Nashville Predators Case Essay
Nashville Predators Case
The Nashville Predators have been going through a seemingly endless process since entering the NHL in 1998. It did not take the Predators long to establish a successful and competitive nature among the franchise. Their first five seasons they struggled becoming a team and missed the playoffs, however, they have come together and made the playoffs every year since. The Predator’s on-ice performance was consistently among the top three teams in the league, but still faced many challenges.
Although the Predator’s on-ice performance continued to mature, they still struggled with growth in ticket sales. How does a number three ranked NHL team fall to twenty-three of thirty teams in overall ticket sales? Clearly something needs to be evaluated in the management marketing strategy. According to many officials, Nashville has all the tools to generate a profitable franchise. It seems that since a team plays well that they should attract a loyal fan base. It was not this easy for the Predators as they dealt with several contracts over the years to gain one full-time owner.
The team’s franchise might be undergoing new ownership once again. This puts an immense amount of stress on the management team as they have several things to prepare, for a potential new owner. The team believes that a new owner might move the Predators to a location outside of Nashville. The management team needs to come up with an efficient marketing plan/ strategy for the new owner. Re-location suggestions are among the top issues to evaluate. The team has narrowed their approach to five potential cities for the Predators, as well as the possibility of leaving them in Nashville. Hamilton, Winnipeg, Kansas City, Las Vegas, and Houston were among the best-fit re-location options.
Although the team needed to look at other cities, they were also determined to prove Nashville could be a success. The management team believed that with the on-ice success and a new and exciting marketing campaign would increase the average attendance at games. Some challenges they faced along the way were mainly generating more revenue, and targeting a new clientele. NHL depends heavily on ticket revenue and less on broadcasting compared to any other professional sport. This alone tells the management team, much more focus needs to be applied toward selling tickets. While more tickets need to be sold, there is a separate approach within this strategy. The majority of NHL teams sell sixty percent of their tickets to corporations, and accommodate business suites. The Predators are generating seventy percent of ticket revenue through individual sales and only thirty percent from business packages. This is a number that needs to improve for the franchise as they look to increase revenue. Gaining support from major corporations is always an upside for any business.
Whether the team moves, or remains in Nashville, there are several key decisions that the management team must make. First off they have to establish a comprehensive strategy starting with a recommended location. Where the Predators will be best fit is a decision that must be set in stone. Once you have the location set is when the team can move into an overall strategy for the franchise. They will need to consider recommendations on promotions, pricing, and customer focus. What will the ticket prices be, and how will they obtain the brand (team) loyalty from fans? No matter what strategy they decide it must be viable and profitable. Ticket prices are directly correlated to the attendance in the building, and present a major challenge. Last but certainly not least; the team must develop a strategy for targeting new corporations among its new location. This is hockey, however, at the end of the day this is business and is about having, “a good product on the ice”.
Upon further evaluation of the franchise’s relocation, an internal analysis of strengths and weaknesses helps to visualize potential. As I said before, the Nashville Predators have a good team, but things must be evaluated to understand what to and what not to stress in their marketing strategy.
Nashville Predator Franchise
On-ice performance: achieved playoff contention every year since 2003; Ranked third of thirty teams in NHL Competitive Nature: a team that plays well and succeeds generates more awareness & fans Sommet Center: only twelve years old; over seventeen thousand in capacity Seventy luxury suites for businesses
Newly Renovated Arena: updated game clock/ score board; hundreds of televisions added for better spectator views State of the art technology in Arena
Majority of employees/ players have been together for a while now and know how to work together through changes As of right now they have no clear strategy
Management team is “in the dark”: because the team has not confirmed whether or not they are gaining a new owner- the management team is forced to plan for multiple scenarios under new ownership; Preventing them from focusing on one effective strategy Lack of corporate interest in Predators franchise
Due to the attempts/ failures of multiple ownership agreements: the franchise appears as unwanted and undesirable to outsiders Lack of customer Service Department- over five hundred thousand dollars Lack of consistency within franchise
Customers- NHL tickets serve purely hedonic needs in the eyes of the consumers, as Sports games are a facet of the entertainment industry. One group that the NHL targets in ticket sales are fans of the sport, both diehard and casual. Diehard fans purchased season tickets regardless of winning or losing seasons or other conditions and as such they are not considered price sensitive compared to casual fans. Casual watchers of hockey perform more of a search to find the best entertainment option for their dollar and can be trickier to encourage buying multiple tickets. Based on statistical figures your average NHL fan is a male in his middle 40’s, although almost 40% of fans are women. An interesting fact is that according to the article, NHL fans are wealthier than any other fan of a major league North American sport. Fans of the sport geographically speaking are spread out across North America, but NHL franchise attendance is highest in Canada and Northern U.S. regions. Context:
Political: the National Hockey League governs Major league hockey games. The NHL regulates how many games are in each season, controls where teams are located or relocated, and determines salaries for players, etc. Economic: Like any other entertainment option, success as a business depends on the customer’s amount of discretionary income. If the general economy is suffering, NHL games likely suffer in terms of ticket revenue. Social: NHL is a part of the sports entertainment industry, which continues to grow into a multi-billion dollar industry. Many in North America follow a sport one way or another and are a way to socialize with other fans. Technological: Not too many technological advances in the sport of hockey, other than to watch games while not in attendance. Company- The National Hockey League (NHL) is the governing body for professional hockey teams. The league, more than any of the other professional leagues, depends on ticket sales as a main source of revenue.
According to Porter’s generic strategies, the focus of the NHL is to provide a different kind of professional sports experience at a competitive price point. Unlike football or baseball, hockey is generally not susceptible to fluctuations in ticket revenue based on weather since it is an indoor event. No other sport is played on ice so that is the NHL’s main source of competitive advantage. Collaborators- The NHL is in contract with venue leasing companies to provide the arena for the games and they are their biggest collaborators. Also contributing to the game day experiences are the firms that provide the food and beverages, manufacture the merchandising and player uniforms/equipment, security, etc. Most of these arenas aren’t built solely for hockey games so firms that design, build, and manage the ice rinks are crucial to delivering the product.
Product Category Competition: NFL, NBA, MLB, and MLS
Generic Competition: College sports games, race tracks (of horse and car variety), lesser league/amateur league sports games, high school sports games, heater performances, concerts, other live events, etc. Budget Competition: Movie theaters, restaurants, PPV, etc.
Power of Suppliers- Low/ If we are assuming the players are the suppliers since without Them the sport wouldn’t exist. The NHL has every player on a contract and while there Are other hockey leagues they are of lesser quality and do not pay as well as in the NHL. Providers of the food/beverage, merchandising, etc. are not in control because it is easy for the NHL and the individual teams to seek other sources.
Power of Buyers- High/ Potential ticket purchasers can seek other forms of entertainment that is of more value to them. Powers of Substitutes- High/ There are other lesser leagues as well as a plethora of non-professional sports that the NHL has to compete with. Power of New Entrants- Low/ Each individual sport has their own governing body that regulates the professional games. To rival the NHL there would need to be massive capital costs, economies of scale, etc. Rivalry- High/ Other professional leagues compete to attract the casual sports fans to increase ticket revenue
When looking at the Nashville NHL franchise, it is important to consider the competition it has with other league teams, such as the Tennessee Titans and the Nashville Sounds. In this situation, Nashville in particular doesn’t have any other major league team but within a couple hours’ drive is the Memphis Grizzlies, an NBA team. Nashville is also a popular destination for music lovers. This aspect of the entertainment industry poses a threat to the Predators franchise. The franchise is also at a disadvantage geographically as fans of NHL is more congregated in northern regions and into Canada. The NHL desired to reach into the southeastern U.S. region but based on the performance of Nashville and other franchises as Atlanta, Carolina, and the Florida Panthers, it seems that the experiment is failing. 4. Hamilton-
The target market that this city should focus on is the casual fan. With its proximity to Toronto and Buffalo, Hamilton will have a difficult time luring diehard fans since they already have their team loyalties. Casual
fans aren’t as willing to travel to watch games so targeting these fans would be an advantage. The team should be positioned as the closer, more hometown team since fans in the city probably had to travel to attend NHL games. Competition could arise from its close proximity to already established NHL teams; this location option in our opinion is seen as cannibalization more than already as ticket revenue would likely cut into Toronto, Buffalo, and other Canadian teams. Winnipeg-
This location should target the diehard fans in particular as it is noted that the city once held an NHL franchise and many in the city are desperate to have another team again. Positioning the team would be easy, it’s the best games, the best players, and it’s the NHL, the pinnacle of hockey. As far as competition, it seems that the team would have no significant location competition, as there are no other professional teams in the area, just NHL affiliates. Kansas City-
This location should target the casual fan or entertainment seeker, as there is intense competition from other professional teams such as the NFL Chiefs, MLB Royals, and an arena football league team. The franchise would have to be positioned as something different in the city, as a different way to enjoy an intense physical sport that compares to football in that regard. Las Vegas- An NHL franchise in this city would be the only professional league team in the city, and other than competing with the gambling/dining/other entertainment options offered by the tons in the “entertainment capital of the world” would have the ability to stand out as an elite sports experience that stays year round. Las Vegas hosts all sorts of other sports events, but this would be a year round sports experience. The target market would need to be both casual and diehard sports fans as this would be the only professional sport in the city and the franchise could easily capitalize on this. Houston-
Competition from all the major professional league franchises would make this city a challenge for the Predators. Appealing to casual fans would be important for the team, although diehard hockey fans who regularly attend Dallas Stars could attend games in Houston if they lived closer. Houston usually doesn’t endure any harsh winters so this team could be positioned as a way to cool off and get chilly watching intense physical hockey games.
After carefully reviewing all the possible candidate cities, our group decided that we would select Las Vegas as the next location for the Predators franchise. One of the main reasons why we chose this city is because it is devoid of any professional league teams already, so the franchise would be the only one in the area. The franchise could easily capitalize on this and create a niche for itself against the wide assortment of gambling and other entertainment in the city. The city is also one that is quickly growing, with a population of 1.7 million at the time of the article and a yearly growth rate of 11.5%. While seat capacity is limited, creating high demand for the NHL experience in the city would allow the franchise to potentially raise ticket prices, therefore increasing revenues and profits.
Median family income is also the highest of all the U.S. candidate cities with $58,465, which could further justify charging higher ticket prices. As the “entertainment capital”, Las Vegas is a popular tourist destination in the country and the world. Having a team in this city could see casual and diehard sports fans making the trip to Las Vegas and make a complete experience out of attending an NHL game. After attending a game, fans can explore all the casinos and nightlife hotspots that make Las Vegas famous. In our opinion, Las Vegas is the most exciting prospect for an NHL team and with the potential to charge more premium ticket prices could see the franchise turn around and become profitable.
In order to determine the ticket price that the Predators should charge, assuming they move to Las Vegas, we will need to determine the fixed costs associated to running the team in this area. Fixed Costs Nashville Predators
Above are the fixed costs associated with the Nashville Predators moving to Las Vegas. Broadcast costs along with lease costs were used from historical data. Total fixed costs amounted to $44,300,000 excluding sponsorships from the MGM casino and corporate historical sponsorships.
Next our group chose to use the historical average prices from the Predators and the average prices from the NHL. We decided to use these prices as reference because we wanted to get a general feel as to where the Predators sit in their pricing scheme compared to the national average.
From this analysis we decided that the Predators are charging too low for their ticket prices. We did not want to charge above the national average though, after the Predators move to Las Vegas they can then get a better feel for whether or not they should increase the price even more. So our group decided to charge $48.72 for regular admission and $112.10 for premium tickets. If the arena meets capacity of 19,300, this would bring in revenues of $529,175.14.
We also wanted to make sure that the Predators are able to recoup the initial investment they will make. To do this we ran a break-even analysis to see how many tickets they will need to sell to cover their fixed costs. Below is our break-even analysis. Break-even Analysis
We weighted the ticket prices by their percent of interested fans in that price. Then took the fixed costs and divided them by the ticket price to come up with 714,173 tickets that must be sold in order to cover fixed costs. This is solely in ticket sales and does not include the revenue from future concessions and other revenues from the arena in Las Vegas. This number is slightly higher than the number of tickets the Predators sold last year that was 611,328. This number was extremely low compared to the league. Our group believes that our estimated 714,173 tickets is a plausible number if the Predators move to Las Vegas. Promotional and Advertising Plan:
TV/Radio Promotions: TV and radio ads are aired typically on sports-related media. The viewers and listeners to these stations were males between the ages of 25 and 54. In Las Vegas the median age of residents is 34, which is right in the middle of the TV/Radio viewer age. Also Las Vegas is primarily male, coinciding with the viewers of sports radio and TV. We would hit hard in promoting the Predators though radio and TV. The demographic for this type of promotion is perfect and we believe we would be very successful using this media. Player Appearances: As the main demographic for player appearances is a younger child, we believe that this tactic can only be used for specific events that may hit the city of Las Vegas. Most likely we would have players appear at charity events, and other found raisers that are hosted in the city. This way they can get in touch with an older generation that better fits the demographic of Las Vegas.
Corporate Mail Outs: We would use corporate mail outs in our strategy. As Las Vegas is already thriving in businesses that are mainly casinos, shows, and shopping, asking them for sponsorships and advertisements would be competition against our main sponsor MGM, also the hotel where the arena would be located. Fan Giveaways: Fan giveaways will be very useful in promoting the Predators. Las Vegas is a place where people come to WIN! Having giveaways for our main ticket purchasers, such as a free stay at the MGM Grand, or simply cash, would be very effective in keeping out current fans interested and satisfied while also attracting new fans with the hope of WINNING BIG! Online Advertising: Online advertising is a medium that is becoming more and more successful with the increased use of technology. As research stated, 68% of avid sports fans had used the Internet in the past 30 days. We would take full advantage of this less-costly way of promoting the Predators. The website for the Predators would need to be updated to coincide with the likes of the Las Vegas demographic, and the surrounding area. The site would need to be exciting and captivating as well as very easy to access. Our advertising would also have to appeal to the nation, as it would be seen on ESPN.com, TSN.ca and NHL.com, all of which are viewed nationally and internationally.
Ticket Sales: With using TV/radio and Fan Giveaways as our main ways of promotion and advertising, these two mediums would be where most of the Predators ticket sales would generate. Cost of Plan: In order to use these two mediums to create the most hype and ticket sales, it is going to be costly. The predators would need to spend about $3.5 million and up on TV/radio advertising, in order to sell the number of tickets they need per game. If TV/radio advertising is successful then the Fan Giveaways can become less and less costly. If TV were successful then the Predators would need to spend from $0 to $500,000 to make up for the rest of ticket sales. If TV/radio advertising is less successful then they will need to spend from $750,000 to $1,000,000.
If they go higher than these costs, research shows that in Las Vegas they will still attract the same amount of ticket sales as they would if the only spent $1 million. As we are not completely utilizing corporate mail outs and player appearances, combined these would cost the Predators a maximum of $200,000, but most likely the cost would be much less. As previously stated we would use online advertising. Las Vegas stays rather consistent with the number of tickets that are sold related to online advertising so the Predators would only need to spend a maximum of $700,000, after this amount, historically the same number of tickets have been sold. Below is a table that shows the maximum that the Predators would have to spend on advertising and promotion in Las Vegas.
Maximum Cost of Promotion and Advertising