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Booming NHL business a double-edged sword for low-revenue teams

Nov 27, 2013, 1:01 PM EDT

Coyotes fans Getty Images

Yesterday, the NHL announced a 12-year Canadian broadcast agreement with Rogers worth almost $5 billion in U.S. dollars.

Yeah, it was a pretty big deal.

Immediately after the news broke, people started to wonder what it would mean for the league’s 30 franchises. And in particular, they wondered about the clubs that aren’t considered among the financial powerhouses of the NHL, for which finances are always a concern.

For example, Yahoo! Sports columnist Nicholas Cotsonika was thinking about the Phoenix Coyotes, a team that very nearly relocated this past summer before finally finding new ownership.

Say you’re the Coyotes. You have been at or near the bottom of the league in attendance in recent years. You want to win, draw fans and make the business work on your own. But the cap and floor are more manageable. You don’t have to hit attendance targets to receive revenue-sharing anymore. Your cut of the Canadian TV revenue now is $4.75 million a year at the current exchange rate, but it will shoot up to an average of about $13.8 million a year over the next dozen years – a $9.05 million difference per year. Now factor in revenue from the American TV deal, the outdoor games, a World Cup, other international events, et cetera.

And now consider this: If the NHL does expand – to, say, Quebec City and Seattle – the owners will split hundreds of millions of dollars in fees between them, and they won’t have to share any of that money with the players.

That’s the positive spin. But here’s the potential negative side, from the CBC’s Elliotte Friedman:

The only thing to worry about here is the salary floor, if you love a low-revenue club. Article 50.5 b (i) of the CBA states “the magnitude of the Team Payroll Range shall never be less than $16 million … or greater than $28 million.”

The promise of this new agreement allowed Bettman to stabilize his three biggest trouble spots: Florida, New Jersey and Phoenix. No doubt the owners of those teams, like Leonsis in Washington, are thrilled by the television bonanza and updated revenue-sharing formula.

The true test of the new CBA will be how many teams can’t afford to go much higher than the floor because you know the revenue powerhouses can’t wait to flex their financial-steroid muscles.

That’s the only concern I see. It’s at $44 million this season, and a $60-million base – with the upper limit approximately $20 million higher – is not out of the question in the near future.

The Globe and Mail’s James Mirtle conservatively estimates the salary floor/cap will rise as follows throughout the course of the CBA:

source:

It’s impossible to say for sure how current low-revenue teams like the Coyotes, Panthers, Predators, and Blue Jackets will fare in the next few years. Yes, there will be more national TV money coming in, and yes, there’s more revenue sharing under the new CBA. But paid attendance will still matter greatly for individual clubs, meaning much will continue to depend on their win-loss records.

  1. thailer35 - Nov 27, 2013 at 1:12 PM

    Say you’re the Coyotes. Under new ownership, you’re attendance numbers for October are up significantly from the last time games were played in October with new owners just barely settling in and having very little time to make impact on attendance. Your team is playing well, which should also help attendance, and provided new ownership continues to push new initiatives to drive attendance, your numbers should also continue to raise. Despite this, everyone continues hating on you.

    • thailer35 - Nov 27, 2013 at 1:13 PM

      Second you’re should be your. /shame

      • ibieiniid - Nov 27, 2013 at 1:38 PM

        how people get thumbed down for correcting themselves always baffles me.

      • thailer35 - Nov 27, 2013 at 1:40 PM

        Maybe because I didn’t give them a chance to correct me? Who knows.

        To be fair though, I gave myself one just for the incorrect usage of you’re. Drives me nuts when other people do it and then I go and do it.

      • ibieiniid - Nov 27, 2013 at 1:44 PM

        Not talking about you personally, I know YOU have a brain, but I won’t lie, I judge people based on their ability to use they’re/their/there, too/to/two, and your/you’re. I’ve tried not to… but I judge them anyway.

        and don’t even get me started on putting an apostrophe in plural words…..

      • blomfeld - Nov 27, 2013 at 2:40 PM

        Could Ibieinijad & Trailer have ‘issues’ ?

        Seriously friends … you’re both to be commended for bringing the issue of ‘good’ grammar to light here. We as a so-called ‘connected’ society are becoming ever more lazy with the written and spoken word and that’s a shame. In fact, even ‘certain’ journalists here at PHT have been guilty of grammatical errors from time to time, which is ‘incomprehensible’ when you stop to think about it eh?

        ps: I’ll never forget that January day back in 2010, when I was golfing with three locals at a course down in Tucson (ie: The Forty-Niner GC). I asked them innocently enough during the round if they were Phoenix Coyote fans ? All three of them replied by saying ‘nothing’ while offering facial expressions which essentially said … ‘we know you mean well friend … may God bless you’ …

      • joey4id - Nov 27, 2013 at 2:45 PM

        Well! ibieniid, I think your two out their to judge people because of there improper use of those words.

      • thailer35 - Nov 27, 2013 at 2:52 PM

        Blom, I am confused here. You’re commending us, and at the same time insulting us? And then taking shots at my Coyotes with one anecdote from Tucson? A city 2 hours from Phoenix, probably a solid 3 from Glendale. What’s your agenda here?

      • ibieiniid - Nov 27, 2013 at 3:03 PM

        I’ll admit, I laughed at “Ibieinijad.”

        but sir, I’m not saying I’m grammatically flawless. <—quite often, I don't capitalize. in my defense, I'm SAVING keypresses and I punctuate properly, so there's really no need unless you're grading me. BUT, if somebody is of the age where they know how to type and come up with opinions about hockey issues, but they haven't yet remembered that "there" is not possessive, their opinion means nothing to me. if you can't learn the meaning of some common words, why should I think you know what other words mean? that's my thinking on it.

        also, there's typos, then there's chronic misspellers like our friend steelers88 or w/e his name is.

        oh, I do cut slack on it's/its though.

      • blomfeld - Nov 27, 2013 at 3:39 PM

        Achtung Ibieinijad & Trailer !

        Come on you guys, I’m just teasing you! :) Look, I like the Coyotes and I love the great state of Arizona, even more than California man! But here’s the deal the way I see it. Until you get those condescending Canadians off their lazy asses up there in Scottsdale and have them opening up their wallets at the arena, then this thing is probably never going to work? I hate to say that, but that’s what I truly think. And you can’t expect the Mexicans to save the day, as hockey isn’t exactly their thing either. All the times I’ve been to Phoenix, whether it was for work or pleasure, never once have I ever encountered a Coyotes fan? Now obviously I’m sure they exist, no question about that. But the problem as I see it, is that there’s simply not enough of you guys? … :(

    • columbiannecktie - Nov 27, 2013 at 4:09 PM

      It’s because Phoenix is an illegitimate franchise. It’s a non-hockey market, they have few fans, they’re a boring team to watch, they have no stars, and they have no shot at a championship anytime soon, nor have they ever. You flip to NBC sports and see it’s a Coyotes game, if you’re like 99% of us, unless the other team is your home team, you change elect to watch something else. I know, I’m the bad guy. The Phoenix Coyotes are bad for hockey, and I sincerely wish they had been relocated, though there is good reason to believe they will eventually.

      • ibieiniid - Nov 27, 2013 at 4:26 PM

        I don’t see why you think it’s impossible for them to win a cup. They’ve iced some really good teams throughout the years. And the only reason they “have no stars” is because you have to be in a big market to really have that star power. How much did you hear about the Atlanta Thrasher, Ilya Kovalchuk? not a lot.

  2. thecheeman - Nov 27, 2013 at 1:33 PM

    Oh Brough you forgot to factor in that the Coyotes will be playing at least 18 outdoor games by 2019, so that’s where all the revenue will be coming from.

    • ibieiniid - Nov 27, 2013 at 1:41 PM

      15 standard outdoor, 2 rooftop, 1 aircraft carrier*

      • ballistictrajectory - Nov 27, 2013 at 2:25 PM

        I’m holding out for the “Fast Attack Sub Classic”. Outdoors AND Underwater!

  3. bencia823 - Nov 27, 2013 at 1:42 PM

    As somebody who is studying sports marketing, it’s important to note that tickets are not the only major source of revenue for teams. Different leagues tend to have different revenue distributions (ex. 40% attendance, 40% sponsorships, 20% merchandise), but in most cases, sponsorships take up a good portion of revenue. The increased exposure that the NHL is likely to see in the coming years should increase the value of these sponsorships, so assuming that these franchises are decent negotiators, the TV deal shouldn’t negatively impact them.

    • ibieiniid - Nov 27, 2013 at 1:49 PM

      That’s an interesting thought. I don’t know all the circumstances of this TV deal, but how will the smaller American teams get more sponsors because of a TV deal to cover Canadian teams?

      • bencia823 - Nov 27, 2013 at 2:06 PM

        it’s more of an exposure thing as a whole. That being said, if a team like the Coyotes (for example) is now going to get a few more nationally televised games (in Canada), they can use that fact to bargain for higher prices with brands that have a presence in Canada. The inclusion of these games televised in Canada should bump up the average viewership per game, and as a result, teams should be able to negotiate for higher prices for advertisements on the boards that will be seen by all of the viewers

      • ibieiniid - Nov 27, 2013 at 2:11 PM

        idk man, we’re talking about the floor rising $26mil here. I don’t know if 10 more Canadian-televised games a year is gonna raise that kind of dough, especially from local or America-only businesses. I think it hurts them. maybe more sponsors helps them absorb it better, but i think this still hurts them in the end. but I’m not a marketing major, maybe i’m just not looking at the whole picture.

      • bencia823 - Nov 27, 2013 at 2:28 PM

        That’s 26 million over 8 years, which averages to a little over $3 million per year. With inflation, increased viewership (NHL popularity has trended upwards since the 2004-2005 lockout), and a possible major TV deal in the US during that time frame, everything should work out.

      • ibieiniid - Nov 27, 2013 at 2:39 PM

        eh, that’s a 50% rise in player expenditures over 8 years. that’s a struggling company being ordered to pay it’s employees 1.5x what they were. is the market in Phoenix and Florida really growing at a rate that would cover that? sure, NHL revenues are good, but they can’t sell tickets in these small markets. that’s really the bottom line though, they’re screwed either way if they can’t start selling some tickets.

      • bencia823 - Nov 27, 2013 at 3:14 PM

        Ticket sales will increase as the ticket prices increase with inflation. It’s fairly unlikely that teams like florida and other struggling teams will play poorly and lack stars for that entire time frame. As the teams begin to play better, ticket sales should see a decent increase. At the end of the day, if a team can’t sell tickets, the increase in the cap floor isn’t going to be the reason why they need to move.

      • ibieiniid - Nov 27, 2013 at 3:19 PM

        well, seeing as how the Panthers are unwilling to spend over the cap floor (or maybe I’m jumping the gun on the owner, as I don’t believe he’s even had a full offseason to work with yet), there’s nothing that tells me they’ll be any more star-studded in the next 5 years.

        “Ticket sales will increase as the ticket prices increase with inflation”
        ^^^ and is that a brain fart or did you really mean to type that?

      • bencia823 - Nov 27, 2013 at 3:31 PM

        A clearer version of that statement: Revenue generated from ticket sales will increase as the price per ticket increases (ticket prices increase with inflation). Guys like Huberdeau, Barkov, Bjugstad, and their likely top 5 pick this year could potentially develop into superstars, so the Panthers wont necessarily have to outbid the rest of the league for an all star.

  4. blomfeld - Nov 27, 2013 at 3:03 PM

    BEACH VOLLEYBALL IN GREENLAND ?

    A WNBA TEAM IN KYRGYZSTAN ?

    NASCAR RACING IN ZAIRE ?

    However you want to slice it friends, the bottom line remains that NHL hockey is ‘not’ an indigenous sport for the people of Arizona … and therefore Bettman’s attempts to ‘shove it’ down their throats regardless, will ultimately prove to be a complete and utter failure. The accrued losses for this franchise are now fast approaching 500 million dollars and someone has to pay for that, sooner or later. And that’s a shame in a way, as the Coyotes do have a loyal, albeit ‘small’ fan base. The problem however is that there simply aren’t enough of them in-order to continue justifying this ‘experiment’ in the desert.

    • ibieiniid - Nov 27, 2013 at 3:09 PM

      Then explain bobsled in Jamaica, smart guy.

      Feel di riddim, feel the rhyme, get on up….

      • blomfeld - Nov 27, 2013 at 3:19 PM

        Friend, there are always the odd ‘exceptions’ in life … don’t you remember that English ski jumper called ‘Eddie the Eagle’ or something ? … well that still doesn’t change the fact that ski jumping will never be big in England … same thing with bobsledding in Jamaica … it’s simply not going to happen man …

    • thailer35 - Nov 27, 2013 at 3:11 PM

      And now you’ve gone full on trollfeld. Come on Blom, you’re better than that. Look at their numbers these last two months versus 2011. Give it time now that the product is good and the franchise is stable. Rome wasn’t built in a day.

    • walthocreative - Nov 27, 2013 at 5:30 PM

      Don’t live in AZ but while visiting I went to a Yote’s game in AZ last week against the Avs. Midweek but against a good opponent. I’d guess that the arena was about 65% full. The interesting thing was that the corporate suites were virtually empty. Those seats are the top dollar seats. Felt like Disneyland around the arena, you could even get sushi! The team has some talent no doubt, and their record is good this year. But I felt like I was in a minor league arena with minor league fans. You know, the “glass bangers” and the “shoot, shoot” from almost anywhere. Whether they make any money or not in the future remains to be seen but this just seems like a forced franchise.

  5. xxxxsuperxxxxboyxxxx - Nov 27, 2013 at 5:25 PM

    Settle down blom Scott’s dale is no we’re near Canada pic up a map meat head!!

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