The Shoddy Case for Illinois Hockey

At least in theory, a feasibility study is supposed to give the reader the unvarnished truth about whether the thing being studied is, in fact, feasible. But neither you nor I was born yesterday, and so it was no surprise to either of us that the feasibility study conducted by Collegiate Consulting at the behest of the National Hockey League, the NHL Players’ Association, and College Hockey, Inc. would come back with a report on the prospect of starting a hockey program at the University of Illinois saying, “yep, totally feasible you guys.”

What was shocking was the overwhelmingly poor quality of the report itself. And not just the analysis, mind you.

This is the very first page of the report, ignoring the cover and table of contents. As the executive summary, this is the meat of the report, the tl;dr version for people lacking the attention span to sit through all 46 pages. If any portion of the report should get checked and re-checked, it is this.

And yet: (1) The apostrophe is missing from National Hockey League Players’ Association; (2) the facility constructed in Fargo is the “Scheels Arena,” not the “Scheels Center,” which is an entirely different building; (3) the cost of Bemidji State’s Sanford Center was closer to $73 million, not $35 million. This may all come off as nitpicking, and in some respects, it is (although in a report on whether hockey is feasible, misstating the cost of an arena by $38 million is a big oops). But the point is a simple one: Collegiate Consulting couldn’t bother to get the little things right. What reason is there for confidence in the bigger conclusions?

Nor is this an isolated example. Here is from a little further down in the executive summary on the very next page:

Why is Division I sometimes capitalized and sometimes not? Why is “Feasibility Study” now capitalized when it wasn’t on the first page? Who are the “[m]any” people who believe hockey would be “transformative?” What are the “powers to be [sic]?” By what metric was the Frozen Four in Chicago an outstanding success? (The report never gets around to this; the Frozen Four is only again mentioned once in the report, offhandedly, in reference to North Dakota’s participation). Did no one see the extra space between “expand” and “with?” Why is Collegiate Consulting, ostensibly a neutral consultant, so outwardly invested in Illinois adopting a hockey program?

If this isn’t enough, look at the “case study” conducted of Arizona State University and its recent adoption of a hockey program:

That’s it! That’s the whole case study! Paragraph one: We conducted a case study. Paragraph two: Arizona State didn’t used to have a hockey program. Paragraph three: Arizona State got $32 million in donations and now they have a hockey program. Paragraph Four: Arizona State has played in a few different arenas and are building a new one.

What in the hell is that? Here are the sorts of questions that you’d expect any halfway competent case study to at least gesture towards: What advantages or disadvantages did Arizona State have before starting the program? What obstacles has it encountered? Have initial revenue and expense expectations been met? If not, what assumptions proved incorrect? The report does none of this.

Now let’s get to the more substantive criticisms.

The heart of the report, to the extent that there is one, can be found on the second page of the executive summary. “Once the Division I hockey program is fully operational, Collegiate Consulting is estimating first year annual revenue of $3.0 million rising to $4.6 million by year five with annual expenses at $3.5 million rising to $3.7 million by year five.” Put another way, should everything go according to plan, Illinois hockey could prove profitable to the tune of about $900,000 a year within five years of getting up to speed — ignoring, of course, start-up costs. What went into this conclusion?

For one thing, “year five” isn’t really the fifth year. It’s the seventh year:

Leave that aside, though, because it’s not the biggest deal in the world. Let’s go through the categories one by one:

Season Ticket Sales: The report concludes that by year three, the program can expect about $2 million in season ticket sales, with that figure growing roughly with inflation after that. How does the report reach that figure:

The report figures that Illinois can expect to sell about 3,500 season tickets, including the full allotment of Club and Center Ice seats going for $800 and $700 a pop. Is that realistic? Here’s Collegiate Consulting’s own accounting of season ticket prices around the Big Ten:

I’m taking this at face value, although I’ve caught some errors through my own research — for example, Wisconsin does not have two levels of pricing, but two different half-season tickets, one covering Friday games and the other covering Saturday games. Only three schools (Notre Dame, Minnesota, and Penn State) have pricing roughly comparable to the 1,500 seats that Collegiate Consulting expects to sell at $700-$800 level. The Illinois “Blue Line” seats, from which the largest percentage of sales is expected, go for more than the priciest seats at Michigan State and Ohio State, and not much less than the priciest at Michigan. These are optimistic projections for Illinois.

Program Revenue: The biggest jump in revenue will come from Program Revenue, says Collegiate Consulting:

Why will “Corporate/Radio” jump from $55,000 to $800,000 in year four? Who knows! What is the “annual fund” and why is it tossing off almost $300,000 each year by year seven? I have no idea; the phrase “annual fund” appears once in this report, in the paragraph shown above. My only guess is that the annual fund comes from this:

Got that? If the University raises a mere extra $10 million and parks it in the bank, they can get back $400,000 a year in revenue. Easy peasy!

Game Day Ancillary:

I’ll be honest: I don’t know whether these figures are realistic or not. Both appear to assume that Illinois will outright own their arena and therefore be entitled to all derivative revenue, but it is not impossible to believe that Illinois might be entitled to parking and certain merchandise revenues even if renting the facility. Twenty dollars for parking, with every spot being sold for every game, strikes me as rosy as well, but the income gained is small enough that it doesn’t matter all that much to the bottom line if the number is somewhat off.

Single-Game Ticket Sales: I can more definitively say that these numbers are wildly unrealistic:

Are we really expecting to sell every last ticket to every last game in the most expensive section? That said, here is one of the rare errors that Collegiate Consulting made not in Illinois’s favor. Whoever added up the numbers missed the “Corners” column; the total revenue projected should be $252,450, not $180,450 (yet another instance of sloppiness). But given the expensive ticket prices and unreasonable projections about numbers sold, let’s say this comes out in the wash.

Auxiliary Revenue: Not coming out in the wash is the over $400,000 in “Auxiliary Revenue” expected to accrue to the program by year seven:

The University of Illinois will be entitled to this revenue only if it owns its own arena. Under no realistic proposal is the university expected to own the arena outright. Illinois will not be entitled to a dime of this money.

Of course, if Illinois is not entitled to the revenue from these operations, they will not be responsible for the expenses, either. But Collegiate Consulting thinks that revenue will exceed expenses by $400,000 in year five. Put another way, if Illinois does not own its own arena, that is $400,000 in net income out the window.

And the margins are already razor-thin. Collegiate Consulting projects a $900,000 operational surplus by ‘“year five” (again, really year seven). Take away the $400,000 to which the school will not be entitled. Then take away the $300,000 in revenue from a non-existent endowment. All of a sudden the margins are razor thin, even if we thing the unjustified assumptions about commercial revenue exploding in year four are correct, and even if we think Illinois can maintain top-of-the-market pricing for season tickets while coming close to selling out.

Expenses: If revenue projections are perhaps overly sanguine, expense projections are laughable. Without belaboring the point, here are a few examples:

  • The report expects Illinois to pay middle-of-the-conference coaching salaries by 2018 standards in 2027. It also expects salary inflation of three percent per year. The first figure is sadly realistic for the University of Illinois, although not heartening if you think that Illinois will attempt to be competitive in hockey. The second, inflation figure is laughable to anyone who has even a passing familiarity with salaries in college sports over the past two decades.
  • The report similarly expects tuition inflation of three percent when computing scholarship expenses. Good luck with that.
  • No justification is made for any of the figures attached to things like travel, meals, recruiting expenses, and game guarantees (which will be necessary to maintain a schedule with 20 home games per season — itself essential for the revenue figures).

Collegiate Consulting — which itself seems to be something of a fly-by-night operation of two full-time and two part-time employees, plus a handful of consultants— should be embarrassed to have put out such a mistake-laden report. The NHL should be embarrassed to have paid for it. And the University of Illinois should be embarrassed for trumpeting it.