Thursday, November 08, 2007

The big small markets

But too much of anything good can be a problem, and the NHL appears on the brink of a significant dilemma. The rise of the Canadian dollar, which can be partially attributed to the slump of the U.S. dollar, is bound to put several small-market U.S. clubs in a bind.
Ten years ago, a "small-market NHL team" meant something quite a bit different than it does today. And as what are being called the American small market teams get squeezed by an ever-rising salary floor, my guess is we're going to be hearing an awful lot about these quaint little burghs trying to make it in the big bad world of professional hockey.

The CBA uses something called DMA, or designated marketing area, to measure the size of markets for revenue sharing purposes, and "if the Club is in a DMA ... with a value of greater than or equal to 2.5 million households," it is ineligible for revenue sharing funds.

Of the 24 American cities with NHL franchises, this provision excludes the four largest markets: New York, Los Angeles, Chicago and Philadelphia. No revenue sharing for the Rangers, the Islanders, Devils, Kings, Ducks, Blackhawks or Flyers.

Dallas, San Jose and Boston are closing in on this marker as well.

A look at the NHL's 21 U.S. markets as ranked by DMA:
1. New York - 7.4 million
2. Los Angeles - 5.6 million
3. Chicago - 3.5 million
4. Philadelphia - 2.9 million
5. Dallas - 2.4 million
6. San Jose - 2.4 million
7. Boston - 2. 4 million
8. Atlanta - 2.3 million
9. Washington - 2.3 million
11. Detroit - 1.9 million
12. Phoenix - 1.8 million
13. Tampa Bay - 1.8 million
15. St. Paul - 1.7 million
16. Miami - 1.5 million
18. Denver - 1.5 million
21. St. Louis - 1.2 million
22. Pittsburgh - 1.2 million
28. Raleigh - 1.0 million
30. Nashville - 0.97 million
32. Columbus - 0.91 million
50. Buffalo - 0.64 million
The real small markets in the U.S., using the same DMA designation the league uses to determine its big dogs? Buffalo, Columbus, Nashville, Carolina and Pittsburgh.

Those, however, aren't the league's welfare cases (aside from those plucky Predators, of course).

Revenue sharing paid out big time to Music City, sure, but Washington has had a finger in the pot two years running. St. Louis, a bigger city than four Canadian markets, received roughly $10-million after both 2005-06 and 2006-07.

Phoenix, Atlanta and Florida, well, they enjoy the league-sanctioned dole as much as anyone.

Canadian markets aren't categorized using DMA but rather something known as BBM, which makes direct comparisons of market size difficult. In terms of population, Toronto is in the Philadelphia/Dallas range, Montreal with Detroit/Washington/Phoenix, and Vancouver compares to maybe Denver or Pittsburgh. The other three Canadian cities would all be in Nashville territory, comparatively, in a measure like DMA.

Which is why "small market" isn't a universal phrase when it comes to hockey, not when a place like Atlanta, among the largest 60 or so cities in the world, fits the description.

At least in the NFL, revenue sharing benefits the little guy, the Jaguars, Packers and Bills, with the Cowboys and Redskins ponying up big time to keep them in the game. That makes logical sense — unlike hockey, where small towns are the moneymakers and Ottawa props up a metropolis like Phoenix that can't get its act together, 11 years in.

It all reminds me of a great quote from NHL player agent Ian Pulver:
"The fact that the Edmonton Oilers are a revenue-share provider, and considered a big market in the National Hockey League ... that doesn't make sense to me," Pulver said. "The Edmonton Oilers are a small market who should forever receive money in any professional sports league. When the Edmonton Oilers become a revenue-share recipient for the right reasons, that will be a signal that the league is headed in the right direction."
It's not going to happen. Not in the NHL. Not when, in the U.S., "small market" oftentimes acts as a stand in for "big market, indifferent to hockey."

Why not call it like it is?


At 4:16 a.m., November 08, 2007, Blogger Andy Grabia said...

Really interesting post, James. Just fantastic. So what is the BBM, and why do they use that instead of the DMA?

At 8:04 a.m., November 08, 2007, Blogger FAUX RUMORS said...

1) Could not the Isles and Devils, and guess the Rangers as well argue that the numbers for their markets should be divided by three since they all ostensibly competing for the same fans?
2) Do they calculate in parts of southern Ontario for the Sabres?

At 8:30 a.m., November 08, 2007, Anonymous Katebits said...

Wow. Interesting.

At 9:27 a.m., November 08, 2007, Blogger Matt said...

I was coming to ask the same question that Faux Rumors did.

I'd really like to see the "map" that the NHL uses for their calculations. Is there one that's made publicly available?

25% of Sabres STH's are from Southern Ontario, and there's a good number from the Rochester area as well.

At 9:55 a.m., November 08, 2007, Anonymous Anonymous said...

Bravo James.
I would think BBM would be the Bureau of Broadcast Measurement which is how radio and TV ratings are compiled in Canada.
They wouldn't have the American equivalent here. So they would use this, I would guess.
Maybe BBM stands for something else as well.
Last night I caught part of that McCown show on the radio and they were laughing about the city councillor from Nashville saying...Florida, Phoenix and Atlanta were in far worse shape and how those words would make Bettman's head explode.
They also laughed at Bettman for being indignant when Brunt suggested to him that the Big Six in Canada generate 33 per cent of the league's revenues. Bettman "wanted to jump across the table" metaphorically speaking to get at Brunt. Also I guess Eugene Melnyk said the six Canadian teams are now generating 40 per cent of the revenue.
Nice that we get to subsidize the St. Louis Blues too.
Hey but we can't support another team in Southern Ontario according to the sawed off Dictator who is owned by the Welfare Bums of the league.

At 10:22 a.m., November 08, 2007, Blogger Darrell said...

Melnyk SPECULATED that Canadian Revenues could be as high as 40%. I think it certainly shows that the 1/3rd number, even if not quite reached last year is going to be obliterated this year. This should come out once the first escrow meeting takes place in a few weeks.

At 10:24 a.m., November 08, 2007, Anonymous Nick said...

I wonder how the league determines the DMA.

St. Paul/Minneapolis, for example, has a metro population of 3.5 million; Pittsburgh, over 2 million; Buffalo 1.2 million. And these populations don't take into account even wider surrounding areas that certainly support these teams: for St. Paul, the entire state of Minnesota; for Buffalo, Rochester and SW Ontario.

At 11:04 a.m., November 08, 2007, Anonymous paul said...

Nick: DMA is the number of households, not population.

At 1:15 p.m., November 08, 2007, Anonymous Gerald said...

Melnyk SPECULATED that Canadian Revenues could be as high as 40%. I think it certainly shows that the 1/3rd number, even if not quite reached last year is going to be obliterated this year.

Bettman was on the FAN morning show this morning and specifically addressed that. He said he had heard that Melnyk said that and asked his people to run the actual numbers. He flat out said that Melnyk was mistaken and that the actual numbers were "materially" lower than that.

THe idea that Bettman was "jumping across the table" about the 33% stuff is laughable. He was composed throughout the interview, whereas Brunt was coming out of his shoes (mostly because Bettman was verbally manhandling both Brunt and McCown). They are still obviously smarting.

At 2:42 p.m., November 08, 2007, Anonymous Frank said...

Hey Gerald, who are you going to believe - Bettman or Melnyk - both have proven they are very good at creative accounting!!

One should never compare NFL revenue sharing with NHL revenue sharing. In the NFL the vast majority of revenues are shared equally by ALL clubs regardless of their financial position. In fact the NFL is the closest thing to socialism there is in the US!

In the NHL very few revenues are shared, and they only go to a hand full of teams in financial distress.

In the NFL all merchandising, TV revenues and gate revenues are shared equally by ALL the clubs. In the case of gate revenue the home team keeps 60%, the visiting team 40% - exclusive of suites and premium seating, which are all retained by the home team.

This has allowed the small market teams like Buffalo and Green Bay to pay a rapidly escalating minimum salary cap without problem, and still make money.

However, this sharing plan is starting to break down. Many of the big market teams have or are constructing new stadiums where 80% of the gate revenue will come from suites, premium seating and seat licences - all non sharable.

The planned new Dallas stadium is a prime example of this. Also, Jerry Jones is leading a revolt of the big market teams to get even more revenues out of the revenue sharing formula. This is the real threat to teams like Buffalo and Green Bay.

Where Bettman made his mistake is that he took the NFL cap system and "bolted" it onto the NHL without understanding that minimum caps only work in the NFL because of the large amount of revenue shared equally by all teams. When applied to the NHL - where very little revenue is shared - it will become disasterous for the low revenue / growth teams.

At 3:44 p.m., November 08, 2007, Anonymous said...

To many Canadian fans thought Bettman was going to be the knight in shining armour for the small market Canadian teams with the salary cap and revenue sharing.

He couldn't care any less about the Canadian teams, just ask Winnipeg or Quebec. For Gary its all about covering over the glaring error of expansion/relocation that he spear headed. I'm sure he is actually pleased that the Canadian teams are bleeding to support the already dead horses he created.

The NHL has a giant piano tied to its ass, and the rope needs to be cut.


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