Kukla's Korner Hockey
by Paul on 11/21/12 at 07:21 AM ET
from Josh Cooper of the Tennessean,
To help explain where the two sides are from an economic standpoint, and how the lockout may hurt Nashville, The Tennessean talked with Vanderbilt sports economics professor John Vrooman.
You’ve often discussed the NHL’s “Southern Strategy” and the issues that have come with it. Is the league’s lockout cycle correlated to this?
John Vrooman: “Yes, on both the revenue and cost sides, the Sun Belt expansion has put the squeeze on the NHL bottom line.
“On the revenue side, the Sun Belt clubs have been placed in mid-markets with nontraditional hockey fans. This reduces average club revenue and increases its volatility. Risky cash flow is worth less than certain cash flow in financial terms.
“On the cost side, the addition of nine teams in nine years increased the demand for relatively scarce skilled hockey talent, and as a result player salaries exploded from 1995 to 2004.
“The purpose of revenue sharing is to remedy the first problem, and the imposition of the hard salary cap is designed to remedy the cost side of the problem. In the sports business, cash flow certainty is critical on both the revenue and cost sides of the equation.
“The 2005 CBA rectified the cost problem (with the exception of signing players to long-term salary cap-circumventing deals) but the revenue side ... not so much. Revenue sharing is still a major shortcoming in the current NHL.”
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Paul Kukla founded Kukla’s Korner in 2005 and the site has since become the must-read site on the ‘net for all the latest happenings around the NHL.
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