Friday, 19 August 2011

Business Morons

I'm not knocking anyone who loves the NHL out of pure entertainment here, but I'm pretty sure we all know that the NHL is big business first, right? The NHL talks about how many rears they put in the seats, how much merchandise they sold, and how well the teams are doing financially ad nauseum so it seems to be a pretty cut-and-dry discussion when debating whether the NHL is a business or entertainment. Don't get me wrong: entertainment can be business, but, at the end of the day, it's still and always will be the bottom line that makes or breaks that entertainment business.

In that vein, I found an article written in The Business Journals today to be very idiotic when it comes to business. The writer, G. Scott Thomas, is probably a very good businessman and has had several books published, but I'm not sure if he understands sports at all. His bio reads,

"G. Scott Thomas has been a journalist for more than 30 years, specializing in stories about business and demographics. He has written 8 books and more than 100 articles for such national publications as American Demographics, Biz, Savvy, Sporting News, and The Wall Street Journal."
Impressive, but, again, I'm not convinced he has any savvy for how hockey works, and his latest article on the most overextended markets for pro sports is, in my view, delusional and insulting. Personally, it goes to show how little he knows about the business of sports, and the idea of sports being a form of entertainment.

In today's article, Mr. Thomas puts a painstakingly ridiculous set of criteria forward to determine which markets would be ideal choices for future NHL expansion. Never mind the fact that expansion at this point would be an absolutely moronic idea for the NHL, but the examination was done by Mr. Thomas anyhow. According to Mr. Thomas, "[t]he study estimated that an NHL team needs an income base of $37.6 billion" - a very large number for smaller markets, but entirely acceptable in some large American markets.

But it's just a number.

This number is some number-cruncher's rationale for putting an NHL team into a particular place that isn't currently served by the NHL. However, it doesn't take other factors into its analysis: hockey's popularity, fan commitment, overall business support of the sport. Those three things are vitally important when talking about hockey because the NHL's revenue is derived largely from ticket sales and merchandise sales. You would think someone who knows sports business would have a grip on how the NHL does business, right?

Let's take a look a few of the 58 North American cities chosen in this study. I'll focus mainly on the top ten cities, and we'll look at why the criteria chosen by Mr. Thomas is debunked by his own oversights in this study.
  • Ranked #1 by Mr. Thomas was Riverside-San Bernadino, California. Forgot for a moment that the distance between downtown Riverside-San Bernadino and downtown Los Angeles is approximately 60 miles, but Riverside-San Bernadino has Coussoulis Arena to house its NHL team. Coussoulis Arena holds 5000 people. So not only is the market part of the Kings' surrounding market, but it doesn't even have an AHL-calibre arena. But it should be the top market for the NHL to pursue in future expansion, right?
  • Houston came in at #2, and there's a good chance that Houston could be on the NHL's radar in the future. The Toyota Center can seat 17,800 fans for hockey, and it is the fourth-largest metropolis in the US. The only problem? No one has stepped forward in the last decade as a viable owner for an NHL team in Houston. If no one wants to own a Houston-based NHL team, why would the NHL pursue that city? And where do the AHL Aeros move to if the NHL moves in? The Aeros have long been one of the best AHL franchises since joining the AHL, and they have excellent in-state rivalries with the Texas Stars and the San Antonio Rampage. Why would the NHL want into an AHL market if the AHL market hasn't made it clear it wants an NHL team?
  • Bridgeport-Stamford, Connecticut was #3, and this suggestion is even more stupid than Riverside-San Bernadino. Stamford is a mere 40 miles from Madison Square Garden in New York City, so a new team in the Stamford area would certainly be within not only the Rangers' market, but also the Islanders' market and potentially the New Jersey Devils' market. Secondly, the Islanders have their AHL franchise - the Bridgeport Sound Tigers - in Bridgeport, Connecticut, and it does fairly well there. Again, why is the NHL moving into AHL markets when the AHL market hasn't expressed any desire for NHL membership?
  • Cities ranked #4 through #7 have all had or have minor-pro hockey in them at one point. Las Vegas (#4) had the IHL Thunder there for a while, and they discovered what a lot of other leagues have experienced: no one goes to Vegas to watch sports. Norfolk, Virginia (#5), Providence, Rhode Island (#6), and Austin, Texas (#7) are all successful AHL cities, so I'll refer to Houston's and Bridgeport's question: why would the NHL want to set up shop there if there is no demand for it?
  • Hartford, Connecticut (#8) is a different situation as they had both an NHL and WHA team in the Hartford Whalers who were extremely popular with the fans in Hartford. Fans in Hartford would certainly welcome the NHL back as easily as the people in Winnipeg did, but they are still operating out of the aging Hartford Civic Center, aka the XL Center. It seats 15,635 fans for hockey, making it one of the smallest venues for hockey in North America - something that still hasn't been corrected since the NHL Whalers left. Besides that fact, the Connecticut Whale AHL franchise operates out of that building, and they haven't exactly been the most successful franchise at the gate over recent years.
  • Sacramento, California (#9) is an interesting idea. It is 120 miles from San Jose, California, so it really isn't part of San Jose's market per se. But it is faced with two major challenges: no ownership and no NHL-suitable arena. Sacramento has the Maloof brothers who own the Sacramento Kings NBA franchise, but no one has even remotely mentioned ownership of an NHL franchise in recent years. Add to the fact that new arena votes were shot down by Sacramento voters, and the Power Balance Pavilion would instantly become the smallest NHL venue at approximately 14,000 fans. Expansion franchises with low attendance and no billionaire owners won't last long.
  • Richmond, Virginia (#10) is about 100 miles from Washington, DC, so there might be an argument over the Capitals' market reach. Richmond also has an arena issue - it seats just 11,088 fans for hockey. That would be a great AHL arena, but it doesn't even come close to what the NHL expects. The AHL Richmond Robins played there from 1971-1976, and there have been two ECHL teams since: the EHL's Richmond Rifles ('79-81) and the Richmond Renegades (1990-2003). If we look at the SPHL Richmond Renegades, the most recent hockey team from 2006-09, the attendance was abysmal. The Renegades averaged 2977 fans per game - horrible numbers. Ownership issues, arena size, and fan apathy make Richmond a very moronic choice as the tenth-best place for the NHL to settle.
If you look at the top ten list, there are two cities from each of Virginia, California, Connecticut, and Texas. If you happen to peruse the list of states with the most millionaires, those four states rank seventh, ninth, fourth, and twenty-sixth on the list of millionaires per capita. So if Hawaii was #1 with the most millionaires per capita, why wasn't Honolulu one of the chosen NHL destinations for an expansion team? Well it was - #15 - and there are no pro teams, lots of money per capita, and a chance to stick it to their landlocked brethren - seems like a no-brainer to me.

Could it be because hockey isn't popular there? Hockey has failed twice in Atlanta now, and it was ranked as #11. Louisville, Kentucky, and Birmingham, Alabama are college towns when it comes to sports despite the University of Kentucky having a team. Hockey doesn't get much recognition in Louisville at all, and the AHL failed there when the Louisville Panthers existed. New Haven, Connecticut (#17) saw the AHL New Haven Beast fail miserably. Orlando, Florida (#18) saw the Orlando Solar Bears win the IHL's Turner Cup, and they still folded.

And that's the problem with this list: the cities chosen would not have NHL hockey as the first, second, or even third entertainment choice on their lists. The NHL is a source of entertainment, and it competes with a myriad of other entertainment choices. From the plethora of shows and events in Las Vegas (#4) to Disney World and Universal Studios in Orlando (#18) to rodeos (Tulsa), college football (nearly every American city), pro football (nearly every American city), and everything else, the NHL knows its niche and is wise in sticking to it. Would it be great if every American city grasped the sport? Absolutely. But it just isn't going to happen.

Quebec City, possibly the next place the NHL will consider for relocation, was ranked as "borderline" at #31. Hamilton, Ontario got the same verbal rating as they came in at #33 just ahead of the thriving metropolis of Poughkeepsie, New York (#36). Kansas City, a place where the Penguins, Predators, and Islanders were all rumoured to end up, which has a new arena and only would compete with the Royals and Chiefs for sports dollars, was called "insufficient" and still ended up as #57.

Is it just me, or does it seem like Mr. Thomas is a little brain-dead? Maybe he just has no clue about sports in general. Business people sometimes get into these ideas about how good something is in theory without actually taking a look at the practical side of the coin. It doesn't matter how rich a city's peoples are if they have no interest in the entertainment you're bringing to town.

In the vast majority of these cities' cases, they are already AHL towns, and they are doing very well with minor-pro hockey as opposed to the NHL. Grand Rapids, Michigan (#40) could never support an NHL franchise, but the Grand Rapids Griffins are extremely popular and successful as an AHL club. Worcester, Massachusetts (#26) is home to the AHL Sharks, but the popularity of the Boston Bruins would crush any NHL team in Worcester.

Perhaps it would be wise if The Business Journals actually stuck to business and stopped wading into sports. From Mr. Thomas' deductions, it's clear he knows little about hockey, and he comes off as a complete moron with this type of article.

Until next time, keep your sticks on the ice!


Robert Ullman said...

I saw this linked on Puck Daddy as well. Kind of a dumb story. Almost all of the cities in the top 10 are within the "sphere of influence" of another team...correct me if I'm wrong, but even the Whalers failed in part because people in Hartford were fans of either the more successful Bruins or Rangers.

As a resident of City #10, I can tell you in no uncertain terms that there is NO WAY an NHL team belongs in Richmond. I think it'd make a great AHL city, as hockey is awfully popular here. I know many many people who play and are fans, and events like the Winter Classic always get good ratings here.

I realize that attendance numbers for the most recent incarnation of the Renegades, and the Riverdogs before them, were abysmal, but the product on the ice was abysmal as well. I don't know the exact details of why the ECHL team left here a decade ago, but the games I attended always had decent crowds, and I imagine that if you put a team of players with a future on the ice, the fans would come. True, our building is a relic and a bit of a dump, but the Norfolk Scope, home of the Admirals, is at least twice as bad...and 75 miles further away from my house!

Teebz said...

Great comment, Rob. Glad you shed a little light on Richmond, but is that still considered Caps territory from what you see in town? Or is it a mixed bag of east coast NHL fan affiliations?

As for the Admirals, I agree, but they do have the AHL. Maybe there's a future for the Richmond Admirals if Norfolk doesn't cut it?

Robert Ullman said...

Yeah, I'd say it's mainly a Caps town, but like all other more progressive southern cities, there are folks here from all over, which leads to seeing a mishmash of fandom. Pens, Canes, Devils, Rangers, you name it.

I don't really know how well the Ads draw, though they seem to do okay. I'd be all for them moving here though...the building really is awful, and not worth the almost-2-hour trip!

Also, as it happens, I hear Rod Langway lives in my neighborhood! I've never seen him,but folks say he hangs out with his family at the community pool all summer. Gotta teach my kids to swim!