Latest League Revenue Prediction

Is Mr. Bettman being overly-optimistic?

As I reported earlier, Gary Bettman was in Vegas promoting the NHL Awards when a gem of a business comment caught my eye in the Yahoo article that described the press conference:

"Bettman said the NHL is in sound financial shape, and he expects to see league revenues to increase 5 percent this season. He said that playoff ticket sales and season ticket sales for next season were fine, based only on anecdotal evidence."

Awfully optimistic. But Bettman always is; he never would admit that the NHL is in big trouble, because that is just being a poor salesman. What shocks me more about the comment is the actual figure of 5%. The time line for revenue projections were as followed:

1. Pre-Season: 1, 1.5, or 2% increase in revenues.
2. All-Star Break: 1% increase or flat revenue.
3. Monday, April 6: 5% increase in revenues.

Quite a jump, no? 5% doesn't seem like a huge number, but when we're dealing with billions, especially in a "niche" sport, it can make all the difference. Take a look at the chart (click to enlarge):



Essentially, with a 5% increase in revenues, around $130 Million more dollars get brought into the league and its clubs. I think that may just be enough to cover the Escrow worries as of late; which would mean players would get most of their money back (or definitely more than is planned right now).

Along with this, what would this do to the salary cap? Many are planning either a small drop or staying at the same $56.7 Million figure the league is at now. It would definitely stay flat if the 5% increase stays true, but I still don't think we will see much if an increase next season because of worries of inflation and bloated contracts in general.

So yes, it was a small comment in a small article. But it could make all the difference when it comes down to the NHL's bottom line come the end of the 2008-2009 fiscal year.

The Tuesday Memo

News and Notes from around the Business World of Hockey.

- The Nashville Predators will in fact reach the 14,000 paid average attendance mark for revenue sharing (The Tennessean):

"That's big news for management, because it likely will mean more than $10 million dollars to help the franchise remain financially competitive with larger-market teams."

- Playoff tickets that went on sale yesterday for the Penguins we're snatched up quickly (Penguins.com). From the gist of the article, it seems as all the playoff tickets are sold.

- Former Canadiens Captain and GM Serge Savard says he plans on making a bid for the Canadiens if they do in fact get put up for sale (The Gazette):

“If George Gillet clearly says that the Club de hockey Canadien is for sale, then, if that’s the case, me, I’m ready to do the deal,” Savard told the Montreal newspaper La Presse this morning. “I can complete the deal and buy the club.”

- Gary Bettman said yesterday while in promoting the NHL Awards Show that arena issues are the main hurdles for Las Vegas getting any franchise, but at the same time the NHL has no plans to expand (Yahoo). I also found this little gem involving revenue:

“We have no plans to expand, and I don’t think anybody does in this time frame based on the economy,” he said.

Bettman said the NHL is in sound financial shape, and he expects to see league revenues to increase 5 percent this season. He said that playoff ticket sales and season ticket sales for next season were fine, based only on anecdotal evidence."

5 %? Where did the conservative 1% bet go from the All-Star weekend? That would put the league around an HRR (Hockey Related Revenue) of $2.74 Billion. Wheres the escrow news? Hopefully more on this later.

- Phillips Arena (Home of the Atlanta Thrashers) gets a coveted award for their environmental practices (NHL.com).

- The Lighthouse Project on Long Island took a stumble last week, getting to political to keep it short. But with public outcry heard, the Project is gaining momentum as opposition is dropping (Let There Be Light (House)).

- Finally, the classic Verizon Wireless maternity ward spot:



More later.

Revenue Sharing 101

With all the talk this afternoon involving the Islanders and Revenue Sharing (note: tomorrow the fifth edition of my series, "Playing Below Capacity," will be published around noon. Fittingly, I will take a look at the Islanders), I figured I would outline what it takes to become eligible for revenue sharing in the NHL. I still plan on attempting to project these figures in the near future, I just haven't found time just yet. For some explanation of figures I will be using to do this, check out my post from last week here.

After reading up on revenue sharing last week in the CBA, there are four requirements in order to qualify for revenue sharing to begin with. There are further sub-requirements that designate how much that revenue sharing check will get you. First, the four requirements:

1. The club must not be in a market that reaches over 2.5 million television sets for the season. That list can be found here.
2. The club is within the top 15 clubs in terms of revenue.
   
3. The clubs revenue growth rate (%) from the previous season ('07-'08) to the season just ended (currently; '08-'09) must be equal or higher than the NHL average growth rate (%).
4. The clubs paid attendance average must be over 14,000 (for '08-'09) or the average attendance capacity percentage must be over 80 %.

If a club meets all these requirements, then they are entitled to a full maximum share of the revenue sharing funds. The first requirement knocks out 7 teams immediate, all of which are American. The Rangers, Devils, Islanders, Kings, Ducks, Blackhawks, and the Flyers are all ineligible under the current CBA to receive Revenue Sharing Funds. Like I said, I have not ran the numbers on this yet, but if I had to guess I would say no share to any team goes over $20 million. Furthermore:

• A club that meets the requirements but has been apart of the program before (but not as of last season) will receive 75% of a full share of the funds.
• A club will receive a 60% share if it is the clubs second year in a row in which they qualify for the program.
• A club will receive a 50% share if it is the clubs third year in a row in which they qualify for the program.

The idea behind the program is not to keep franchises afloat using league-created revenue and player escrow funds; but to rather support a club shortfalls along with letting the club know to get their act together in the near future. As the links show above, their is a current debate going on about how fair the TV market rule is. I see it as fair. For a long time now (business-wise), the Islanders have been bottom feeders on and off the ice. They are in a solid market with a great TV deal, and although they face challenges few other teams do with two other teams in their direct market, the Islanders can be successful.

That's all for now, maybe more later, but if not check back tomorrow for the fifth edition of Playing Below Capacity.

Minnesota and Revenue Sharing

Messing around with the Attendance tracker at ESPN today, I sorted the "Road" attendance by average. The team in dead last didn't shock me, but it did get me thinking.

The Minnesota Wild are in last place in visiting team attendance, as the chart shows. What does this mean? Well, nothing really. The list is a rough correlation of which teams are most popular in the NHL, because casual fans might circle the date when the top teams on that list come to town for their team. But other than that, what could it be?

To be honest, I racked my brain all day. All I could come up with is the fact of how the Wild play their game, which is their infamous trap style. Still. a quick look at the standings shows that the Wild are not last in Goals For, in fact they would rank around 25th if I drew up a chart. As for Goals Against, they are tied for the second lowest, but I don't think this affects the fans decision.

They do have the 2nd lowest shots on goal, per 60 minutes. Any way I put it, they are a trap team. What got me thinking about this was that I wonder if their reputation really matters to fans when they see the Wild are coming into town. And if so, how much does it matter? Does it mean the difference between going to a game and not? Does it mean the difference between not watching a game? I'm going to keep an eye on this and see if I can think up of any ways to look into it.

Some plans for the future...

A comment last week from the Nashville Predators Playing Below Capacity article suggested that I look into NHL Revenue sharing, as Nashville should figure into that mold. Well after a couple days of poking around and actually reading the CBA, I have something.

I do plan on taking a deep look into NHL Revenue Sharing, and I hope to be able to forecast it in the months to come. But the following are just some raw facts that we all need to know going forward, as they are key in understanding on how I will compute the numbers for Revenue Sharing:

• NHL Salary Cap (2008-2009): $56.7 Million
• NHL Salary Floor (minimum): $40.7 M
• Salary Midpoint - $48.7 M
• Minimum Team Player Compensation: $29.9 M
• Targeted Team Player Payroll: $48.7 M
• Pro Rata Benefits Portion: ???

Understanding the Salary Cap and Floor aren't too difficult. The Salary midpoint is just the difference in the cap and floor ($16 M) divided by two which is added to the floor. This represents what each team should target for a payroll in order to maximize revenue. The Toronto Maple Leafs are the closest to this figure this season, at $48.6 Million, and only 8 teams including the Leafs are below this figure.

The Minimum Team Player Compensation represents what each team should have available at the start of the season to spend on players in regards to league revenue. It is calculated by dividing 20 Million by 1.74 Billion, and the multiplying that figure by the leagues revenue (which at the end of last season was 2.606 Billion). As you can tell, the floor is nearly 10 Million higher than this, but this gives the league a sense of the bare minimum of at which it can operate.

Finally, the Pro Rata Benefits portion. The Pro Rata is a small figure but it nonetheless figures into the final available funds for revenue sharing. It takes the total benefits paid by the NHL during its season and divides it by the number of clubs in the league (30) in order to determine the amount. I'm a bit confused on this, as the benefits cover a broad range of topics. If anyone has any information on how much the NHL spends in this area, please let me know.

That's all I feel like explaining at the moment, as the Rangers take on the Penguins. Tomorrow I will explain how clubs can qualify for revenue sharing to the best of my abilities. Please feel free to comment if you think I mis-spoke on anything or have something to add.

NHL Salaries indicating trouble?

James Mirtle points out an article by Mark Spector of Sportsnet.ca, who explains that even though the NHL already holds back an astonishing 13.5 % of players salaries for (if needed) revenue sharing purposes, it may not be enough to cover some of the leagues troubles for this year. Therefore, Spector says, the percentage may increase in the future.


Mirtle says it best here:

If at the end of the season that's the chunk that's missing on a $56.7-million salary cap, it means teams are actually paying only $49-million in player salaries. A $7-million player like Thomas Vanek will make only $6-million this season, Sidney Crosby's $8.7-million deal is worth $7.5-million and the league minimum players fall from $475,000 to $411,000.

No, no one will be crying poor, but that's the difference we're talking about, and that's also likely the ballpark we should be thinking about (a) potential free agent salaries and (b) next year's cap.

I think this is an indication that, although Bettman has said in earlier reports the economy hasn't really had a hard hit on the sport thus far, that hammer will come down soon enough. We will all soon find out.

But hey, at least attendance is rising... right?