Arena negotiation discussion. UPD: Flames release their proposal

[Locke]

Originally Posted by EldrickOnIce

Since last CBA, Flames revenue as percentage of league revenue is at its lowest 3 years since the lockout, dropping in 2015-16 to less than 3% of league revenue.

Average post lockout/ pre latest CBA?
Somewhere around average 3.3-3.4% of NHL revenues.

Any idea why this should be the case?

Please feel free to correct my math. It could be off some. I lost the NHL link
https://www.statista.com/statistics/...es-since-2006/

Probably the Rebuild. The Flames put together some pretty rough seasons sandwiching that one playoff run.

[GGG]

Originally Posted by EldrickOnIce

Since last CBA, Flames revenue as percentage of league revenue is at its lowest 3 years since the lockout, dropping in 2015-16 to less than 3% of league revenue.

Average post lockout/ pre latest CBA?
Somewhere around average 3.3-3.4% of NHL revenues.

Any idea why this should be the case?

Please feel free to correct my math. It could be off some. I lost the NHL link
https://www.statista.com/statistics/...es-since-2006/

Drop of the Canadian dollar?

Leafs show a similar pattern in the last 3 years

https://www.statista.com/statistics/...fs-since-2006/

[EldrickOnIce]

Originally Posted by GGG

Drop of the Canadian dollar?

Leafs show a similar pattern in the last 3 years

https://www.statista.com/statistics/...fs-since-2006/

Huh. Flames as percentage of league revenue have fared better than Leafs since then, actually.

[s_procee]

Originally Posted by EldrickOnIce

Huh. Flames as percentage of league revenue have fared better than Leafs since then, actually.

I think he meant they both went down because of the Canadian dollar, wasn't comparing them to each other

[Robbob]

Thinking out loud, would the fact that the Stampede benefits from this relationship not count for something? Wouldn't surprise me if the monies from parking really helps their bottom line. I know in the original land swap, the Flames lose their parking. I'm not saying the board needs to throw money in on this, but I think the money they stand to make being benefactors of a stadium should count as a benefit for the city.

Ballparking on the low side 3000 stalls at $15 for 70 events(Flames, Hitmen, Roughnecks, and concerts) gives them around 3M a year.

[Bingo]

I built a model that looks at the arena deal in Calgary, however a model is only as good as it's variables and assumptions, which are of course numerous.

Thought there was very little point in just sharing an answer without testing the parameters with the site.

Once done I'll publish an article with the findings, and then as more details roll out I'll update the thing so at least to the strength of what I built we have a decent answer.

Does that sound like a good attack plan to flesh this thing out?

[Passe La Puck]

Originally Posted by EldrickOnIce

Since last CBA, Flames revenue as percentage of league revenue is at its lowest 3 years since the lockout, dropping in 2015-16 to less than 3% of league revenue.

Average post lockout/ pre latest CBA?
Somewhere around average 3.3-3.4% of NHL revenues.

Any idea why this should be the case?

Please feel free to correct my math. It could be off some. I lost the NHL link
https://www.statista.com/statistics/...es-since-2006/

Where are you getting 3% of revenue from? What you linked shows a blip from the year they reached the second round of the playoffs. That tells me if they want more revenue they should focus on icing a decent team as opposed to what they've generally done for the previous two decades.

Regardless of the above, I guess you need to purchase the additional stats. All this shows is Calgary, a "small" market team which has barely made the playoffs in the last two decades has middle of the pack revenues. How could anyone expect more than this?

[Lanny_McDonald]

Originally Posted by EldrickOnIce

Since last CBA, Flames revenue as percentage of league revenue is at its lowest 3 years since the lockout, dropping in 2015-16 to less than 3% of league revenue.

Average post lockout/ pre latest CBA?
Somewhere around average 3.3-3.4% of NHL revenues.

Any idea why this should be the case?

Please feel free to correct my math. It could be off some. I lost the NHL link
https://www.statista.com/statistics/...es-since-2006/

Do you have a graph that charts where the Flames fall in this regard? Who are the big money earners and what type of coin do they generate?

[EldrickOnIce]

Originally Posted by Passe La Puck

Where are you getting 3% of revenue from? What you linked shows a blip from the year they reached the second round of the playoffs. That tells me if they want more revenue they should focus on icing a decent team as opposed to what they've generally done for the previous two decades.

Flames revenue vs league revenue

https://www.statista.com/statistics/...es-since-2006/

Lost the link to league revenue in same format, but 2015-16 for NHL was $4.1B

121M/4.1B = 2.95% of total league revenue, lowest since lockout.
The year they made playoffs under Hartley, second lowest since lockout.
I had expected the Flames revenue, as % of overall league revenue, would be dropping due to revenue streams being exhausted in comparison to other teams. It seems I was wrong. Going instead with (as GGG suggested) that it falls on low Canadian dollar over that period.

[EldrickOnIce]

Originally Posted by New Era

Do you have a graph that charts where the Flames fall in this regard? Who are the big money earners and what type of coin do they generate?

No. I'm still can't find the table league wide revenue again. I had it earlier. Some copy/paste into excel (if all teams' data was available) would be very interesting. I'll look some more when I get a few minutes

[jayswin]

Originally Posted by Flamenspiel

and Montreal's population(1.7 vs 1.4) is not that much more then Calgary.

What?

[Locke]

Originally Posted by jayswin

What?

Its kind of 'Cherry Picking' stats.

Calgary is one of the biggest Metropolitan populations in Canada, but most other major metro areas (Toronto, Vancouver, Montreal, etc.) include the populations of all the little Parasite communities and Cities anywhere nearby.

Calgary is just Calgary.

'Vancouver' is a half-dozen Cities combined, ditto Toronto, etc.

[Frequitude]

Originally Posted by longsuffering

Complete speculation on my part, but I'll float a prediction of what the Flames proposal might look like based on some media reports.

City portion - 52% ($286 million)
Flames direct portion - 20% ($120 million)
Ticket Tax - 28% ($154 million) - Considered by Flames to be part of their contribution. ALTHOUGH IT IS NOT

Obviously, there would be zero money flowing back to the City from their investment by way of taxes or revenue sharing. Although I expect that CSEC will ultimately agree to some form of rent.

I'm as pro-city as they come in this debate, but the bolded is 95% wrong. A ticket tax is absolutely a Flames contribution. It's basic economics.

Assuming a $100 ticket with a $10 ticket tax on top, the market price is $110. Its not like the Flames would benevolently reduce ticket prices to $100 if there were no ticket tax. They'd still charge $110. A ticket tax is simply the Flames borrowing against their future revenues.

Now I said 95% for two reasons:
1) There is some truth to the fact that the psychology of the purchaser changes when they see the price as $100+$10 vs $110. So a ticket tax may marginally shift the demand curve. This is the only way that the argument could be made that a ticket tax, or part of it, is borne by the user (i.e. the fans).
2) If the City fronts the ticket tax loan at an artificially low interest rate, this would represent a transfer of wealth from the city to the Flames (or from whoever the lender is to the Flames). This is the only way that the argument could be made that a ticket tax, or part of it, is borne by the City.

However those two subtleties pale in comparison to how much of a ticket tax is born by the Flames.

[Lanny_McDonald]

Originally Posted by Locke

Its kind of 'Cherry Picking' stats.

Calgary is one of the biggest Metropolitan populations in Canada, but most other major metro areas (Toronto, Vancouver, Montreal, etc.) include the populations of all the little Parasite communities and Cities anywhere nearby.

Calgary is just Calgary.

'Vancouver' is a half-dozen Cities combined, ditto Toronto, etc.

Metro Calgary, or the CMA, includes three cities (Airdrie, Calgary and Chestermere), three towns (Cochrane, Irricana, Crossfield), one village (Beiseker), and one First Nations reserve (Tsuu T'ina including RedwoodMeadows). Calgary Regional Partnership includes three cities (Airdrie, Calgary and Chestermere), nine towns (Banff, Black Diamond, Canmore, Cochrane, Irricana, Nanton, Okotoks, Strathmore, and Turner Valley), and one townsite (RedwoodMeadows). Calgary's population is somewhere between 1.3-1.4M people. It also covers just over 5,100 sq km.

Greater Montreal has a population of just over 4M and covers just over 4,200 sq km. Metro Vancouver Regional District has a population of 2.46M and covers an area of 826 sq km.

[GGG]

Originally Posted by EldrickOnIce

No. I'm still can't find the table league wide revenue again. I had it earlier. Some copy/paste into excel (if all teams' data was available) would be very interesting. I'll look some more when I get a few minutes

They have NHL revenue by team for 2015/16 on that site if you dig around it. I found it by googling NHL 2016 revenue by team. When I tried to link here it shows you have to pay a fee to get it. I can't seem to link to it though.

[corporatejay]

Originally Posted by Frequitude

I'm as pro-city as they come in this debate, but the bolded is 95% wrong. A ticket tax is absolutely a Flames contribution. It's basic economics.

Assuming a $100 ticket with a $10 ticket tax on top, the market price is $110. Its not like the Flames would benevolently reduce ticket prices to $100 if there were no ticket tax. They'd still charge $110. A ticket tax is simply the Flames borrowing against their future revenues.

Now I said 95% for two reasons:
1) There is some truth to the fact that the psychology of the purchaser changes when they see the price as $100+$10 vs $110. So a ticket tax may marginally shift the demand curve. This is the only way that the argument could be made that a ticket tax, or part of it, is borne by the user (i.e. the fans).
2) If the City fronts the ticket tax loan at an artificially low interest rate, this would represent a transfer of wealth from the city to the Flames (or from whoever the lender is to the Flames). This is the only way that the argument could be made that a ticket tax, or part of it, is borne by the City.

However those two subtleties pale in comparison to how much of a ticket tax is born by the Flames.

Bang on. I will mention that there will be a ticket tax for non-flames events so I'm not sure it is ENTIRELY their revenue, but in principal, I agree.


Frankly, the real way this could be funded is entirely through a ticket tax. Perhaps the city puts up the capital and then backstops it on a ticket tax and locks the flames into a 35 year lease. That would be a truly "user pay" system and frankly probably the fairest way to do it. It will never happen though.

[ynwa03]

Originally Posted by Frequitude

I'm as pro-city as they come in this debate, but the bolded is 95% wrong. A ticket tax is absolutely a Flames contribution. It's basic economics.

Assuming a $100 ticket with a $10 ticket tax on top, the market price is $110. Its not like the Flames would benevolently reduce ticket prices to $100 if there were no ticket tax. They'd still charge $110. A ticket tax is simply the Flames borrowing against their future revenues.

Now I said 95% for two reasons:
1) There is some truth to the fact that the psychology of the purchaser changes when they see the price as $100+$10 vs $110. So a ticket tax may marginally shift the demand curve. This is the only way that the argument could be made that a ticket tax, or part of it, is borne by the user (i.e. the fans).
2) If the City fronts the ticket tax loan at an artificially low interest rate, this would represent a transfer of wealth from the city to the Flames (or from whoever the lender is to the Flames). This is the only way that the argument could be made that a ticket tax, or part of it, is borne by the City.

However those two subtleties pale in comparison to how much of a ticket tax is born by the Flames.

This is all semantics. The Flames are not paying out of their pockets for the ticket tax. It will be paid by the citizens who use the facility. The same citizens who make up "the city." The argument that it is Flames revenue is really lazy and, to me, is an attempt to somehow create a third party in all this (the city, taxpayers, the Flames).

You're telling me that a ticket tax that is paid, tangibly, by Calgarians for using the new facility is a Flames contribution? It amazes me how things can be so skewed. Ken King complained about accounting tricks in the deal the City came out with, yet tried to convince people that the tax is Flames contribution, and the Flames will be paying 120%.

[corporatejay]

Originally Posted by ynwa03

This is all semantics. The Flames are not paying out of their pockets for the ticket tax. It will be paid by the citizens who use the facility. The same citizens who make up "the city." The argument that it is Flames revenue is really lazy and, to me, is an attempt to somehow create a third party in all this (the city, taxpayers, the Flames).

You're telling me that a ticket tax that is paid, tangibly, by Calgarians for using the new facility is a Flames contribution? It amazes me how things can be so skewed. Ken King complained about accounting tricks in the deal the City came out with, yet tried to convince people that the tax is Flames contribution, and the Flames will be paying 120%.

He's right. If the market for a ticket to the flames game is $110. Whether all of that revenue goes to the flames or 100 goes to the flames or 10 goes to a tax, the market is set.

I mean, technically the flames "contribution" is from general revenue anyway so that's also contributed by the fans.

[Bingo]

I think another way to put it is ...

the ticket tax comes with an assumption that the Flames either a) haven't or b) won't max out the ticket price including the tax when the building is ready to go. If they raise all ticket prices by 40% and then tack on a 7% tax (like Edmonton) they may hit that ceiling.

If they do then the tax is completely coming out of their bottom line. If they haven't, then it comes out of the fans pockets completely.

Either way it's the team's risk to bare going forward.

[Calgary4LIfe]

I believe the only way that you can look at the ticket tax portion as NOT being paid by CSEC is if you feel that CSEC isn't inclined to price their tickets to the maximum amount that the market would purchase them at.

Flames are wanting a new arena simply to increase their revenues, no? I think it is only logical that an increased ticket price - approaching that of the maximum that the market would purchase them for - is a practical guarantee to me. If there is additional costs involved on each ticket, whether it is visible as a 'ticket tax' or invisible as just one single price, is still the total cost to a customer purchasing the ticket. No?

Therefore, the Flames (under the assumption that they intend to maximize their profits) would have to lower the price of their tickets to factor-in the ticket tax to have the total amount in-line with what the market is dictating as the price-point for sell-outs or near sell-outs.

Am I missing something here? The accounting on the tax is of course different, and that is important for stuff like HRR, taxable income and so on, but it means absolutely nothing to a fan who has to decide where or not he can afford to go to a game or not.

I am surprised that Ken King pushed that out in his statement last week actually (about the Flames being the ones that would end up having to pay for nearly the entire thing), as to me it also stated that the Flames are indeed going to increase ticket prices to the maximum that the market will accept.