The Atlanta Solution
James Mirtle weighs in with a pretty good piece on the reasons why we are headed for a lockout despite the fact that the league has recorded – and bragged about – record revenues. In a nutshell:
Where the league is suffering and why we may have yet another lockout (the third under Bettman) is (a) the bottom 10 teams have revenues so low they can’t cover their expenses and (b) those at the top have little intention of helping them do so more than they already are.
While I think this is all certainly true, the Mirtle story illustrates the problem we all have when we try to sort out how the league and the players should go about to solving the problems. Data. James was left with trying to make his case using the numbers published by Forbes.com even though we all know their numbers are pretty much nonsense. The team valuations never seem to match up to the sale price when a franchise changes hand. The revenue numbers never match up to the reality either. When the Phoenix numbers were published as part of the bankruptcy, they showed Forbes missed the mark by a mile.
There are two clear erroneous trends in the Forbes data in my opinion: Forbes consistently underestimates the revenues of the smaller Canadian cities (and the impact of currency fluctuations) and consistently overestimates the revenues of the poorest American markets. Tyler Dellow published a spreadsheet of the ticket revenue data leaked to the Toronto Star some weeks ago. Edmonton sold $35 MM more in tickets than Tampa Bay last season. Is it credible that TB sold $25 MM more than Edmonton in concessions, sponsorships, local TV and merchandising? Forbes thinks so. I don’t.
The Forbes data has the effect of minimizing the problem, particularly when it adds in estimates for centrally driven revenues and even revenue sharing. In a league where 90% of revenues are locally earned, what really matters are the local revenues. This is why I’d quibble with the Mirtle conclusions. I don’t think it is the bottom 10 teams that are the problem – I think it is the bottom five teams. Teams like Colorado, New Jersey, Dallas and St. Louis may be enduring rough times lately but all four markets have proven that they can generate big revenues with a winning program.
Revenues drop in most markets when the team is rebuilding. This is normal. While I don’t believe in revenue sharing, I could almost accept it for teams like this – perhaps it is reasonable to give them some cash until revenues bounce back with an improved team. But what about teams that have pathetic revenues win or lose? Teams that will apparently be on welfare forever?
Thne team that generated the least amount of ticket revenue in 2011 was Atlanta and we know how that problem was solved. The next five teams – the Islanders, Phoenix, Tampa, Florida and Nashville totalled $94 MM in 2011. Worse, those five teams are down 20% since 2008. The gap is not getting smaller. It is getting bigger. The players can’t (and should not be asked to) solve that problem. The rich owners can’t (and should not be asked to) solve it either. Florida has to fix the Panther problem and Phoenix has to do something about the Coyotes.
If they can’t find enough people willing to pay big money to watch hockey? Too bad. The Atlanta solution works.
Note to the headline writer at the Globe and Mail: The league had record revenues last season, but it did not show record revenue growth or anywhere near it. Revenues quadrupled in the 1990′s. League revenues go up nearly every year and as long as they do, even by a little bit, Gary Bettman is happy to proclaim record revenues.