Olympic play may harm NHL teams

In research that has become very timely with the conclusion of the 2014 Sochi Winter Olympics, an article published in the International Journal of Sport Finance suggests that NHL teams who have players who played in the Winter Olympics are likely to experience a drop-off in success.

The study, conducted by Neil Longley of the University of Massachusetts, is titled The Impact of International Competitions on Competitive Balance in Domestic Leagues: The Case of the National Hockey League’s Participation in the Winter Olympics.

Longley’s research was featured in an article in The New York Times (linked below), which examined just how teams who had star players in the Winter Olympics, may be affected during the remainder of the season. Interestingly, the study suggests that players representing the host country, in this case Russia, may experience the greatest decline in performance once they rejoin their NHL teams.

http://www.nytimes.com/2014/02/25/sports/hockey/study-says-top-nhl-teams-may-decline-after-sochi.html?smid=fb-share&_r=0

Devils in Trouble

The New Jersey Devils of the National Hockey League (NHL) are reported to be in severe enough financial trouble that the league is considering taking over the team.  Current owner Jeff Vanderbeek, a former Lehman Brothers executive, was not able to meet payments on his newly restructured loan which was suppose to help ease payments.  Forbes reported earlier this year that the Devils have are more than $230 million in debt, which is around the amount that the Atlanta Thrashers were in debt before they were purchased and moved to Canada.  Curiously, Forbes is also reporting that the NHL does not want the Devils to declare bankruptcy as the Phoenix Coyotes did.  Rather, they are going to try and take control of the team and then help find a new ownership group to takeover the Devils.

The takeover seems to have some logic to it, as we have seen teams like the Los Angeles Dodgers get taken over by Major League Baseball to get rid of incompetent ownership and management.  The Dodgers were bought out at a major profit, and the team somewhat rejuvenated.  While I do not think there will be any “mega” offers for the Devils, the franchise has won Stanley Cups in recent memory, and was once one of the dominant clubs in the NHL.  With the league taking over the team, they may be losing out on the $25 million they are currently owed from Vanderbeek, as well as the $55 million in salaries that are due to players this season.

While it does not surprise me that another team has had such financial troubles in the NHL, to see one in one of the larger markets in the league may be a sign of several things.  It could be poor management from a financial perspective, an owner trying to bite off more than he can chew, or it could be that the metro area cannot support that many professional hockey teams.  In any case, this will probably be another point in the argument by the owners to get an even larger split of the revenue the next time they negotiate a collective bargaining agreement.

Will the Premier League kill Major League Soccer?

This past week, NBC announced that they will show every single match of the Premier League campaign in the United States beginning at the start of next season, which begins at the end of the summer in 2013.  This means that NBC will literally use its empire of networks to broadcast Premier League games from England during the weekends.  There is even a graphic going around, showing that on May 11th, 2014 – what is referred to as “Championship Sunday” or the last day of the Premier League season – there will be games on the following NBC channels: NBC, NBC Sports, USA, Bravo, CNBC, SyFy, Esquire, MSNBC, E! and so forth.  I’m sorry, but Premier League on SyFy seems to be quite a reach, but NBC has paid $250 million for the 2013 Premier League rights, and they want to do things the right way.  As their press release notes:

Details of the 2013-2014 NBC Sports Group Premier League programming include:

• All 380 matches presented live on television with studio pre- and post-game coverage;
• All 380 matches streamed live via NBC Sports Live Extra;
• Games not aired on a designated NBCUniversal channel will be made available to distributors via Premier League Extra Time, a package of overflow television channels available at no extra cost for each of their customers who receives NBC Sports Network;
• Championship Sunday – May 11, 2014, when all 10 Premier League matches will be available live on a different NBCUniversal channel;
• 76 Spanish-language telecasts, 10 on Telemundo, 66 on Mun2;
• More than 600 hours of Premier League original programming.

NBC SPORTS LIVE EXTRA: Every Barclays Premier League match will be streamed live via NBC Sports Live Extra, the NBC Sports Group’s live streaming product for desktop, mobile and tablets and, in most cases, on the digital platforms of participating cable, satellite, telco and other video subscription services. The vast majority of Barclays Premier League matches will be streamed via “TV Everywhere,” available on an authenticated basis to subscribers of these services.

NBC happens to have the rights for Major League Soccer as well, which they pay $10 million a year for.  In this current deal, NBC shows usually one or two MLS matches a week, with the Premier League they will be showing around 10 matches a week through the season.  Some people have discussed that the deal would be beneficial for MLS, as it would draw more soccer fans to the NBC network who could then carry over watching Premier League matches to MLS matches.  I believe that this logic doesn’t fully fit.  First, the MLS matches would usually not transition smoothly with the Premier League, unless the MLS started playing at 10 or 11am, which would mean much less fans in the stadium.  At this point in time, fans in the stadium are the lifeblood of the MLS, as the revenues from television, once distributed, aren’t even worth a quarter of a team’s salaries for a season.  In this, the Premier League may not kill the MLS, but could draw some major attention away from the professional soccer in the U.S.

Time will tell how this deal affects MLS, but I personally think obtaining the Premier League rights was a great move by NBC.  For many years, I was part of a that crowd of people who paid extra money to get Fox Soccer on their cable plans to watch matches early on Saturdays.  Now, NBC will bring the Premier League to a national audience on over-the-air channels, meaning that people can watch certain Premier League matches without paying.  I think that this move could really help heighten the popularity of the Premier League, though I’d be curious to see how well ratings do on NBC during college football season.  The games wouldn’t overlap, but I am not sure how many college football fans will turn on their television sets early to catch Fulham play Everton.

Will the NFL come to Los Angeles?

In previous posts over the last few years, there has been discussion on this blog about whether the NFL would finally place a franchise in Los Angeles.  Things seemed to be getting close in the last year, as Anschutz Entertainment Group (AEG) supposedly secure most of the backing and agreements needed to build Farmers Field in downtown L.A., next to the Staples Center (another AEG owned facility).  The picture grew a little more cloudy when AEG said that they were going to sell off their Los Angeles based organization, allowing another investor to take over.  Now there is downright chaos as it seems more conditions are on the plate for AEG, and there is also question of whether AEG has been following the proper timeline.

Amongst the discussion, is the NFL wanting a team to come to L.A. before Farmers Field is built.  That would mean a franchise would need to relocate first, and then attempt to build a new facility.  What this creates is the situation where a lot of cities may try to keep their teams by offering upgraded/new facilities where they are currently located.  In this way, the team would be guaranteed at least a new stadium.  The move to L.A. no longer seems to make a new stadium a certain thing.  St. Louis and Buffalo had been two franchises that had been considered on the hot seat in regards to having their franchises pulled away to the West Coast.  Now with this news, it may be that the Rams will try to leverage a potential move to get the $700 million in upgrades that St. Louis has supposedly been offering for their stadium.  In this, there is certainly the question of which franchise would move to L.A., or if the NFL wants to keep it open, to continue to pull public subsidies from other cities across the country with the simple threat of “if you don’t give us a stadium, we will move to L.A.”

The second part of the most recent drama is the council that had approved the project had set a timeline two years ago for the Farmers Field project to move ahead.  Currently, it would seem that the project is well off track and may not be allowed to happen at this point.  Part of this deal is that AEG must finish its work on the downtown convention center it is building in L.A. before it can move forward with Farmers Field.  This project is suppose to finish in the Fall of this year, but that is not certain to happen anymore.

Finally, as noted in this article from Yahoo, the NFL doesn’t believe the economics of the stadium will work for AEG.

“The numbers just don’t work, no matter how you look at the deal,” a league source said in February. “It’s either too hard for AEG to make money [and pay the debt on the stadium] or too hard for the team. I just can’t see a way for it to work.”

Officially, a league spokesman said Monday that the NFL is still tracking what AEG is trying to do.

“We continue to monitor the AEG situation and remain interested in multiple sites in the Los Angeles area,” NFL spokesman Brian McCarthy said in a statement.

Sounds to me like an NFL franchise is a long way from calling downtown Los Angeles home.

Hat-tip(H/T) to my students in my sports economics class who brought up this news during our discussion on stadium subsidies today.

Is the NCAA in danger?

The NCAA attempted to have a court case filed by former players thrown out in court.  The former players led by Ed O’Bannon want to recoup some of the broadcast right fee revenue that has only been shared by the NCAA and member institutions.  This initially focused on re-broadcasts of games, but now a new ruling from Judge Claudia Wilken is signaling that players (former and current) can go ahead with their antitrust lawsuit against the NCAA.  So what does this mean exactly?  If, and that is still a big if, but if the NCAA loses this lawsuit, it could mean that the face of collegiate sport as we know it could change forever.  It would also mean that the NCAA could be held liable for hundreds of millions (or even billions) of dollars in revenue to be paid back to former student-athletes.  That would be in addition to having to potentially split some of the broadcast revenues from here on out with student-athletes in those events.  If such events were to transpire, this could mean that many programs which need their current level of revenue from broadcast right revenue would find themselves short of money, and that they would probably find themselves in the red.  I would anticipate athletic departments either going into the red, or making cuts to many programs on campus in an attempt to stay financially stable.

What would all of this mean?  It would be a major sweeping change in athletics, and the financial and economic structure of how the NCAA and member athletic departments do business.  It would also make things more interesting as it would push forward the discussion of whether a student-athlete is an employee or not.  Many argue both sides of this, with discussion of whether the National Letter of Intent which all student-athletes sign is a contract or not.

This is still in its early stages, and is sure to be battled in court for quite some time.  With that said, I’m sure many in the NCAA and athletics are probably sweating a bit after today’s ruling.

If you are going to price gouge, do it to the other team’s fans!

The media has been abuzz this week with discussion over the price of tickets for the away section at the Arsenal vs Manchester City match in London this weekend.  Arsenal, decided to raise the price of the tickets in the away section to £62 (about $99 U.S.), which has made many supporters of Man City and the media very angry.  Manchester City actually returned 900 tickets to Arsenal of the several thousand that they were given for their fan section, as supporters of Man City have refused to pay so much to go travel to London to watch the game.

Which might have been a smart thing, as I believe it is now 35 years since Man City has beaten Arsenal at Highbury or the Emirates. (Yes, I’m an Arsenal supporter, and I keep track of these things…)

Notably, Arsenal and other teams in England have begun using multi-tiered pricing where different games are priced differently based on the opponents and other factors.  This practice means big games like Man City vs Arsenal will garner a high price, while QPR vs Norwich will be rather cheap.  It is also a practice which is not new to fans in North America, where many of the sport leagues use variable ticket pricing to try and capture greater consumer surplus.  Economists have begun to examine this practice of price dispersion, and research studies looking at similar practices in Theaters have found that it has boosted revenue for organizations.  Which means it seems only natural for sport organizations to copy this behavior.

But Arsenal fans are also unhappy, and have complained to the club this week because of the high prices.  They noted that in other countries across Europe, tickets often run between ten to twenty Euros.  I think with the growing nature of the business that is the Premier League, fans will only be disappointed in the future as ticket prices continue to soar, especially for matches with top tier opponents.

 

Economic impact of the Hall of Fame vote?

Across the country there are people who are holding their breath waiting to see what happens with this year’s Hall of Fame vote.  Many believe that this may be the first time that no players who currently eligible under normal standards will be elected (others could still be elected such as broadcasters, owners, older players who are no longer eligible).  If no players are elected, this could mean that there is not as much interest in the Hall of Fame this year, and could lead to decreased attendance at the induction ceremonies which occur in the summer.

Already many articles are pointing at the potential economic impact that this may have for Cooperstown, where the Hall of Fame is located.  The LA Times notes that some stores do about 15% of their annual sales during the induction weekend.  Professor McDonnell in this article of Forbes discusses the tie between Cooperstown and the Hall of Fame:

The village of Cooperstown is just as anxious to hear the Hall of Fame results as the candidates themselves. Cooperstown’s hospitality and tourism industries are inextricably tied to the Hall of Fame’s fortunes. They can ill afford to have a half empty dais on Hall of Fame weekend due in part to protest or lack of interest. Likewise, they need Main Street to be bustling with visitors who are spending their disposable income at the local restaurants, shops, motels and inns. A summer without a single living member of the Class of 2013 or a boycott of any kind by fans or current Hall of Famers could be detrimental to business owners that rely heavily on the allure of baseball’s history.

I understand that there is a good deal of business in hospitality and tourism that revolves around the Hall of Fame, but the Hall of Fame itself has been losing money over the last several years.  While it is a big deal for many local businesses, I begin to wonder how much we should be worried about the economic impact of the Hall of Fame vote.  Yes, some individuals and businesses will be affected, but at the same time, one has to question whether Cooperstown has literally put all of its eggs into one basket.  Furthermore, if we are talking about the vote mattering for the economy, then will not some writers feel more pressured to vote yes for individuals they think shouldn’t be in the HoF, all for the sake of propping up some businesses that have a great dependence on a event for a few days every year.

I hate to sound like I am not sympathetic, but at the same time I have to shake my head when I hear all this talk of the economic impact of the Hall of Fame vote.  It wasn’t like people knew this problem, I think better business planning and strategies needed to be created to try and offset some of these issues.

It’s Over! NHL/NHLPA Reach Tentative Agreement

The NHL and the Players Association reached a tentative agreement.  While there are still details to hammer out, it looks like hockey fans will get a 48-50 game season starting in mid January.  The deal comes after a 16 hour mediation session where the two sides finally came to terms on the core items.  It is a ten year deal with a opt out option after eight.

Scott Burnside from ESPN has a great article on the damage done by the lockout.  I am not sure the “Bad News Bears Breaking Training” philosophy of “Let them play” is the best course of action, but that does seem to be the logical marketing strategy for a league that cannot seem to get out of its own way. Fans are very upset, I am not sure you can just drop the puck and let it be. Will the hardcore fans flock back to the game? Of course. The NHL has a lot of work to do in the coming months and years.

NHL Brand Suffering?

An interesting article in today’s The Globe and Mail concerning research done on the NHL at its brand.  According to the study done by Level5 Strategy Group, based out of Toronto, shows a very high number of NHL fans who have become disinterested in the sport.  Level5’s program creates “emotional maps called the emotisphere” to show favorable feelings, or dislike, toward a particular product.

There are some interesting findings in the survey.  First, Canadian passion toward hockey is diminishing.  Only one-third of Canadians would classify themselves as passionate hockey fans.  Second, researchers found those in the other two-thirds to be apathetic or angry towards their feeling toward the NHL.  The last bit of noteworthy information in the study is the emotional map created by the NHL brand was as bad or worse than BP after the oil spill in 2010.

It does seem like this lockout is completely different in the eyes of the fans.  I hold onto the notion that fans will come back to the game no matter how long this work stoppage endures. However, it may take a McGwire/Sosa type of race to get a lot of fans back.

There were a lot of rule changes last time to make the game more exciting i.e. shootouts, crackdown on obstruction.  What can the league offer this time?  One thing we do know, it will not be cheap tickets!

The greatest infographic ever?

Courtesy of Deadspin, this infographic shows the growth of tax subsidies for stadiums over time.