Welcome to the Real World, Part 3?

Question

You are an NHL owner. The commissioner has presented you with two potential Television deals.

Deal A)
$20-30MM/season for 5 seasons
93% home penetration

Deal B)
$65MM/season for 5 seasons
62% home penetration

Which TV deal do you pick?
Why do you pick it?

Note: If you are the owner of the Philadelphia Flyers (a publicly traded corporation), SEC rules require you to pick option B, option A would be a violation of shareholder value and the subsequent lawsuits would sue you into oblivion

If you pick option A, how do you tell your fans that you can't sign Jean-Michel Hockeystar because you don't have the money?

The best plausible answer will get the 10 points when I return to Toronto.

Home penetration is the percentage of homes that receive your channel

Home penetration is the percentage of homes that receive your channel

Poob
At the time, Bobby Hull was the highest paid player in the NHL at $250,000.00 a year. Wirtz offered him $500,000.00. Clarence Campbell vetoed the offer as ludicrous.

5 years later, Tony Esposito was the highest paid player in the NHL at $350,000.00 (Orr, Clarke, and Dryden were all at $300,000.00). By that time, only Howe and Hull were making more than that in the WHA.

As far as Chelios? Chelios wanted out and was traded. Amonte...he wanted too much money and ended up signing in Phoenix for less than Pulford offered him. Roenick and Belfour were the ones he should have signed and wouldn;t give them market value.

Lubers,
Bettman took the ESPN offer (offer A) to the owners, they rejected it.

Mike (Avs Fan)
The rejection was unainamous.

The sad reality is that in today's NHL, $1MM for most teams is really pocket change. The difference between deal A and deal B (after miscellaneous) is about $1MM per team. Surly that could be made up elsewhere...........

Answer 1

I love your group of Real World questions. This is the only one I feel I have a legitimate answer for.

If I am an owner, aside from Mr. Snider, I am going to take option A. Yes, I sacrifice $35 million up front, but I believe in the changes made coming out of the lockout and I have confidence that my ratings will climb if people are given the opportunity to see the improvements to my product.

I am still able to sign Jean-Michel Hockeystar because with my new CBA, my salary cap is now adjusted annually based on revenues. In addition to myself taking a hit to my wallet for what I believe is the betterment of the game, the players will be required to do so as well.

Bottom line, I know the owners are business men, in this to make money and make as much as they possibly can. I believe it would benefit them more in the long run by taking less money to gain the exposure of their game, as opposed to taking the money while shutting out current fans who do not have access to the games. I think this is even more important because they were coming out of the lockout season. I believe in my product and feel that if people have an opportunity to see the changes, my ratings will improve and I will be able to sign an even more lucrative deal down the road.

Like: I understand that. You posed the question asking for my answer if I were an NHL owner. This is what I would have voted and lobbied for if I were an owner. I believe the 93% home penetration would have been more beneficial than the extra cash at the time given the ire the lockout caused amongst hockey fans. By going with the OLN option as opposed to ESPN, they shut out approximately 1/3 of their current audience.

Like: Your point about $1M being pocket change to an NHL owner is exactly why I would have taken less money in favor of more exposure. The league needs the exposure more than I need the $1M and I would have the confidence that I would earn more than $5M total in the long run. (This is, of course, in my little fantasy of being an NHL owner!)

Answer 2

Before I answer, what's home penetration? Aside from it sounding like it came from a porno...lol

Okay, so it's basically the percentage of homes watching hockey. With the facts stated, I'd go with option A. Less overhead, more exposure to the product. It just makes sense.

Obviously, I'd go with option B if I was in a position like the Flyers. I can always collapse the team by strategically trading my star players for high draft picks and rebuild. The rookies would be playing with low salaries for the same calibre of play (in a few years), turning them into a playoff contender and a Cup contender later on. Once word starts spreading of the success of the team, coupled with smart marketing, people would catch on to the team and by merchandise, tickets, etc. This would be, in my opinion, a worthy investment into the TV deal. This formula worked for the Penguins, and the marketing aspect worked for the 'Canes and Lightning; two areas where hockey was the last thing on people's minds.

Answer 3

I assume Deal A is the Espn offer and Deal B is the OLN offer.
My feelings and my understanding were that Bettman just outright said no and did not even negotiate to try to work for a btter deal from ESPN. No, done that's it instead of trying to hammer out a more lucrative deal, he just told them where to go. To me, that was wrong. Of course ESPN lowballed and threw viewing numbers in Bettman's face to work toward a deal. THAT is how contract negotiations work, you go in with your LOWEST OFFER, they come back with their HIGHEST OFFER. You don't just go in saying OK, we'll give you 100 million, you meet somewhere in the middle. That really bothered me that they skipped the back and forth banter and told them to shove it. In spite, they said OK, you can shove it too. That is negotiating in bad faith. Bettman in my understanding did not even counter offer and that is counter productive.
I will also add the Deal C to the table with NBC. How much do they pay the NHL to show their games? Without researching my answer for verification, I believe the correct number would be exactly 0000000 million dollars. Zilch. Nada. A "partnership". Again, I cannot confirm this but it seems to me that I did indeed read it somewhere.

Answer 4

If you have any control you don't even offer Deal B...

Unfortunately, Deal B was put forward by a powerful owner.

I think that if Bettman can keep a team out of Hamilton he could have got the owners to take Deal A.

Answer 5

I would take Deal A. Lubers has a good answer. BTW do you know how the voting went when Deal A was offered to the owners by Bettman? Did they vote unanimously against it?

Answer 6

The extra merchandise sold due to the 50% increase in exposure would likely exceed the $35mm decrease. I'd like to see shorter length deals but if these are the 2 options, I'd go with A.

Answer 7

deal A. more home "penetration".

get it to more people, generate more fans.

what did wirtz tell his fans when he couldn't/ wouldn't sign bobby Hull? Amonte?Chelios?

Answer 8

Junior hockey is sounding more and more appealing to me by the minute. Go Giants Go!

Answer 9

A and get sponsors

Answer 10

LOL 288, I dunno these answers get perverted more and more, jenni finds 5 holes home penitration sounds like it came outa a porno lol, we're on a roll!