“It isn’t going to work very well unless this building is sold out every night.” – Gary Bettman
The day that Winnipeg was formally announced as the new home for the Atlanta Thrashers, many wondered: could a 15,000 seat arena support an NHL franchise? Could a city of 750,000 residents consistently pay top prices for NHL hockey? While bringing the Jets back to Winnipeg was the feel good story of 2011 for everyone north of the 49th, these were valid questions at the time. Finally, in the minds of Canadian hockey fans, a wrong had been righted by Gary Bettman. But would it work financially?
For years, when relocation stories were written, it was always based on: does City X have the requisite 18,000 seat arena? Does City X have 4 or 5 Fortune 500 companies? Is City X a major TV market? So at the time, given the usual criteria, the concept of a team in Winnipeg working long term was beyond laughable. No commissioner in any sport had ever demanded a sold out building for every game from any market. The concept seemed impossible. However, now entering their second season in Winnipeg, the model has proven to be an early success.
The Winnipeg model is about maximizing the potential of what would normally be defined as a subpar market. You find an arena that provides much less supply than demand. For example, in a market where you have the potential to sell 20,000 tickets, but you only have 15,000 available for sale. Then you implement demand pricing. This involves taking different games and pricing them based on the assumed demand that a visiting opponent will create. Therefore, inter-divisional games, Canadian match-ups, and attractive opponents are priced at a premium compared to games against cellar dwellers or teams with minimal star players. With three pricing levels for games, combined with seven different price points for different seating options, the Jets are ensuring that maximum revenue is derived from each game. By attractively pricing subpar games and subpar games, and maximizing revenue for must see games and the best seats, the model minimizes the potential for empty seats and ensures that the 15,000 seats at the MTS Centre are maximizing potential revenue for the team.
MTS Centre (Winnipeg Jets) Seating Chart
This revenue maximization model is successful when demand is extremely high, such as in Winnipeg. But could this model work in other situations? That is the question that the New York Islanders hope to answer in 2015.
Beginning in 2015, the New York Islanders will begin play at the newly-minted Barclays Center in Brooklyn. This new, state-of-the-art arena has a capacity for hockey that is currently smaller than that of the MTS Centre in Winnipeg. With a capacity of 14,500 seats, it’s pretty safe to say that they must sellout every night to be viable. However, a major difference compared to the MTS Centre is that the Barclays Center was built for basketball. It has barely enough floor space to fit an NHL sized rink, it has limited seating in one end zone, and will provide some interesting sightlines for fans and TV viewers.
Barclays Center (NY Islanders) Seating Chart
When hockey is played at the Barclays Center, it will be in a “horseshoe style” set-up which eliminates behind the net seats in the lower bowl at one end of the rink. It is inexplicable that an arena made in this century would not have a suitable configuration for hockey and basketball. Nevertheless, the Barclays Center is just that. Yet, with the success of the Winnipeg Jets model, it allows the Barclays Center to be discussed as a potential home to an NHL team.
The key part of this pipedream is the capacity. While Barclays Center is much less than the 17,000 capacity minimum that was once believed to be the starting point to any talk about arena design, based on the success of the Winnipeg model, it is believed that this is the best case scenario for the Islanders to stay near Long Island. And considering that the team currently draws around 13,000 fans per game in the dilapidating Nassau Coliseum, the Barclays Center is potentially a great new home for the Islanders. They just have to be creative with their pricing model.
How can the Islanders be successful at the Barclays Center? They do this by pricing their games similar to the Jets: by having tiers for marquee match-ups, and then by having seven to ten price points that really drive revenue from the seats that are available. Potentially, the Islanders could use the bizarre horseshoe style layout to their advantage. They could price one level of seats behind one of the nets (which are normally priced lower than sideline seats) higher. Or potentially convert them into club or premium seating for hockey. Furthermore, the Barclays Center has more concession and merchandise terminals than most arenas, and certainly more than exists at Nassau Coliseum. Therefore, the Islanders can create additional revenue streams by packing as many fans into the building.
What will also work in favor of the Islanders, much like the Jets, is the available supply versus current demand. Selling out 14,500 tickets is a much easier proposition than 16,000, and is exponentially easier than selling 18,000 tickets. The further away from the ice the seats are, the lower the price, and the more expensive it is to sell those seats (as advertising and promotional giveaways often happen for nosebleed seats). The Islanders will not have this problem as most of the seats are very close to the ice, and the amount of seats in general is very low.
There are two more things that makes the Barclays Center an attractive home for the Islanders. First, the team is still two or three years away from being a legitimate NHL contender. However, a new arena (and a new market) will have the “honeymoon effect” where people will come to your arena to see the building, not just the team. Second, a sold out arena makes television rights more valuable. If fans cannot buy a ticket to see your team live, the only other way is to check them out is on the tube. In a city with two regional sports networks, and other local stations, this will allow the Islanders to maximize these revenue streams more so than at Nassau Coliseum.
The Jets have sold out every game that they have ever played in Winnipeg, and with an 8,000 name season ticket holder waitlist, that streak looks to be nowhere near slowing down. With reports placing the Jets in the top ten in league revenue, their smaller arena capacity appears to be a non-issue. And now it appears that this model will be replicated and attempted by the New York Islanders in Brooklyn. The jury is now out to determine whether a Canadian NHL team has found something unique and special, or if the Winnipeg model is a real business model that is perhaps the future of NHL market success.
Jeffrey Lush is a weekly blog contributor to Sports Business Canada