The Senators’ profitability

Interesting post by Tyler Dellow in which he speaks about the disproportionate percentage of league revenue that comes from Canadian hockey teams. This in itself is nothing new, though it contrasts rather inconveniently with local writers and business interests who paint a picture of Canadian clubs on the edge of profitability in order to ensure 1) monopolies in their markets, and 2) some degree of fear-driven support from fans.

Melnyk’s resorted to as much, playing up how much money the team has lost in recent years and making repeated reference to a break-even point of the second round of the playoffs. In the spreadsheet Dellow links to you’ll see that Ottawa actually does fall around the middle of the pack in per game ticket revenue in 2010-2011, during which they made $45.10MM. This is just over $1MM in revenue per home game, or roughly half what Montreal, Toronto, and Vancouver make. Last season Ottawa spent to the cap and had a horrible year, so you can see why Melnyk feels justified in making his annual entreaty to fans, strategically just days before tickets go on sale, to support the team. On a superficial level–you buy tickets to see the team, and they spent more on salary and operating expenses than they made on tickets–the team did lose money.

But this doesn’t tell the whole story. The spreadsheet doesn’t contain revenue from television sales, merchandising, from other events at ScotiaBank Place from which Melnyk derives pure profit (assuming fixed costs are paid out of hockey revenues), or revenues shared by all teams from the sales of NHL memorabilia. That remains under wraps. This spreadsheet–leaked to Toronto Star, as it is every year–is unhelpful because it enables those with an interest in the status quo to make the case that NHL clubs lose money on a strictly ticket-for-services basis. It also allows the owners to plead poverty in the upcoming CBA negotiations, despite Bettman’s perpetual reports of rising profits. The in-out dynamic of most profit calculation is politically motiviated, and ignores many of the residual profits associated with team ownership.

But the spreadsheet does allow us to speculate about this year’s profitability. The team is spending roughly $14MM less on salary this year than last, and is vastly more competitive. The 20th Anniversary Season and All Star Game (which you can only attend by buying ticket packages) are also pushing the brand, and revenues. Revenue per ticket may not be up, but attendance is. (Ottawa is seventh in league attendance this season, up from 11th last season.) Television revenue, heritage jersey sales, and more may contribute to a larger take. Ottawa is going to have a big, though not huge, year.

I’m not trying to portray Melnyk negatively here. He spends to the cap on salaries when appropriate, and wants to bring a Cup to Ottawa. Sometimes he seems like the most delusional Sens homer of all. He just spent $5MM on a new scoreboard, albeit one he had little choice in acquiring as the new one was literally only quasi-operational. And the team continues to include a number of money saving ticket deals for fans, from throwing in two tickets with the purchase of a jersey, to food voucher specials, to family packs of tickets for a hundred bucks. I appreciate these things, knowing they would never, ever happen in a market like Toronto. It’s just as important to consider these things part of the big picture as it is to remember that billionaire franchise owners aren’t prone to running money losing ventures.

7 thoughts on “The Senators’ profitability

  1. Melnyk is most certainly a ridiculous homer, but I appreciate that since it shows his love of the team and his commitment. As long as he doesn’t meddle in the GMs duties, I can enjoy the awkward moments for what they are. I mean, he’s practically David freaking Brent!

    It’s great to see the attendance up. But I guess we’re all just having an easier time supporting a young, exciting team that’s fun to watch, over an uninspired and older core that can’t seem to get to the next level.

    Lastly, I can’t say enough about the heritage jerseys. They’re incredible!

  2. Just an incredibly well-thoughout and intelligently formulated piece. I come for the laughs but I stay for stuff like this. Great job!

    • Yeah, that’s true. Though I like to think that Atlanta was an anomaly, and definitely very different than a Canadian market. They just couldn’t get it right after all those years, and I’m sure it was a number of factors. But it still remains a mystery to me. Atlanta is huge, and definitely a sports town. I have to think that if they had had any measure of success at all in their time there, they would have gradually grown the brand. Look at Nashville. But zero playoff games one in franchise history? And they still stuck with Waddell? That’s just asking for it.

  3. Good point re: all those great cheap deals offered by Melnyk and Co. Sure, it’s almost necessary to pad out the seats at SBP when they’re playing the Islanders or whoever, but for thousands of families (and younger folk) who don’t make 100-level seats dollaz, that shit is essential to building a bigger fan base – especially among kids/ immigrant communities. Maybe this is biased or whatever, but based on merchandise wearers here in Toronto, I’d say as far as Leafs fans go, they tend toward white, middle class folk (in the most diverse city in the world) while the Raptors and TFC have done far better with less traditional markets. In Ottawa, I don’t think that’s quite so much the case, although I’m no sociologist and I’m probably just looking for more reasons to scoff at TML.

  4. Pingback: Eugene Melnyk Accepts Honorary Degree from Chicago School of Economics |

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