Sunday, May 17, 2009

Gary Bettman, Lost in a Field of Dreams...

I know that sometimes when I watch a movie it has a profound effect on me, leading to a permanent impact on my psyche. I swear that Gary Bettman was brainwashed by the film Field of Dreams, because the keynote quote of “if you build it, they will come” seems to have had a dramatically negative impact on the NHL Commishioner. The idea that you could just drop an NHL franchise in the middle of the Arizona Desert and you will create NHL fans out of thin air. Well they built the Arena in Glendale, and they did not come. I get the feeling that ego has a role to play in Bettman resisting the migration of his failed experiments back to the great white north. Despite allegations that he has expressed a desire to return the Coyotes to Winnipeg, it is clear that Hamilton is the far better choice. There are just that many more eyeballs and wallets within driving distance. The largest hindrance to relocation to franchise is a lack of luxury sweets in Copps Coliseum. The luxury boxes are how franchise extract millions of dollars from Corporations who compete for the right to spend that money.

I don't believe anyone has officially quantified the economic benefit of a hockey franchise in a strong hockey market. I suppose it would not be difficult. What you would need is economic statistics from the greater Winnipeg area for the period leading up to the departure of the Jets, and the period after. Look at business revenues in Winnipeg and tax revenues in the city and province. You could easily see if there is any measureable effect of the departure of the franchise. There was certainly a significant loss of happiness (or in economics, the immeasurable variable of utility) with thousands of hockey fans. You can't measure the loss of pleasure that the people of Manitoba suffered, but you can measure business and tax revenues. Conversely, you could also measure the impact in Ottawa when they brought in the Senators. You could then compare the two circumstances, ripping a team and adding a team, and measure any possible economic impact.

While I have not seen an official study, I did gain some unique insight working at GM Place, being there for events, and cleaning up afterwards. A pro sports franchise, especially one so popular as the Canucks in Vancouver, is a magnet for commerce. You have thousands of consumers who fill their wallets with cash and head to the arena to spend money in a fashion from which they derive enjoyment. The actual stadium will directly employ anywhere from 400 - 700 people. In Hamilton they would be moving into an existing building initially, a building which already employs people.

Between preseason, regular season, playoffs, charity events, open practices, you would be adding roughly 60 - 70 major events to Copps Coliseum annually. That translates to an increase of about a million visitors. For that new traffic, there would be an increase of about 200,000 man hours of janitorial services, Concessions and souvenir sales people, security, and so on and so forth on an annual basis. I never saw the official revenue and cost balance sheets of my employer, so I am just estimating based on observation. The "multiplier effect" applies mostly to the food and beverage industry in the downtown area. This effect is more substantial depending on the size of the "secondary market" of fans. In Phoenix, they don't sell out, so anyone who wants to see the game can buy tickets for cheap at the door. There's no need to go to the sports pub next door to watch the game. In Vancouver, thousands of secondary fans who can't get tickets congregate in the downtown area where the stadium is. It allows them to be close to the venue, and share in the celebration with the fans that were at the game. I have no idea if it is more profitable to build an Arena outside town like the Senators in Kanata, or downtown like most teams.

I suppose at the heart of this entire "study" would be whether or not the existence of a pro sports team actually stimulates economic growth, or if it is a zero sum game. It is after all just entertainment. People show up, watch, feel emotion, and go home. At the end of the day no tangible product is manufactured, and all it really does is encourage people in the area to spend money. Does spending that money in a different manner improve the economic prosperity of the region as a whole? The franchise does attract outside dollars primarily in the form of corporate advertising. Businesses buy luxury suites, and spend big money to litter their ads all over the stadium. Money that would not otherwise have been spent in a fashion that could provide tax revenue to government. That is somewhat offset by teams dropping big money on players who don't live permanently in the city. It hardly benefits the people of Vancouver economically to have Mats Sundin build a mansion outside Stockholm. However a number of players do live here year round, and they spend a lot of what they make right here.

So again, you'd have to look at Winnipeg and Ottawa before and after to see if there is any measurable impact economically. It certainly redistributes the way money is spent, and perhaps spending money to watch a hockey game means that you don't buy that new barbeque? Restaurants could do fantastic business, but Canadian Tire may suffer. If it is a zero sum game economically, you can't exactly measure the amount of pleasure that people in the region have gained by the arrival of a team or the loss of a team. Were factory workers who had Jets season tickets bummed out and less productive when the team left town? Did those tech workers in Ottawa become more productive when their company bought those box seats? Tough to say.

The Canadian Dollar is a whole other matter. Canadian teams lose money mostly in the form of payroll. All player salaries are paid in American dollars from Canadian revenue. An 80 cent dollar means that your 40 million payroll now costs 50 million. It is a disadvantage, but not a hindrance because the Canadian teams generate much more revenue than most of their American counterparts. But even a 50 cent dollar does nothing to help save the sinking ships in the Southern USA. Infact, the NHL membership has to inject cash into those franchises, and with a lower Canadian dollar it decreases the net total income of the NHL as a whole. The NHL would have less money to bail out their failed experiments. The only way it really affects Ballsille is that a 220 million dollar offer would now cost 265 million Canadian dollars, though I don't know how much of his current accounts are in Canadian. In so far as a lower dollar providing a reason for Bettman to block franchise migration to Canada, that is nonsense (even if he really believes that). I don't care what the dollar is at, it is better to have a Canadian team operating at a profit than a Phoenix team operating at a loss.

1 comment:

  1. With the exception of the cases where a lot of taxpayer money is used to fund the hockey arenas, an NHL franchise should be a net contributor to the economy.

    The primary reason, is that is a healthy hockey market like Ottawa, a large portion of your ticket holders are in the top 5% of income earners in the community. This is disposible entertainment money. If they do NOT spend the money one the team, then they could spend their money out of town.

    I remember a story, during the lockout, about a gentleman who now did NOT have to purchase his 4 front section season tickets, basically spent that money on a vacation for his family to Florida, and still had money to spare.

    So basically an NHL franchise should be able to bring more money to the local economy, verses being spent out of town.