Posted by John Vrooman on Tuesday, May 16, 2017 in National Hockey League.

Interview with Nashville Biz Journal

-What’s the difference, economic impact-wise and team finances-wise, of the Predators making the Stanley Cup Final, as opposed to just having a moderately successful playoff run?

The classic rule of thumb in the NHL is that clubs break even on average over the regular season, and then generate positive in the black profit during each successive post-season round. This is especially true for non-traditional sun-belt hockey markets like Smashville.

My best guess is that the Preds clear just under $1 million in local gate and venue revenue per Stanley Cup playoff game. The red hot Preds will probably host 3 more games in the final series for a total of 11 home games, which should bring the net post-season profit to a cool $10 million, compared to a breakeven regular season.

Because of relatively low revenue sharing in the NHL, the post-season runs are financially critical for the home the home team. The key to playing into the NHL black is to win consistently in the regular season and to somehow get out of the first round of the Stanley Cup playoffs.

And how much does that change if they win the final? Essentially, is there a measurable difference in either the impact on the team or the city for each playoff run you go?

According to most academic economists the fiscal impact of post-season runs in professional is exaggerated and zero-sum at best. This is because the increased spending at and around Bridgestone comes at the expense of spending somewhere else in the local regional economy. In this zero-sum view the congestion from the playoffs just crowds out other local events and usually results in higher prices for the hospitality industry. Furthermore most of the post-season gains are captured by the new luxury seat venues and the NHL teams themselves.

I differ from most academic purists with the argument that the negative-sum crowding out argument may not apply as well to NHL arenas as more monolithic NFL stadiums. There is clearly a positive impact on the unique business surrounding Bridgestone (including the 7^th man big-screen economic spinoffs).

-Overall, where does the biggest benefit from a Stanley Cup run play out? Is it a bigger impact just on the team and its finances, or has playoff success/victory historically brought significant impact to the cities where the teams are based? How does it compare to other sports?

The key to increasing franchise value in non-traditional NHL markets is consistent winning and consistent playoff runs beyond the first round. The second important factor is the financial structure of the roster that generates the product on the ice. Helped by the mediocrity of the NFL Titans, Preds ownership has weathered the perfect storm in Nashville over the last decade. This Preds team has been built the old-school hockey way. The Western Conference Champion Nashville Predators are legit and Smashville has become a hokey town

When compared to the defending Stanley Cup Champion (and possible Cup opponent) Pittsburgh Penguins, the Preds roster is more efficiently structured from top to bottom. About half of the Pens salary cap is tied up in only 4 players compared to 6 players for the Preds. Still, because of a history of winning, the Stanley Cup Champion Penguins franchise is probably worth around $600 million, about twice the current value of the Preds.

It is clear that the major “real” economic impact of the Preds’ run for Lord Stanley’s Cup is ironically the intangible networking or “water cooler effect” throughout Music City. The Preds are smoking hot and all of Smashville is buzzing, along with the rest of the more traditional NHL…. Go Preds.

V