Economics 101
Posted 12:55 AM ET | Comments 2
The more posts and reliable news outlets I read there is a common theme. The NHL is anti Canada. Now, I know I may not be the most educated man on the planet or the most business savy, but there were some basic lessons in economics and business. There will be some people who may have a degree or more experience in the field I am about to talk about and I will take criticism as it comes.
The NHL is not Anti Canada, it has never said no to another Canadian team. The only clear thing is that the NHL doesn't want Jim Balsillie to be an owner. That being said here is my take on the situation.
Any pro sport, including hockey is a business. They are in business to make as much money as they can. The only way this can happen is to have people interested in your game. Canada has 32 million people, most are hockey fans and will watch games, buy tickets, merchandice and watch games on TV. Generating revenues for the teams and league, but there is only so much revenue the area can generate. Eventually the well will run dry. The market can become oversaturated and then the revenues could plateau or even start to dwindle. Would a team in Hamilton make money? Of course, that's not the issue. Let's say Hamilton has a team, then Toronto gets a second team, and Winnipeg gets the Jets back, well based on Canada's population and market share it doesn't take a rocket scientist to see that those teams would start to take fans and their revenue away from other Canadian teams and limit the money the NHL can make as a league. Does this sound familliar? Its the "Law of Diminishing Returns". I learned this in grade nine, high school and college. Remember the curve? the one where the line grows at an exponential rate and then stops rising and begins to drop. Well I think the Canadian market is just before the drop off. It could support another team or two, but not without an adverse affect on teams in the region.
The United states is nowhere near the midpoint of the previously discussed curve. With a population of 320 million and a minor amount considered to be hockey fans the potential for revenue generation is limitless. The only thing is that the revenues are harder to generate because you are trying to introduce a sport to areas of a country that may have never seen or played your game. There are no grass roots, but the seeds have been spread, they just need time to grow.
I mentioned at the start that the NHL was a business. Well, any business I have worked with is looking for a certain rate of return. I have a take on this too, one that most of us deal with on a daily basis. This one is a little harder to grasp becuase the revenue numbers may say otherwise.
The NHL in Canada is makes money. Would a team in Hamilton make money? Yes, that's not the issue. Due to Canada's population and market share there is only so much money that could be made, limiting the rate of return for the league. It would be like investing into a savings bond. Would you make money on your investment? Yes, would it be a good rate? not really.
If I wanted to make more money, like most people would I go to the stock market. Is my return guaranteed? No, but can I make more money? Way more, but I have to ride out the cycles. This is like the NHL in the US. Sure NHL may be struggling in Tampa, Phoenix and Nashville, but they have the potential to earn more money than Edmonton, Calgary, Vancouver or for that matter a team in Hamilton. It just takes time.
The NHL is not Anti Canada, it has never said no to another Canadian team. The only clear thing is that the NHL doesn't want Jim Balsillie to be an owner. That being said here is my take on the situation.
Any pro sport, including hockey is a business. They are in business to make as much money as they can. The only way this can happen is to have people interested in your game. Canada has 32 million people, most are hockey fans and will watch games, buy tickets, merchandice and watch games on TV. Generating revenues for the teams and league, but there is only so much revenue the area can generate. Eventually the well will run dry. The market can become oversaturated and then the revenues could plateau or even start to dwindle. Would a team in Hamilton make money? Of course, that's not the issue. Let's say Hamilton has a team, then Toronto gets a second team, and Winnipeg gets the Jets back, well based on Canada's population and market share it doesn't take a rocket scientist to see that those teams would start to take fans and their revenue away from other Canadian teams and limit the money the NHL can make as a league. Does this sound familliar? Its the "Law of Diminishing Returns". I learned this in grade nine, high school and college. Remember the curve? the one where the line grows at an exponential rate and then stops rising and begins to drop. Well I think the Canadian market is just before the drop off. It could support another team or two, but not without an adverse affect on teams in the region.
The United states is nowhere near the midpoint of the previously discussed curve. With a population of 320 million and a minor amount considered to be hockey fans the potential for revenue generation is limitless. The only thing is that the revenues are harder to generate because you are trying to introduce a sport to areas of a country that may have never seen or played your game. There are no grass roots, but the seeds have been spread, they just need time to grow.
I mentioned at the start that the NHL was a business. Well, any business I have worked with is looking for a certain rate of return. I have a take on this too, one that most of us deal with on a daily basis. This one is a little harder to grasp becuase the revenue numbers may say otherwise.
The NHL in Canada is makes money. Would a team in Hamilton make money? Yes, that's not the issue. Due to Canada's population and market share there is only so much money that could be made, limiting the rate of return for the league. It would be like investing into a savings bond. Would you make money on your investment? Yes, would it be a good rate? not really.
If I wanted to make more money, like most people would I go to the stock market. Is my return guaranteed? No, but can I make more money? Way more, but I have to ride out the cycles. This is like the NHL in the US. Sure NHL may be struggling in Tampa, Phoenix and Nashville, but they have the potential to earn more money than Edmonton, Calgary, Vancouver or for that matter a team in Hamilton. It just takes time.
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