The Value of Round 1
With the first round of the playoffs now firmly behind us, I thought an update would be interesting on how teams are faring financially from making it to the post-season. This is based on my analysis, The Value of Making The Playoffs, previously posted here.
As a reminder, while previous analysis was a back-of-the-envelope exercise, it serves as a proxy for a team’s financial success in the post season. One of the most significant realizations of the number crunching below is that while we do not necessarily want to see teams go deep into series, it is in the financial best interest of owners. This is particularly the case for teams with home-rink advantage as they host games five and seven. For away teams, it’s in their best interests to close things out in game six. I am sure owners do not consciously think of this as most/many of them want to see their team’s name on the Stanley Cup, but you have to imagine that somewhere in the back of their minds dollars signs ringing when any series moves past being a sweep.
Revenue Leaders
From the chart below, with the bracketed numbers beside teams indicating the number of home games played in the first round, Vancouver comes out on top with regard to total revenue as their series with Dallas went the distance.
One thing that is most interesting and has been an issue for Detroit and New Jersey in particular is that attendance for many teams has not reached capacity. The implication of this is that the numbers above in these circumstances is overestimated, so revenue for Detroit and New York should be taken with an added grain of salt. This also raises an interesting question, and the subject of another discussion, of why the NHL is having trouble selling tickets to playoff hockey. One would think that Detroit of all places would pack the house. Apparently, not so. For a great analysis on what is going on in Detroit, check out Behind the Jersey.
Return on Payroll
With consideration to the fact that players do not get paid for playoff action, I decided to take a look at the financial return ownership has achieved based on their total payroll for the season. Given Vancouver’s seven game series, it comes as no surprise that they lead the tables on this metric. What is interesting is that their total return is already 10%. In other words, they have recouped 10% of the total payroll from their current playoff run. The worst return - at a paltry 3.5% of payroll - was the New York Islanders.
While there is nothing to think that dollars spent and talent are correlated, we could infer having made $1.4 million in EBITDA, the Islanders only needed four more home games to cover the $3.7 million additional expense of hitting the salary cap: ($3.7 million additional salary expense less $1.4 million EBITDA from playoff home games) divided by average home game revenue of $700,633. If we have learned one thing it is that if you are going to make a charge into the playoffs, spend the money if you can!
Average Return per Game
Finally, as a measure of efficiency and benchmark for General Managers on how they assemble their teams, I have calculated the average return per home game. (Away games were excluded as they do not generate any revenue.) It should not be a huge surprise that the New York Rangers lead with an average return 3.4% given the size of their revenue per game. What did surprise me is that only one other team, the Dallas Stars, breached the 3.0% mark.
I will update these figures after each round. Until then, for more on the League’s playoff attendance woes, see Behind the Jersey, The Fanhouse and The Toronto Star’s Chris Young.
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