NHL Fan Base Rankings: Americans may like Hockey, but Canadians Love it

PLEASE NOTE THAT THESE ARE OUR 2013 RANKINGS, FOR OUR 2014 RANKINGS AND IN-DEPTH STUDY, PLEASE CLICK HERE.

For our NHL Social Media Equity Rankings, please click here.

A quick search of the Internet about who has the best fans in any sport will lead to multiple articles and rankings.  These rankings tend to rely a lot on personal opinion, and very little on any type of analysis.  The best of these studies tend to use a little bit of data concerning metrics like attendance, or maybe how many “likes” the team has on Facebook.   Occasionally, the ranking will be some type of weighted average of several pieces of data.  The vast majority of these approaches are badly flawed.  In the case of looking at raw numbers such as attendance, a frequent mistake is to ignore that attendance is driven by winning rates.  If this is the case, then such a study inflates winning teams’ fan bases by including bandwagon fans.  In the case of using a weighted average of multiple criteria, we still have the problem of not accounting for winning rates, but we also have the problem that the “weights” for each factor tend to be arbitrary.

What we do in our rankings is to use a wide variety of data and some statistical modeling to get around these issues.  We use something called a revenue premium approach to assess a team’s fan equity (value of the fan base).  The basic procedure begins with a statistical model that predicts a team’s box office revenues based on market potential (population and median income), team quality (winning rates) and other factors (such as team payroll).  We then compare the predictions from this model with each team’s approximate box office revenues to determine which teams over and under perform.  More details on the approach are available here.  In today’s post, we rank NHL fan bases using the above approach.  Later in the week, we will present results that rank teams based on social media equity (rather than the economic value of the fan base).

Using the past three years of results, we find that the best NHL fan bases live north of the border.  In first place, we have the Toronto Maple Leafs.  The Leafs pack the fans in despite charging the highest prices in the league.  The key point is that while the Leafs have been up and down the last few seasons, the fans continue to show up and pay premium prices.

In second and third place, we have Edmonton and Montreal.  The Oilers ranking second may be a bit of a surprise given some of their recent struggles on the ice.  But Edmonton continues to sell out their building on a regular basis, while charging fairly high prices and losing more than half their games in recent seasons.  Remember, Edmonton does this with a metro area population that barely exceeds one million.  The Canadiens are number three on the list.  A comparison between the Canadiens and the Chicago Blackhawks might be instructive.  These two clubs are fairly similar in box office performance. The Hawks sell a few more tickets but Montreal charges higher prices.  But, Montreal achieves their results in a metro area a third the size of Chicago’s, and without being one of the best teams in the league.

In positions 4 through 6 we finally see the Americans represented.  The Penguins come in 4th, the Rangers 5th and the Flyers 6th.  Our initial reaction to these results was that Pittsburgh is a heck of a professional sports city.  The Steelers were the leaders in our study of social media equity in the NFL.  The Rangers and the Flyers are both solid franchises across all dimensions.

One of our favorite parts of doing these rankings is determining the bottom five.  It’s fun because we typically get to be insulted by folks from all over (thankfully, the Trashers left Atlanta so we are spared the local abuse*).  San Jose and Anaheim are 5th and 4th from the bottom, respectively.  Californians seem to be the opposite of Canadians (take it as a compliment or insult).  Third from the bottom is the Phoenix franchise (We’re not even sure of their name). Second from the bottom we have the Ottawa Senators.  This is just embarrassing for a Canadian team.  Let us respond to the Ottawa fans right now.  We don’t care that you sell out – read the description of the method.  In last place, we have Dallas.  Why would anyone move a hockey team from Minnesota to Dallas?

*On a related note, the Winnipeg Jets are excluded from the rankings because the team moved from Atlanta during the period of the study.

Mike Lewis & Manish Tripathi, Emory University 2013.

Why Sports Fans Hate Dynamic Pricing

The dynamic pricing trend keeps accelerating with the recent announcement that the Toronto Maple Leafs will be pursuing a form of dynamic pricing.  The Leafs’ policy seems to involve more of quality based pricing than any true dynamics in that the plan involves charging different prices for different tiers of games (based on opponent and game time).  Some might quibble that this should be termed variable rather than dynamic pricing, but ultimately this is a form of price discrimination that can adversely affect how fans think about teams.

In our first two entries on dynamic pricing, we have discussed some basic principles of dynamic pricing (revenue management).  In this entry, we begin to consider the specific challenges of implementing these practices in sports contexts.  Industries that employ dynamic pricing will often make impassioned defenses of the practice.  Typically, the industry defense emphasizes that dynamic pricing is “fair” because market forces are dictating prices.  What could be more “fair”?

Obviously, many consumers don’t view dynamic pricing as a positive development.  Dynamic pricing is something that at best makes consumers nervous, and at worst angry.  This is not a surprising reaction, since dynamic pricing is at heart a system of price discrimination and inventory rationing.  If we think about the connection that exists between a consumer and a firm as a relationship then these practices are obviously not going to improve the “relationship.”  In the previous paragraph, we placed fair in quotes for a specific reason.  Fairness is subjective and teams do not get to decide how fans feel.

If consumers accept dynamic pricing in travel industries, why should these techniques be a problem in sports?  Let’s consider a couple of key differences between air travel and sporting events.  First, in the airline industry, the consumers who typically pay the highest rates do not pay for their own tickets.  In the airline industry, the business customer often chooses the travel options while the firm pays the price of the travel.  And as a bonus, the employee collects loyalty points.  A second, key difference is that air travel is purchased in order to achieve some other goal, whether it is a business meeting or a visit to a resort.  In other words, air travel is a product that is purchased so that the buyer can do something else.  In contrast, dynamic pricing of tickets affects the focal experience rather than an intermediary transaction cost.

A third issue is that the relationship between a fan and a team is fundamentally different than the relationship between an airline and a traveler.  There is a reason why we call consumers of sports “fans” rather than “customers.”  In what other categories, do consumers proudly wear the brands they consume on their clothing?  For example, Manish’s wardrobe seems to consist of mainly t-shirts emblazoned with team logos and cargo shorts.  In the last week I have seen Cubs, Maple Leafs and Redskins t-shirts.  I raise the issue of clothing because it highlights that consumers want to have a strong relationship that includes being publically associated with the team.  In marketing, we might refer to this as a desire for a “communal” relationship.  In contrast, a reliance on strict demand based pricing will tend to reduce the fan-team relationship to a series of cold economic exchanges.

Mike Lewis & Manish Tripathi. Emory University 2013