Monday, February 18, 2008

Funny money

Where the NHL's money comes from
An estimated total of $2.56-billion (U.S.) in revenue this season

Regular-season tickets: $1.02-billion (40%)
Arena naming rights, concessions, parking, sponsorships: $768-million (30%)
Local TV and radio: $307-million (12%)
Playoffs: $282-million (11%)
National TV revenue: $179-million (7%)
— Toronto Star

Rick Westhead had a pretty nifty cover story in Sunday's Toronto Star, and the above numbers ran along with it in the inside pages. Their source is listed as "Toronto Star research, bankers and NHL team officials."

Westhead reports that one of the ways some players feel the league could increase revenues would be to sell jersey advertising, beginning with goaltenders. According to "prominent hockey marketer Brad Robins and Edmonton player agent Ritch Winter," "on-uniform ads might generate upwards of $30-million a season for the NHL."

It's an interesting twist that we're now seeing players pushing ways to increase revenues, even relatively unorthodox ones (by North American standards) like jersey ads. $30-million seems like small potatoes in a $2.56-billion pie, but one imagines this would only be the first of many similar suggestions the NHLPA will generate.

In King of Russia, Dave King and Eric Duhatschek talk about the structure of the Russian Super League's business model, and how — unlike the NHL — gate receipts actually make up a very small portion of league revenues. Jersey advertising is minimal there at the moment, but referees are skating billboards and some teams are named after the corporations that sponsor them.

Sponsorship dollars actually offset a lot of the costs in European hockey, making games more affordable for average fans. (One of the reasons many feel a rumoured new European "Super" league would fail to compete with the NHL is that hockey fans overseas simply aren't used to paying top dollar to go to games.)

Now, it's rather optimistic (or out of touch) to suggest higher sponsorship revenues could ever affect NHL ticket prices, but what it could do is change the revenue structure in the league. There's such incredible pressure on teams to jack up ticket prices given receipts make up more than 50 per cent of revenues, and much of the real revenue "growth" that we've seen postlockout has come from increased ticket prices.
"This is the wave of the future," says Winter. "The NHL isn't as profitable as other leagues, and we have very little choice but to pursue new ways to create revenue so we can reinvest in our sport. It's just a way to pay the bills."
More creative thinking could equal more hockey related revenue, which as far as the league, its players and agents are concerned, is a good thing.

Is this an area of mutual agreement where the partnership can work?



At 1:15 a.m., February 18, 2008, Anonymous ]effadams#2 said...

To whom it may concern,

The day that the NHL starts to advertise on it's jerseys is the day I finally give up on the league. I can tell you now it WILL be the straw that breaks the camel's back.

- a lifelong hockey fan

At 5:55 a.m., February 18, 2008, Anonymous Geoff said...

I just posted this on Covered in Oil.
I'm Australian and all our professional sporting teams have some degree of jersey sponsorship, and i've always found it strange that american teams don't do so.

sporting teams all across the globe seem to do it, although european hockey jerseys are amazingly excessive.
an example of australian rugby team that manages to sell rights on their strip with minimal impact to the overall look.

and i'm prett against team naming rights going to companies as well....

At 11:06 a.m., February 18, 2008, Blogger Pyronite said...

Instead of advertising on jerseys, they should just re-name the teams when the time is right. Think of it as the Mighty Ducks x 30. Though come to think of it, the "Phoenix Job Hunters" isn't the most promising indication...

At 12:28 p.m., February 18, 2008, Blogger Kirk said...

There are 2 ways to control anyone's financial situation:

1. Increase revenue
2. Lower costs

It is always amazing that a collection of successful businessmen can own these franchises and lose so much money by not being competent at performing #2 above. And its mostly because they pay too much (more than they can afford) for players.

Don't they understand yet that increasing revenue doesn't solve anything? They added advertising on the boards and that didn't fix their problems. Then it was stadium naming rights with the same result. Now it's wholly owning all the revenue that comes into an arena, even though the local citizenry paid for the arena. Advertising is becoming ubiquitous and all they're doing is degrading the fan experience which should be at the heart of the game.

I agree with Jeffadams#2 and see advertising on jerseys as a final straw. I'd be very happy focusing my energy on college hockey instead.

At 12:46 p.m., February 18, 2008, Blogger J. Michael Neal said...

Adding advertising dollars, anywhere, will have no effect on ticket prices. Zero. Maybe those damned socialists in Europe have team owners that think differently, but here, they are trying to maximize revenue. Ticket sales revenue is maximized at a certain price point (which, by the way, is a point that does not lead to sellouts every game), and other revenue sources don't affect that.

It's really the same thing as the fact that player salaries don't drive ticket prices. It's the other way around.

At 1:36 p.m., February 18, 2008, Anonymous Daniel said...

As someone who has recently moved to Canada from the UK and has only just began following and playing ice hockey. I must admit I find the cost of tickets to NHL games to be really really high compared to the cost of an equivilent sporting event back home.

As to ads on team jersey's I agree that the european jersey used as an example is very extreme in the amount of ads on it. However in the UK we have ads on jerseys and sports strips and it really doesn't make that much of an impact visually. This is the Scottish National Rugby Squads jersey:
and this is a jersey from one of the big Scottish football teams:

So you can see you don't have to go as overboard with ads as the example jersey used in Jame's orginal post.

At 1:46 p.m., February 18, 2008, Anonymous beingbobbyorr said...

". . . create revenue so we can reinvest in our sport"

I wonder what Mr. Winter means by reinvest?

They added advertising on the boards and that didn't fix their problems. Then it was stadium naming rights with the same result.

There was no "problem" being fixed by these initiatives. Everyone always seeks to maximize profits. There is no magic formula that leads to stasis.

though the local citizenry paid for the arena

That's a flaw in your local government that they were ever hoodwinked into paying for areni/stadia. Can't blame businessmen for trying to shake the money tree when they see the money tree distributing handouts everywhere else.

At 3:19 p.m., February 18, 2008, Blogger Bruce said...

Now, it's rather optimistic (or out of touch) to suggest higher sponsorship revenues could ever affect NHL ticket prices

No kidding. All the talk during the owner-imposed lockout of how a new deal would relieve ticket prices was pure, unadulterated bullshit. I still can't believe how the local fandom swallowed that crap whole, and then lined up to pay ever-more-inflated prices for the "New" NHL.

At 8:40 a.m., February 19, 2008, Anonymous Anonymous said...

I wouldn't mind say...ONE! I mean we think of these teams as being the "Pittsburgh" Penguins or the "St. Louis" Blues but they are owned by corporations not cities. I don't know why the team owners can't put their names on the jerseys somewhere.


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