Part 1: NHL Fan Equity
We begin our review of NHL fan bases with our “Fan Equity” rankings. This ranking looks at fans’ willingness to financially support their teams using a model that controls for winning rates, population, income, and other factors. The basic idea is that we look at how teams over or under perform in terms of home ticket revenue to what similar (with respect to market potential and on-ice results) teams produce. More details on the revenue premium model we use to evaluate fan equity may be found here and here.
So where do the best NHL fan bases live? Sorry America, but Canada dominates these rankings. The top six teams in terms of fan equity are Toronto, Montreal, Edmonton, Winnipeg, Vancouver, and Chicago. The top US based teams are Chicago, Philadelphia, New York (Rangers), and Minnesota.
Really? Edmonton has a better fan base than Chicago? Pointy-headed academics should stick topics they know something about, and hockey is obviously not one of those topics. What drives these findings? Let us highlight some of the underlying factors that drive the results. Chicago won 46 games (107 points) and averaged over 22,000 fans last season.
This is great support for the Blackhawks, and this is why they crack the otherwise Canadian top six. So, why does Edmonton beat Chicago? Because Edmonton’s support is stronger once we control for market characteristics and team performance. Last year, Edmonton averaged 16,800 fans per home game while winning only 29 games (67 points). Both teams sell out, but Edmonton does it despite playing well below .500. In addition, the Edmonton market is less than 1/8 the size of the Chicago market. And despite these differences in success and market size, Edmonton is able to charge slightly higher average ticket prices.
The big winner in all this is the Toronto Maple Leafs. The Leafs achieve amazing pricing power and consistent sell-outs despite only average on-ice performance. Toronto is truly Hockeytown North America.
At the bottom of the rankings, we have Columbus, Tampa, Dallas, and Phoenix. This grouping suggests that the key to having a vibrant fan base is locating somewhere where people play hockey. We understand the desire to achieve a broad television footprint, but there is also something to locating where the fans live. For example, last year Dallas drew an average of 14,600 fans despite charging some of the lowest prices and winning 40 games. As a contrast, Winnipeg drew more fans despite winning fewer games. But the kicker is that Winnipeg is able to charge more than twice the average ticket price as Dallas. Also these results occur despite Dallas having a population of about 6.8 million compared around 700,000 in Winnipeg!
Part 2: NHL Fan Attendance Sensitivity to Wins
Now, we start to dive a bit deeper into our analyses of NHL fan bases. Specifically, we look at the top teams in terms of sensitivity of attendance to wins. These rankings are based on a regression model that includes team fixed effects, average prices, winning percentage and interactions between the team dummies and the winning and pricing variables. We use data from 2000 to 2014 for the analysis.
These analyses are instructive as they provide a look at the consumer behaviors that generate our fan equity rankings. But these analyses also raise questions. The best way to consider the results is that they are driven purely by the data. What we don’t have is the underlying theory. The best example of this occurs with our win sensitivity rankings. What does it mean if attendance is very sensitive to winning rates? Are the fans discerning and demanding of quality or are they bandwagon fans that abandon the team when things go bad. We leave the interpretation to the reader.
The top five teams in terms of sensitivity to winning rates are the Detroit Red Wings, Chicago Blackhawks, St. Louis Blues, Buffalo Sabres, and Dallas Stars. We suspect that this list will raise eyebrows. The Red Wings are one of the most dominant franchises in the NHL, and are a great box office draw. But, a closer look at the data reveals that this is a fan base that has perhaps become a bit spoiled. When the Red Wings went from being a 70% plus winning percentage team in the early part of the decade to a 60 something winning percentage team around 2007 to 2010, Red Wing attendance dropped below 20,000 for a few years. While this drop was small, the rate of attendance change versus winning percentage was large compared to other NHL teams.
The Blackhawks might be the best example of a fickle fan base. When the Blackhawks are winning 30% of their games they draw around 13,000 fans per home game. When they win 70%, they draw 22,000 fans. The figure below shows a scatter plot of winning percentage and home attendance for the Blackhawks.
On the flip side, we also have a list of the five fan bases that react the least to changes in winning rates. Here, again we have multiple interpretations. Are these fans completely loyal, and therefore they show up regardless of if the team is winning or losing? Or are these fans there for the fireworks and ancillary entertainment, and thus barely know that a game is going on?
The teams with the least sensitive fans bases are Arizona (Phoenix), New Jersey, Columbus, San Jose and Florida. Arizona, in fact, has a negative correlation between winning rates and attendance (see figure below). Yes, we know that there are some factors that are not in the model such as time in market, but this pattern is striking. Basically, the take away is that for these teams performance on the ice is secondary. This actually could be the right strategy in small markets, or markets where hockey doesn’t have a deep tradition. It makes sense to play up the entertainment aspects in a place like Columbus where a team may never be as consistent a winner as the across town competition.
Part 3: NHL Fan Attendance Sensitivity to Price
The next study in our NHL fan analysis is a quick look at price sensitivity. The central idea here is to understand (statistically) which teams’ fans are the most value-oriented and which are willing to spend. The results are based on a regression model that predicts home attendance based on winning rates, prices, team fixed effects and interactions between the winning rates, prices and team dummies.
The most “value-oriented” fans live in Columbus, Ohio. The Blue Jackets are in a tough competitive position. While the Blue Jackets have fewer resources than most of the other NHL teams, their local competition is one of the biggest spenders and most successful college programs. Following Columbus, other frugal fans reside in Colorado, St. Louis, and Minnesota.
On the other extreme, we have teams whose fans seem to be insensitive to the prices charged. At the top of this list are the Buffalo Sabres. The Sabres are followed by the Red Wings, Blackhawks, Bruins and Dallas Stars. And interesting aside in this analysis is that several of these markets like Detroit and Chicago also made our list of teams with high sensitivity of attendance to wins. While our conclusions are limited by our use of aggregate data this observation does suggest that these teams would be better served by increasing prices and using the incremental revenues to enhance team quality (assuming they have room under the salary cap).
Part 4: NHL Fan Social Media Equity
We continue our analyses of NHL fan bases with something thoroughly modern: Social Media Equity. In this analysis, we look at how teams’ combined social media following on Facebook and Twitter compares to teams that have similar records and populations. Social Media Equity has some significant pluses in that it is not constrained by stadium capacity, and allows for including non-local fan support. Social Media Equity may also be a forward-looking metric since social media is more prevalent among younger consumers.
The social media rankings are dominated by the traditional NHL powers. Detroit is first followed by Boston, New York (Rangers), Pittsburgh and Chicago. A significant difference between the revenue premium based brand equity ranking and the social media based rankings is the relative position of US and Canadian teams. The US teams dominate the social media rankings while the Canadian teams dominate the Fan Equity rankings. At the bottom of the rankings we have Anaheim, Columbus, Tampa Bay, Phoenix and St. Louis. These tend to be the teams that struggle on many of our fan metrics.
Part 5: NHL Fan “Personality”
Social media is increasingly being used as a market research tool, and we believe that it provides opportunities to develop some richer descriptions of NHL fan bases. The foundation for today’s analysis is something known as social media sentiment. The idea behind sentiment is that we look at the “tone” of tweets surrounding each team. In this study, we are examining the distribution of positive versus negative tweets for each team over the past three years.
Our actual approach uses a variety of statistics used to characterize distributions (e.g. mean, variance, skewness, kurtosis, etc.…), and then we employ a technique known as cluster analysis. We will avoid the details (feel free to contact us) but the general idea is to find teams that have similar distributions of social media sentiment. We use cluster analysis on team social media sentiment on Twitter over the past three seasons to dynamically segment fan bases (we allow fan bases to move across clusters over time). Perhaps, it is more accurate to describe what we are doing as segmenting the types of relationships fans have with their teams. Do fans have unconditional love for their team? Do they have violent mood swings?*
Based on our dynamic cluster analysis of Twitter sentiment, we are able to describe each NHL fan base. The chart below summarizes the social media “personality” of most NHL fan bases over the past three seasons.
*One caveat to this study is that since this is all based on Twitter data, the results reflect the opinions of fans on SOCIAL MEDIA only. Also, please note that unlike our previous study of NHL social media equity that was based on the size of each team’s following, this analysis is based on sentiment or tone.
Mike Lewis & Manish Tripathi, Emory University 2014.