Economics 101: Why "blame the fan" doesn't make sense

MLSE has no incentive to ice a winning team because the ACC is already full every night, even when the team isn't good. If fans refused to buy tickets unless the team was doing well, MLSE would have to invest in a winning team. Therefore, the fans are to blame for the Leafs lack of success.

The argument above is well-known, often repeated, and makes absolutely no sense.

This really shouldn't be complicated, but apparently a lot of people are struggling with it. And since that includes most of our high-paid media stars, I thought I'd spell it out. This is going to be way too basic, to the point that anyone who really does understand economics will be embarrassed by it, but I'm really going to try to make it as simple as possible.

There are two broad categories of things you can sell: Those with a limited supply, and those with an unlimited supply. Airline tickets are a good example of a product with limited supply. There are only so many of them available for each flight, and once they're gone you can't sell anymore. You've made as much money as you're going to make.

On the other hand, if you're selling sneakers you're only limited by demand, and how many you can manage to produce. If demand goes up, and you can make more, you'll make more money. Some products, like MP3s on iTunes, are essentially completely unlimited since it costs nothing to make and store additional product.

Makes sense? Everyone still with me? Even the media guys?

Tickets to a hockey game have a limited supply. If a team sells all its tickets, it can't sell any more. Putting aside the (excruciatingly basic but apparently ignored) possibility of raising ticket prices, once all the tickets are sold then you can't make any more money. And since only the people with tickets are going to need parking and concessions, those are essentially limited too.

So yes, if the owner of a hockey team knows in advance that they will sell out every game, they have no business incentive to change the product.

This is a very sound argument. If it was 1983.

Sure, back when Harold Ballard was in charge the Leafs made most of their money off of gameday sales. So did every other NHL team. Yes, they sold a few jerseys and they made money off of TV rights. But most of the cash came from tickets and concessions.

So the "no incentive to win" argument probably made sense in those days, as Ballard himself confirmed.

Unfortunately for the fan-bashers, that was twenty years ago. Today, the business landscape is very different in the NHL in general, and that's especially true in Toronto.

The Toronto Star reported that the Leafs themselves estimate that by 2011, ticket sales will account for barely one-third of revenue. By then, the Leafs expect to bring in over $300 million a year from sources other than tickets.

Think about that: $300 million every year from non-ticket sources.

Today, the Leafs have revenue streams that Ballard couldn't have dreamed of. Licensed products, which used to mean t-shirts and jerseys and not much else, have expanded to virtually everything you can slap a logo on, including condos. Gameday advertising (or as they like to call it now, "corporate partnerships") brings in revenue that would be unimaginable in the 1980s. Increased competition for TV broadcasts has caused rights prices to skyrocket. Online revenue, still small today, has enormous potential for growth.

All new or greatly increased sources of revenue. All, unlike ticket sales, virtually unlimited.

You think revenue from any of those sources might go up if the Leafs won a Cup?

And that doesn't even touch on the topic of Leafs TV. While the channel isn't a money-maker yet, it's an enormous opportunity for MLSE. The Leafs are trying to follow the same model that the New York Yankees used in launching their own TV empire. The YES network launched in 2002, on the heels of the Yankees winning four World Series in the past six years.

That network's estimated worth now? Try $2 billion. With a "b".

No incentive to win? Really? Really?

Don't forget, the Leafs' primary owner is the Ontario Teachers' Pension Plan. As a pension, they view the team as an investment to hold onto as long as it increases in value and then eventually sell. That means they need for MLSE to grow. Profits are nice, but investments only go up in value when the company can demonstrate growth. The growth for MLSE is going to come from all of these new revenue streams.

And again, since there's virtually no limit on how many people can watch a game on TV or how many companies can cram an ad onto something, the growth potential is enormous. Especially if the team is winning.

And yet we still hear from reporters -- people who are paid to be experts about the Maple Leafs and the NHL -- who drone on and on about ticket sales. Why?

Could it really be that some of these guys haven't paid for a ticket in 20 years, and so still think about the economics of the game the same way they did back then? Or are they just intentionally misrepresenting the situation because "Blame the Dumb Leaf Fan" is a fun story to write?

I have no idea. But hopefully some basic economics will help at least a few of them see the light.

The bottom line: Arguing that Leafs ownership has no motivation to win because the building is always sold out is like arguing that the increase in concussions must be caused by players not wearing helmets. It's a nice idea, but outdated by 20 years.

The Leafs make a lot of money when they lose. But they'd make even more -- a lot more -- if they could figure out how to win.

MLSE doesn't lose because of lack of interest, they lose because they don't know how to build a winner. And you can't lay that at the feet of the loyal fans.

Two things we know about the 2008-09 Maple Leafs

I'll have some more detailed thoughts about the first ten games later this week, but for now here's a quick summary of the two things we've learned about this team.

Fact #1 - They're not very good.
The forwards struggle to score goals. Shot selection is iffy, they don't crash the net especially well, and just plain don't have the skill to create offence out of nothing. Even the so-called skill guys don't have much finish. Only a handful of guys can hit with any authority, and nobody on the team can fight.

The defencemen are solid but prone to mistakes, still get caught out of position too often, and so far as a unit have been less than the sum of their parts. They've been OK, nothing more.

Goaltending has been average at best. Toskala has been excellent some nights, and downright bad on others. Joseph looks like a 41-year-old backup.

In short, they're pretty much what we expected: a bad team.

Fact #2: They just do not quit.

This team skates hard from the opening faceoff to the final buzzer. Every shift. Everybody forechecks, even the guys who everyone knows aren't good at it. They attack the other team's zone relentlessly, pepper shots from everywhere and just never stop swarming.

If they fall behind, they keep coming at you until they can find a crack somewhere to get back into the game. If somebody gets hit, somebody else steps in and does something about it. They seem to genuinely like playing with each other.

Everybody blocks shots. Everybody finishes checks. Everybody competes. If they don't, they sit down next game and somebody else gets a chance.

Bottom line:

Half of these guys probably shouldn't even be in the NHL. On pure talent they should challenge for last place overall.

Over the course of a long season, talent usually wins out over will. I'm not sure a team can work this hard for 82-games, and when that letdown finally comes things could spiral downward very quickly.

But in the meantime... This year's team seems like they would be a really, really hard team to play against. And that's the first time you can say that about the Leafs since the Quinn days.

On paper, this team is far worse than last year's squad. But I'd rather watch these guys any day of the week.

They either don't know that they're bad, or they don't care. It can't last. But as long as it does, it's a really fun ride.

The myth of "false hope"

Leaf fans' two favorite keyboard-bangers are singing from the same hymn book this week:

Damien Cox:

All the Luke Schenn hype in the world isn't going to change that, and isn't it a shame the Leafs are determined to use such a quality prospect to deliver a public relations message?

Howard Berger:

In a carefully crafted effort, the Maple Leafs have hyped and boosted rookie Luke Schenn in virtually every public forum during the first two-plus weeks of the season ... As for the legion of fans in this city, the Leafs understand how readily they have bought false hope through the years, so that isn’t about to change.

I have a question.

I thought Leaf fans were dumb zombies who keep pushing through the turnstiles every night no matter how bad the team is? That makes it largely our fault that the Leafs are never any good, because MLSE doesn't need to build a good team since they'll just keep getting rich off of all the mindless sheep.

I'm pretty sure I've read that somewhere recently... about a thousand times.

So if Leaf fans are so dumb that we fill the building every night, buy up jerseys and watch every game no matter what... why exactly would the Leafs need to feed us false hope?

Why would we need any kind of hope at all? I thought that was the whole point of all the fan-bashing over the years -- that we don't care how hopeless the team is, we keep plopping down our money anyways.

Now it seems like the argument has flipped 180 degrees -- now Leaf fans are demanding and insist on seeing a light at the end of tunnel, so MLSE has to construct this elaborate facade around Luke Schenn in order to keep the fans happy.

I've said it before: nobody should want a media full of homers, because then you wind up with everything-is-sunbeams-and-puppies fans like Ottawa had for so many years. A media that holds the team accountable is a good thing, and Toronto fans are lucky to have one. This team deserves some honest criticism, and I'm usually one of the first in line to dish it out.

But if you're going to criticize the Leafs, their management or even their fans, you need to pick a lane. You can't tell them to do one thing, then complain when they do exactly what you suggest. You can't say Leaf fans love negative coverage one week, then say they hate it the next week. You can't say Leaf fans aren't demanding enough, then turn around and say the team can't rebuild because fans won't accept it.

If you do those things, readers start to figure out that you're just playing games. And then they realize you probably don't mean most of what you say at all. And then they start to feel foolish for falling for your act.

And then they tune out, and start getting their Leaf coverage from better sources.

Time to pull the trigger, Cliff

The Leafs have a terrible problem right now that most team wish they had.

They have too many NHL defencemen. And somebody needs to do something about it.

It's becoming more apparent every day that Luke Schenn isn't going anywhere. With Schenn, Tomas Kaberle and Pavel Kubina guaranteed a lineup spot every night, that leaves six players fighting for three spots.

If newly heatlhy Jeff Finger is also considered an everyday player (and his contract would hint that he is), that leaves five guys fighting for just two spots: Stralman, Frogren, Van Ryn, Colaiacovo and White.

All five guys have upside. All five can play in the NHL. And none will have a chance to get in any sort of groove if they're shuffling in and out of the lineup every night.

The glut of defencemen also means that Jiri Tlusty had to be sent down. That may have a good move anyway, since Tlusty hasn't done much of anything so far this season. But demoting a prospect is not something a rebuilding team like the Leafs should ever be forced into doing.

Another negative side effect of carrying nine defencemen: it leaves on 12 forwards on the roster. Remember how great it was to see Ron Wilson hold veteran like Jason Blake and Matt Stajan accountable for their bad habits by sending them to the press box? That's history now. Every forward on the roster knows they get to play every night now... and that includes useless fourth-liner Ryan Hollweg.

So enough is enough. It's time to move one of these defenceman. Let's make a deal.

Fletcher told reporters this week that he plans to hold onto his defencemen "until somebody blows us away". In a perfect world, that's the way to go. But the Leafs world is far from perfect right now, and this doesn't feel like the time to be stubborn.

Let's face it, nobody is going to step up with a knock-your-socks-off offer for Ian White. While I'm as big a fan of Colaiacovo as you'll probably find in Leafland, there won't be any GMs looking to sell the farm for the guy. In fact, none of the Leafs five pressbox-warmers are worth much right now.

And let's face it, the price is only going to drop each time they're listed as healthy scratches.

Sure, maybe in a few weeks some team will run into injury trouble on the blueline and Cliff would be able to squeeze them for a fourth-rounder for White instead of a fifth. So be it. That's the chance you take.

Pull the trigger, Cliff. Give one of these kids a chance to resume their career somewhere else. And call up a forward (Tlusty, or somebody else who's earned it) to allow Wilson to keep everyone honest.

And do it soon.

A few more thoughts on shootout strategy... plus more goons

There was some really interesting discussion as a result of my last post disagreeing with Ron Wilson's decision to pull Vesa Toskala before the shootout. Thanks to everyone who participated.

A few followup thoughts before we all head over to the game thread. As I said in the last post's comments, I'm all for coaches getting creative and going against the percentages. I just didn't like this move because I thought it put both goalies in a tough position, both during the game and going forward.

But let's assume that Wilson's basic premise is right: The Leafs are bad at shootouts, it's costing them points and they need to try to something desperate to turn that around. What's a creative coach to do?

Here's an idea: What about trying to stay out of shootouts? If you're going to lose the shootout anyway, why not swing for the fences in overtime?

For example, what about using three forwards during overtime? Throw whichever forward line is playing best out there with Kaberle and tell them to go score. Or heck, if we're getting crazy why not four forwards? What about having a skill guy like Kulemin or Grabovski hang around the other team's blue line for an entire shift as a cherry picker?

Sure, it might mean a few 2-on-0's coming the other way. But what's the worst that could happen? They score, you lose and have to settle for a single point? That was going to happen anyway, and now everyone gets to go home a few minutes early.

(One note: You couldn't go all the way and pull your goalie in OT, since the NHL has an obscure rule that forfeits the extra point in that case. Otherwise I'd suggest that too, at least in the final minute.)

Much like the Toskala switch, any of the strategies above would be controversial and go against conventional wisdom. They might work, they might not. But they have one advantage: they wouldn't embarass anyone.

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Also, for anyone who enjoyed the Top Ten Norris Division Goons post, a Bruins blogger has created a list for the Adams Division. Check it out.

Will anyone step up and do the Patrick or Smythe? Stay tuned.