Myth Busting, Part 4: “We need a new model”

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Hockey Day in Canada 2019. Natalie Spooner for the former Toronto Furies. Photo by Courtney Szto.

Co-Authored by Courtney Szto and Brett Pardy

Last year, we tackled three common myths that circulate around discussions of women’s hockey:

With the NWHL’s recent announcement that it will expand to Toronto, we thought it might be a good time to complicate common understandings of how revenues are generated. Digit Murphy, President of the newly named Toronto Six, made the following comments on a recent episode of ESPN on the Ice:

But what happens in women’s sports is it’s about the revenue. What are you doing for ticket sales? Merchandise? Broadcast rights? In order to sustain a livable wage for these players, let’s just do the math — $30,000 a year, that’s nothing, that’s the poverty level. Times 20 players, that’s $600,000, just for salaries. Times six teams, that’s $3.6 million. That’s just for salaries! Now you have to sell that many tickets, that much revenue coming in, just for a six-team league, and that doesn’t include ice or anything else…

We’re in like that fourth tier anyway … you’ve got football, basketball, baseball, then hockey. So we have to play 90 games on the men’s side to generate the revenue that we have to.

When asked about a playing venue for Toronto, Murphy said:

We probably will go into an arena that is similar to the other NW venues now, This is a long-term strategy by our ownership. It’s not like we’re going to go into a 5,000-seat arena and fill it. Our sustainability model is on a three- to five-year path. It’s not going to be overnight. With that said, yes we have a couple of arenas in mind. We need obviously a professional-type arena that can seat 1,000 or so. The No. 1 goal is to fill those arenas…We’re going to roll it out with this criteria in mind, probably a smaller arena at the beginning, parking, all the things that go with a good franchise arena partner, then go from there. Then a couple years after that, maybe we can graduate into a larger arena. I think the first step is to fill the stands of the rinks that you have.

Murphy raises some conflicting ideas about how revenue is generated by professional sports organizations because the ticket sales, merchandise, and broadcast rights that she mentions are largely dependent on the stadium itself. The infrastructure of modern professional sports systematically excludes women’s sports from the important revenue streams that are typically relied upon.

The Stadium

This may be the most critical part of setting a team up for success because the stadium represents an asset for the team and is the anchor point for other revenue streams. In Artificial Ice: Hockey, Commerce and Cultural Identity, John Hannigan (2006) explains the following about the Toronto Maple Leafs’ transition from Maple Leaf Gardens to the Air Canada Centre:

In the 1990s, sixty major league facilities were constructed by franchises in the Big Four sports leagues — the National Football League, the National Basketball Association, Major League Baseball, and the National Hockey League — at a cost of $18 billion (US). From the owners’ point of view, this makes good business sense. Older venues have poor sightlines and limited parking and concessions, and they are difficult or impossible to retrofit with the private boxes and suites that have outstripped regular seating as a money generator. Equally, if not more important, team owners are able to develop new revenue sources: from the sale of naming rights and seat licenses, from sponsorship deals and in-stadium advertising, and by playing cities off against one another in order to secure infrastructure improvements and tax breaks. In this new era of sports business, success means establishing a team brand with a global impact. (p. 201-202)

When the Leafs played out of Maple Leaf Gardens, the team generated its revenue from ticket sales and concessions, which is how things worked before branding became “a thing.” Then the Leafs moved to the Air Canada Centre, where ticket sales still represent the largest revenue stream ($116,731,000), but they are supplemented by “broadcast revenue ($81,353,000) and sponsorship revenue ($44,735,000)” (Hannigan, 2006, p.204); thus, ticket sales now account for about half of the revenue generated.

In 1999, Air Canada paid $40 million over 20 years for the naming rights to the stadium, which is another significant source of cash if you own the stadium. Then, in 2017, Scotiabank paid $800 million to rename the stadium the Scotiabank Arena. To Murphy’s point about starting in a small arena (and even using multiple arenas), the lack of physical capital is one of the biggest hindrances to women’s sports. If you do not own the building (or receive a very generous lease from the city), you are limited in the revenue streams available to you, such as luxury box sales:

Most new stadiums are built not because they are physically obsolete, but because they are financially obsolete. Whether it’s the NBA, NHL or Major League Baseball, suites now account for anywhere between five and 20 percent of total team revenue. Luxury boxes provide a constant flow no matter how good or bad the team is playing. The payment is already made and it’s part of the revenue generated by the facility. (CNBC)

The Quebec Nordiques and Winnipeg Jets were other teams that also struggled financially in outdated arenas because they could not generate additional revenue from things like luxury boxes (Mason, 2006, p. 185). Luxury Boxes (and club seats) are like gift cards–it’s money in the bank regardless of whether people or come or not. And, luxury boxes are pre-sold for all events that take place in the stadium, such as concerts. Women’s hockey has never had access to luxury boxes to sell, or even to club seats that are priced exponentially higher than single game tickets. Even Canadian Hockey League stadiums in small cities like Moose Jaw, Saskatchewan and Brandon, Manitoba have luxury boxes available. The Mississauga Steelheads (OHL) sell 12 person luxury boxes for $400 and 22 person boxes for $700 in a 5000 seat stadium.  Twenty-two individual tickets for a CWHL game at $15 per ticket would only bring in $330. Luxury boxes also represent a place to conduct business (or host an event) more than they represent dedicated hockey fandom. So, as long as women’s hockey is relegated to community arenas, it will not be seen as a viable business venture or even a business setting.

The city of Winnipeg and the province of Manitoba helped keep the Winnipeg Jets afloat during the 1990s with $40 million in government funds (Mason, 2006). Forty-million dollars spent to lose the team to Phoenix in 1996…only to have the expansion Atlanta Thrashers move to Winnipeg in 2011. This is a perfect example of how men’s sports are too big to fail. The Jets sucked $40 million from public coffers and they were invited back! And, into a nice new stadium, no less (of which another $40.5 million was paid for by city, provincial, and federal taxes). The Jets continue to receive a yearly $14.1 million annual tax subsidy. While the MTS centre succeeded in luring the NHL back, Quebec City spent $400 million, half of which came from public funds, on the Videotron Centre in 2015 but have yet to find a team for it. The Videotron Centre, however, has succeeded in becoming leverage for other NHL teams to use as a threat in their quest for new publicly funded stadiums.

The WNBA is often used as a comparison for what women’s hockey could become but the  difference in playing surfaces poses a unique challenge for hockey. As an example, the Washington Mystics play out of The Entertainment and Sports Arena, which seats 4,200 and has luxury boxes for sale. They share their home with the Capital City Go Gos (a G League team) and the Washington Wizards use it as their practice facility. The beauty of basketball is that they can change the court surfaces so that when the Mystics play it looks like the home of the Mystics, and when the Go Gos play it looks like their home too:

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Washington Mystics. Photo from Washington Mystics.

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Capital City Go Gos. Photo by Kelyn Soong/Washington City Paper.

Unfortunately, the rink is usually only flooded once a season. It might be flooded again if a team makes the playoffs and new logos need to be added underneath the ice surface, but what is not feasible (or environmentally sustainable) is regularly lifting the ice in between games for different teams. Hence, men’s hockey teams rarely share rink facilities. The logo at centre ice is an important branding piece but also cements a team’s presence in a community. Furthermore, as on ice advertising becomes more commonplace, women’s teams are also cut off from these opportunities. Here’s an (ugly) example of all the advertising opportunities that women’s teams cannot offer if they do not have a home rink to call their own:

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Oulun Energia Areena in Finland. Photo by Ilari Savonen via The Hockey Writers.

Concessions and Merchandising

When the NHL shuttered for COVID-19, Scott Burnside of The Athletic outlined how much each NHL team earns in revenues per home game, with estimates landing between $1.5 and $3 million. Burnside approximated (because pro sports teams are notoriously secretive about their revenue accounting) an average breakdown comes from $1.3 million in tickets, $215k in concessions, $86k in merchandise, and for teams who own their arena, $17k in parking fees. Not only do women’s teams not make money from spectator parking but the players may have to pay for parking themselves or they receive limited spots from the arena for the team. Women’s teams are rarely even featured tenants in their arenas, like many minor and junior men’s teams who increasingly receive greater cuts of concession revenues and parking fees.

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Hilary Knight driving into Place Bell in Laval, Quebec, explaining that players often have to carpool because there are not enough parking spaces for them to drive individually. (Screen capture from Red Bull Video.)

Fans inside an arena are a captive audience, barred from bringing in outside food. The Winnipeg Jets made a big deal out of cutting their concession prices by 30%, but even that reduction still resulted in $7 beers, $5 pizza slices, and $3.50 bottled water. Concessions are extremely profitable, with items selling at up to a 90% markup and employees working at or near minimum wage. However, arenas contract out their food services to mega-corporations like Aramark or Delaware North, who receive up to 65% of the profit (and even larger cuts in luxury boxes). Team parking facilities often have similar agreements with parking management companies such as Impark. But because fans have no other choices, this allows both the team and the third party contractor to both make a substantial profit.

The $86,000 estimated merchandise figure above accounts for the team’s retail income, but teams also receive licensing fees from those products. The NHL has licensing deals with at least 211 brands, covering nearly everything imaginable from video games to Himalayan salt crystals (seriously), from hockey cards to tool sets. The majority pay flat fee licenses, though this varies by contract and some deals provide royalties. The league splits all merchandise revenue evenly between the 31 teams, allowing the most popular to subsidize the least popular.

Returning to the centrality of the arena, having a bricks and mortar team store facilitates merchandise sales. It also helps with that branding piece so that people know X team plays out of that facility. It can be difficult for even the most devout fans to buy women’s hockey merchandise because it isn’t physically inaccessible. No one accidentally stumbles across women’s hockey merchandise.

Broadcasting

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Toronto Unifor Dream Gap Tour 2019. Photo by Courtney Szto.

Having an arena is not just for the fans inside the building, it facilitates television broadcasts. While women’s hockey leagues have made valiant efforts to broadcast from the stands of community rinks, it’s not the same as an arena with broadcast gondolas, appropriate sight lines, and multiple cameras. Modern arenas are built to be television friendly, not only so fans can watch a high quality presentation, but also because it increases exposure for in-arena advertising and allows teams to set higher ad prices. (Fun Fact: The last time we were at a CWHL game in Montreal, we were standing on a landing and were asked to move because we were blocking the TV camera.)

NHL television exposure and revenues have lagged behind the other major leagues in the United States for two interrelated reasons. The first was simply that the NHL did not have a major network television contract between 1975 and 1990. The only way that fans could watch NHL games in the United States was to be a cable-TV subscriber. As a result hockey failed to get the national exposure that only network television could bring. Moreover, the NHL had arguably missed the boat in its cable-television strategy deal leaving the vastly more popular ESPN in 1988 for a $17 million per year deal with SportsChannel. (Mason, 2006)

The NHL was able “to take advantage of Fox’s early 90s sports-driven strategy to negotiate a five-year $155-million contract with Fox television, starting with the 1994-95 season” (Mason, 2006, p.183). The league returned to ESPN in 1999, who saw NHL broadcast rights as an investment in its own future and agreed to pay the “NHL $600 million over five years for both cable and over-the-air national rights” (Mason, 2006, p.184). This partnership was short-lived as ESPN felt they overpaid, offering “only” $60 million a season. So, the NHL left for the much less popular NBC SportsNet for $70 million a season between 2007 and 2010.  The NHL and NBC extended the deal for nearly three times that sum in 2011. (Mason, 2006)

Currently, as The Sports Daily summarizes:

The NHL has a deal with NBC that runs through the 2020-21 season that pays over $200,000,000 annually. That’s just the USA. The Canadian TV deal is worth a whopping 5.2 billion dollars for 12 years beginning in 2014. This breaks down to approximately 500,000 annually. Divide nearly 700,000,000 dollars by 30 and that comes to over 20,000,000 per team. The salary cap per team in The NHL is 75 million. So TV revenue pays a huge chunk of the players’ salaries.

***

Did you know that Canada has a professional basketball league? Actually, we have more than one men’s pro league, but the Canadian Elite Basketball League (CEBL) was founded in 2017 and completed its inaugural season in 2019. One season in and the CBC stepped up to be the premier media partner with a 3-year deal that is supposed to include streaming of 70 regular-season games on CBCSports.ca, CBC Gem, and the CBC Sports app. In addition to streaming, CBC agreed to show eight games on television. Here is how the CBC explained its decision to support the CEBL:

A three-year deal allows the CBC to choose what it wishes to cover about the CEBL, how much it wants to invest in telling stories and in the communities where the teams live, and take some risks along the way.

“We picked up the product midway through the [2019] season and saw it as a good fit,” said Chris Wilson, executive director of CBC Sports and Olympics. “It was low-risk to give it a try and it started to build an audience. It’s not a huge audience, yet, but there was definitely enough [of a following] to believe it was worthwhile investing the next few years.”

This explanation counters every argument waged against women’s hockey about earning their way to the top. Chris Wilson admits point blank:

  • There isn’t a huge audience yet but they see potential. (If the millions of Olympic viewers for women’s hockey isn’t potential the size of the Statue of Liberty, what more do you need?)
  • They are going to BUILD an audience. No one really asked for summer league basketball, but they are going to try and create something out of nothing.
  • It’s a low-risk opportunity to give the CEBL consistent streaming with some Saturday television coverage.

This is literally all the CWHL ever asked for: a chance to build a nation-wide viewing audience with consistent access. Oh, and in case you’re wondering what kind of facilities the CEBL teams play out of, they are all in stadiums, with the smaller venues holding at least 4,000 spectators all the way up to the Saskatchewan Rattlers playing in the Sasktel Centre that has over 15,000 permanent seats. Average attendance for the league in its first season was approximately 1,400-1,500 “give or take a few hundred depending on the night and venue.” In other words, no! You don’t need to sell out small community arenas before you “earn” your way into a top-notch facility. You can and should start in stadiums with the amenities needed to grow an audience. Here’s the myth: men’s teams do not earn stadiums. Rather, they are gifted stadiums as an investment, and these gifts are framed as public goods.

The components above help set teams up for long-term sustainability. To Murphy’s point about women’s sports being overly focused on revenues, this is not an unreasonable demand given the risk involved with playing hockey. Denna Laing‘s unfortunate accident during the Outdoor Women’s Winter Classic in 2015 has left her with a permanent spinal cord injury, and is a prime example of why athletes need to be compensated accordingly — it’s not just about “greed.” Whether it’s a player’s first shift or last shift, they have accepted a certain level of risk to play this sport. If we want to be entertained by athletic labour (and for some people to make money off of them) then players need to have access to medical and rehab staff, health care, dental and vision, pensions, and long term disability coverage etc. This is a loophole that sports has managed to dodge by being framed as “play” and a “game,” but these are workplace risks that employees assume. For men’s professional sports, leagues can get away with shoddy pensions and health care coverage by making it up with large salaries. Thus, if women’s sports cannot be compensated financially at that scale yet, then employers have to accept the responsibility of providing other forms of compensation. This should be the minimum cost of doing business.

Do we need a new model for women’s hockey? Yes…but only a “new to us” model because we’ve never actually tried the established method. Unfortunately, “filling the stands of the rinks that you have” fails to address the significant investment gap that faces women’s hockey. For women’s hockey to legitimately take up space in the world of sports and entertainment, they have to be given the opportunity to literally claim space within stadiums. It’s also important to understand that sports stadiums are generally bad investments for cities (i.e. great for private capital, terrible as a public good) but, if we can’t stop the demand for new infrastructure, then perhaps we can shift expectations so that requests for new facilities require and/or prioritize proposals that include a women’s team as part of the overall vision.

Works Cited

Hannigan, J. (2006). From Maple Leaf Gardens to the Air Canada Centre: The downtown entertainment economy in “World Class” Toronto. In D. Whitson & R. Gruneau (eds.), Artificial Ice: Hockey, culture, and commerce (pp. 201-214). Toronto: University of Toronto Press.

Mason, D. (2006). Expanding the footprint? Questioning the NHL’s expansion and relocation strategy. In D. Whitson & R. Gruneau (eds.), Artificial Ice: Hockey, culture, and commerce (pp. 181-199). Toronto: University of Toronto Press.

 

 

One thought on “Myth Busting, Part 4: “We need a new model”

  1. Your academic citations are adorable. But you don’t have to be Mariah Burton Nelson (“Who?”) to realize that both male and female television viewers are broadly uninterested in watching wymmynz sports. Of course everybody loves figure skating, and now wymmynz tennis is popular, but beyond that, what you academic girls refuse to accept is that everybody wants to watch male athletes. Because we’re bigger, stronger, and faster.

    You do realize I was writing about that 25 years ago? If only your citations were not solely academic.

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