Profit

Sens Plan To Jack Up Price

Ottawa's favourite hockey team plans to raise ticket prices on premium games. The closer it is to game day, the higher the cost will be for some of the seats.

...and this predictably drags out the boo-birds who declare this as nothing less than unadulterated greed.

What I don't get is why these "fans" think it is OK for a third party to buy a ticket from the Senators for some price, then sell it at a higher price, pocketing the difference. That ticket still sells for the higher price. Why should that profit not go to the team for providing the entertainment?

The problem for these "fans" isn't that the Senators want to raise prices. The problem for these "fans" is that someone is willing to pay more than they are. And the team just wants an increased cut of that money.

This is basic economics, people. If someone is willing to buy a particular ticket for $300, why on earth should the team sell it for $200?

And if the team raises prices beyond the willingness of their market to pay, then they'll end up with less-than-sold-out games, and at that point they'll have to reconsider.

Fear of numbers

Watching the game last night, and in the first intermission Dave Hodge gets on about how the salary cap is bad for hockey. He had a litany of complaints, including "trades don't happen", "for hockey news all you hear about is cap impact", "millionare players getting sent down to the AHL", amongst others.

My favorite? In his gripes about how the salary cap is supposed to save money, he says that the cap "just ends up requiring capologists, who cost money..."

Yeah seriously, when we are talking about owners who want to sign stars to obscene contracts for millions of dollars per year, complaining about having to pay some guy on staff what, $80K to $120K per year is going to be a franchise-breaker?

I think Mr. Hodge is an old-school hockey guy, probably one who resents the fact that modern hockey management includes math that is more complicated than "one goal plus one goal equals... uhm... oh look, the scoreboard has been updated for me. Two goals!"

The bottom line is that the cap is good for the NHL. The last lockout was triggered by the owners who had made commitments for all these high-value contracts and now wanted out of them because the money to pay them just wasn't there. The owners can't be trusted with the health of their franchises. By putting a cap in place that is at least reachable by most of the league's revenues it ensures that the franchise ownership picture is going to be a lot more stable.

Yes there are always going to be teams that can't generate the revenues to reach these levels, but does anyone seriously think that the financial or ownership situations in Nashville or Phoenix would be helped in ANY way by letting the New Jersey Devils pay Kovalchuck $15 million per year? Like... ANY way.

Removing the brakes on player spending will just let stupid owners dig their own holes again. And the complexity in the rules is there to balance flexibility for the real world while simultaneously preventing stupid owners from digging their own holes while circumventing the intent of the cap.

Reducing the trading activity certainly makes the media dig harder for something to talk about, but really, why is having a mostly-static roster bad for the local fans? Besides, Brian Burke's dumping of a third of his roster last year shows that if you are a motivated seller you can still get deals done.

Whether or not the cap is good for hockey is another issue, although without a healthy NHL, this hypothetical hockey would remain nothing more than a fantasy.

Personally I think the cap is good for hockey, in that it prevents teams which have (or think they have) deep financial pockets from assembling high-cost superstar dream teams and dominating the league. Here, everyone has the same starting field and over time this will lead to different teams being good at different times.

The cap even promotes younger talent, as the "middle class" hockey player is the one who is going to get squeezed out. Teams will keep a few high-priced stars, and balance the books with younger, cheaper players. Players who are "better" than the younger ones, but not superstars, will have to be careful when negotiating their contracts as they could price themselves out of a job, especially with hot youngsters with potential development upside waiting to take their place for a fraction of the cost.

But I don't feel sorry even for those players squeezed out or sent down to the AHL. More guys getting a briefer chance means sharing the wealth around. It is a net gain.

So I think that those old guys, the hockey purists, are just going to have to live with the cap. Just like they live with 4-on-4 overtime, the shoot-out, the trapezoid, and all those other non-purist rules that the NHL has.

Keep the cap.

Toronto As A Sports Town

Here's another article crapping on Toronto sports fans: When it comes to sports, Toronto is a city of losers

I agree with the notion that because the fans continue to come out to see the games, win or (as seems more likely) lose, the organizations behind the teams has no financial incentive to improve the on-field product. However, the problem isn't so much the individual fan, but the fact that there are so many of them that demand for the product far exceeds the organizations' abilities to deliver.

My favorite example of this is the Maple Leafs. The problem is that the fan-base in Southern Ontario is so wide that even if every fan who attended a game this year totally boycotted the team next year, the arena would probably still sell out.

Maple Leaf Sports Entertainment (MLSE) has a monopoly, in that they are the only ones who can supply regular access to games played by the Maple Leafs. Such is the demand that MLSE can demand high prices for tickets to those games; the surrounding market provides enough rich people who want to see the games that these games will frequently (usually?) sell out.

So consider what happens if by some miracle the Leafs are built into a contending team. How does this affect the box office? Since the box office sells out already, it doesn't. The fact that a winning team would increase the desirability of a Maple Leafs ticket means MLSE could conceivably raise prices. However the fact that there is a secondary market for Leafs tickets shows that MLSE is already leaving some money on the table.

The combined Southern Ontario market in general, and the Metro Toronto market in particular, is so big that any organization with even a moderate market penetration will find enough fans with enough money to keep them in business.

In a smaller market, say for example Ottawa, a losing team does become economically unviable. This will eventually run the ownership group out of money, resulting in a change of ownership, management, and eventually -- should the on-field product not improve -- venue. We saw it with the CFL several times, and minor league baseball has left Ottawa twice already too.

But Toronto's sports enterprises have such a rich market in potential fanbase that it is unlikely that you could measure a drop in fan support at the box office. As such, while the organizations want to improve for pride reasons, there isn't any financial mechanism to sweep out the ownership and management which has thus far failed to deliver.

Ottawa as a Sports Town

Ugh, maybe I didn't need to see the Philly game tonight. Perhaps the less said about that the better -- I'm sure the usual suspects will trot out the usual saws. Instead, lets poke some bears.

So Out Of Left Field is muttering that the attendance drop at Scotiabank Place is the end of Ottawa's romance with the Senators.

The thing of it is: Ottawa isn't a Sports town. Never has been. What Ottawa is, is a government town. And as such, the residents treat their recreational pursuits as entertainment. As in, the pursuit of fun.

And losing, as we all remember from those gym classes in primary school, isn't fun.

Now there are some people in this town who are truly passionate about their sports. The thing of it is that there are not enough of them to maintain a sporting enterprise through the inevitable rough spots.

Anyone doubting this can only look to the parade of people who stepped up for their opportunity to own the Ottawa Rough Riders or Renegades or whatever. And then lost their shirt, and stepped aside for the next group in the parade. Heck, some owners even came around twice (hello Gleibermans!) When the team was winning -- at least, according to the history books, there is some suggestion that it was winning -- the fan base was there. Once the wins started to dry up, so did the fan base. The end result was the CFL left Ottawa not once, but twice.

Similarly, the triple-A baseball team. When the Lynx were winning, people flocked to the stadium. Once that ended, so did the fans. And now we have a fine baseball stadium that stands empty with insufficient parking and isn't on any major transit service.

The hype surrounding attempts to bring back the CFL or baseball to Ottawa is always interesting, because after the prospective ownership group, the most "support" seems to come from the municipal politicians and the media. What makes this interesting is that both of these groups end up being the loudest supporters, but probably expect to go to the games for free -- or even, as is the case of some sports reporters, get paid to go. If you ask the average fan in the city (forget the average citizen) you get indifference, at best.

Now in some respects hockey is an exception to this rule. The 67's have a built-in fan base of hockey parents plus kids who are hoping to be the next generation. They also have very modest costs, which means they can live within their gate receipts. And the Senators will always have a value intrinsic to the NHL franchise that they represent.

However, as far as the fans go, there is a real possibility that a lack of production on the ice will be reflected in a lack of fans in the arena.

The more we look at this season unfold, the more the Senators start to look like a mid-field team, one which at best can be described as hoping to sneak into the 7th or 8th place for the playoffs. Management isn't giving me the feeling that they know they should be rebuilding the team for a run a few years down the road -- Murray's actions seem to indicate he thinks that he can still "tweak" this team back into a contender. And I really think that ship has sailed.

The problem is that the average fan has to be asking himself: will I be entertained if I go to this game? And if his definition of "entertainment" is "winning", then he is less likely to get the money together and go. I mean, if I'm dropping $200+ on a seat and parking (or the required hour on a bus) and "food", I damn well better get a win out of it, right?

Ottawa has neither the deep tradition of hockey that provides a large number of people who love the game such as Toronto. They also don't have a fan base used to supporting their team through long, painful droughts such as... well, Toronto. And they don't have the sheer numbers of population within travel distance of the arena to ensure that even if the percentage of people who fall into the above two categories starts to dip, they will still be likely to sell enough tickets to make money on the whole exercise no matter what the product on the ice is like. Such as... ok, I'm going to say Toronto again.

In the short term, Ottawa fans will return when the results on the ice return.

If the team lasts into the long term, eventually there will be a tradition of following the team. The kids today will turn into the fans of tomorrow, and as long as the team can hold their attention they have a really good chance of building a more robust (and failure-tolerant) fan base.

As a business, the Senators' ace is the value of the NHL franchise. And since that franchise can be moved (it is possible), there will always be a lineup of people willing to put money down to own it. They may prefer to move the franchise to another market, one where they think the team might be more viable... but they won't just blow away in the wind like so many CFL teams have.

Now personally I think this is overblown hype at this point, yes, even after I've written all the above. Looking at the state of the economy, with people worried about their jobs and all is not conducive to $200 trips to the hockey arena. I think any attendance dip both here in Ottawa as well as Toronto can be traced more to people (and businesses) worrying that they can't afford to spend the money than to a drop in interest in the team. At this point, it's a warning, not a disaster in the making.

Make no mistake about it, a prolonged drop in gate receipts will be a stern test of the current team ownership. But really, to succeed in this town you have to be a winner.

Another Post About The Leafs

The Toronto Star wonders if fans are finally tired of bad Leaf teams:

The face time with Burke, apparently, was the latest in the line of sweeteners meant to entice a faithful that, once upon a time, didn't need enticement.

Interesting development. Now I'm sure the Leafs will lose some of their season ticket holders due to the economy; to pretend otherwise would be crazy. But the general assumption has always been that there would be people standing in line behind them ready to take the opportunity.

I've long said that Toronto could field a team consisting of Timbits and they'd still sell out, and I still think it is true to some extent.

When you think about it, the scarcity of Leafs tickets was what was driving the potential relocation of the Nashville Predators to Hamilton. The theory was that fans in Southern Ontario who couldn't get Leafs tickets would make the drive to Hamilton, if only to watch the visiting teams. Now this plan may not be as feasible as originally thought.

I do wonder if the Leafs have managed to devalue their own tickets, even as they drive the price up. Increased prices were paid by corporate customers, while your fan-in-the-street made do with increased TV coverage on CBC, TSN, SportsNet, and of course Leafs TV. Going to the rink to watch the game becomes less about the game and more about the experience of being there. If fans want to actually watch and follow the game, they stay home and watch it on TV.

It will be interesting to see how the Leafs do next year with their season tickets holders.

(Assist on the play: PPP)