In a Cold Economic Climate, Many NBA, NHL Teams To Freeze Ticket Prices
In case you haven't noticed, the economy is in a bit of a mess. While sports are often used to help people relieve stress and to distract them for the problems with the world, the business of sports entertainment is not untouchable.
The economic issues of today are swallowing up more and more, putting sponsorships and ad revenues for teams and leagues in jeopardy.
With many important sponsorships around the world of sports, companies like AIG, Bank of America, Citibank, Ford, and General Motors are being forced to review and curtail many of their sponsorship deals in an effort to stop the bleeding.
While many of the league's are still managing to prosper, they are also being forced to take a few steps back and look at the big picture in an effort to stabilize and tighten the belt just a little bit.
Recently, both the NBA and NHL have taken substantial steps in protecting themselves from any sort of backlash that may be forthcoming in this brutal economic environment.
With lagging season ticket sales for the 2009-2010 year, the NBA estimated benchmark renewal rate which is typically set at 82-85 percent, has been slashed by four percent by Chris Granger, senior vice president of team marketing and business operations for the NBA.
While season tickets are purchased well in advance, it is impossible to notice the effects on the line of revenue at this point in time.
However, the NBA recently received a $200 million extension to an existing $1.7 billion league wide credit facility by JPMorganChase and Bank of America, which the league did not seek out specifically, but did accept without hesitation to help out the smaller clubs who are being hit harder by the recession.
Notably, the Orlando Magic (who are moving into a new arena in 2010), who have lost between $15-20 billion annually over the last six years and have been mentioned as being among the teams who are freezing ticket prices for the upcoming year.
The loan extension was offered to the NBA both to help build off of a strong and rewarding relationship, and to help the banking institutions who offered secure a future source of income in the event of further economic fallout.
The interest rate carried along with the new loan is about two and a half percent higher than the previous loan rate, which is a direct reflection of the harsh economic climate.
With top NBA teams trying to avoid paying the luxury tax on an annual basis, it has been more evident this season of planning for the future with teams like the Los Angeles Lakers and New Orleans Hornets making deals simply for the sake of dumping salary.
In the NHL, things are structured a little bit differently, but the league has been affected in a similar manner.
While teams in the NBA make shrewd moves to avoid paying a league-mandated luxury tax (which is split equally between the lowest revenue earning clubs), NHL franchises scramble to ensure the franchise meets revenue-sharing requirements, which stipulate that a team must increase revenue annually by more than the league average to qualify for the NHL’s redistribution.
So teams like the Buffalo Sabres and the Washington Capitals are essentially forced to raise ticket prices so they can earn at least a small slice of the NHL revenue pie.
While both the NBA and NHL are seeing revenue increases between 12-17 percent each, it is due as a result of the prudent financial planning that each league has engaged in as a result of the lockouts each league has experienced within the past ten years.
In the NHL, different strategies are employed all of the time as a preventative measure, but brand new plans have been set into place to help alleviate the financial stress that season ticket packages may have on season ticket holders.
As the most recent season ticket purchasing window closed for the NHL, league and team marketing officers have set forth a plan enabling fans to lock into payment plans, or promise to pay at a later date.
While the payment plans have allowed the common fan to spread out the cost more effectively, it also gives the league a constant trickle of revenue at a time when fiscal planning is at its most important time.
Whiles revenues currently are up, a possible hint at a potential shortfall came up earlier this year when the figures for NHL players' escrow payments to the league were released.
In the NHL, the Players' Association makes payments to the league to protect against possible revenue shortcomings. At the conclusion of the season, the league pays the players back the money that was paid to them in advance (money that the league could use to accrue interest and secure future loans), but that is a trend that is expected to end this year.
With average NHL salaries back on the rise, this compromise was made without hesitation, which is something other leagues with upcoming labor squabbles should take a look at.
With the both the NBA and NHL in caution mode, it appears as though they are making the right steps towards keeping the gravy train rolling. Realizing that the economy is in a bit of dire straits, here is a list of the franchises who have made it known of their intentions for the upcoming seasons:
|2009-10 NHL season-ticket pricing|
|Teams freezing prices:|
|Anaheim Ducks||Florida Panthers|
|Atlanta Thrashers||Los Angeles Kings|
|Boston Bruins||Minnesota Wild|
|Calgary Flames||New York Islanders|
|Carolina Hurricanes||Ottawa Senators|
|Colorado Avalanche||Phoenix Coyotes|
|Columbus Blue Jackets|
|Tampa Bay Lightning|
|Buffalo Sabres||Washington Capitals|
|Toronto Maple Leafs|
|2009-10 NBA season-ticket pricing|
|Teams freezing prices:|
|Boston Celtics||Orlando Magic|
|Chicago Bulls||Dallas Mavericks|
|Miami Heat||Utah Jazz|
|Cleveland Cavaliers||Atlanta Hawks|
|Philadelphia 76ers||New Jersey Nets|
|San Antonio Spurs|
|Portland Trail Blazers|
|New Orleans Hornets (select lower-bowl seats)|
Note: Teams listed have made their plans public.
Sources: NBA, NHL franchises
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