Wednesday, December 19, 2007

Canadian contribution: 28 per cent

With the NHL having won its hard salary cap the hard way, Kelly's job is to drive revenues to keep players' salaries growing. The source of the NHL's revenue growth is no secret. Kelly pointed out the six Canadian franchises represent 28 percent of the revenues (or 4.7 percent each). The other 24 U.S. teams make up the other 72 percent, or 3 percent each.

Street and Smith's Sports Business Journal reported at the most recent NHL board of governor's meeting, revenues were projected for the current season at $2.53 billion — a 10 to 11 percent increase over the previous season.
Players would receive a higher cut of NHL revenues (57 per cent) if they top the $2.5-billion mark, which would also mean a higher salary floor and ceiling for 2008-09.

21 Comments:

At 7:47 PM, December 19, 2007, Blogger Paul Nicholson said...

Aside from the usual banter about exchange rates being favorable and such right now (and yes, i am sensitive to this topic)...

Isn't this pretty nationalist and/or close to racist or something?

I understand (though don't agree or like it) when you come after "non-traditional" hockey markets in the south and western US. Any analysis there? That would really prove your point.

But it sounds like you're saying that Buffalo, New York, Colorado, Detroit and any other US cities are just mooching off the mighty Canadian teams.

Again, i refer you to this map of the history of the NHL for perspective on the US vs Canada.

I would LOVE Canada to have more hockey teams. I would also love more of the US teams to be more financially stable.

Why can't we all just get along?

 
At 7:51 PM, December 19, 2007, Blogger Doogie said...

No offence, Paul, but what the bloody fuck are you talking about?

 
At 8:00 PM, December 19, 2007, Anonymous Dave said...

Kelly pointed out the six Canadian franchises represent 28 percent of the revenues (or 4.7 percent each).

More like Toronto 27 percent; Montreal, Ottawa, Calgary, Edmonton, Vancouver 0.2% each.

 
At 8:07 PM, December 19, 2007, Blogger Andrew Bucholtz said...

Paul, I don't think James is being unfair here: he merely pointed out what the numbers are. Even if you don't consider where those teams are located, having 20 per cent of your teams providing 28 per cent of your revenue is certainly worth looking into: the fact that those teams are north of the border only adds a political dimension to this. Everyone involved with the NHL (including Kelly and the PA) wants its revenues to grow, so logically they'll be looking at where their profitable markets are and where they're losing money. I wonder if this might persuade Gary and co. to take another look at the comments he tossed out there a while ago about returning to Winnepeg and Quebec City? This doesn't devalue the contributions of franchises like New York, Colorado, and Detroit, which will be key to having any presence in the U.S., but it raises questions about those ones that can't attract fans and are only keeping their heads above water via revenue sharing. It's impressive that league revenues are projected to increase by so much given the dismal attendance numbers in many markets and the continued lack of a national TV deal: maybe the NHL isn't in as bad shape as it seems to be in.

 
At 8:13 PM, December 19, 2007, Anonymous Anonymous said...

Gee, would those revenues be increased by the incredible jump in the value of the Canadian dollar this year?
I'm sure Tom Benjamin will examine this issue.
Essentially if you consider the dollar is at par now compared to 80 cents when the lockout started, that is where the revenue increase is coming from and why Bettman does not want another team in Canada.
Another team in Canada generates more revenue makes the minimum level much much higher and basically screws the small markets in the US.

 
At 8:56 PM, December 19, 2007, Blogger James Mirtle said...

I understand (though don't agree or like it) when you come after "non-traditional" hockey markets in the south and western US.

Paul, you cannot come here and post unsubstantiated nonsense like this, especially not on a post that simply provides some economic information that's been debated at length here. That Paul Kelly is telling us Canadian teams make up 28 per cent of the league's revenue stream is of note, and no further analysis is needed other than to provide the link.

How's about you prove your point that I'm being "close to racist" and coming "after non-traditional hockey markets" by posting this information?

 
At 9:40 PM, December 19, 2007, Blogger Paul Nicholson said...

Sorry guys. I'll eat some crow here. I over reacted. Been a rough few months for Preds fans (and tonight vs Chicago isn't looking good on the ice either). I read things that weren't there that i've heard too many times on other blogs and forums. Heard a little here, but not really from you James.
-------------
To be more on topic, i don't think it is terribly unusual for 20% of the markets to make up 28% of revenue. Maybe not. I'd be interested to see other sports franchises. I know in the general sales world the 80/20 rule holds pretty true. 20% of your customers are responsible for 80% of revenue.

I think the problem in the league (and i know Nashville is a huge violator here) isn't what percentage of the total revenue comes from which franchises, but what percent of franchises are profitable.

 
At 11:49 PM, December 19, 2007, Blogger auxlepli said...

Well I think if a team is going to relocate or the NHL expands again, Canadian cities need to be looked at more seriously. In my opinion they were previously dismissed out of hand. It also seems to me that they should be looked at every bit as much as U.S. cities, and should be looked at more than southern U.S. cities. Still, the NHL needs to make itself healthier in all markets before expansion should be considered.

 
At 12:02 AM, December 20, 2007, Anonymous Anonymous said...

Paul raises an excellent point: it's probably not unusual at all for 20% of the teams to generate 28% of the revenue.

In fact, I would be an enormous amount of money that in baseball the numbers are even more skewed than that.

 
At 1:06 AM, December 20, 2007, Blogger James Mirtle said...

How about when half those cities are the smallest markets in the league?

 
At 8:18 AM, December 20, 2007, Blogger Meg said...

James, while I think the smaller markets comment is certainly valid, it's also one of the reasons why I think it would be much more interesting to see contribution broken down on a team by team basis rather than a Canadian vs. American basis.

The Canadian vs. American breakdown tells us hockey is more popular in Canada and says something about the current value of the Canadian dollar, but let's be honest: is that anything we didn't already know? It seems to me like it's pretty much a statement of the obvious. I'd be much more interested in knowing what individual teams are doing.

 
At 8:24 AM, December 20, 2007, Anonymous Gerald said...

For the record, and to defend James, it was I who brought the link to James' attention and requested/suggested that he post it.

Both here and on HF and on Benjamin's board where I frequently post, for the past year I have been deconstructing the ridiculous notion that CDN team revenues were 1/3 of NHL revenues. When the notion came up (due to an ignorant comment by Melnyk) that they were moving to 40%, I renewed my dismissal of such suggestions. I asked James to post it so that the original ridiculous declarations of James Duthie and more recently Eugene Melnyk were shown to be a sham to James' considerable audience, lest the cadre of elitists among my fellow CDN fans get too out to lunch and continue to ratchet the figure up further.


More later when time permits.

 
At 8:27 AM, December 20, 2007, Anonymous Gerald said...

Gee, would those revenues be increased by the incredible jump in the value of the Canadian dollar this year?

No.

I'm sure Tom Benjamin will examine this issue.

I addressed this in full on HF. I am not sure if it was on Benjamin's blog as well. But it has been addressed, withotu the assitance of that guy.

Essentially if you consider the dollar is at par now compared to 80 cents when the lockout started, that is where the revenue increase is coming from and why Bettman does not want another team in Canada.

The CDN$ increase has had a relatively minimal contribution to increased revenues.

 
At 10:21 AM, December 20, 2007, Blogger J. Michael Neal said...

The CDN$ increase has had a relatively minimal contribution to increased revenues.

I have yet to see any evidence that would suggest this. What I have seen you post is data that suggests that, during a period when there was little movement in the exchange rate, the strength of the Canadian dollar had little impact on league revenues. However, that finding had a lot to do with the fact that the stretch immediately after the lockout ended coincided with a relative lull in movement in the US$. I have yet to see you try to perform the same trick over a longer period.

Paul raises an excellent point: it's probably not unusual at all for 20% of the teams to generate 28% of the revenue.

I'm sure that it isn't. However, I would bet that it is extremely unusual for 28% of the revenue to be generated by 20% of the teams, when those teams are selected for some criteria other than inherent value of the franchise location. When you select the six Canadian franchises, you are selecting one enormous market, two medium size markets, and three very small markets.

Now, add to the Canadian teams the Rangers, Bruins and Red Wings. What percentage of league revenues are coming from 30% of the teams?

 
At 1:19 PM, December 20, 2007, Anonymous Anonymous said...

Why are Ottawa, Calgary and Edmonton paying into revenue sharing?
Wasn't this CBA supposed to help ALL small markets, not just the ones that have their heads so far up Bettman's butt hole?
If you can't make it in the sunbelt.
Fold.

 
At 1:38 PM, December 20, 2007, Anonymous Anonymous said...

I think what bugs a lot of Canadian Hockey Fans is that their instinct (apparently true given the data) about where the money is coming from feeds into their frustration with existing power structures which wield control within the NHL. If the Canadian teams are disproportionally 'pushing' there is a feeling that they should also be 'steering', rather than feel like they are either ignored, taken for granted, or dismissed as hicks. Actually it surprises me that the figure isn't even higher, I wonder if you seperate out another group of six teams, say; Toronto, Montreal, New York, Minnesota, Dallas and Los Angeles, what proportion of revenue would they constitute?

 
At 3:21 PM, December 20, 2007, Anonymous Anonymous said...

Look, the situation in the NHL is much worse than 28/20.

Let's take the following markets: New York, Toronto, Boston, Montreal, Philadelphia, Minnesota, Colorado, Detroit. If there is a legitimate revival in Chicago, we can add in that market as well.

How much of the league's revenue is generated by teams in those markets? I'm guessing here, but I would say most of it.

Whether that's truly a "problem" is more a matter of your opinion on where teams "should be" than anything else. Surely league revenue would be higher if there was a second team in the Toronto metro area than, say, in Nashville or Floria. But then again, isn't it the Leafs themselves that are keeping out another team?

And to say that the revenue bump has nothing to do with the 20% appreciation of the Canadian dollar defies reason.

 
At 5:39 PM, December 20, 2007, Anonymous Gerald said...

And to say that the revenue bump has nothing to do with the 20% appreciation of the Canadian dollar defies reason.

To say that it has anything of real significance to do with it defies math.

 
At 6:37 PM, December 20, 2007, Anonymous Gerald said...

I have yet to see any evidence that would suggest this. What I have seen you post is data that suggests that, during a period when there was little movement in the exchange rate, the strength of the Canadian dollar had little impact on league revenues. However, that finding had a lot to do with the fact that the stretch immediately after the lockout ended coincided with a relative lull in movement in the US$. I have yet to see you try to perform the same trick over a longer period.

JMN, I am not sure exactly what more evidence you require. My original analysis went back to before the lockout.

I would suggest that you do at least a little research before asserting that the periods which I addressed had "little movement in the exchange rate". In fact, during each of the previous two years, the exchange rate fluctuated by over ten cents during the course of the year. The year before the lockout, there was a fluctuation of eight cents. Accordingly, it is quite thoroughly incorrect to say there was a "lull in movement" in the US$.

frankly, what you ascribe to a "trick" is simply nothing more than a common misperception being shown to be completely incorrect.

As I have said before, at the end of the day, every cent difference in the exchange rate amounts to about $7 million difference, or less than one-third of one percent of NHL revenues. Even with the freakish runup in the CDN$ this year, the impact has been somewhere near 3% of NHL revenues, and the exchange rate has not gotten any wackier in recent years than it has been this year.

 
At 6:57 PM, December 20, 2007, Anonymous Anonymous said...

"And to say that the revenue bump has nothing to do with the 20% appreciation of the Canadian dollar defies reason.

To say that it has anything of real significance to do with it defies math."

My god - are you totally retarded?

The Canadian currency appreciation has everything to do with the increase in NHL revenues this season. The value of the Canadian dollar is up about 20% this year, and NHL revenue is calculated in $US. When you have money pouring into the league that is worth 20% more than it was a year ago, then, duh, it has very real significance to the revenues of the league.

That's why any commodity-based company in Canada right now is stinking on the stock market, because the commodities they are selling are priced in $US dollars - like gold, steel, oil. When it's converted to Canadian dollars, companies are actually losing money!

This is also why, with oil near $100 USD a barrel, gas is still only about a buck a litre at the pumps. If our dollar was back to 87 cents, we'd be paying 1.20, 1.30 for gas, because all gas retailers pay for gas in US dollars. We're actually protected right now from high gas prices by the Canadian dollar.

You have absolutely NO idea what you are talking about if you arrogantly suggest the high Canadian has nothing to do with the increase. It probably has everything to do with it. Ha ha ha! I can't believe I had to type that out. Seriously, you are stupid.

 
At 7:29 PM, December 20, 2007, Anonymous Gerald said...

While normally I would not respond to someone who does not have the testicular fortitude to at least sign a nickname to their post, try doing some research and some math, sir (or ma'am).

1. The CDN$ is not up 20% from last season. It is up from .8831 to .9854 this season.

2. Based on Mr. Kelly's statement to the AJC that league revenue will be US$2.53 billion, CDN team revenue will be US$708.4 million (CDN$719 million). Last year, the equivalent revenue would have been US$634 million. Accordingly the exchange rate impact is $85 million (rounded off), or 3.3% of league revenue. League revenue increases based on the above reported numbers will be 10-11% ($250 million). The exchange rate impact is just about a third of the revenue increase. Perhaps it is overstating it for me to say that it is not of "real significance"; perhaps not.

Before you call someone stupid, perhaps you should state your credentials regarding business or, heck, even raw intelligence. I seriously doubt you can hang, chum.

 

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