that number does seem a tad conservative. IIRC, True North takes an extremely large cut of all liquor sales at MTSC.

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08-22-2012, 12:34 PM
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Quote:
Originally Posted by Hank Chinaski View Post
Centerplate (MTSC concessionaire) is going to take its cut, or more specifically provide TNSE with a fixed percentage or sum from its revenue. Even still, that number does seem a tad conservative. IIRC, True North takes an extremely large cut of all liquor sales at MTSC.
Good point. Concessions are always lower than people think. Generally, concessions are managed through concession agreements to third parties (in this case, Centerplate), and the Jets gets a percentage of sales bought during hockey games usually with a minimum guarantee.

No doubt, the $3,000,000 figure could be low, but there's no way its double or triple. I've based on some data that was leaked by Carolina a few years ago. They were making $2.5M and so I adjusted it for attendance. EDM bloggers seem to peg their number at $3M to $3.5M for concessions. Either way, I think we're + or - $500,000 here, which is basically a rounding error.

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08-22-2012, 12:41 PM
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Does any one else remember the article that Scott Oake wrote during the ROTJ campaign last year? He estimated that a team in Winnipeg would generate approx. 98M per season. This total shows just under 112M. It makes me smile because the naysayers jumped all over Scott Oake for these dreamy figures he pulled out of thin air.

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08-22-2012, 12:43 PM
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Quote:
Originally Posted by King Woodballs View Post
I would at least double that
If not triple
Count me in for $100 per game. For 11 games.....ouch, thats a lot of beer

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08-22-2012, 12:44 PM
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One thing thats missing from the revenue equation is the Moxie's lease. I have no clue what they're paying the Jets to lease that space but a guarantee its 3 times what it used to be. Anyone know?

The other line item that seems to get a lot of attention is merchandise. Jets merch was literally flying off the shelves last year but most of that revenue goes to NHL Central Revenues and is divided up equally amongst all 30 teams. THe NHL and its member clubs are licensors, and are paid accordingly. Essentially, the Jets Stores get to keep the 20% retail markup and any of the customizing revenues...but its not as high as most people think.

Leaked data from Carolina had their merchanise revenue at $667,000K in 2010. I've also seen reports that the Leafs / Habs make about $3.5M on merchandising....so I settled on $2.5M.

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08-22-2012, 12:46 PM
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Quote:
Originally Posted by surge1979 View Post
EDM bloggers seem to peg their number at $3M to $3.5M for concessions. Either way, I think we're + or - $500,000 here, which is basically a rounding error.
Hmm. I'm not exactly sure what the Oilers arrangement is, but my guess is that their concessionaire pays out a sum to Northlands (Rexall landlord), who then give the Oilers a set amount. Then again, perhaps the agreement is that the Oilers receive the full cut of what the concessionaire pays out, so who knows.

Great work, btw. Even if the numbers aren't exact, it serves as a great starting point.

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08-22-2012, 12:49 PM
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Joe Hallenback
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I was shocked to go to Jet games this year and see EVERYONE spending gobs of Money on concessions. Beers were everywhere all game long. I would estimate the cost per person at Jets games at least 40 dollars per person

That might even be conservative

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08-22-2012, 01:00 PM
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Hank Chinaski
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Re: luxury suite revenue, the average price is reportedly 180K/year, and there are 57 total suites.

http://www.winnipegfreepress.com/loc...123531629.html

Quote:
However, in all the renovations, True North was able to boost the overall number of suites to 55 from 48. If you include two party suites, which may be sold to companies on the luxury-box waiting list, the suite count is now 57.
http://www.winnipegsun.com/2011/06/01/taking-the-plunge

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With 48 suites, at an average of around $180,000 each, True North stands to take in more than $8.6 million from the city’s well-heeled.
57 suites * 180K = $10.26M, so the $9M figure may also be conservative. Then again, the average suite price may have dropped slightly, given that the large party suites were downsized.

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08-22-2012, 01:12 PM
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I know we are talking jets here.. But TNSE profits from other events such as concerts.

I wonder how TNSE views these revenues and if they would be used to support the jets during a tough year (dollar drops etc).

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08-22-2012, 01:13 PM
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Quote:
Originally Posted by Joe Hallenback View Post
I was shocked to go to Jet games this year and see EVERYONE spending gobs of Money on concessions. Beers were everywhere all game long. I would estimate the cost per person at Jets games at least 40 dollars per person

That might even be conservative
$40 is pretty accurate, between myself and my girlfriend at games I would bring $80 and it would be gone by the end of the night.

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08-22-2012, 01:13 PM
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How did you calculate the ticket revenue? Just curious..especially the game day number.

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08-22-2012, 01:17 PM
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The building was extremely profitable before the Jets were in there. Once TNSE completes the SHED project I can see the entire business being able to sustain the Jets through poor years easily. That was there general idea to not just rely on revenue via the NHL games but the whole business as a whole.

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08-22-2012, 01:22 PM
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Quote:
Originally Posted by Joe Hallenback View Post
I was shocked to go to Jet games this year and see EVERYONE spending gobs of Money on concessions. Beers were everywhere all game long. I would estimate the cost per person at Jets games at least 40 dollars per person

That might even be conservative
I think averaged over everyone that $40 mark is high. Lots of people sitting around me don't buy any concessions at all. I'm usually good for a pair of $7 beers at the start (one for me, one for whoever is with me) and a pair in the third period, so $28/game.

But at intermission I'm over at Tavern. Honestly I'd be happy supporting the Jets more and would easily buy beer there and eat the $3 difference between what Tavern is serving but the washroom situation is quite simply too brutal. I've had that conversation about a hundred times with guys at Tavern - they'd all rather support the team if only they could have relatively quick access to washrooms.

I'd say the washroom situation probably costs the Jets about half their beer revenue, at least for those at the south end. I imagine a number of the north end seats either head to Moxie's or across the street if they can.

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08-22-2012, 01:30 PM
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Quote:
Originally Posted by Hank Chinaski View Post
Re: luxury suite revenue, the average price is reportedly 180K/year, and there are 57 total suites. 57 suites * 180K = $10.26M, so the $9M figure may also be conservative.

Then again, the average suite price may have dropped slightly, given that the large party suites were downsized.
Perfect. Even 55 suites at $180k is ~$10M. I was using old information in my estimate (avg suite revenues of $163K.) Lets go with $10.2M.

The really big unknowns are the TSN Jets Contract, Advertising and Arena Naming Rights and Parking.

TV: $10M. There is not a great deal of public information on local TV contracts but media reports in Alberta suggest that both the Oilers and Flames get about $10M in local TV revenues. That seems justifiable, given that MTL has a much older / cheaper deal and they still get $20M / yr, albeit with much higher viewers per househould. Plus, you've gotta figure that the radio rights are worth good money too, so I figured $10M was a safe bet.

Advertising: $10M. I took this directly from Carolina's 2010 revenues of $6.1M and adjusted upwards based on inflation and the relative size and intensity of the market. Nothing scientific, and still ballpark...could be agressive but I'm conservative in other areas.

Arena Naming Rights: $3.5M Again, very little public information on this. True North trumpeted the MTS contract as setting a new benchmark for naming rights in middle markets in the NHL. Paledeau has agreed to pay $2.5M for the QC naming rights if they get an NHL team. Taken those things together, I settled on an estimate of $3.5M.

Parking: $387,000. I based my estimate on 1100 spaces at $8/each. The truth is, I don't actually know how many spaces True North owns but I was guessing on the surface lot south of CTV and the ramp just west of the MTS Centre. Anyone have an idea?

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08-22-2012, 01:34 PM
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projections based on salary cap, 5percent growth on jets income and 7 percent league revenue growth avg.

2012-2013 jets 112.00 nhl 3.300 cap 57: 70-54 cap 43: 55-39
2013-2014 jets 117.60 nhl 3.531 cap 57: 75-59 cap 43: 58-42
2014-2015 jets 123.48 nhl 3.778 cap 57: 80-64 cap 43: 62-46
2015-2016 jets 129.65 nhl 4.042 cap 57: 85-68 cap 43: 66-50
2016-2017 jets 136.14 nhl 4.325 cap 57: 90-74 cap 43: 70-54
2017-2018 jets 142.94 nhl 4.628 cap 57: 96-80 cap 43: 74-58
2018-2019 jets 150.09 nhl 4.952 cap 57: 102-86 cap 43: 79-63
2019-2020 jets 157.59 nhl 5.299 cap 57: 109-93 cap 43: 84-68
2020-2021 jets 165.48 nhl 5.670 cap 57: 116-100 cap 43: 89-73
2021-2022 jets 173.79 nhl 6.067 cap 57: 123-107 cap 43: 95-79


cap43 is current owners offer
cap 57 is current percentage for cap




Thats best scenario, I do not think the jets can maintain a 5 percent growth but you never know.

Lets say worst scenario. so looking at 2021. lets say canadian dollar drops to .8 That would means the jets revenue is only 139mil. so the current cap would grow to 107 as the min. and the same 35 mil in expenses, the jets would be losing money.

I'm no business person but i would think expenses increase over time. and some years you will not get that 5 percent increase in revenue. So you could say its very fickle, alot can go right for the jets or go wrong. One thing for sure is you should side with the owners and hope the cap percentage goes down for the long term viability of the jets.

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08-22-2012, 01:35 PM
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Quote:
Originally Posted by Lorenzo1000 View Post
How did you calculate the ticket revenue? Just curious..especially the game day number.
I calculated the season ticket revenue by using 13,500 seats * average ticket price of $82 * 44 games = $48.7M.

For the game day ticket number, I used 500 seats * average ticket price of $98 * 44 games = $2.156M

The difference in per seat revenue is basically the season ticket price discount.

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08-22-2012, 02:19 PM
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Regarding the value of CDN dollar. I think the league has measures in place for Canadian teams should the dollar plummet again in the future.

With the American economy where it is right now..... I think you'll be hard pressed to find anyone that would predict another free fall of the Canadian Dollar. The only way the dollar drops would be thru the actions of the Bank of Canada itself....... if it artificially drives up interest rates then our dollar would fall..... can't see that happening at all. Interest rates in both countries have (for the most part) trended in similar fashions.

The one way to leverage against a low CDN dollar would be purchase some greenbacks right now.

Example..... 5M USD can be purchased for approx. 5,044,500 CDN.

If our dollar went back down to $0.80 that 5M USD would then set you back 6M CDN.

I'd like to think that our extremely wealthy would be prepared on the off chance our dollar went back into the tank.

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08-22-2012, 02:43 PM
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Quote:
Originally Posted by JMT21 View Post
Regarding the value of CDN dollar. I think the league has measures in place for Canadian teams should the dollar plummet again in the future.

With the American economy where it is right now..... I think you'll be hard pressed to find anyone that would predict another free fall of the Canadian Dollar. The only way the dollar drops would be thru the actions of the Bank of Canada itself....... if it artificially drives up interest rates then our dollar would fall..... can't see that happening at all. Interest rates in both countries have (for the most part) trended in similar fashions.

The one way to leverage against a low CDN dollar would be purchase some greenbacks right now.

Example..... 5M USD can be purchased for approx. 5,044,500 CDN.

If our dollar went back down to $0.80 that 5M USD would then set you back 6M CDN.

I'd like to think that our extremely wealthy would be prepared on the off chance our dollar went back into the tank.
If the Canadian dollar drops, league revenues will also drop - the 7 Canadian teams probably account for 40% of league revenues (based on this article which states that the 6 Canadian teams accounted for 33% in 2010: http://www.thestar.com/sports/hockey...h-is-in-canada ). A 20% drop in the Canadian dollar would reduce the salary cap by about 7% (assuming players retain a 57% share of revenues).

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08-22-2012, 02:51 PM
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Quote:
Originally Posted by surge1979 View Post
I calculated the season ticket revenue by using 13,500 seats * average ticket price of $82 * 44 games = $48.7M.

For the game day ticket number, I used 500 seats * average ticket price of $98 * 44 games = $2.156M

The difference in per seat revenue is basically the season ticket price discount.
I believe the season tickets are capped at 13,000 (could be wrong though). I assume you took out 1000 seats for the suite seating which leave us at about 1000 seats left. I also believe they hold back 500 or so for the nhl, players, etc so 500 may be correct for walk up.

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08-22-2012, 03:03 PM
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Quote:
Originally Posted by Hank Chinaski View Post
Hmm. I'm not exactly sure what the Oilers arrangement is, but my guess is that their concessionaire pays out a sum to Northlands (Rexall landlord), who then give the Oilers a set amount. Then again, perhaps the agreement is that the Oilers receive the full cut of what the concessionaire pays out, so who knows.

Great work, btw. Even if the numbers aren't exact, it serves as a great starting point.
Of note the Oilers concessions are run by Dominion Sportservice a division of Delaware North Companies. Of course Delware North is owned by Boston Bruins owner and NHL Board of Governors Chairman Jermey Jacobs. Jacobs also has his hands in the Predators concessions.

http://dss-edmonton.com/DSSWebSite/D...ce_Canada/?p=1

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08-22-2012, 03:04 PM
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Good thread I am running but have a minute for a few points.

Is the $4 million in VLT revenue the new deal taking into account the new casino in Centre place?

The luxury suite renvenues would need to be amortized against all events in the MTS centre no? The number is accurate but I believe the suite fees allow access to all events.

the consession deal with Centre plate generally is a fixed term (10 year) where centre plate builds out the leaseholds and equipment and TNSE would get a % of gross sales. all the costs of goods sold, labour, Managment etc would come out of centre plates end. I have seen some of these deals very attractive for the owner (TNSE) where they can get 46% to 48% of gross on total sales that can reach upwards of $30 million annually for a busy venue like the ACC. I think you could assume half that number for MTS centre but you would need to factor in all events when breaking out your Jets revenue model. to be clear the Jets events would drive a heavy % of the sales though given the volume of guests, demographics, 3 revenue rushes (pregame and two intermissions).

merchandise one time only would be significantly north of your number. according to Chipman in a season ending interview the Jets were the number 1 selling brand in the NHL this past season. This is only relevent when it comes to sales in Jets gear stores where the Jets get full retail markup. I would guess this past season the Jets might have netted $7 million profit off merch sales but that will normalize in years to come.

Sponsorship is interesting and we might be light in that area. Even things like rink boards for a pair (they sell them in sets of 2) increased to $250,000 per season depending on the location. Major sponsors like Air Canada were rumored to have had a $1 million dollar deal (not sure what they got for that). These are just two examples of pretty decent money changing hands.

I do know in pretty much every catagory this past season the reality exceeded TNSE's most optomistic projections.

One last thing is that entertainment tax charged and refunded to TNSE by that I mean do they charge for and capture the fee or is it revenue neutral? If so it might need to be deducted from our income statement.

We will have to see what the recurring revenue model will be but with the lowish payroll and high revenue numbers it is safe to say TNSE got off to a very good start

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