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Monster View: The NHL's Cold War?
Category: FEATURED
Tags: NHL Lockout Donald Fehr Gary Bettman NHLPA NHL

 

So why write about hockey? It's football season. Baseball's Hot Stove is heating up. The NBA somehow is attracting crowds. The NHL? It exists right now only in name. Oh, sure, there's a new proposal out. More talks are scheduled. The remaining short-term question, should there actually be a stortened season, is how much interest will remain in what is the quintessential winter sport. But there's a much bigger question: does the NHL really have any long-term prospects of success, regardless of how this season pans out?

First of all, why is the league in its current standoff? Bettman is a popular scapegoat. The owners are the target of class warriors everywhere. You hear "It's not a strike, it's a lockout!" That's pure spin. Of course it's a lockout. Uncontracted players can't be allowed to use team facilities in this lawsuit-driven era. And no one who can read or hear could be missing the elephant in the room, Donald Fehr. It's all pretty complicated until you boil it down to an unappealing but accurate scenario --- the billionaire owners and millionaire players are all trying to make more money. That money comes from the customer base, as in any industry. We call them 'fans'. That's short for 'fanatics' in old-time baseball lore. They may have to be fanatics (rich fanatics at that) to support what emerges, if anything does.

But as for the current absence of hockey, it's all about Fehr, the guy who torched baseball, the sport now almost universally acclaimed to have the most unworkable contract structuring. Nothing is about long-term sustainability. It's all about a raid on the cash box while it lasts.

Baseball rides its sadly diminishing status as the National Pastime, but even a quick look at old newspapers and tv shows (e.g. Ted Williams' appearance on What's My Line) tells you that it's not in the public imagination at that level anymore. The market is just bigger. Kind of like Def Leppard's albums out-totaling the Beatles at one point, or nearly everybody outselling Bing Crosby, who dominated the pop music culture like nobody before or since. People just have gotten more access to recordings and to media on which to play them as technology has increased. Sports are in the same boat of entertainment and media. Hence big markets. But 'big' doesn't mean 'too big to fail'. They rise faster --- and they disappear faster. Just like corporations, they have their bubbles. It's a business. Baseball rides revenue sharing right now (more on that below).

Which brings us back to the NHL. Why are the owners suddenly so adamant on lowering the cost of being an owner? And why is the union entrenching itself with an infamous character like Fehr?

The ultimate answer: not enough revenue. See this article. It's informative:

http://www.forbes.com/sites/kurtbadenhausen/2012/09/18/nhl-lockout-is-all-about-the-benjamins-and-who-doesnt-have-them/

The article also explains how MLB is using revenue sharing with success to prop itself up. It doesn't explain that a huge amount of revenue comes now from cable. The Yankees' YES network props up a lot of stuff. The Red Sox own NESN. That's something hockey doesn't have. The Bruins get $22M/yr. from NESN (and the Red Sox) in return for broadcast rights. These days that ought to pay for Carl Crawford's spikes.

Looking deeper for particulars doesn't take long. For actual details, take a look at these breakdowns of team value, profitability, cost, revenue etc. in Forbes for the 2009 NHL season. Newer listings are available, but this one is easier to decipher. Here's the link to the first team in the chain. Look at all of them. The vast majority operate at a loss and are kept above water by the few that do not.

http://www.forbes.com/lists/2009/31/hockey-values-09_Toronto-Maple-Leafs_312012.html

So the culprit is over expansion, right? Everybody knows that folks south of the Maxon-Dixon line aren't ga-ga over hockey. Yet the population of the US is headed there, so it makes demographic sense to instill interest in a sport you could never play on the local pond. That seems to have been the thinking back in the late '60s and '70s when the great over expansion got its impetus. But those were recession years. Barrooms, TVs and arenas traditionally get a lot of attention when a lot of people don't have anything more pressing to do or yearn for escape from reality, and absolutely every sport was in a state of uncontrolled expansion back then. Seemed the thing to do, and it worked monetarily. There's also no coincidence that it came immediately on the heels of Curt Flood, Andy Messersmith et al shattering the age-old structure of sports contracting. The leagues suddenly needed more money. That means more customers. That means more cities and more TV contracts.

The NHL, however, had something working for it, if for no one else. That was Communism. With the spread of Canada's sport overseas, Northern and Eastern Europe had become a bastion of major-league talent. But... most of it was cooped up behind the Iron Curtain. Only the rare defector got out. As doctrines like peristroika and glasnost came around in the '80's more Euro-Slavic talent became available to the NHL, giving the over expanded league more quality. But then the Cold War ended. It has taken a while, but the dust has largely settled and Europe now includes the old Soviet Bloc. That is a huge number of people, almost all of them seemingly hockey fanatics. Per-capita income may not yet be huge, but numbers can help offset that. The KHL becomes more of a force every year, and other leagues exist. Western Europe's trend toward socialism is about the only thing that keeps them from becoming yet another more tempting destination for home boys (and maybe for Canadians and Americans?) than the NHL.

In other words, the NHL now has competition it didn't anticipate some 25 years ago. It doesn't have the national appeal (in the US) for huge network contracts. Outside of Canada, the local cable revenues aren't propping anybody up. It's mostly gate. And the few truly profitable franchises don't make sufficient profit to want to prop up an entire league. Toronto is the most profitable. It is owned largely by the unionized Ontario teachers. If they don't want to help their NHL union brethren in a heartwarming show of solidarity (or, as owners, perhaps philanthropy), then who does?

The markets of true hockey fandom are concentrated in Canada and the extreme northern US, just as they were in the six-team heyday. The great experiment for creating legions of new hockey maniacs under palm trees has largely failed. Canada and the northern US can't match the power of hundreds of millions of Russians, Byelorussians, Latvians, Poles, Finns, Swedes, Germans, Czechs, Slovaks etc. etc., and as their economies grow, especially in the still-rebounding eastern zones, the situation becomes worse. Note that Europe doesn't rely on success in places like Spain, Italy or Greece. The South, in other words.

30 years ago Zdeno Chara never would have returned to his homeland to play during a work stoppage for fear that he might never leave except on heavily-guarded road trips. Now he's there. He'd probably prefer to be here, making more money, but how long will even that lure remain? As we sit and twiddle our green thumbs, the liberated Communist world catches up by leaps and bounds every year. They can't get enough of it. It's understandable, considering what they've been through. And the Far East is now sprouting hockey leagues. China, Japan, South Korea and the Pacific Rim going nuts for hockey? With billions of people and huge economies? Champing at the bit to have Canadian/US talent to showcase? Game, set, match.

One thing's for sure, even without an Asian nightmare... the NHL won't continue anyway unless the league comes up with a miracle cure and the union agrees to it. Hint: the union will never agree to a contracted league. And even if they do, that will raise the question of whether even a contracted, more northern league will have the economic clout to lure European talent. Maybe it will. Maybe it won't. Maybe it can't. Maybe their guys should stay there and our guys should stay here. There's plenty of talent to go around from Canada and, increasingly, from the US. But you can't ban players from leaving, nor ban imports from coming. What's that, the Aluminum Curtain? Is there really a sustainable long-term solution now? The end will come quickly when and if the owners calculate that their time will be better spent focusing on less expensive, perhaps less litigious, and more profitable ventures. At the moment, that prospect must look tempting. The value of NHL franchises has multiplied hugely since the bulk of expansion took place. That boom has stagnated and profits have evaporated (if they ever were a factor). What do you do with an investment, say a stock, that made you rich on paper and has now flat lined? You get rid of it before it tanks --- if you can find a buyer. If worse comes to worst and it's an industry (which hockey is), you lay off the workforce and liquidate property to cut your losses.

I don't pretend to know the answers to the NHL's issues, but I suspect I may have the $64K question down at least. Hockey is succeeding as never before --- worldwide. But the league that could be said to have made it all happen is in trouble. Players like to use the cliche "It's a business" to explain team-hopping. Caveat Emptor, fellas. That, ultimately, is just what it is.

 

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