The Thursday Memo

News and Notes from around the Business World of Hockey.

Slow, slow day so far.

- A look at the Escrow Situation along with some reporting on TV Revenues of four major sport leagues in the US (National Post):

"The players are having 22.5 per cent of their cheques deducted and put into an account with J.P. Morgan until the league determines what the actual revenues from this season have been. Once decided, the players will then be getting some of that money back, but the whack to their bottom line is expected to be substantial.

"Our best estimate at the moment is about 13 per cent will be what the players will eventually lose," says Kelly

...

"In terms of national revenues per season, the NFL is at $3.7 billion (US), major league baseball is $1.37 billion, the NBA is at $930 million and the NHL, with RDS, CBC, NBC and Versus all in, is at just $225 million," says Kelly. "There's a lot of reasons for that, but it's the single biggest drawback we're facing in the league right now."

The NHL makes 24% of what the NBA makes, 16.4% of MLB, and 6% of NFL. Downright puny. Remember my theory on the NHL being near a business peak? This is what I'm talking about. Yes, it is great that the league is filling two-thirds of its arenas on a regular basis but in terms of revenue growth without TV the league is going nowhere fast. Do I wish the NHL could make 3.7 Billion on TV? Sure. But its a special "niche" sport for a reason, I guess.

- Want your kid to go to school to learn hockey? How's $32,000 (Canadian) a year sound? (Metronews.ca)

- Finally, Bobby Granger bumps into Henrik Lundqvist:



More later.

The Tuesday Memo

News and Notes around the Business World of Hockey...

- Players are expected to forefit around 13% of their salaries (through escrow funds) in order to cover revenue shortfalls this season (Globe and Mail). However, because of the raise from 13.5% to 22.5% for the second half of the season, the players will recieve money back plus interest over the off-season:

"If the union and league projections prove to be correct, the players will keep just 87 per cent of this year's salaries. That would be after they receive a refund of about 5 per cent of their salaries plus interest, Kelly said in an e-mail message."

My question would be, how short are we talking here, and which teams are in the most trouble? I was really expecting the league to stay flat in terms of Hockey Related Revenue this season, but with so much money being taken out of the escrow funds, it doesn't look so anymore.

- Tonight at Jobing.com arena the Coyotes take on the Canucks at 7 PM PST, and it is 1980's night. Paul Kukla thinks the Coyotes should have Gretzky play to make it more realistic (KK Hockey).

- A fanpost at James Mirtle's From The Rink dives into European Attendance figures, which are "up" this season:

"In a press release last week, IIHF president René Fasel trumpeted a "substantial increase" in attendance at European club hockey games. What Fasel didn't say and a closer look at the attendance figures reveals is that attendance actually declined for 37 of the 64 teams for which year over year comparisons are possible.

...

A fairer statement about European hockey attendance would go something like this:Attendance at European club hockey has plateaued at slightly over 70% of arena capacity and is at risk of trending downward."

Oh, and hockey is more popular in North America than Europe:

"The NHL reports attendance of about 21 million for 1230 games involving 30 teams in metro areas with a population of about 117 million. The six major European leagues report combined attendance of about 13.7 million for 2512 games involving 92 teams in metro areas with an estimated population of about 96 million.

And for those who like really big numbers, try this: North American hockey attendance at 11 leagues (including the three major junior leagues) with 201 teams is approximately 44 million per year. European (including Russia and Great Britain) attendance for the 301 teams listed at Hockeyarenas.net is about 18 million."

- Finally, the NHL was once the "coolest game on earth" with coy ads such as this one:



More later.

The Monday Memo

News and Notes from around the Business World of Hockey...

- Really fun Player/League escrow amount news! Sports Business Journal (from Paul Kukla) reports that the NHL will retain $120 million in player salaries to cover shortfalls. This equates to about $ 4 million per team. From SBJ:

"Sources familiar with league revenue projections said that 'significantly' more than $120 million in escrow money will be retained by the league."

I point this out because back in late January I produced a ballpark escrow figure on how much each player would lose and how much shortfall the league will have this season. I came up with a shortfall of just under $210 million, which means each player would lose just under $123,000 per million in their contracts (18% of their deals).

- Ticket pricing news, as according to Team Marketing Report the Predators and Bridgestone Tires have teamed up to offer a 3-game pack for the renaming of the season:

"Fans who purchase any three games on the remaining Predators regular season home schedule will receive a $250 discount card, redeemable on anything from an oil change to a free tire (when you buy three)...

Although the pack was still available through the end of February, Predators Senior Vice President of Corporate Development Chris Parker said the team sold “several hundred packages” with more than a week left"

Apparently, this has been going on for at least a couple weeks is the feeling I get from reading the article. I couldn't find anything on the Predators website, though. Either way, good deal.

- Sportsnet.ca will stream its day-long trade deadline show in the US (Puck The Media). It's official, I really won't be doing anything come Wednesday.

- Finally, as the playoff approaches, one of many former NHL Ads that will be shown here:



More later.

Updated Escrow Projections

As I mentioned last night, I said I would take the format that Daniel Tolensky provided Saturday in his article over at HockeyBuzz and update it in light of new updates of the Escrow percentage and revenue growth via TheFan 590 and Paul Kelley, the Executive Director of the NHLPA.

As a quick reminder, Kelley said yesterday on TheFan 590 in Toronto that the NHL expects revenue growth at the end of this season, ranging from 1 to 2 %; but more and more its looking like 1%. Along with this, Kelley stated that the second half escrow percentage, which is the amount of player salaries that are held back from them in order to cover any shortfalls of the league and its clubs, will rise to 22.5% from the first half percentage of 13.5. Kelley then confirmed that this would give an average of 18% for the season, which is the number I used in my projections.

As I stated last night, the players will lose money this season due to escrow, it just depends on the bottom-line revenues at the end of the year which will determine how much. So, non-playoff team players, root for 7-game series all around. Without further adieu, here's what I came up with (click to enlarge if necessary):


A couple of quirks I ran into while running these numbers:

- In his +2 Revenue Scenario, Tolensky had an overpayment/shortfall % of 12.9 %. But when I ran his numbers again, I figured it to be 11.43%. Triple-checked and I'm not sure how he came to his number.
- In that same scenario (basis for this report), he has the interest at Escrow at 0.10%. Of a million, this would equal $100,000. Since I doubt the league would be paying 100K per player in interest, I changed this to .01%, or 1%, which equals 10,000. I'm not sure where Tolensky got his figure, but for now, this works.

What to take away from all of this. Focus on the Shortfall dollar and percentage figure. This is the amount of money the players are going to have to foot to bring the leagues clubs out of the red ink. If the league grows by 1%, this figure should be between 205 and 215 million, depending on how the revenue shakes out. This means that players will be handing over anywhere from 10 to 13% of their salaries. For the player making the league minimum of $450K, this means that close to $59,000 will be taken from them. Granted, I think they'll be alright with their bills, but that is still a significant amount.

Please comment if you think anything is wrong, or would like me to explain anything.

More later.