Friday, February 6, 2015

Understanding the AHL Pacific: Independent v. NHL Ownership

Money lies at the heart of the divide between the two AHL ownership camps
(Credit: Lindsay A. Mogle/AHL)
Monday's article about AHL affiliations and arena contracts included a lot of information about NHL ownership versus independent ownership. One key to understanding the movement that is happening the AHL is the sometimes divergent set of needs that these two groups of owners have.

First, let's set up the ground rules here. The AHL has 30 franchises. Every one of those franchises is affiliated with an NHL club. Some of them are owned by the same group that owns the NHL team. With the purchase of the Texas Stars and the Norfolk Admirals, there are now 15 of these teams in the league. The remaining 15 teams are owned by groups independent of their NHL team.

All AHL teams, regardless of NHL or independent ownership, have an affiliation agreement with their NHL partner. In these deals, the AHL team pays some amount of money to the NHL club for the affiliation and the NHL team agrees to send its development players to the AHL side. In addition, there may be some details regarding the NHL teams providing some assistance with AHL travel. In the NHL-owned case, it's basically just shifting money from one bucket to another on these affiliate deals.

Based on the level of competition in the AHL, you should expect to never see a team without an affiliate. AHL president David Andrews echoed this point last week at the State of the League address. An AHL team without an affiliate would not be able to field enough high-level players to compete in the league, because the NHL affiliate usually provides 75% or more of the AHL affiliate's roster. (The ECHL has several unaffiliated 'independent' teams, however.)

So, let's think about each of these scenarios. If you're an NHL team, your number one priority is developing NHL-calibre players for your team. You want to make sure they play games, because that's where you probably learn the most about what they have. Playing too many games might add more wear-and-tear to your top prospects, more chances to get injured. You also want to get as many practices in as possible. Each practice is a chance to instill your system in your players and make them better NHL players, which is your top goal.

Independent teams, however, don't care as much about development. Their primary goal is make money and keep their affiliate reasonably happy. The main way that you make money as an independent owner is filling your building. To that end, you want as many games as you can get within reason, full buildings (fueled by good/interesting opponents) and relatively low travel budgets.

Low travel budgets just so happen to coincide with a desire of the NHL teams to have as much practice time as possible. Mark Divver, beat writer for the Providence Bruins, commented on Twitter recently that the Bruins get 45 more practices per season than Western Conference teams that travel more often.

The point where these two camps diverge is on games played. On every other issue, one defers to the other, but Andrews said that it's "like Republicans and Democrats" when this issue comes up, comparing it to the rancorous nature of US politics. The AHL played an 80 game schedule as recently as 2010-11. It dropped to a 76 game slate the next year and hasn't moved since. According to Andrews, there isn't support in the room to drop to any fewer games. (For comparison, the ECHL plays 72 games.)

With the move to the West Coast, many of those NHL teams were clearly pushing for a reduced schedule given all the long travel they would have to do to play teams outside the division. Some proposals rumored the number of games falling all the way to 66, a reduction of ten games for every team in the league.

Independent owners, predictably, balked at this plan. While they would love not paying to travel to those five lost road games, they would also lose the ticket, concession and ad revenues from five home games. The drop from 38 to 33 home games would account for approximately 13% of their annual budget. With no way to make up that revenue, those owners would be in a bind. It's not like player and staff salaries would decrease 13% to compensate.

But the NHL owner doesn't care as much. The AHL team can be a loss leader (revenue-wise) because its job is not to drive revenue but instead to drive player development.

And so here lies the crux of the matter: money. Independent owners need games and full buildings to drive revenue. NHL owners need players to develop, full stop.

Reports indicate that the league expects to play 76 games next season across the board. Tim Gortsema, Grand Rapids Griffins senior vice president of business operations, told MLive.com that a proposal to reduce the season was defeated in the Board of Governors meeting last week.

2 comments:

  1. There has been talk about the NHL expanding,but I am not sure if expansion would be just one team or two teams at once. I am assuming at the very least they will have an NHL team Las Vegas or possibly Seattle. This would enable the West division to add an 8th team. Why not play all their schedule in conference. From looking at one of the schedules it appears that the west coast teams play 8 games out of conference. That doesn't seem necessary

    ReplyDelete
    Replies
    1. I think you mean out of division, but I get what you're saying.

      I think the argument against that is pretty simple. Why not have a separate league just for those West Coast teams if they never play anyone else? That's what the AHL was trying to avoid with the compromise of 68v76.

      Delete

Thanks for commenting. Remember to keep it civil. Using a name will help us identify replies and build a Texas Stars community.