POINT/COUNTERPOINT: The UH Price Increase

Welcome to the 5th edition of POINT/COUNTERPOINT, a weekly segment where Erik Bohn and Jason Briggs discuss and debate the most talked-about topics in MN Rec Ultimate Hoops.

Last week, Erik and Jason discussed three topics on the minds of GM’s across MN Rec. Those topics ranged from selling out your normal team for a run at the Gold Cup, to unbalanced scheduling and how that could help or hurt the league. In case you missed it, here is the link.

Have a question you would like Erik and Jason to debate? Feel free to place it in the comments below or send it here and your topic could be up next.

BRIGGS
Alright Mr Bohn, are you ready to talk about something heavy this week?

BOHN
You want to talk about the women I've been dating recently?? I'm not sure if this is the proper forum for that discussion Briggsy.

BRIGGS
While I like where your head's at, I'm not interested in talking about your social agenda at this point in time. I'll meet you at Applebee's in Fridley after the games on Thursday and we can discuss your success or lack thereof in person. What I want to know is, are you ready to give UH a little discussion on a topic that hits people both in their heads and their wallets? Of course, I'm talking about the new price increase and late payment fee rolled out this week by Ultimate Hoops.

BOHN
There's already been quite a bit of chatter both online and at the games regarding this issue, which seems to be creating some controversy in the world of UH Minnesota. Why don't you start it off and give everyone a bit of background since you were in the Players Committee meeting last night devoted to this subject.

BRIGGS
Well, as most people know by now, Ultimate Hoops is raising their rate from $60 per season to $69 dollars per season. While some people may think the price increase is too much already, they are also implementing a late sign-up fee of $10, making anyone who signs up after December 30th pay $79 to play Ultimate Hoops.

Since this has obviously caused a stir amongst current and former players, Teresa Resch from UH National Operations was kind of enough to attend the Player's Committee meeting last night to answer questions and provide explanations. Teresa and Alan also released a video on Facebook discussing this issue as well, so you might want to check that out if you haven't seen it. Some of the questions and comments thrown at Teresa ranged from thought-provoking to borderline incoherent, but she did her best to provide honest answers to everyone in attendance.

The price increase is being implemented to account for rising costs and an increased desire by Lifetime Fitness to make Ultimate Hoops a profitable league. The late payment fee was added to that to help improve the Ultimate Hoops experience in the first week. Normally week 1 consists of a partial schedule, a mad dash to add new teams, and coordinators spending all their time on opening night signing up players rather than focusing on the games. The desired outcome for this late fee is to be a deterrent from players waiting until the last minute to form a team or pay for the league, which hopefully provides a richer experience for all the players involved.

While these may only be general summaries of their rationale, hopefully this gives you a good picture of where Ultimate Hoops is coming from. What are your thoughts on this issue Mr. Bohn?

BOHN
Even though we're only talking about a $9 (potentially $19) increase, there are actually a fair amount of talking points associated with this issue. The first reaction I heard from nearly all the players I talked with once they were informed of the price increase was one of almost utter disbelief that UH would dig into the pockets of the players and charge more in league fees. What is the justification? It's already expensive, why do they want more? What are we getting out it? There was even a "retired" player posting on the UH Minnesota Facebook page talking about a UH lockout - which leads me to believe he doesn't actually understand what a lockout is. Based on the common responses of the players, you would have thought they were adding mandatory drug testing and implementing a dress code!

I have to say that in principle, I'm not opposed to an increase in league fees. With that said, before I'm accused of being sympathetic towards NBA owners, err...I mean UH management, I also need much more information in regards to the reasoning behind the rise in cost for the players. But, before we dive into the numbers, specifically the costs and revenues associated with UH, there are a couple points I want to address.

First, anybody trying to marginalize the increase in cost uses the argument "It's ONLY $9 - that's basically like taking one trip to Davanni’s, get over it." I'm not saying adding $9 to my UH bill is breaking the bank, but in reality, it's a 15% increase from the previous league fee. Anytime you increase the basic cost of something by 15%, there is a right for people to question the logic behind the decision. And compounding this point is the fact that I'm willing to bet there will be a fair amount of people assessed the $19 increase due to signing up after the deadline. Now we're talking about an increase in cost of over 30%, which is a fairly dramatic jump.

Second, and maybe I'm simply diving into a semantics argument, but the banner on www.uhlife.com for online sign-up clearly states that by registering on or before December 30th, you receive an "early sign-up discount." Call this a small point of contention if you wish, but advertising you are receiving an "early discount" at the $69 rate, clearly implies that $69 is not the regular rate, it's the discounted rate. This means the $79 league fee would be the normal rate for playing in UH, and goes against the premise of Alan and Teresa's video.

Granted, the second point is more of a public relations blunder, but I feel the PR angle of this issue was handled poorly by UH. I'm curious to hear your thoughts specifically related to the PR portion of the increase Briggs, and then we can dive into the numbers.

BRIGGS
Well, as I pointed out in the meeting on Wednesday night I don't think the PR was handled very well. I may have a little more knowledge on this topic than the average player due to my experience in sales and marketing, but allow me to pass on a few nuggets to our viewing audience.

One major key in handling bad news is getting out in front of it, which is clearly something UH did not do. The banner was posted and the message boards were already in full tilt before the video explanation was released. By that time, it was like UH putting a band-aid on a bullet wound because player unrest was out in full force. Getting the intended message out before releasing the price changes would have been a great way to inform the players that an increase was coming and offer up the reasoning behind it.

I work in sales for UPS, so I also know a thing or two about raising rates (yearly). The very first question that comes to the mind of a consumer when dealing with increased cost is "What's in it for me?" So you want me to pay more for something I'm getting already, what do I get out of this deal? The video talked about rising costs, which we'll get to later, but also mentioned great ideas for opening night. What it didn't mention was exactly what costs were rising or list any of the potential improvements briefly suggested by Teresa. Those are things players want to know, so providing details and being completely transparent would help put most players at ease.

While I have been critical of the PR portion of this increase, I do appreciate the willingness of Alan and Teresa to discuss the situation. They did not need to make a video, answer emails, or attend the Player's Committee meeting, but did so because they actually care about this league and the players. There are a lot of organizations that would send out an email or letter and simply leave it at that.

As a member of the UH community, I truly appreciate their openness in this matter and the availability they've provided for answering questions. I think that's enough on the PR angle Erik, why don't you start breaking down the numbers.

BOHN
I agree with your point regarding Alan and Teresa’s willingness to address and discuss the situation, I hope that isn’t lost on everyone during the course of this discussion.

To most of the players, the numbers are the most important part of this issue. I keep going back to a couple things Mr. Arlt said in the video posted on Facebook. In explaining why UH Minnesota was increasing their fees he said this:

“Just like any other business out there, with the cost of labor and the cost of goods, unfortunately keeping your price the same and consistent each year can prove challenging.”

He went on to say this:

“Obviously, the last thing we want to do is pass additional costs onto you, our customers, but we didn’t find any other way to get around it in 2012.”

I’m not by any means disputing either of those statements. I understand how a business works and that costs – both fixed and variable – are subject to change over time, but, because those two statements seem to be the crux behind the increase in league fees, I think it’s prudent we take a look at some of the costs associated with UH, as well as examine a rough picture of the revenue streams.

The numbers below were confirmed with my league coordinator in Bloomington South, Mr. Tim Allen, as well as with Mr. Briggs, who also moonlights as a statistician and scoreboard operator in multiple leagues.

The labor costs associated with a UH game are:
1) Referees
2) Statisticians
3) Scoreboard operators
4) League coordinators

UH referees are paid $20/game and there are (usually) two refs per game. Statisticians are paid $10/game and scoreboard operators are paid $8.75/game. League coordinators are paid $10/hr, but their hours can vary week to week depending on their duties, which include: working each game, set-up and take down, posting stats, taking pictures for the website, recruiting teams, finding refs (and replacements when they cancel) and many other responsibilities.

Just between the two MN Rec divisions in Fridley and Bloomington there are 15 games/week, which translates to 120 regular season games. When the playoffs are included, you must add 4 play-in games, 8 sweet sixteen games, 4 elite eight games, 2 semi-final games, 1 Gold Cup game, and let’s throw an All-Star game in for good measure. The total number of games played in which UH will incur labor costs in the MN Rec division comes to a total of 140.

Using 140 games as our benchmark, here is how the labor costs described above would break down:

· Referees cost $40/game total, 140 x $40 = $5600
· Statisticians cost $10/game, 140 x $10 = $1400
· Scoreboard operators cost $8.75/game, 140 x $8.75 = $1225
· Chad Wessels and Tim Allen (league coordinators) will put in roughly 150 hours total between working the games and their other responsibilities, 150 x $10 = $1500

That brings us to a grand total of $9725, but let’s round up and use $10,000 as the magic number. On the revenue side, we have 130 players in Bloomington and 113 players in Fridley for a grand total of 243 players. The easy math would be to take that number multiplied by the $60 league fee to figure out the MN Rec division revenue stream, but that would be an inaccurate number. Members of the players committee are granted one free season for their time spent on the committee. In addition, some players may quit early or never pay their bill in full. Like any business, you have to factor in sunk costs, or in the case of UH, revenue you know won’t be collected.

Between members of the players committee being granted a free season and players who never pay their bill, let’s use 10% as our margin of error, which eliminates 24 players from the total of league fee paying customers and lowers the revenue brought in by UH.

For those of you keeping score at home, here is your grand total for revenue brought in through league fees: 219 x $60 = $13,140. When you subtract our previously calculated labor costs from this number, UH is still in the black by a $3,140 margin between both leagues each season, which means Bloomington and Fridley bring in roughly $1,500 each, and over the course of a year each league will bring in roughly $6,000 above their costs. Of course, this number isn’t accurate either. There are additional costs associated with UH that Mr. Briggs or I have no way of knowing, examples being marketing costs, depreciation of equipment and purchases of new equipment, and the income of UH management to mention a few.

These numbers are also just for the MN Rec division – there are 46 UH leagues spread throughout the country including the 5 from Minnesota, but most of these leagues don’t have as many teams and players as Bloomington and Fridley, so extrapolating the numbers we calculated above would not be fair or even close to accurate. The main point of this exercise is not to show how much UH is making off the players (which after looking at the numbers isn’t a large amount), but rather to get a feel for what costs are involved with UH and gain a basic understanding of the revenue coming through the door.

Briggsy, I think I’ve spent enough time laying out the numbers, why don’t you give us some analysis.

BRIGGS
The numbers you provided above Erik are a great starting point for this discussion, because I feel that is what the typical player looks at when seeing this increase. I'm not sure exactly what dollar amount was mentioned, but former player Arthur Williams is quoted on Facebook as saying Ultimate Hoops made like a billion dollars in both Fridley and Bloomington alone over the last four years. While I think Arthur is a terrific person, he certainly did not major in math. Using his logic, which is not uncommon amongst players, any increase in fees has to mean better refs, better stats, shot clocks, matching jerseys, and personal trainers to justify that $9, because they are obviously making so much, right? That type of thinking is missing the a much larger piece of the UH puzzle, that being the numerous other costs that are associated with running this league and that even the totals listed above in our Bloomington/Fridley example are probably high estimates.

So what are these other expenses that UH incurs on a season by season basis that lie outside stats, coordinators and referees? Well, you have the salaries of the Ultimate Hoops employees that are not working every game, but are working hard behind the scenes. While I can personally guarantee you that people like Alan and Teresa won’t be seeing a penny of this increase in their paychecks and fought hard against an increase on our behalf, those costs do need to be considered. You have the website development and improvement costs associated with www.UHLife.com. Anyone who has been around the league for a significant period of time can attest to the improvements of this site from seasons past. New features are consistently being added at the request of players like us, but all of those changes cost time and money. You also have extra costs associated with business materials such as basketballs, scoreboards, rims, and Gold Cup Trophies that are included in our league fees.

While the above expenses are important, the most significant costs to consider are both advertising and brand expansion. I list these two together because they go hand in hand with trying to make Ultimate Hoops both bigger and better. It costs money moving to new markets and building up a league to the level of Bloomington South or Fridley. There is a large amount of advertising and PR that needs to be done to get players both interested and actually signed up to play in UH. Expansion is not an easy thing to accomplish, whether talking about new markets or even existing markets. You cannot simply put Ultimate Hoops in every club and expect it to be profitable, so to prevent against things like market saturation you need to take your time and put in some serious effort to ensure the success of not only future leagues, but your current leagues as well.

What UH players need to ask themselves is making the league bigger and better something that benefits them? In my opinion it does, but I’m just one player out of a couple thousand. I like being part of a basketball league with a national scope that includes players like Penny and Earl Barron. I think the extra attention we get due to our size makes this league a lot more enjoyable and also attracts better talent. I also think expanding our local leagues to include an Elite Rec League or possibly Draft League would greatly enhance UH on a local level. While I’m extremely interested in both of these ideas, there are once again expenses associated with starting up either idea.

The most frustrating part about this discussion is that it is really difficult to quantify these costs and put an exact dollar amount on how much is spent on each. Advertising and brand expansion are never cheap, so it is an extremely safe to assume that UH is not necessarily a cash cow for Lifetime Fitness on its’ own. That being said, there is another part of this equation that is the most costly to players and that is the membership fee. Most players are paying about $780 a year to be a member of Lifetime Fitness, and there is a fair percentage of those players that are doing so just to play Ultimate Hoops. The problem lies with attributing an actual dollar amount to how much UH brings in for Lifetime, so once again we have something that we’re not able to quantify.

While all of this may be an exercise in futility, it at least shows there are several parts to this story that we may never know and might not have even considered. What we do know is that the price increase is not going to refs, coordinators, founders, or stat boys like myself, but rather to continue building up the Ultimate Hoops brand and expanding it around the country. I’m all for expansion and have no problem paying $9 to make Ultimate Hoops the biggest and best league in the country, but I still want to see incremental improvements at the leagues I participate in. They don’t need to be things like shot clocks, mascots or cheerleaders, but a few more videos, interviews, and Muscle Milk appearances would go a long way.

BOHN
I completely agree the most overlooked portion of the costs incurred by UH is their budget related to marketing and expansion, and these are costs that very few players in UH have likely thought about. On the flip side, it’s also important to acknowledge that UH players bring in more revenue to Lifetime Fitness than just the league fees they pay. As you already mentioned, that number is incredibly hard to quantify, but the membership dues brought in by players who are only Lifetime members in order to participate in UH don’t show up in the bottom line of UH, even though they are directly attributable to the league.

I think both you and I are on the same page regarding the “late fee” that is being rolled out alongside the $9 increase, and by on the same page, I mean firmly against it. From the perspective of a GM who tries to put out the most competitive team he can every season, the late fee is going to be a hindrance. To use our team the Blue Chips as an example, even though we routinely have the same core of players returning each season, there is inevitably a certain amount of roster turnover due to injuries, players having other commitments, etc. Not only have we never had a finalized roster more than a week before the season began, we’ve been forced to add players up through the week 4 roster change deadline on occasion.

If every team had phenomenal roster continuity and there was very little change in which teams were playing season to season, I could understand how it would be much easier to avoid the late fee, but that isn’t the reality of the current landscape of UH. I would need either Tim Allen or Chad Wessels to back up this statement, but I believe a fairly large percentage of current Fall 2011 season players would have been assessed the late fee this season, and unfortunately I don’t see that changing for the upcoming Winter 2012 campaign. If it were simply a matter of players being lazy and not signing up prior to the first week even though they had a team and knew they would be playing, then I would understand why a late fee would be implemented. The reality is that things happen and players that had planned to play end up dropping out right before the season, or somebody gets injured and the GM is left scrambling to add additional players to the roster. Now, on top of finding those players, he has to explain that they will be paying more to play in the same league.

What are your thoughts on this one Briggsy?

BRIGGS
I completely agree with you and think the late fee has to go. You brought up the Blue Chips as an example, but I know for a fact that teams like the Nets, DY Nasty, UnPredictables, Thundercats, Huskies, and both versions of The Bulls would have suffered a similar fate, and those are just the teams I’ve talked to. It also seriously hurts any chance of getting new players into the league, because playing on the free agent team now has gone up to nearly $80. If the goal is to get more players involved, it is not smart to punish new players that just found out about the league. While telling everyone that you don’t want players to have to pay the late fee is great, I’ve got to question whether or not that income is actually very important to Ultimate Hoops. If the intention is really just to make opening night easier on the coordinators and better for the players, this is not the best way to do it.

So what is the underlying issue with the late fee and why does UH want everyone to pay up front? Well clearly it is because they have been burned too many times by players who don’t pay. When players sign up the night of their first game, they are playing in a league they haven’t yet paid for. While you would hope people would actually intend on paying $60 or $69 dollars for the league before they suit up in a game, there are plenty of examples of players that have not lived up to their commitment.

Since I don’t want to be someone who complains about a problem yet doesn’t have a solution, I’ve got a proposal that could work for both sides. I think you continue to push online signup and make sure you get as many people signed up as early as possible, but then you offer two options to players who have not yet paid for the league. Option #1 is walking with your signup sheet to the front desk and paying for it on the spot. Option #2 is having an Ultimate Hoops employee working that night as a cashier and using a laptop to help players sign up online before their games. Both options allow players to sign up the night of without being punished by a late fee, while also taking payment issues out of the coordinators hands and allowing them to focus on the games. This also guarantees Ultimate Hoops and Lifetime Fitness get paid before anyone plays, so they don’t have to worry about cards being cancelled or people ducking out after 2 weeks.

I understand this may not be the perfect solution, but I believe it will be better for business than any option involving a late payment fee. I know there is always a risk when implementing a price increase that players will walk, but I also feel it’s an intelligent decision to avoid as much risk as possible. In my opinion, the late fee will severely cut down the number of players and teams that participate in the Winter Season and will more than cancel out any increase achieved by raising the league fees.

BOHN
I think we’re at risk of beating the proverbial dead horse on this issue, so let’s wrap this baby up. Again, I think we’re both on the same page, meaning we’re not against an increase in the league fee in principle. We understand how running a business works and that there are almost always more costs associated with said business than meet the eye. However, there seems to be a number of unanswered questions related to the reasoning behind the increase as well as the purpose and viability of the late fee.

I am very curious to hear from the players and GM’s who have been involved with UH since before it was a part of Lifetime. My first season in UH was in the Bloomington South open division in Summer of 2010, so I haven’t been around nearly as long as the Nick Roell’s, Kyle Wenzel’s, Joe Epple’s, and Sean Ball’s of the world. I think it would be valuable to hear the opinions and suggestions from some of the players who have seen UH evolve into what it is today.

Hopefully Jason and I were able to bring up some valid points associated with this multi-faceted issue and it will help produce some intelligent debate and conversation around ways to expand and improve UH. If possible, it would also be great to hear from UH founder Alan Arlt in order to address some of the concerns of the players and also bring up any points we may have missed.

Well Briggsy, we obviously don’t have anything better to do on Wednesday nights besides UH, so we’ll be coughing up that extra $9 to keep on playing. What are you going to cut out of your budget in order to play?

BRIGGS
I'll either be buying the DVD version of Happy Potter & The Deathly Hallows Part II instead of going Blu-Ray, or end up cancelling my subscription to Cosmo Girl. While I'm not happy about either one, life is full of hard choices.


*I would also like to remind everyone that costs are estimated and that Erik and I do not speak on behalf of Ultimate Hoops or Lifetime Fitness on this issue.*