Ontario Hockey League

Ontario Hockey League Order Description Read case Ontario Hockey League and doing the case situation analysis only foucs on Competition and Customer. Word document Situation Analysis Competition and Consumer is teach you how to write analysis. 29. 9B13A028 THE ONTARIO HOCKEY LEAGUE 1 Ian Meagher wrote this case under the supervision of Professor Ma tthew Thomson solely to provide material for class discussion. The authors do not intend to illustrate either effective or i neffective handling of a managerial situation. The authors may have disguised certain names and ot her identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under  authorization by any reproduction rights organization. To order copies or request per mission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t)  519.661.3208; (e) [email protected]; www.iveycases.com. Copyright © 2013, Richard Ivey  School of Business Foundation  Version: 2013-09-10 It was late May 2010 and another su ccessful season for the Ontario Ho ckey League (OHL) had come to a close, with the Windsor Spitfires winning their second consecutive Memorial Cup. 2 Generally, the league was performing well from both a business and hockey  standpoint. Although great strides had been made in recent years to grow the OHL brand in  Ontario, there was a lot of work to be done this off-season. League-wide attendance figures had remained fairly consistent with last year’s numbers: year after year, there were mostly consistent but a few inconsistent teams. Along with these trends came the struggle for certain OHL franchises to remain profitable. One of the organization’s interns, Mark Wallace, was asked to prepare a report and the preliminary information it contained could prove  to be valuable if analyzed appropriately. How exactly could this information be used to help some of the st ruggling teams with their attendance figures? Wallace’s job was to develop a more comprehens ive report by the end of the week, along with recommendations on how to improve attendance in struggling markets. Under no circumstance could any recommendation try to help a struggling franchise at the expense of a more successful and stable team. HISTORY OF THE ONT ARIO HOCKEY LEAGUE In 1893, junior hockey was first played in the provi nce of Ontario under the jurisdiction of the Ontario Hockey Association (OHA). 3 In 1974, the OHL became independent from the OHA and emerged as the highest level of junior hockey in the province. As  of 2009/10, the OHL fell under the umbrella of the Canadian Hockey League (CHL), 4 which included 59 member teams located across Canada and parts of the United States (Exhibit 1). Every year since 1919, the CHL crowned a Memorial Cup champion. 5 The 1 This case has been written on the basis of published sources only.  Consequently, the interpretation and perspectives presented in this case are not necessarily those of the Ontario Hockey League or any of its employees or members. 2 The Memorial Cup is awarded to the C anadian national junior hockey champion. It is a tournament format with a host team, and one team from the Ontario Hockey League, the Q uebec Major Junior Hockey League and the Western Hockey League. 3 http://ontariohockeyleague.com/ page/ohl-media-information-guide, accessed September 3, 2013. 4 www.chl.ca accessed September 3, 2013. 5 http://ontariohockeyleague.com/page/ohl-media-i nformation-guide accessed September 3, 2013. For use only in the course Marketing Management (BCOMM) at Saint Mary's University taught by Gordon Fullerton from September 03, 2014 to December 25, 2014. Use outside these parameters is a copyright violation. 357 Page 2  9B13A028 Quebec Major Junior Hockey League (QMJHL) 6 and Western Hockey League (WHL) 7 were the other two leagues under CHL jurisdiction that competed  with the OHL for the coveted trophy. In 2009/10, the OHL had 20 member franchises, three  located in the eastern  United States (two in Michigan, one in Pennsylvania), 8 and the other 17 scattered across th e province of Ontario. The business operated as a franchise model in which each team was privately owned and independently operated. David Branch became the fourth commissioner of the OHL on September 15, 1979. 9 He had an array of experience within junior hockey since graduating from  the University of Amherst, Massachusetts; he had been a member of his university’s hockey team and was passionate about hockey  in general. Along with being the commissioner of the OHL, he had also served as president of the CHL since 1996. 10 He was highly regarded within the Cana dian junior hockey community. DEVELOPING PROFESSIONAL HOCKEY PLAYERS Since its inception, the OHL had been among the top leagues in the world for developing professional hockey players. The league’s success had continued to  improve in recent years. Based on previous reports, Branch knew that 30 per cent of the active players in the National Hockey League (NHL) 11 graduated from the OHL. 12 Between 2006 and 2009, the OHL had a total of  29 players drafted in the first round of the NHL draft. The highlight of those years was in 2008, when 11 OHL prospects were drafted in the first round, including seven in the top 10. A 2002 study conducted by long-time  minor and junior hockey employee Jim Parcels revealed the difficulty of making a career as an NHL hockey player 13 . In short, it was tremendously difficult to become a professional hockey player and even harder to earn a spot in the NHL. The study revealed that of the 22,000 active hockey players in Ontario born in 1975, 232  were drafted to the OHL (1.05 per cent) and 41 played NCAA Division I College Hockey 14 (0.018 per cent). Of these 273 players, 48 of them were drafted to the NHL (0.02 per cent). 15 Even for the very skilled players who  played in the OHL, it was still rare and difficult to jump to the NHL. INDUSTRY Ontario Minor Hockey Trends Branch and his staff had always prided themselves on having a good understanding of the impact in terms of both attendance and quality of players on the OHL of minor hockey trends. But, due in part to injury concerns and increasing costs, participation rates in  minor hockey had been experiencing a consistent slide 6 The QMJHL has teams from Quebec, New Brunswi ck, Nova Scotia and Prince Edward Island. 7 The WHL has teams from British Columb ia, Saskatchewan, Alberta and Manitoba. 8 For the purposes of this case, t he three American teams are ignored. 9 http://ontariohockeyleague.co m/page/ohl-media-information-guide accessed September 3, 2013. 10 http://thepipelineshow.blogspot.ca/2011/08/does-david-branch-wear-too-many-hats.html ,accessed September 3, 2013 11 The National Hockey League is the highest leve l of professional hockey in the world. 12 http://ontariohockeyleague.com/ page/ohl-media-information-guide, p.  178, accessed September 3, 2013. 13 Jim Parcels, “Chances of Making It in Pro Hockey”,  www.omha.net, April 2002, accessed September 3, 2013 14 Division I NCAA Hockey was another common route for minor hockey players trying to carve a path to the NHL 15 Jim Parcels, “Chances of Making It in Pro Hockey”,  www.omha.net, April 2002, accessed September. 3, 2013 For use only in the course Marketing Management (BCOMM) at Saint Mary's University taught by Gordon Fullerton from September 03, 2014 to December 25, 2014. Use outside these parameters is a copyright violation. 358 Page 3  9B13A028 for years. 16 Given the drop in general interest in hockey among Ontario’s youth,  this trend was destined to negatively impact the OHL in the future. If it continued, the OHL would need to plan for drops in both attendance and quality of play. Competition Analysis The economic recession of 2008/09 hindered discretionary spending  nationwide. Competition for consumers’ entertainment dollars was fierce in 2009/10, more so than in pre-recessionary years. OHL teams not only competed against other sports franchises, they also competed against other entertainment options such as theatres and restaurants. From the OHL’s perspective, direct competition could be separated into two categories: other hockey leagues and other sporting leagues. Two other hockey leagues posed potential threats to OHL attendance: the NHL and the American Hockey League (AHL). 17 The OHL’s major advantage over most NHL teams was the fact that their ticket prices were at least 50 per cent cheaper. However, it was much harder for the OHL to differentiate from the AHL on price. The only major difference between the two was that the AHL was a professional league, whereas the OHL was considered amateur hockey. While one might assume fans would prefer to watch a prof essional hockey team over an amateur  team, many OHL fans enjoyed the spectacle of watching the development of future stars. There were four non-hockey professional leagues that competed with the OHL, NHL and AHL for fans: the National Basketball Association (NBA), the Nati onal Lacrosse League (NLL),  the Canadian Football League (CFL) and Major League Baseball (MLB). For the most part, tickets in these leagues were more expensive than OHL tickets, though low-end prices in each league were somewhat comparable (Exhibit 2). This made it difficult for the OHL to compete on price, even if the average ticket price for these other leagues was much higher. For the most part, OHL franchises were located in smaller towns across Ontario with a few teams located in larger metropolitan areas such as Mississauga , Brampton and Ottawa. Indeed, it was likely that individual franchises were impact ed by nearby sports options. Given the increase in demand for discretionary spending dollars, relative  location might be a key advantage. ONTARIO HOCKEY LEAGUE STRATEGY A significant strong point for the entire CHL was its  exclusive partnership, established in 1998, with Rogers, a national media company that included sports broadcasting. 18 The network held the exclusive rights to the annual Memorial Cup tournament. There we re rumours that Rogers  was planning to broadcast a junior hockey game every Friday night over the c ourse of a season. The deal was not finalized, but Branch anticipated it would be within two years. In terms of a long-term plan for the league, Branch  knew there were a number  of factors that could potentially contribute to the attendance problems in certain markets. Perhaps there were simply too many 16 Emile Therien, “The Future Looks Bleak for Canadian Minor Hockey”, Jan. 4, 2012, www.thestar.com, accessed September 3, 2013.  This decline was being experienced both within Ontario and across Canada. 17 The AHL acts as a feeder system for the NHL; the natural progr ession would be to go from the OHL to the AHL, then on to the NHL. To play in the AHL, a player must be 20 years old or older. 18 http://www.chl.ca/article/watch-friday-night-hockey-on-sportsnet-sarnia-at-london, accessed September 3, 2013. For use only in the course Marketing Management (BCOMM) at Saint Mary's University taught by Gordon Fullerton from September 03, 2014 to December 25, 2014. Use outside these parameters is a copyright violation. 359 Page 4  9B13A028 teams and not enough fans to  support all 20 OHL franchises. Cutting te ams, though, was not a viable short-term solution to fixing the league’s attendance woes.  Perhaps the OHL needed to relocate some of the struggling franchises to more remote parts of the province where there would be less competition. This might provide these franchises with a more loyal and consistent fan base. Howe ver, most franchises had long-term building leases in their cu rrent locations that they would not be able to break, and many owners would be unwilling to move, meaning new owners would have to be found. THE REPORT When Wallace created the data set in the initial report, he had explained some of the possible relationships within the data. In other words, he had some working theories about how the data might predict or explain the league’s attendance figures (see data file, Ivey product #7B13A028). Some of his thoughts appear below. Hockey Related Variables Looking at the percentage of players drafted to the  NHL from each franchise, Wallace was fairly certain that this variable would have a pos itive relationship with attendance figur es in a given market. He assumed that the more players a particular team had drafted to  the NHL, the higher the quality of play on that OHL team. Wallace felt strongly that the same would hold true about the number of points a team collected over the course of a season; more points meant more wins, thus higher quality play in that market. Given his understanding of the competitive landscape, Wallace recognized that the average ticket price variable was likely negatively correlated to attendance:  the higher the ticket price, the lower the attendance in a given market. He was unsure of the impact that price had in market s that were consistently sold out (e.g., Kitchener, Niagara, London). Was it possible that  raising the ticket price  could result in decreased demand for tickets? What was an appropriate price th reshold in markets that sold out on a regular basis? On the other hand, were higher ticket prices merely a reflection of a higher qualit y hockey product? It was something he’d have to look at. He also thought that average ticket price was probably related to how long a team  had been in a particular city. His rationale was that if a team had been in a market long enough, they would likely have a strong fan base willing to pay for hockey. If this was true, it could mean it would be easier to raise prices in certain markets. However, he was not fully convinced that this was the case since  certain markets such as Kingston had been in place since 1974/75 yet were operating below 60 per cent of arena capacity. Raising prices risked the additional proposition that OHL fans  would switch to watching another sport, going to an NHL game if close enough, or worse ye t, just staying home. Raising prices  might help revenue in one way, but it might also mean fewer people in seats watching games, which was exactly what he was trying to avoid. Wallace was unsure what to make of the building capacity variable. It could be that larger capacity buildings would be more profitable given that they  could hold more fans. But he knew this was not necessarily the case based on the data in markets  such as Mississauga and  Brampton. Were certain buildings simply too large? Could too many empty seats in an arena have a negative impact on the fan experience? For use only in the course Marketing Management (BCOMM) at Saint Mary's University taught by Gordon Fullerton from September 03, 2014 to December 25, 2014. Use outside these parameters is a copyright violation. 360 Page 5  9B13A028 Finally, Wallace suspected that proximity to NHL fran chises would have a negative correlation with OHL attendance. Thus, the closer an OHL team was to an  NHL franchise, the lower its attendance figures would be. This was a competitive argument, though he had hear d it suggested that OHL and NHL fans were quite different segments. He wasn’t sure; he’d recently h eard one team manager argue that ardent hockey fans were just looking for a good game to watch, that more was better and that they didn’t care if the players were associated with the OHL or the NHL. There was a lot to consider. Market Specific Variables Wallace was also intrigued by the impact of market  variables, such as local median household income. He was fairly confident that with higher income came more discretionary buying po wer, making attendance at OHL games more likely. On the other hand, it could be that with higher incomes, fans might switch from the OHL “value” product to more expensive options  such as the NHL or other sports products. Wallace also knew that he could not look at median household income without relating it to the local market average house price, which was really a measure of cost of living. If household income was high but housing prices were proportionately higher, for example, then fans  might not have gr eater discretionary spending after all. Wallace thought th at these two variables might also  be correlated to the local market growth rate figure. His rationale was that if a city  were thriving, people would be more inclined to immigrate there, driving up population growth. He cont emplated again whether this increase in population would drive OHL attendance in a particular market, or was it more likely that people would look to other forms of entertainment? Wallace did not have much of an understanding of the impact of  immigration and other demographic variables on attendance, but he thought they were worth  considering. He had three variables that reflected the percentage of the local market that had immigrated  to Canada at any time, that had immigrated more recently (2001-2006) and that was a visible minority. He thought that the percentage of the local market who had immigrated to Canada at some point would  be negatively correlated to  attendance since it was unlikely that recent immigrants to Canada would  have the same exposure to  and love of hockey as Canadian-born fans. He was less certain of what to make of the visible minority data, since it include d people born in and out of Canada. In other words, there were plenty of visible minorities born in Canada who were hockey fans, and many immigrants were hockey fans and also visible minorities. His initial instinct was that the percentage of visible minorities would be  negatively related to attendance, but he had to think about how to handle this variable more carefully. Wallace had to complete his analysis by Friday. He was trying to make a lasting impression before his contract expired in September. Th is was a tremendous opportunity for hi m to make a name for himself in the industry at an early age. For use only in the course Marketing Management (BCOMM) at Saint Mary's University taught by Gordon Fullerton from September 03, 2014 to December 25, 2014. Use outside these parameters is a copyright violation. 361 Page 6  9B13A028 EXHIBIT 1: BREAKDOWN OF CANADIAN HOCKEY LEAGUE (CHL) Western Hockey League (WHL) Brandon Wheat Kings      Calgary Hitmen Edmonton Oil Kings      Everett Silvertips Kamloops Blazers   Kelowna Rockets Kootenay Ice    Lethbridge Hurricanes Medicine Hat Tigers      Moose Jaw Warriors Portland Winter Hawks   Prince Albert Raiders Prince George Cougars     Red Deer Rebels Regina Pats    Saskatoon Blades Seattle Thunderbirds   Spokane Chiefs Swift Current Broncos   Tri-City Americans Vancouver Giants   Victoria Royals Quebec Major Junior Hockey League (QMJHL) Acadie-Bathurst Titans   Baie-Comeau Drakkar Drummondville Voltigeurs     Cape Breton Screaming Eagles Chicoutimi Sagueneens     Gatineau Olympiques Halifax Mooseheads   Quebec Ramparts Blainville-Boisbriand    Moncton Wildcats Rimouski Oceanic       Rouyn-Noranda Huskies P.E.I. Rocket    Victoriaville Tigres Val-d’Or Foreurs      Saint John Sea Dogs Shawinigan Cataractes Ontario Hockey League (OHL) Barrie Colts    Belleville Bulls Brampton Battalion       Erie Otters Guelph Storm    Kingston Frontenacs Kitchener Rangers       London Knights Mississauga St. Michael’s Majors  Niagara Ice Dogs Oshawa Generals   Ottawa 67’s Owen Sound Attack   Peterborough Petes Plymouth Whalers   Saginaw Spirit Sarnia Sting         Sault Ste. Marie Greyhounds Sudbury Wolves   Windsor Spitfires Source: www.chl.ca; www.whl.ca; www.theqmjhl.ca; www.ontariohockeyleague.com, accessed September 3, 2013. For use only in the course Marketing Management (BCOMM) at Saint Mary's University taught by Gordon Fullerton from September 03, 2014 to December 25, 2014. Use outside these parameters is a copyright violation. 362 Page 7  9B13A028 EXHIBIT 2: COMPETITION PRICING CHARTS Hockey Competitor Prices ** Sample includes NHL: Buffalo, Detroi t, Ottawa, Toronto; AHL: Grand Rapids, Hamilton, Lake Erie, Rochester, Toronto. Source:  www.nhl.com; www.theahl.com. Non-Hockey Competitor Prices League  Low End Price  High End Price NBA $12.50 $200 NLL $15  $70 CFL $20  $75 MLB $15  $200 ** Sample includes NBA: Toronto; NLL: Buffalo, Rochester,  Toronto; CFL: Hamilton, Toronto; MLB: Detroit, Toronto. Source: www.nba.com; www.nll.com; www.cfl.c a; www.mlb.com accessed September 3, 2013. League  Low End Price  High End Price NHL $25  $450 AHL $10  $45 For use only in the course Marketing Management (BCOMM) at Saint Mary's University taught by Gordon Fullerton from September 03, 2014 to December 25, 2014. Use outside these parameters is a copyright violation. 363 PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT :)