Rising NHL revenues both good news and bad
Apparently, as the NHL's powers that be have discovered this week, fans don't really matter as much as they think.
Not to the bottom line anyway.
Officially, there are only about one percent fewer fans coming to the NHL games now than after the lockout, when promotions and deep discounts helped lure them back. That's not bad, particularly during a time of year when the NFL and college football dominate the sports landscape -- although the figure doesn't seem to include the numbers from places like St. Louis, Florida, Long Island, Chicago and Phoenix, where they obviously do a good job disguising people as empty seats.
Meanwhile, television ratings, which have long been dismal in the U.S., started heading south even in Canada this season before winter kicked in up there.
And yet, NHL teams are making more money than ever before.
No wonder the mood at the NHL Board of Governors annual meeting came across as rather sunny when the league's brain trust retreated to the hockey heartland of Palm Beach, Fla., for their version of a reality check. Especially once it became known that a number of teams are actually bringing in more bucks than last season, to the benefit of all.
While the league guards details of its member finances zealously, it has to come clean to the players association now that everyone is in one big happy family partnership, and that led to the revelation. There were no specifics, obviously, but commissioner Gary Bettman and union chief Ted Saskin both were able to express confidence that the salary cap, which is tied to a percentage of overall league revenues, would increase next season based on current revenue projections for this one.
"It's only the beginning of December, but it appears that revenues will be up," Bettman told reporters. "I do expect the cap to go up, but I don't know by how much."
The number that floated around most of the week was about four to five percent, which would raise the cap level to around $47 million. But what seems to be a positive trend might actually be a bit illusory because it results from price hikes that have papered over the large pockets of empty seats in a number of arenas.
"You don't want to rely on higher revenue growth solely from ticket prices, especially in the face of stagnant attendance," said Patrick Rishe, an associate professor of economics at Webster University in St. Louis and owner of a sports consulting company. "That is a concern."
This season, all but five of NHL's 30 teams raised ticket prices, and while the biggest increases have generally been for the premium seats that usually belong to corporate interests, it suggest that the NHL is moving closer to becoming inaccessible to the core base it has relied on.
"Teams are run on luxury boxes and club suites," said John Vrooman, a Vanderbilt economics professor who focuses on sports economics. "The marginal fan is becoming less and less important because the arena structure has turned hockey demand upside down.
"It used to be the regular fan was important. Now the corporate fan is what counts. The marginal fan in upper deck, the one you see on the videotron, doesn't really matter."
But that approach might be difficult to maintain. David Carter, executive director the USC Sports Business Institute, doesn't believe the average fan is getting squeezed just yet, because most of the price increases have been absorbed by those who aren't price-sensitive. But he added that the NHL still has to figure out which sector is critical to supporting individual teams.
"It's undeniable it would be a drag on the future business of the NHL if these arenas are only filled with people on steep discounts, the face painters and the corporate folks," Carter said. "That may not be enough to build a sustainable, well-rounded fan base."
Certainly the NHL has developed new streams of revenue from sponsorships, European television outlets, satellite radio and deals with websites like YouTube, but it remains a gate-driven league. And while the new CBA provides for revenue-sharing from the haves to have-nots for limited periods of time, it also elevates the salary cap limits at both ends.
Ultimately, that hinders teams from keeping themselves affordable to many of those who were told that would be their reward for standing by the league.
"At some point, the NHL has to address the fact the cost of that individual family may be too high," said Carter.
Or at least consider other notions that might mollify those fans. The decision-makers didn't really get to things like hits to the head or officiating during their meetings, but changing the schedule to ensure that each team plays everyone else was bandied about seriously.
Ultimately though, the discussion was put off because the governors couldn't reach the two-third majority needed to effect a change.
"My club travels too much right now," said Anaheim GM Brian Burke.
The governors also failed to support a pet project of Bettman, which called for the league to eliminate the reseeding process that takes place after each playoff round. Presumably that would make life a lot easier for the television types who could project potential matchups at the start of the postseason, but the byproduct would have been to simplify things for casual or newer fans.
Then again, the fans don't really matter. At least until they stop digging into their pockets.
