Hockeynomics 101

The Tennessean reported this past week that the Predators expect to show a small profit at the end of the season. Obviously, this is good news for the Preds and the viability of the franchise in Nashville. Several factors come into play when looking at the economics of a hockey franchise, notably per game attendance, corporate sponsorships, and the stability of ownership, to name the most prominent factors. In looking at these factors, one would say that the trends are positive for the Preds. Attendance is averaging right at the magical 14,000 per game to participate in the league's revenue sharing program, with per game attendance approximately 800 more fans per game than at this time last season. Local ownership has done a great job signing up more local sponsorship, notably Nissan and Vanderbilt Medical Center. In cannot be understated the positive impact that a local ownership group has had in this area as well as the general stability of the Predators franchise. The Boots del Biaggio saga notwithstanding, local ownership has made great inroads into the Nashville business community, and the results are being shown in the bottom line. Hockey fans in Nashville will always be grateful to Craig Leipold for bringing hockey to Nashville, but Craig's biggest shortcoming was that he did not have local ties to the Nashville business community and was, for all intents and purposes, an absentee owner. This precluded the necessary ties to the business community and the resultant support that comes from those relationships. So for the 2008-2009 season, the financial outlook looks positive.

For me, the question becomes what happens next year. With the economy in the throes of the the worst recession since the great depression, can this franchise (or for that matter, any franchise) continue to enjoy financial success? The league is currently working with Phoenix, a franchise in desperate financial straits, to salvage the franchise. David Shoalts of the Toronto Globe and Mail newspaper reports that the the Coyotes are losing $30 million dollars a year, and that owner Jerry Moyes is actively seeking financial partners or attempting to sell the franchise. Moyes, the owner of Swift Transportation, a trucking company, can no longer fund the operating losses of the franchise and is locked into an unfavorable long term lease (25 more years) at Jobing.com arena in Glendale. Additionally, Moyes owes $80 million to a New York hedge fund that was used to purchase the franchise. By comparison, the Predators have a more favorable lease with the City of Nashville; they have managed their payroll well; debt is manageable; and the owners have approached the ownership of the franchise from the perspective of civic pride, not profitability. Certainly, they do not want to hemorrhage red ink, but profits from hockey operations, while essential, are not the first priority.

The tenuous economy forces one to look at the critical factors for the financial success of the Predators franchise. First, will ticket sales hold up for the coming year? Increasing season ticket sales is essential. A significant drop off in season ticket sales bodes ill for any franchise, especially the Predators. There is no doubt that this will be a major push in the off season, and for the franchise to be stable, ticket sales must remain at or near current levels. Secondly, corporate sponsorships must continue to be added. Over the years, Nashville has lost some corporate and regional headquarters (such as American General and Kroger's). Corporate sponsorship dollars tend to gravitate to the city that is home for those corporations, which has been a detriment to the large dollars being available in this market. The front office has to continue to make available sponsorship opportunities that fit with our business community. Lastly, the ownership interest that del Biaggio had (25%) must be resolved to solidify the stability of the ownership group. TSN has reported that Calgary investment banker Brett Wilson has reportedly been in negotiations to buy del Biaggio's interest in the Predators. Wilson has some ties to the current ownership group as he is a partner with David Freeman in the West Tennessee Diamond Jaxx, a AA baseball club in Jackson, TN. It will be up to the bankruptcy trustee in the del Biaggio case to resolve the disposition of his interest. With vultures such as Jim Balsille around, and until the trustee does so, that cloud hangs over the franchise.

Overall, Preds fans should take heart in the fact that the franchise is financially healthy. This summer poses many financial challenges, not only to the Predators, but to the league as a whole. Ticket sales, corporate sponsorships, and stability of the ownership group are the critical variables that fans of the Preds should be watching.