A rewarding recession

With the recession battering many sports leagues and their teams, the NHL and its Washington franchise are hanging tough.

Both the Washington Capitals and the NHL as a whole have seen a strong rise in fan interest so far this season, placing them in a somewhat unique position in sports as many fans struggle with the loss of jobs and income.

The NHL said it’s on track for at least 5 percent revenue growth, while the Caps have seen revenue rise by more 40 percent, largely because of an increase in attendance of more than 2,500 a game. Team owner Ted Leonsis, however, said he will lose more money on the team than he did last year because of a higher payroll and warned that ticket prices for games at Verizon Center will likely increase again next year.

The Southeast Division-leading Caps have averaged more than 17,900 fans a game. The team ranks 10th in paid attendance, according to internal NHL data, after spending years with some of the lowest attendance figures in the league. Fewer than 7,000 tickets remain available for the remainder of the Caps’ home games.

Meanwhile, television ratings on Comcast SportsNet have risen 130 percent over the first half of last year. An average of 28,000 fans tune in to Caps games on TV.

“It’s very humbling because it’s a very tough economy and very difficult circumstances for everyone,” Leonsis said. “I think this team has really captured the imagination of this community. We’ve got a lot of positive things synthesizing together, and if we keep playing well and win, things will be very strong for us even next season.”

Leaguewide, attendance is essentially flat from last season, but several once-downtrodden teams have seen robust growth similar to the Caps’. The Chicago Blackhawks lead the league in attendance, drawing nearly 22,500 a game, an increase of nearly 6,000 over last season and 10,000 from two years ago. The St. Louis Blues have increased attendance by more than 1,000 a game after increasing by 4,000 last year.

Meanwhile, more people have tuned into the NHL’s marquee events with ratings increases for the Winter Classic outdoor game in Chicago and Sunday’s All-Star Game in Montreal.

“Economically we are having a great season under the circumstances,” NHL commissioner Gary Bettman said Saturday during the league’s All-Star festivities. “Are we growing as much as we had anticipated at the start of the season? No, but we are having real growth.”

Not all news has been positive. The NHL Players’ Association has expressed skepticism about Bettman’s revenue projections, insisting that the league should increase escrow holdings from 13.5 percent to 25 percent to offset any possible shortfall in league revenue. Sponsorship revenue for both the Caps and the league has been close to flat in the last year as companies have cut back on advertising spending. Though the NHL did strike a deal with Honda to be the official car of the league last year, many teams have seen a major drop-off in support from struggling automakers and banks in particular.

“Every time we add a sponsor we lose a sponsor,” Leonsis said. “Every game we have to show them that when a fan base is connected to a product and you as a sponsor get connected to that product, then that passion will flow to you. But now we have to show that that passion will turn into sales.”

Elsewhere, the Phoenix Coyotes and Nashville Predators have faced financial difficulties, leading to widespread speculation that at least one of the teams eventually will relocate. Bettman said he expected the teams to succeed in their cities but acknowledged that the Coyotes have required an infusion of capital from the league.

Leonsis, for his part, said he is encouraged by the Caps’ rising popularity but still will lose millions of dollars this year. He said he would be comfortable operating the club on close to a break-even basis financially, but to reach that point the team likely will raise ticket prices again next season, bringing it closer to the league average. The Caps this season charged an average of $41.25, about $8 less than the league average and ranking them 24th in the NHL, according to Team Marketing Report. Leonsis said specific details of pricing haven’t been determined but offered a theoretical example that a $16 ticket might cost $20 next season.

“We can’t spend any more money, and everything we’ve done has been first class,” Leonsis said. “We have to raise our prices. We are now offering above league average in performance and charging below league average. We will have to raise our prices, but it will be modest enough that people won’t get upset. People will understand.”