rh71
No Lifer
They are dying. I'd seriously like to know your thoughts on why you haven't caught onto the sport...
Optional reading:
Optional reading:
The Coming Ice Age
Mammoth Revenue Problems, Looming Lockout, Limited Fan Base Could Leave Game
in the Cold
By Jason La Canfora and Thomas Heath
Washington Post Staff Writers
Saturday, January 17, 2004; Page D01
As the NHL enters the second half of its season, many teams are playing
before sparse crowds, TV ratings continue to slip and players and owners are
hunkering down for what many expect will be the longest work stoppage in
professional sports history.
A chasm between the owners and the players' union over how -- or even
whether -- to control skyrocketing salaries is all but certain to lead to a
decision by the owners to cancel part if not all of next season when the
current collective bargaining agreement runs out in September.
The looming lockout has many fans worried that some of the game's brightest
stars from Europe and Russia may never return to North American ice. And
with the economic stability of several franchises in question, some are
debating whether all 30 teams would survive an extended layoff.
"I'm nervous," said Washington Capitals owner Ted Leonsis, whose club
expects losses of $30 million this season and routinely plays before
thousands of empty seats at MCI Center. "The league is in trouble."
According to the league's figures, NHL teams could lose an estimated $300
million this season. Twenty clubs are losing money, according to the latest
Forbes magazine analysis. Two teams filed for bankruptcy last season before
new owners were found, and at least one franchise, the Mighty Ducks of
Anaheim, has been for sale for years without finding a buyer even though the
team came within one game of winning the Stanley Cup last spring.
NHL Commissioner Gary Bettman says the sport's business model is broken, and
he has staked the health of the league on achieving a labor agreement that
he believes will be an economic cure-all by capping player salaries.
Salaries have tripled from an average of $558,000 in 1993-94 to $1.79
million last season, overwhelming the growth in league revenues, which will
reach about $2 billion this season.
"The irony of our situation is that the bigger we've gotten as a league and
the more revenue we've generated, the worse our economics have gotten,"
Bettman said. "With the right system all of our teams will be healthy and
well-supported."
The National Hockey League Players Association insists owners are making
more money than they admit, and it is adamantly opposed to any labor
agreement that would put a ceiling on salaries.
"We believe in an open marketplace and we don't believe in a cap system,"
said Ted Saskin, the union's senior director and general counsel.
"Everything we've seen from the NHL suggests that their vision of cost
certainty isn't anything other than a salary cap system, and they know this
is a complete nonstarter for us."
But hockey's problems run deeper than finding a way to align salaries with
revenues.
The NHL historically has been a regional sport, best seen live by its
fiercely loyal fan base. The league's big bet to embed itself into
mainstream American sports culture by expanding into non-traditional U.S.
hockey markets in the last decade has not brought the buzz, or the
multibillion-dollar national television windfall that it hoped for. The NHL
in 1999 began a five-year contract with ABC/ESPN that earns each team just
$4 million annually, a fraction of the $80 million for each NFL team or the
millions that NBA and Major League Baseball teams earn on their national
deals.
Expansion has brought a decline in the quality of play, in the eyes of the
sport's critics, as an increasing number of clubs with diluted talent seek
to mimic a successful, but boring, defense-oriented style of play that has
led to a drop-off in scoring and may be turning away fans. The league
averaged 6.7 goals per game in the five-year period from 1990-91 through
1994-95, peaking at 7.2 in 1992-93. The average goals-per-game figure this
season is 5.0.
Many players, coaches and fans are wondering how long the league's arenas
will be dark once a new Stanley Cup champion is crowned in June -- and
whether the NHL will survive a lockout in its current form.
'Not an Easy Sell'
In the last 13 years the NHL has grown from a 21-team league composed
predominantly of clubs in the northern United States and Canada to a 30-team
entity, with its 24 U.S.-based franchises spanning the sport's northern
heartland and the Sun Belt. When Bettman was hired as commissioner in 1992
he was charged with growing the NHL, making it geographically suitable for a
national television contract in the United States and entrenching it as the
fourth major professional sport in the country. Three years after the league
added its latest franchises, in St. Paul, Minn., and Columbus, Ohio, many
question whether Bettman has achieved his goals.
Jimmy Devellano, the Detroit Red Wings' longstanding senior vice president,
remembers the league's first expansion -- when it grew from six to 12 teams
in 1967 -- and says that many of the same problems remain.
"What we found out then, and what we are still finding out today, is that
hockey is not an easy sell in many U.S. markets," Devellano said. "Those who
had to sell hockey in L.A., Oakland and Pittsburgh found that they were
almost like missionaries taking something very new and foreign into markets
where it wasn't part of the sports fabric."
Among teams with the lowest attendance through Dec. 15, four -- Carolina,
Nashville, Phoenix and Atlanta -- are in or near the Sun Belt. But the
remarkable fact this season is that even traditional hockey strongholds such
as Chicago, Boston and Pittsburgh are filling just 67 percent, 80 percent
and 70 percent of the seats in their respective arenas, according to the
Sports Business Journal.
New Jersey is coming off winning its third Stanley Cup in the last nine
years and went 13 games without a loss in November, yet Continental Airlines
Arena was half-empty on many nights that month. "God forbid if we were
losing," Devils Coach Pat Burns said.
NHL marketers have had difficulty making the sport second nature to U.S.
fans, many of whom grow up tossing a football, throwing baseballs or
basketballs -- even kicking soccer balls -- but very few of whom don skates
and pick up hockey sticks.
The Dallas Stars have developed a strong grass-roots strategy, including
promoting youth hockey clubs throughout its marketing area. As a result,
Dallas fills more than 99 percent of the seats at 18,532-seat American
Airlines Center. But the game's fiercest advocates say the story of Dallas
-- which has won one Stanley Cup and reached the conference finals three
times since moving from Minneapolis in 1993 -- points to the old-fashioned
dictum that winning makes a successful franchise.
"It doesn't matter if you are in Phoenix or Nashville or Tampa Bay, or
whether you are in Edmonton, L.A. or Chicago," said Wayne Gretzky, a
part-owner in Phoenix and the league's all-time scorer whose trade from
Edmonton to Los Angeles in 1988 fueled the expansion drive of the 1990s.
"And it doesn't matter if it's hockey, baseball or football: It costs a lot
of money to go to sporting events. That's just the way it is, and people
want to see their teams be successful. If you put a team on the ice that's
competitive and wins, I don't care [where] you play, you are going to draw
well."
TV-Friendly
The NHL is a gate-driven league, much more so than the other three major
professional sports in the United States. The lack of big television money
has always forced the NHL to rely more heavily on arena-generated revenue
than the other leagues, all of which have a greater amount of revenue
sharing among teams than hockey. But with the NHL's average ticket price at
$43.57, or about as much as an NBA game, NHL teams are hard-pressed to
squeeze new money out of ticket sales.
"Even though payroll continues to go up, we can't raise ticket prices any
higher," said Devellano, whose Red Wings consistently sell out Joe Louis
Arena.
The NHL is holding out hope that high definition television -- which
presumably would make the puck more easily visible -- will make the sport
more TV-friendly. For the time being, however, a new ABC/ESPN television
contract is unlikely to increase much.
ABC Sports President George Bodenheimer said the NHL's ratings on the
network's ESPN and ESPN2 subsidiaries have not lived up to expectations. The
number of average households tuned in to NHL games on ESPN has declined
around 16 percent from 475,576 in 1999-2000 to 396,159 in 2002-03, according
to the network's figures. Games on ESPN2 have held steady at around 194,000
households. In the face of such numbers, ESPN and ESPN2 have reduced the
number of NHL games they broadcast from a total of 128 five years ago to
approximately 70 scheduled for this season.
The NHL's TV numbers are significantly smaller than those of other major
sports, even though the NFL, NBA and Major League Baseball also have been
trying to stem rating slides in recent years. ABC televises just a handful
of NHL games on network television; it will broadcast five regular season
games this season and pick up the Stanley Cup finals at Game 3.
"The revenue sources in sports over last 20 years have been taken over by
television; hockey hasn't participated in that," said Andrew Zimbalist, a
professor of economics at Smith College who writes about sports business.
In the absence of a financial windfall from television, making the playoffs
is essential to making money for most clubs in the NHL. That's because the
costs to the team generally remain the same during the playoffs while
revenues increase dramatically, largely because most teams are able to hike
up the price of tickets.
But as the league expands, it's getting more difficult to make the playoffs.
In the 21-team NHL that existed at the end of the 1980s, reaching the
postseason was easy -- all but five teams did so each year. But now 14 of 30
teams miss out, forcing teams with modest revenues to spend abundantly on
signing star players to expensive contracts just to make the postseason.
'There Is a Problem'
Mario Lemieux, as a Hall of Fame center for the Pittsburgh Penguins, is a
member of the players' union. But he is also the team's principal owner, and
is uniquely positioned as the players and owners face off over the future of
the league.
Lemieux became a multimillionaire thanks in large part to the free market
that the union has championed. As an owner, Lemieux -- who acquired the
bankrupt Penguins because the team owed him millions in salary -- now sees
the league's problems from a management point of view as well.
"The players are aware of the issues and understand that there is a
problem," Lemieux said. "At least privately, [they] understand that
something has to be done."
Brendan Witt, a veteran defenseman on the Capitals, said the lack of big
crowds -- at MCI Center and on the road -- is discouraging to players, and
said he can sympathize with Leonsis and other team owners. "We've had a drop
in attendance and that hurts Ted, and I know there are a lot of other owners
out there going through the same thing," he said.
As far as the labor dispute is concerned, Witt said he sees no sign that
either side is ready to seriously talk about the issue yet. "Hopefully,
something gets done because it could really hurt everybody and hurt the
game," he said. So far, however, there are few signs a lockout can be
avoided. No negotiations have taken place since October and both sides are
stockpiling money to get through a prolonged dispute.
Bettman says the league must have a labor contract that binds salaries more
closely to revenues. "We cannot continue the way we are going and expect to
have healthy franchises and a healthy fan base," he said. "There is no
choice but to fix it."
Union officials say the owners created the sport's problems by spending
beyond their means and say that the owners, not the players, drove up
salaries. The union also challenges the validity of the way the league
accounts for financial losses.
"The old adage is garbage in, garbage out, and that's an apt description of
the current system the NHL has in place on accounting," Saskin said.
Bettman says he is "completely comfortable" with the league's numbers. "I
believe that the union knows the numbers are real, because they are real,"
he said.
Whoever is right, there is no disputing the fact that the average payroll
has risen from $14.3 million to $46 million per team since 1994. During that
time, Bettman developed hundreds of millions of dollars in new revenues,
including league-wide sponsorships, expansion fees and television money.
Eighteen NHL teams have moved into new buildings over the past decade.
But even with new money pouring in, salaries grew faster. Contracts began to
accelerate in earnest in 1997 when owners began a stampede to sign players
at whatever cost. The Boston Bruins used carefully crafted bonuses to skirt
the NHL's porous labor agreement and sign two first-round draft picks, Joe
Thornton and Sergei Samsonov, to deals that far exceeded the rookie salary
cap. Those signings were followed the same year by what came to be known in
the league as "the Sakic deal," named for Colorado Avalanche captain Joe
Sakic's three-year, $21 million blockbuster offer from the New York Rangers.
The offer dramatically raised the bar for salaries. Sakic ended up staying
with the Avalanche, which matched the Rangers' offer.
"People would have every right to say that we created our own problems,"
Carolina owner Peter Karmanos said. "And you know what? We're going to fix
it."
But at what cost? "They might lose as many as six or eight teams and the fan
base would go down," said Zimbalist of a long stoppage in play.
Bettman, a protege of NBA Commissioner David Stern, is likely to follow his
mentor's script from the NBA's 1998-99 player lockout, in which the league
was able to impose a salary cap that limits player revenue to roughly 57
percent of the NBA's basketball-related income. Bettman is likely to lock
out the players and keep the doors closed until he can get the players to
agree to a cap on the percentage they take of the league's $2 billion in
revenues from the current 76 percent to something closer to 50 percent. That
would cap team payrolls somewhere in the $35 million-to-$40 million range.
Bob Goodenow, the head of the NHL Players Association, is expected to follow
the example of the Major League Baseball players' union, which has
successfully avoided a salary cap and instead agreed to luxury taxes on
teams that exceed a certain payroll level. Like his friend Don Fehr,
executive director of the baseball players' union, Goodenow opposes a salary
cap because he believes it kills the free market and prevents players from
earning top dollar for their services.
As the all-star break approaches, the league's six Canadian franchises are
healthier than in recent years, thanks to an improved Canadian dollar.
Dallas, Boston, Toronto, Detroit, Philadelphia, Chicago, Minnesota and the
Rangers are believed to be profitable or close to it. Columbus is apparently
well run and profitable.
But the vast majority of teams are sick.
Case in point is Tampa Bay, which has lost $50 million in the past four
years, according to team officials. The Lightning, with one of the best
young teams in the league, has a payroll at $33 million, which is in the
bottom half of the league. The team saw a rapid spike in attendance during
last year's playoff run in which it got knocked out in the second round.
But Lightning President Ron Campbell said the club would be better off
financially if next season is cancelled. He said that from an operations
standpoint, it would be the best year since his boss, industrialist Bill
Davidson, bought the franchise in 1999.
"No one wants a work stoppage," Campbell said. "We just want a system that
will allow us to operate with a small margin of profit. At the end of the
day, we are still a business. And as much as you want to win, it's not much
fun to win when it costs you millions of dollars."
