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Blood & Money, On Ice

No matter how bad it looks, those in charge find a way to make it even worse.  Like a pack of ravenous dogs, they are snarling over the last scraps of meat rather than get together to work things out.  It’s as if they don’t care that it’s all coming down to a dark, bitter end – each wants their own piece and damn the rest.

I’m not writing about the US Congress or anything so big.  This is the state of the National Hockey League (NHL).  The owners and players are in the process of taking a $1.87B per year league down to zero – for the second time in eight years.  Why they can’t just let them strap on skates and beat each other bloody to get it out of their systems before the real negotiations begin, I don’t know.

Where we stand is this – after the September 15th deadline passed without an agreement, the owners imposed a lockout.  There are no training camps and pre-season has been scratched.  There is no announcement on the October 11th regular season yet, but no one expects it to start on schedule.  There are no real talks or any movement at all.

Last year players scored 57% of the $1.87 billion in league revenues, by their league contract. In July the owners demanded this should go down to 43%. The players’ association counter offer of 54% for three years and then back to 57% went nowhere. The owners responded by increasing their offer to 46%, valid for six years. There are more details to the negotiations, but this is the meat of it – a gap of about 8% of total revenue, or about $150M per year.

If it seems obvious that they are dancing around a 50/50 split, you’re paying attention.  But they can’t come to that figure because the real problem isn’t how to divide up the money with players – it’s the lack the health to support 30 teams at all.

Consider the total of $126M or so made by the total NHL in profit last year.  More than all of that was made by three teams, the Maple Leafs ($81.8M), Canadiens ($47.7), and the Rangers ($41.4).  Most of the teams lost money, with the bottom six losing a total of $126M (nearly 7% of revenue).  That’s the gap between owners and players almost in its entirety.

The gap between the richest teams and the poorest is massive.  It almost goes without saying that the big drains are in towns that don’t care about hockey like Phoenix ($24.4M in losses).  But the entire league is hopelessly out of balance – and largely unwilling to share revenue between teams to provide a competitive league that would be far more exciting to every fan.

Part of the problem for the NHL is that they lack a big network contract to share among all the teams, something that has papered together the other big sports leagues.  That’s why the league keeps trying to prop up teams in sunbelt cities that really don’t know the difference between poutine and a rat’s patoot.  This strategy is never going to work and the league, split between two nations with different broadcasting regimes, is never going to be like the others.  It has to return to its roots and find a way to use internet and pay-per-view cable to bring in revenue they will not get from broadcast.

How that might work is hard to imagine, but they have to start imagining it.  The current negotiations are not the place to be thinking about something this radical, but that is the problem that both sides eventually have to deal with.  A smaller league of about 24 teams would actually have more revenue to split and the gap between the two sides would close.  No other league is so far out of whack that they can claim this.

There may be other ways to find more revenue.  The immediate problem is that they have to negotiate who gets what right now before they figure out how they are going to grow their way out of the problem.  That makes these negotiations far bigger than just hockey because, in a way, their problem is exactly the same as what’s facing the bigger of the two NHL nations right now.

The way they are settling it is the wrong way, but it’s hard to imagine how to bring the bigger picture into negotiations.  It would make more sense for the most snarling dogs to just fight like all Hell for a while – and once there is enough blood on the ice to satisfy everyone just split the difference and move on to the real problem.  If the NHL can do it, our nation can.  But the NHL, so far, can’t.


7 thoughts on “Blood & Money, On Ice

  1. The NHL is so frustrating I don’t know where to begin. You’re talking about revenue which is great, but the gap between the teams is more than just that. It’s like you were saying about in politics the enthusiasm gap. The core of the league is real serious hockey fans. That’s what they are neglecting. It makes me so mad.

    • Hockey, in particular, is fueled by passion. What I find interesting here is how the situation is very analogous to what I think is going on with the US government – an immediate problem that requires a lot of good will to solve (and is thus ignored as long as possible) with a long term problem that can’t be dealt with until the immediate one is fixed.

  2. I didn’t know it was so bad. When a team is “losing” money though you have to wonder how much is a paper loss and how much is genuine cash flow. I doubt that someone is putting $24.4M into a hockey team every year just to keep it going. I remember reading about the NHL somewhere and the definition of “revenue” is part of the issue here, as I am sure the definition of “profit” always is.
    No matter what some revenue sharing has to be a part of any league. The NFL has things set up so that it is impossible to lose money if you own a team. The economics of a professional sports league is fascinating all around.

    • Good point – I don’t know how many losses are “real”. I can tell you that the league took over Phoenix, so the “losses” are being felt by the NHL itself.

  3. Pingback: The Check is … Against the Boards? | Barataria - The work of Erik Hare

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