The Toronto Maple Leafs have long had among the most expensive tickets in the National Hockey League, and this week the team announced it is once again raising prices. The reason? Demand for Leafs seats greatly exceeds supply.
Meanwhile, the Arizona Coyotes earlier this month announced that, unless taxpayers cough up a big subsidy, in the form of a couple of hundred million bucks for a new arena, they'll leave the state. The reason? In Phoenix, hockey tickets are not exactly a highly sought after commodity. Supply greatly exceeds demand, and the franchise's expenses consequently greatly outstrip revenue.
The Coyotes are an endless gusher of red ink, while the Leafs are hugely profitable, and poised to become more so. At first glance, the relative finanical success of these two businesses at opposite ends of the continent seems only natural. After all, this is hockey we're talking about, so you'd expect the Canadian team to have a healthier bottom line than the one from the American desert. It's just the free market at work, right?
But look a bit closer. North American professional sports is not a free market. New teams can't be created without the NHL's approval, and existing teams can't just pick up and move from cities with low demand, like Phoenix, into areas with ridiculoulsy high demand, like Southern Ontario. (Just ask Jim Balsillie.)
As a result, the Coyotes and the Leafs, the basket case and the money machine, have a symbiotic relationship. The Coyotes are unprofitable because they're in Phoenix. But because they're in Phoenix, where the demand isn't – and not in Toronto, Mississauga or Hamilton, where the demand is – the Maple Leafs are hugely profitable.
The Coyotes' problem, since they moved from Winnipeg to the desert two decades ago, is that they can't sell enough tickets, at high enough prices, to cover their costs. The team has among the league's lowest ticket sales, at among the lowest ticket prices.
To remain in Arizona, the franchise needs somebody other than its own paying fans to bridge the gap. Enter Canadian hockey fans. A chunk of the big profits that pro hockey generates up north are shipped south as part of the league's revenue-sharing system.
The Coyotes' other mark are the easily-duped burghers of the Phoenix suburb of Glendale. They built the team a new arena just 13 years ago, and threw taxpayer money at it for years. But they've since become less generous, causing league Commissioner Gary Bettman to last week ask the state of Arizona to gift the Coyotes another new, taxpayer-financed arena – in a different part of Phoenix.
The Maple Leafs' "problem" is the polar opposite. Even at very high official ticket prices, anyone who snags a seat can turn around and resell it at a profit. According to TicketIQ, a blog tracking the secondary market, the Leafs are the most expensive ticket in the NHL, reselling at four times the price of a Coyotes ticket.
MLSE says that upper level season tickets sold at $195 per game are fetching $250 on the resale market, while lower level tickets that retail at $80 can be resold for an average of $141. Maple Leafs Sports and Entertainment would like to capture that extra revenue.
As of Tuesday afternoon, resold tickets in the upper bowl for Saturday night's Leafs home game were being offered for upwards of $119 (U.S.). Comparable tickets in Phoenix were going for just $14. In Toronto at least, a lot of money is being scooped up by scalpers.
As MLSE chief commercial officer David Hopkinson told the Toronto Star, "There is a significant arbitrage here that we've got to try and close... Someone's going to end up with the money, and we'd rather it's not a guy in a parka."
And there's no logical reason why the Leafs shouldn't raise ticket prices. The market has already done it for them.
But the "market" the Leafs operate in is missing one thing you'll find in actual free market: Competition.
If smartphones were far more expensive in Toronto than anywhere else in North America, sellers of the devices would ship more of them to Toronto – and the price would fall. If hamburgers were far more popular in Toronto than anywhere else, entrepreneurs would open more hamburger restaurants, to meet the higher demand.
The high price of NHL hockey tickets in Toronto, relative to much lower prices in places like Phoenix, is sending a very clear signal. And if the NHL were a free market, there would be a response. To get a piece of the excess profits being made by the lone top-tier hockey team in Southern Ontario, competitors would move in. New teams would be founded in or relocated to the league's highest-demand market.
But the NHL doesn't work that way. (Again, just ask Jim Balsillie). Instead, it operates its own version of price arbitrage. A team like the Phoenix Coyotes stays put, its lack of actual fan revenues made up from other sources: A cut from the league's most profitable markets and hefty subsidies from local taxpayers.
So far, the Arizona legislature appears less than eager to accede to the NHL's request for even more cash, so the Coyotes may eventually be loading up moving trucks. But even if they do, the odds are slim that hockey-mad Southern Ontario will be their destination. The MLSE golden goose helps subsidize a squad of American lame duck franchises; those lame ducks, stuck in dry ponds, make necessary a golden goose in Toronto. It's a beautiful relationship for everyone, except Canadian hockey fans.