KHL Expansion Part IX

[SoundAndFury]

What makes you think their requirements are bogus?

The number of teams that don't fit the requirements and realistically are never going to coupled with the fact that expansion that would push such teams out (which was supposed to be the original plan) is not possible for decades, if ever.

 

[vorky]

According to Championat article, Lada's salary budget for the coming season is 520m rub or $6.3m.

Which is on par with Dynamo Moscow this current season who spent 550m rub

It makes sense the league wanted higher paycheck budget due to rising of salary floor to ₽450 million. Lada as a new team had to guarantee club´s budget for 3 seasons, so around $60 million, before KHL BoD even considered their application. That is a condition for every new club to guarantee club´s budget for 3 seasons, it is unachievable for 99% of European clubs.

 

[Albatros]

Heh. Yet another state-owned enterprise is told to finance a hockey club in order to help the league keep up appearances and you speak of it as if it was a business decision made by independent actors.

 

[EvilDead]

Hello. American here. I've lurked in here before when it came to the discussion of KHL expansion and I've seen many cities/teams/etc tossed about but I was wondering if I could get clarity on why the KHL haven't considered the following places to replace the teams they lost:

Orenburg - it's the biggest city in it's province and could provide a steady rivalry with nearby Ak Bars Kazan. I'd imagine the only big hurdle there would be getting an arena.
Saransk - it has a 2 year old 7,000 seat arena in a city of 300,000 people in the European half of Russia that would also serve as a somewhat close by city (and that's a big stretch I know) to Sochi

 

[vorky]

Hello. American here. I've lurked in here before when it came to the discussion of KHL expansion and I've seen many cities/teams/etc tossed about but I was wondering if I could get clarity on why the KHL haven't considered the following places to replace the teams they lost:

Orenburg - it's the biggest city in it's province and could provide a steady rivalry with nearby Ak Bars Kazan. I'd imagine the only big hurdle there would be getting an arena.
Saransk - it has a 2 year old 7,000 seat arena in a city of 300,000 people in the European half of Russia that would also serve as a somewhat close by city (and that's a big stretch I know) to Sochi

I will try to give you a bigger picture...

Basically all RSL teams (2007-08) moved to the KHL, even if they did not meet the KHL criteria (Khimik Voskresensk comes to mind). So, Orenburg & Saransk were not in elite of Russian hockey at the time. Later KHL expanded with new places like Sochi & Vladivostok for obvious reasons - Sochi (top arena & growing city in long-term perspective) & Vladivostok in Far East for the same reasons (Russian domestic policy to develop that region).

Orenburg & Saransk do not have even VHL (2nd tier) clubs. I do not know if there is any hockey tradition in Saransk. Regarding to Orenburg, there is no rivarly with Ak Bars - Kazan is a capital of Tatarstan (rivarly with Neftekhimik) but Orenburg is located in another federal subject not Tatarstan. Btw. the biggest KHL rivarly is between Ak Bars Kazan (Tatarstan) & Salavat Yulaev Ufa (Bashkortostan).

If you are asking why Vityaz, Severstal, Neftekhimik (smaller cities) are in KHL but Saransk/Orenburg aren´t ... because they are in RSL so a top tier of Russian hockey at the time.

 

[Acallabeth]

Heh. Yet another state-owned enterprise is told to finance a hockey club in order to help the league keep up appearances and you speak of it as if it was a business decision made by independent actors.

It's joint funding from AvtoVAZ and Samara Oblast.
Bewildering timing to say the least, as AvtoVAZ is a very unreliable company as a sponsor (they have stopped their production lines many times over the recent years, their 2022 profit of 206M rubles was far lower than the reported team sponsorship, and skyrocketing car prices make some great profits growth very unlikely).

Then again, massive changes in circumstances dictate a change in the league strategy. WIth foreign expansion out of reach for years, the management aren't exactly in position to wrinkle their noses and nitpick on one of the few applications to join the K, especially if it's a historic team with a successful school.

 

[ozo]

If you are asking why Vityaz, Severstal, Neftekhimik (smaller cities) are in KHL but Saransk/Orenburg aren´t ... because they are in RSL so a top tier of Russian hockey at the time.

This is just a pure nonsense, because correct answer is money. For example, when there is money, Togliatti is in the KHL, when there is no money, Togliatti is not in the KHL. Whether or not a team played in RSL 15 years ago nowadays is irrelevant.

 

[vorky]

This is just a pure nonsense, because correct answer is money. For example, when there is money, Togliatti is in the KHL, when there is no money, Togliatti is not in the KHL. Whether or not a team played in RSL 15 years ago nowadays is irrelevant.

You need to understand it in context. In this case, you did not get the context.

 

[SoundAndFury]

Orenburg - it's the biggest city in it's province and could provide a steady rivalry with nearby Ak Bars Kazan. I'd imagine the only big hurdle there would be getting an arena.
Saransk - it has a 2 year old 7,000 seat arena in a city of 300,000 people in the European half of Russia that would also serve as a somewhat close by city (and that's a big stretch I know) to Sochi

Like Ozo is saying, the most important factor is money. Fans in Russia don't pay for their teams, the money fans bring in is laughable. I doubt there is a single team where at least 1/5 of the budget is made up by the actual revenue. So the team needs a corporate sponsor, someone willing to sink at least 15 million dollars yearly (more if you want the team to be at least mildly competitive) for next to no return for it. If there is no such sponsor, there is no team, it's as far as it goes.

All this "arenas, peoples, attendances" business is entirely secondary in Russia. While vorky keeps us updated on those numbers weakly, it's not exactly clear why those numbers matter at all.

 

[SoundAndFury]

You need to understand it in context. In this case, you did not get the context.

Context is that even in the Soviet days team would need a corporate sponsor of sorts. Be it a steel mill, oil refinery plant or tractor factory. Places, where there was no industry powerful enough to support it, didn't have the team, therefore didn't have tradition, therefore in the year 2023 has neither money nor tradition.

Teams like Sochi clearly show tradition actually doesn't mean anything in that aquation therefore the real answer is money.

 

[vorky]

Context is that even in the Soviet days team would need a corporate sponsor of sorts. Be it a steel mill, oil refinery plant or tractor factory. Places, where there was no industry powerful enough to support it, didn't have the team, therefore didn't have tradition, therefore in the year 2023 has neither money nor tradition.

Teams like Sochi clearly show tradition actually doesn't mean anything in that aquation therefore the real answer is money.

You need to read my post more carefully.

I replied to the poster asking why Orenburg/Saransk is not in the KHL. I replied, so the context, that Orenburg/Saransk was not in latest RSL season, so did not continue to KHL. If Orenburg/Saransk was in that RSL season, there is a huge chance, the team would be in KHL now.

It does not contradict what you say. But it is not the context of my post. So, my notice anyone to get into the context before writing anything.

 

[SoundAndFury]

You need to read my post more carefully.

I replied to the poster asking why Orenburg/Saransk is not in the KHL. I replied, so the context, that Orenburg/Saransk was not in latest RSL season, so did not continue to KHL. If Orenburg/Saransk was in that RSL season, there is a huge chance, the team would be in KHL now.

It does not contradict what you say. But it is not the context of my post. So, my notice anyone to get into the context before writing anything.

That's the point, you tried to "explain" something without actually telling anything. The poster asked why the expansion to said cities isn't possible, your answer was "they aren't in the league because they had no RSL team". Which has nothing to do with it, doesn't even address the question which was asked.

Yes, everything you wrote is true but at the same time, it explained nothing. Especially to a person with a limited understand of how KHL/RSL/Soviet league operates.

 

[vorky]

I explained the case in that context and I believe the poster get it. Of course, If I wanted to describe everything wiith all aspects, it would take hundreds of pages.

 

[EvilDead]

Like Ozo is saying, the most important factor is money. Fans in Russia don't pay for their teams, the money fans bring in is laughable. I doubt there is a single team where at least 1/5 of the budget is made up by the actual revenue. So the team needs a corporate sponsor, someone willing to sink at least 15 million dollars yearly (more if you want the team to be at least mildly competitive) for next to no return for it. If there is no such sponsor, there is no team, it's as far as it goes.

All this "arenas, peoples, attendances" business is entirely secondary in Russia. While vorky keeps us updated on those numbers weakly, it's not exactly clear why those numbers matter at all.

Thank you for the information on this.

 

[Acallabeth]

All this "arenas, peoples, attendances" business is entirely secondary in Russia. While vorky keeps us updated on those numbers weakly, it's not exactly clear why those numbers matter at all.

Discussing the "arenas, peoples, attendances" business requires us not only to think about the present day, but to look ahead a bit as well. Yes, it's entirely secondary these days and it's likely that many years will pass until the teams start bringing any profits. This reality is the only starting point we have though, and not caring about it will prevent it from ever changing and not needing a large enterprise sponsorship.

 

[SoundAndFury]

Discussing the "arenas, peoples, attendances" business requires us not only to think about the present day, but to look ahead a bit as well. Yes, it's entirely secondary these days and it's likely that many years will pass until the teams start bringing any profits. This reality is the only starting point we have though, and not caring about it will prevent it from ever changing and not needing a large enterprise sponsorship.

Is there any sign though, at all, anyone is attempting to move to a more sustainable, profit-oriented model? Because the only thing I see is building new arenas which, effectively, is just sinking even more money into the hole. And even those are, frankly, of dubious value and can only be evaluated as stepping stones. Any reasonable town with a population over 500k should be able to sustain a 15k+ capacity arena and the only such KHL arena is in Minsk, not even the new ones are of that size. This only means one thing - even the long-term goal isn't actually to capitalize on the market, it's just? I'm not entirely sure what, so that vorky could post how Russia has finally overtaken the leagues with 4 times smaller budgets in attendance.

I understand your point and don't want to sound too harsh but let's face it: "look ahead a bit" is an understatement of the century. The cold hard fact is that more likely than nobody actually sees an issue with the current sugar daddy system. Furthermore, if that is ever going to change, these new-ish 10k capacity arenas are going to look like bad and outdated designs right that second. So what does 12k attendance in a 10+ million population city really mean? That it's better than it used to be? I will give you that.

 

[Acallabeth]

Is there any sign though, at all, anyone is attempting to move to a more sustainable, profit-oriented model? Because the only thing I see is building new arenas which, effectively, is just sinking even more money into the hole. And even those are, frankly, of dubious value and can only be evaluated as stepping stones. Any reasonable town with a population over 500k should be able to sustain a 15k+ capacity arena and the only such KHL arena is in Minsk, not even the new ones are of that size. This only means one thing - even the long-term goal isn't actually to capitalize on the market, it's just? I'm not entirely sure what, so that vorky could post how Russia has finally overtaken the leagues with 4 times smaller budgets in attendance.

I remember an interview with Morozov in the prepandemic times when he stated that the league strategy of those times had a goal of increasing the share of clubs' revenue to 25% of all budget.
The league executives have also repeatedly confirmed that decreasing the dependence on state money is one of their long-term goals.
Are these goals equal to sustainability or profitability? Of course not. But I believe even bringing these points up is a sign that the K isn't willing to ignore its own teams' lack of financial health. There are also other parties that have their own agendas: FHR wants to earn the prestige of winning international tournaments, the K itself likely brings some profit, the problem obviously is the clubs. Setting a league-wide goal of sustainability at this moment would be too ambitious to a point of pipe dream; achieving it on a scale of even one club would be precedentless and require a lot of creative and energetic action. Then again, club managers are more often than not busy representatives of owner companies or regions, do we really expect them to put the hockey club profitability as their top priority?

I understand your point and don't want to sound too harsh but let's face it: "look ahead a bit" is an understatement of the century. The cold hard fact is that more likely than nobody actually sees an issue with the current sugar daddy system. Furthermore, if that is ever going to change, these new-ish 10k capacity arenas are going to look like bad and outdated designs right that second. So what does 12k attendance in a 10+ million population city really mean? That it's better than it used to be? I will give you that.

Your skepticism is well-grounded of course.
The system represents the current state of society. It always does. Hockey fandom is a relatively small society, so changing the majority opinion with changing the system in mind is relatively feasible. I'll also repeat that I would disagree with the idea that everyone likes the current system.
The attendance itself is a nice index of interest towards the league, and the latter is necessary for any economical capability. So we follow it. It's especially satisfying to see its growth as supporting local teams isn't a popular tradition in Russia, and attending sports events isn't really a popular entertaiment option.

 

[GindyDraws]

There is one I thing I have been repeating here for years: I hope Sokol makes it one day. On paper they would have nothing less than Novisibirsk or Omsk honestly... Major Siberian city with 1M population, more than enough arena for the KHL, no other sport takes precedence over hockey (maybe with the exception of bandy and basketball a little bit but I reckon it is not a strong following enough to dwarf a good hockey team)... Hope there are some works underway for them. With some money and acceptable level of management they could at least be a mediocre eastern team if not one of the best.

Expansion into Europe is a ship that sailed at least for 10 years if not more. Just bring in a few good Russian, Belarussian or Kazakh clubs.

Even before the You Know What, the KHL expansion into central Europe was a challenge for economic and political reasons. Honestly they really need to try and put in another Siberia team.

 

[vorky]

I remember an interview with Morozov in the prepandemic times when he stated that the league strategy of those times had a goal of increasing the share of clubs' revenue to 25% of all budget.
The league executives have also repeatedly confirmed that decreasing the dependence on state money is one of their long-term goals.
Are these goals equal to sustainability or profitability? Of course not. But I believe even bringing these points up is a sign that the K isn't willing to ignore its own teams' lack of financial health. There are also other parties that have their own agendas: FHR wants to earn the prestige of winning international tournaments, the K itself likely brings some profit, the problem obviously is the clubs. Setting a league-wide goal of sustainability at this moment would be too ambitious to a point of pipe dream; achieving it on a scale of even one club would be precedentless and require a lot of creative and energetic action. Then again, club managers are more often than not busy representatives of owner companies or regions, do we really expect them to put the hockey club profitability as their top priority?

Your skepticism is well-grounded of course.
The system represents the current state of society. It always does. Hockey fandom is a relatively small society, so changing the majority opinion with changing the system in mind is relatively feasible. I'll also repeat that I would disagree with the idea that everyone likes the current system.
The attendance itself is a nice index of interest towards the league, and the latter is necessary for any economical capability. So we follow it. It's especially satisfying to see its growth as supporting local teams isn't a popular tradition in Russia, and attending sports events isn't really a popular entertaiment option.

Good point.

It is obvious the KHL strategy is to make their clubs profitable. They just go step by step. I would give another argument to yours - the clubs can sign a sponsorship contract with a betting company. So, a source of non-government money.

I do not know if our colleagues realise but being profitable with a budget of 40 million is different than with 10 or 5 million budget.

I also do not know if people realise what is happening if speaking about European hockey. Their countries are doing everything to make their economics irrelevant. And it, as everything, will affect the entertaiment industry, so hockey, and general standard of living. The USA is on that way as well.

 

[Albatros]

I also do not know if people realise what is happening if speaking about European hockey. Their countries are doing everything to make their economics irrelevant. And it, as everything, will affect the entertaiment industry, so hockey, and general standard of living. The USA is on that way as well.

How is that? The pandemic restrictions are over and for example in Germany 2.5 million spectators followed this season live plus another 19 million over subscription services. Sponsors are happy and have been prolonging their contracts ahead of time. Even the national team was picked up by a major network instead of a sports channel. In terms of financial sustainability things have been improving if anything.

 

[Rigafan]

Like Ozo is saying, the most important factor is money. Fans in Russia don't pay for their teams, the money fans bring in is laughable. I doubt there is a single team where at least 1/5 of the budget is made up by the actual revenue. So the team needs a corporate sponsor, someone willing to sink at least 15 million dollars yearly (more if you want the team to be at least mildly competitive) for next to no return for it. If there is no such sponsor, there is no team, it's as far as it goes.

All this "arenas, peoples, attendances" business is entirely secondary in Russia. While vorky keeps us updated on those numbers weakly, it's not exactly clear why those numbers matter at all.

Kind of touching on this... what is the reason now that the KHL keeps the budgets so high? I don't mean 'now' as in because of the Russia/Ukraine situation, but just in general since the RSL days.

The wealth gap in Russia is madness, so if you are playing hockey and earning for example $300k what is the difference to earning $3m ? If I'm living in Sochi or even in Moscow, not many people have jobs paying so well - if that makes sense? I understand it was KHL vs NHL at one point, but with the current economics at play, that is never going to be an even fight.

I honestly don't think the KHL/Russian hockey would be any different if the salary cap was say $300k max per year, sure more players might leave, but you'd probably have more teams (companies) willing to get involved with funding a team and MAYBE even then these new arenas and attendances and sponsorships might even get close to being sustainable without private funding?

However, the situation is what it is in Russia and the teams are funded by big business and rich people. I don't have any issues with how this works. If Putin tells some other stupidly rich person/company that they have to 'donate' some money as a 'social donation' to fund a sports team, then so be it. At least the locals are getting somebody back. It's not perfect but nowhere is.

NHL/US sports has the issue of billionaires moving teams because the local government won't pay for new stadiums etc, everywhere has issues.

 

[Acallabeth]

The wealth gap in Russia is madness, so if you are playing hockey and earning for example $300k what is the difference to earning $3m ? If I'm living in Sochi or even in Moscow, not many people have jobs paying so well - if that makes sense? I understand it was KHL vs NHL at one point, but with the current economics at play, that is never going to be an even fight.

I honestly don't think the KHL/Russian hockey would be any different if the salary cap was say $300k max per year, sure more players might leave, but you'd probably have more teams (companies) willing to get involved with funding a team and MAYBE even then these new arenas and attendances and sponsorships might even get close to being sustainable without private funding?

Indeed, very few people earn $300k a year in Russia. With today's exchange rate, it's roughly equal to 2M rubles a month, which would still put the earner in the top 0.1% of all employees at least, on par with elite top managers and very best paid experts in certain fields. That sum isn't far from the average price of 2-bedroom place in a sweet Moscow apartment complex. While $3M is roughly equal to a spacious house in a moderately prestigious suburban neighborhood (not a massive fancy mansion in a town populated with oligarchs though).

The KHL salaries are not as high as they used to be in the Jagr and Yashin era with exchange rate of ₽30 per dollar. Those days, a star like Kovalchuk or Fyodorov could get a $10M a year salary (generously, ₽400M), and IIRC Larionov said around that time that average KHL salary was around $800k.
That time is long over. The average KHL salary is reported to be around $425k now, and top earners earn just slightly above $1M (₽80-90M). I would say that the teams are definitely moving in the direction you depicted.

Would reducing the max salary to $300k a year be enough to make teams profitable? Let's see.

The second column in this graph lists the non-sponsored revenue for the KHL teams in 2019. We don't even need a grain of salt: even ₽400M of the most successful clubs is ~6.3M using that year's dollar rate. Which would just be barely enough to pay a full roster of $300k players (ignoring all other spendings). So no, such a significant reduction to player salaries wouldn't be enough to make the clubs profitable. Not without a great increase in the revenue from the fans and TV deals.

I'd also like to point out that we don't really need to hypothesize: we have seen an era when salaries in Russia hockey were lower than in other countries, in the 90s which led to nearly every player of worth leaving to earn more. As people in Russia aren't really supportive towards any local team of any level, the interest to the RSL dropped immensely, which forced the authorities to create the KHL as a powerful local league. We're witnessing something similar on a smaller scale nowadays. I believe not accelerating this issue at least is a correct idea.

I also believe the mods should move this little discussion to the KHL business thread.

 

[Caser]

Mikhail Zislis of Sport-Express wrote that Sokol Krasnoyarsk is making last-minute efforts to join the KHL already next season.

 

[hansomreiste]

BAH GAWD PLEASE this has been my dream for such a long time. Not sure if Russia has enough players of good caliber to support more teams right now honestly but if they could be competitive enough to win just 15-20 games in first season I'd say it is still a step in the right direction.

 

[Caser]

BAH GAWD PLEASE this has been my dream for such a long time. Not sure if Russia has enough players of good caliber to support more teams right now honestly but if they could be competitive enough to win just 15-20 games in first season I'd say it is still a step in the right direction.

They made it to the VHL finals, so they already can't be worse than Sochi. If they add some players via free agency and player loans, also some foreigners - unlikely that they will become a play-off team, of course, but also there's a good chance it won't be any sort of disaster.