The City of Philadelphia and the Flyers hockey team must be getting rich from playing in the Stanley Cup finals, right?
After all, restaurants are filled with thirsty fans, who are filling their closets with commemorative Stanley Cup T-shirts.
And each home game in the finals generates more than $3 million in ticket sales, according to sports-business experts. The average ticket price in the finals for the 19,500-seat Wachovia Center is $184 - triple the regular-season average of $59.
But as pricey as the tickets may be, and as remarkable as the Flyers' just-by-the-fingertips season finish has been, the playoff run may not be as lucrative as one might think.
For starters, the National Hockey League claims a big cut of playoff gate receipts for its revenue-sharing program, which redistributes money to the more financially frail members of the 30-team league.
The playoff teams also have to kick back fees to help cover the league's costs to produce the playoffs, including expenses for travel, marketing, and officiating.
And all the revenue generated by the NHL's national and international television deals - the Cup Finals will be broadcast in 138 countries - is distributed equally among the league members, so the only broadcasting bonus for the finalists comes from pregame and postgame programming on their local TV and radio affiliates.
"After travel expenses, revenue-sharing, and other expenses, it's good money, but it's not the bonanza that people think," Peter A. Luukko, president and chief operating officer of Comcast Spectacor L.P., said in an interview from Chicago, where the Flyers were scheduled to start the Finals Saturday night against the Blackhawks.
Officials from the Flyers and the NHL don't like to talk specifics, but one industry source said the Flyers could net about $5 million from the monthlong playoffs, and an additional $2 million would accrue to Comcast Spectacor as owner of the home ice, the Wachovia Center.
The earnings for Comcast Spectacor, which also owns the Sixers, are impossible to confirm because its financials are not broken out individually in the $35.7 billion annual report of its parent company, Comcast Corp.
According to Forbes magazine, which annually compiles a ranking of hockey franchises, the Flyers are the fifth-most-valuable NHL team, worth an estimated $273 million - and their value would likely increase with a championship. The club generates $101 million in annual revenue, according to Forbes, and operating income of $3.1 million, before interest and taxes.
Andrew Zimbalist, a sports-economics professor at Smith College in Northampton, Mass., said the net increment to profit in the year of the playoff run was "modest." The real money comes down the road, from revenue generated because of a championship team's notoriety.
"Because the demand for the team's products - tickets, concessions, signage, parking, sponsorships, televisions rights, all those things - is higher, you get to sell more product," Zimbalist said. "And you usually get to charge higher prices, so revenues will go up."
Luukko, the Flyers' president, agrees.
"Right now, season-ticket renewals are at a pace 15 percent ahead of last year," he said. "So we'll end up with a renewal rate in the mid- to high-90 percent, which is phenomenal."
Companies that rent suites, club seats, and sponsorship deals are eager to renew.
"It gives us the opportunity to set things up for the following years," Luukko said. "And that's where a run like this really has its most positive impact. It gives us some stability for the next few years."
Professional teams typically increase ticket prices after championship runs, but the Flyers did not increase prices when it appealed to season-ticket-holders for renewals.
Luukko said the Comcast Spectacor chairman, Ed Snider, has been careful not to price fans out of the arena, especially during the recession. Though the team is a top-five NHL market, it ranks 15th in average ticket prices.
Before the playoffs, he said, ticket sales had shown some signs of weakness in the poor economy.
Typically the best seats in the arena, the lower tier, sell first. "But this was the first year in my career that people actually asked to go from the lower level to the balcony because of economic reasons," he said.
He does not hear much bearish sentiment these days.
"Now, we have an incredible demand for the whole building, that's what a run like this does for you," he said. The team is likely to go into the off-season with 95 percent of next year's tickets sold, he said.
Sales of merchandise and concessions also increase during the playoffs. During a typical regular-season game - the Flyers play 41 home games before the playoffs - food, beverage, and merchandise sales amount to $350,000 to $400,000 per game, said Luukko. In the playoffs, sales might reach $700,000, of which the arena gets a net of 20 percent to 25 percent.
"Fans come earlier, they stay later and just spend more while they're there," Luukko said. "It's really a fun time."
The players also get a share of the pie.
Under the terms of the NHL Players Association contract, the league distributes $6.5 million to players whose teams appear in the playoffs. The champions get $1,875,000 of that, which the players divide into shares among themselves. The players on the second-place team get $1,125,000.
As for the Philadelphia economy, Luukko said each home game generates about $200,000 in city tax revenue - sales tax, wage tax, admissions tax.
But Zimbalist, the sports economist, said the games would not really generate too much additional economic activity, because the hockey games do not attract too many out-of-town fans (although 600 media representatives will attend).
"Pretty much all the people who are going to be at the arena will be from Greater Philadelphia, and they spend money at the arena instead of spending it somewhere else in the Philadelphia economy," Zimbalist said. "So it doesn't have much impact one way or another."
Contact staff writer Andrew Maykuth at 215-854-2947 or firstname.lastname@example.org.