Fuelled by diminishing passion? What softer demand for Winnipeg Jets tickets means for True North
The Jets now find themselves in the unfamiliar position of selling hockey to Winnipeg fans
During that first, ecstatic season when the NHL returned to Manitoba, Ken Lotocki went to see the Winnipeg Jets play at each and every one of the team's 41 regular-season home games.
Nine seasons later, the season-ticket holder is going to maybe five or six games, by his estimation. Friends and family members are going to the rest of the games.
"It's nothing related to the team, specifically. I'm not trying to go to fewer games. It's more just things are different than they were, in my situation," said Lotocki, a passionate fan since the days before the original Jets moved to Arizona.
Work and family commitments are taking up more of Lotocki's time as he completes the transition from young adulthood to middle age. But there are also competing demands on his financial resources.
"As the years go by, you start to look back and you're spending a lot of money in the early seasons. And now things have gotten more expensive," he said, referring to everything from ticket prices, concessions at Bell MTS Place, Winnipeg Jets merchandise, parking near the downtown arena and dinners in the vicinity.
"There are other things that we have to do that also cost money, right? So it becomes for us, competing priorities."
In many ways, Lotocki is a typical Jets fan. Nine seasons after NHL hockey returned to Manitoba, he's still passionate about the Jets. He just can't go to as many games.
He isn't alone, as demand for Winnipeg Jets tickets from individual season-ticket holders, groups who share seats and casual ticket-buyers alike, are down to the point where the Winnipeg Jets no longer sell out all of their games the way they did during their initial season.
As well, more than a thousand seats may be available on the resale market for individual games, depending on the opponent.
A ticket to see the Winnipeg Jets — once the most sought-after seat in the National Hockey League — is now so easy to obtain, as many as one in nine seats in Bell MTS Place are available for legal purchase hours before puck drop, provided the opponent that afternoon or evening is not an Original Six draw like the Toronto Maple Leafs or Montreal Canadiens.
This has huge implications for True North, given what are believed to be relatively thin profit margins for an NHL franchise in the league's smallest market.
Compared to other NHL cities, Winnipeg possesses only modest wealth, limited consumer purchasing power and a relatively small stable of potential corporate sponsors. Any softness in the demand for professional hockey thus becomes a concern.
As another round of season-ticket holders face a Feb. 21 deadline to renew their contracts for another three years, True North Sports and Entertainment finds itself in the unfamiliar position of having to sell NHL hockey to a Winnipeg market that is no longer starving for the product the way it was in 2011, when the Jets 2.0 arrived.
"As long as it was a novelty of something really new and really valued by people, it was going to do well. People knew the importance of actually showing up and buying tickets," said Glen Hodgson, a retired Ottawa-based economist and co-author of Power Play: The Business Economics of Pro Sports.
"But we've kind of reached the 10-year point in the marriage where people are reconsidering how much they want to spend on hockey, compared to other things."
One in nine seats up for grabs
To quantify the softening demand, CBC News counted up the Winnipeg Jets tickets available for sale five hours before puck drop at five home games earlier this month. CBC News counted seats on sale directly from the Jets through Ticketmaster, for resale through the team's in-house Ticket Exchange and through StubHub, a legal and licensed resale site.
An average of 1,618 tickets were on sale for those games at Bell MTS Place, which is configured for 15,321 seats for NHL hockey. That works out to 11 per cent of the seats in the arena.
This does not mean 1,618 seats wind up empty for any given game. There could be more empty seats, as some individual seats may go unused and some corporate-owned seats may go unclaimed.
There may also be fewer empty seats, as some season-ticket holders place seats up for resale in the hopes of selling them off and then choose to go to the games themselves or give the tickets away when they don't sell.
Only True North Sports and Entertainment, which tracks the entrance of every ticket holder into the arena, knows the actual vacancy rate. True North declined repeated requests for interviews over the past two months and also declined to respond to questions posed via email.
Watch | Jets tickets available for sale 5 hours before puck drop:
On its own, a single unused seat in Bell MTS Place does not pose a problem for True North. But every empty seat represents a fan that could be purchasing concessions or merchandise at the arena and a lost revenue opportunity for True North.
As a privately owned business, True North does not publish its financial statements.
True North won't say how many fans remain on its waiting list for season tickets and won't disclose the size of its season-ticket base. It also declined to comment on changes to ticket and concessions revenue since the 2011-12 NHL season.
But True North has made a series of moves this season that suggest it's taking the issue of softening demand seriously.
Twice this season — in November and February — True North has issued surveys to season-ticket holders to determine what they like and don't like about everything associated with going to see the Jets, from parking outside the arena, to the quality of food sold at concessions inside the building, to the increasingly quiet atmosphere inside the bowl.
True North has placed a vice-president in charge of "guest experience," reduced the price on five concession items this season and pledged to improve its game production next season by installing an on-ice projection system.
"It's not an insignificant cost for us, but we do think that [as] the technology continues to improve with the laser projectors now, it's really a dramatic way to kick off your game's presentation and kick off the start of the intermissions," True North senior vice-president Kevin Donnelly told reporters in January.
The belief in Winnipeg used to be True North merely had to offer hockey as a product and the fans would show up. Fans now appear to be demanding more from True North, said Dave Best, who co-ordinates the sport business management graduate program at Algonquin College in Ottawa.
"Everyone wants to be entertained now. So yeah, they're probably a bit late to the game in saying, 'We have to do an entertainment bonanza to attract fans to the game.' Hockey never had to think about that and they do now," said Best, suggesting the Winnipeg Jets are not alone.
"Have you ever gone to Toronto and watched a Leafs game one night and a Raptors game the next? Same building, totally different beast in terms of how much entertainment drives the NBA.
"Hockey is saying we've got a million corporate tickets sold and we don't really care as much."
A cushion for a small-market club
Compared to 2011, the Winnipeg Jets also have more competition, in terms of other sports franchises, including the American Hockey League's Manitoba Moose — which True North also owns — and the Winnipeg Ice of the Western Hockey League.
The 2019 Grey Cup victory by the Winnipeg Blue Bombers could also make the Canadian Football League more attractive to prospective fans this year.
But the softening demand for the NHL in Winnipeg may depend less on what other forms of entertainment are available and the quality of the fan experience at Bell MTS Place than it does on the simple economics of running a National Hockey League franchise in a small market.
"There's always going to be limits on the purchasing power capacity in the market because it's a city of what, 800,000 people?" Hodgson said.
"Manitoba has got a million plus a little bit, but that's a small market compared to everybody else. There's not a huge number of head offices in Winnipeg, either, and they buy the boxes and pay for all the advertising."
In other words, the margins for success and failure are believed to be relatively slim.
"To be candid, this isn't going to work very well unless this building is sold out every night," NHL commissioner Gary Bettman said in 2011, when True North owners Mark Chipman and David Thomson announced the league's return to Manitoba.
To provide True North with something of a cushion, the league's return was aided by a package of direct and indirect municipal and provincial subsidies.
They include a property-tax break on Bell MTS Place estimated at $931,000 in 2019, a business-tax refund pegged at $249,000 last year and the ability to collect $8.1 million worth of entertainment taxes on events at the arena.
True North also receives an estimated $5.5 million worth of revenue from 140 gaming machines at the Shark Club at Cityplace mall. Former premier Greg Selinger's NDP government said it created this funding arrangement to help True North survive future economic challenges, such as changes to the Canada-U.S. dollar exchange rate.
NHL players are paid in U.S. dollars. Player salaries alone are now "upwards of $110 million" in Canadian funds, True North vice-president Donnelly said in January, explaining why prices for Winnipeg Jets tickets will rise by 2.1 per cent next season.
It's unclear how long Winnipeg fans can continue to afford NHL tickets in the quantities they purchase tickets now.
"The Manitoba economy is not the growth leader in Canada. It's probably only going to grow at about one per cent this year, so there are reasons to look at the long-term performance of the market and ask what it means for pro sports franchises — and it really comes down to what consumers are going to do," said Hodgson, the economist.
"Let's say their income growth is going to be slower, rather than going to two per cent and then they start to ration. They start to ask hard questions about, within the family budget, how much am I going to spend on sports entertainment compared to eating well or taking a vacation or repairing the cottage at Grand Beach?
"In a market like Winnipeg, which is a limited market, that's the kind of decision-making that's happening now: People either don't renew their season tickets or don't take up the opportunity to go to a game."
Help from the NHL itself
Since True North does not speak about its financial performance, experts in professional sports business can only estimate how well the franchise is doing.
Unlike in 1996, when the original Jets departed Winnipeg, the National Hockey League has mechanisms in place to ensure all of its franchises survive, said Norm O'Reilly, the director of the National Institute for Sport Business at the University of Guelph.
These mechanisms include a salary cap that ensures financial powerhouses such as the Toronto Maple Leafs and New York Rangers don't outcompete small-market teams like Winnipeg for skilled players. The cap provides cost certainty to NHL franchises, O'Reilly said.
The NHL also provides revenue to its clubs in the form of broadcast-rights agreements with the likes of Rogers and NBC. The league also shares revenue among its clubs but keeps the funding formula to itself, O'Reilly said.
True North would not say how much in revenue-sharing funds it receives from the NHL.
O'Reilly said as best as he can tell, True North has narrow profit-and-loss margins on hockey operations alone.
"Certainly, Winnipeg would be in a situation where it would be a break-even [proposition], in a really good year maybe a small profit," he said, considering factors such as ticket sales, revenue sharing and broadcast revenue.
"If really bad things happen, you might see a minor loss, but it's hopefully in that neighbourhood. But keep in mind, people like David Thomson are not used to break-even properties."
Profit and loss may not matter
True North majority owner Thomson, one of the wealthiest people in the world, is used to greater returns on his investments, O'Reilly said.
But he does not believe profit was the primary motive behind Thomson's role in spending $110 million to purchase the Atlanta Thrashers, plus another $60 million on a franchise-relocation fee.
"He did this because he wants to support hockey. He loves Winnipeg. If he wanted to make a lot of money, he would have put that few hundred million dollars somewhere else," O'Reilly said.
Hodgson, the economist, agrees.
"The Thomsons can afford to frankly lose a little bit of money every year on the Jets. Their family wealth is into the billions. And Mark Chipman is a very shrewd businessman who made a great play. He basically bought the Jets for $100 million," he said.
"Now compare that to the asset value of other other franchises or the value of a new franchise, which is up to half a billion dollars."
Hodgson said it doesn't matter whether the Winnipeg Jets are making or losing a little money when the value of the franchise has gone up. The Vegas Golden Knights paid the NHL a $500-million franchise fee. The new Seattle team spent $600 million on the same fee.
The Jets may not be worth that much, they are clearly worth more than the $170 million investment made by True North in 2011.
"If you lose two or three million dollars a year, cumulatively, but your asset is growing in value over time ... you can afford to lose money on an annual basis for a long time," Hodgson said. "So for Mark Chipman, he's looking at the asset value as well as the current operating results."
On the other hand, there's no evidence True North ever intends to sell the Winnipeg Jets. The company's real-estate arm has invested heavily in the downtown blocks near Bell MTS Place, both on the Centrepoint development north of Portage Avenue and True North Square, south of Graham Avenue.
The NHL wants all of its teams to remain in place to ensure franchise values don't decline, Hodgson said.
One unknown factor in the long-term future for True North is the financial investment required to maintain Bell MTS Place, which is now 15 years old. Only six NHL arenas are newer, but older venues such as Madison Square Garden have undergone significant makeovers.
True North declined to comment on the long-term maintenance needs for the arena.
'It's just a blip'
The prospect of the Winnipeg Jets ever leaving Manitoba again is remote in the coming years, O'Reilly said.
"I think the club is safe," he said, noting almost two thirds of Canadians follow the NHL. "As long you're talking about a number like that, you can be pretty confident.
"Now 30 or 40 years from now, if all people care about is e-sports and no one ever goes outside and people don't watch hockey any more, that's a different story. But in the short-term, foreseeable future, it's a very safe bet."
That doesn't mean Winnipeg will ever regain the same passion for hockey as it did in 2011, when the Jets returned.
"Maybe the real story is they had 10 great years after getting the franchise back," said Hodgson, surmising the new softer demand is here to stay. "Maybe this is returning to what might be seen as normal for the long term."
Best, however, believes the soft demand this season is an anomaly.
"I think it's a blip right now. I think expectations were extremely high last year," he said, referring to the team's first-round playoff exit in 2019. "I think it's disappointing, but I don't think it's a full divorce. I think [fans] are just trying to say it's a little separation for a year.
Lotocki, the long-time Jets season-ticket holder, said he doesn't believe fans are any less passionate.
"I don't think that's gone. It's just things change," he said, suggesting the demand for tickets can easily rise again.
"I think it probably could go the other way very soon, to be honest, whether it's more jobs or cheaper tickets or the secondary ticket market starts being a little easier to access than True North makes it.
"Maybe that picks up speed, in terms of getting stuff right."
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With files from Jacques Marcoux