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Pressure Mounting

from Roy MacGregor of the Globe and Mail, 

NHL owners are in a pressure cooker right now, with the heat guaranteed to be applied increasingly as the lockout cancellations add up and fan frustration boils over.

This is no longer the NHL of Clarence Campbell, where owners’ heads and voices often rose far higher than the league president’s own. There are no Smythes, Ballards, Norrises, Wirtzes to break order these days.

It is, increasingly, a Disney World where owners are corporate conglomerates, their heads as unrecognizable in the streets as the average fan. And league commissioner Gary Bettman has done an extraordinary job of herding these lions. So far.

It is worth pointing out, however, that even if the puck is no longer in play, egos are – and the possibility of breaking ranks exists on both sides, players and owners.

Being recognized in the streets is one thing.

Being chased through the streets is quite another.

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Filed in: NHL Talk, NHLPA, | KK Hockey | Permalink
 

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This guy is nuts.  Whatever ‘pressure’ there is on owners actually lessens over time, it doesn’t build.

Posted by HockeyinHD on 10/09/12 at 06:01 AM ET

Nathan's avatar

I think pressure builds on certain owners and clubs as the lockout drags on, sure. I have to think all of the Canadian clubs feel a lot of pressure as they are losing lots and lots of money in merchandise and gate receipts. I would think the Red Wings this year feel a lot of pressure with the Winter Classic on the line (certainly, with Ilitch at his “advanced” age, he’s really looking forward to being able to see and put on this Winter Classic).

But as a whole, one thing you can say about Bettman is he keeps his people in a row, stuck to the same company line, and at worse, keeps the ones that may dissent quiet. It will be interesting to see if more owners speak out as time goes on. I wouldn’t hold my breath, but certainly between the initial NHLPA proposal that has to look good to smaller and mid-market clubs, the Canadian clubs with a lot of money to miss out on from missing hockey, and the special interests of teams like the Red Wings (Winter Classic) and Kings (Cup champions), perhaps there could be just enough smoke to this that a fire is really there.

Posted by Nathan from the scoresheet! on 10/09/12 at 08:21 AM ET

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Individual owners?  Sure.  ‘Owners’ as a collective?  Not even close.

That said, the owners who are already making money are the ones who stand to make spectacularly more money after these negotiations, considering how Bettman is really just pursuing a larger share of HRR rather than any kind of substantive changes to the system.

That’s why I think this notion of ownership unrest is hugely, hugely overrated.  There may be one or two guys who would prefer the bird in the hand to the one in the bush, but in general I would guess those guys know how much money the last CBA made them all, so they’re willing to stay the course in this one as well.

Posted by HockeyinHD on 10/09/12 at 10:10 AM ET

Evilpens's avatar

Liberal Media doing what they can for “UNION”

Posted by Evilpens on 10/09/12 at 10:59 AM ET

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What about teams in the middle that are already on financial shaky ground and need immediate revenue streams to remain afloat. Not sure what the Devils current predicament is, but long term gain could kill the current ownership group if current bills aren’t paid. Not every owner has revenue streams coming in on the back-end to leep them afloat. There is no one-size fits all owner in this mess.

Posted by hockey1919 from mid-atlantic on 10/09/12 at 11:43 AM ET

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Whatever ‘pressure’ there is on owners actually lessens over time, it doesn’t build.

Really?  Because in November when NBC starts looking for their NHL programming there’s going to be less pressure on the league?  And when it’s time to cancel the Winter Classic, with the huge spotlight and revenue that will come with it, the pressure will lessen even more?

The top teams in terms of making money and winning hockey games are going to feel more pressure and, as 1919 suggests, so will the middle of the road teams that will want to make some money and fill their arenas.

Posted by Garth on 10/09/12 at 12:01 PM ET

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Really?  Because in November when NBC starts looking for their NHL programming there’s going to be less pressure on the league? 

Yes.  NBC needs the NHL as much in October as they do in November or December or January or February.  Nothing about that changes.  The longer this goes the more out of sight out of mind the issue becomes.

As soon as we get to mid to late November if there’s not real movement from the NHLPA on HRR the league will just cancel the whole season and that’ll be that.

And when it’s time to cancel the Winter Classic, with the huge spotlight and revenue that will come with it, the pressure will lessen even more?

It’s one game, Garth.  Next year the NHL could schedule +1 ‘Winter Classic’ venues and make all that money back.

The top teams in terms of making money and winning hockey games are going to feel more pressure and, as 1919 suggests, so will the middle of the road teams that will want to make some money and fill their arenas.

Nah.  That’s not how most businessmen look at their businesses.  There are going to be an incredibly small minority of owners, if there actually end up being any at all, who would rather make whatever they were making under the old CBA for 6 years than they would under a much better CBA for 5.

The key is in making sure that the new CBA is, in fact, enough of an improvement that the increased revenue share over time makes up for the loss of one years’ worth of revenue up front.

If the ownes start thinking that the best deal they’ll ever get is 54 or 55% of HRR, then sure.  They should be annoyed.

The problem is I don’t think anybody really believes this is going to go any other way that with the NHLPA getting crushed again, either by capitulating and signing a 50-50 deal or being broken entirely and having the NHL resume play in 2013 with replacement players.

I mean, seriously… do you know how much freaking money the last CBA made Illtch?  Just in pure payroll savings alone we’re talking 100+ million dollars.  The Wings were spending 66-78 million a year on salaries by 2001-2004.  In the four post lockout years they spent 180.

4 years @ 70 = 280.  280 - 180 = 100 mil less in payroll costs.  Sure, it’s likely revenue dipped a little, but man oh man did the new CBA make Illtch a ton of dough.

The next CBA isn’t going to be as drastic, we’re looking at a 12% decrease in HRR share rather than a 24% one, but it’s still going to make a lot of teams a lot of cash.

 

Posted by HockeyinHD on 10/09/12 at 01:04 PM ET

Nathan's avatar

Liberal Media doing what they can for “UNION”

Posted by Evilpens on 10/09/12 at 10:59 AM ET

Please crawl back under your bridge.

Posted by Nathan from the scoresheet! on 10/09/12 at 01:25 PM ET

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Nah.  That’s not how most businessmen look at their businesses.  There are going to be an incredibly small minority of owners, if there actually end up being any at all, who would rather make whatever they were making under the old CBA for 6 years than they would under a much better CBA for 5.

Again the Devils were near default on their debt. The owner needed money ASAP, not promises of future revenues. The next CBA will help the “owners” in the long term,  just maybe not the current owners. The owners, like the players couldn’t care less about the stability of the League if they have a franchised burdened in debt that they have to sell. Some teams may be able to re-finance their debt, but they may also need much more significant gains in order to compensate for the cost of re-financing. Again, it may be a small number, but not none.

 

Posted by hockey1919 from mid-atlantic on 10/09/12 at 02:13 PM ET

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NBC needs the NHL as much in October as they do in November or December or January or February.

Uh, no?  See the thing is, NBC is the #4 network, so can you honestly say that you think they’d be happy paying out for NHL content while the NHL takes its little break?  No, of course not.  NBC Sports is already suffer post-Olympics, so not having the NHL as a tentpole as well as not having the NHL on the regular network isn’t good for them.  The NHL has a brand new deal with NBC and you can bet NBC isn’t going to want to get *#$%@& on the first season of the deal.

It’s one game, Garth.  Next year the NHL could schedule +1 ‘Winter Classic’ venues and make all that money back.

Because that’s how it works, right?  Every dollar lost this season can just be added to the revenue that the league will get next season.  If there is a next season.  And certainly, losing an entire season can’t possibly be a bad PR thing, right?

I mean hell, no fans seem at all put out by this becoming-a-regular-thing labour stoppage, right?

Posted by Garth on 10/09/12 at 02:18 PM ET

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NBC needs the NHL as much in October

Except I don’t think NBC planned on showing any games until after Thanksgiving. NBC Sports, on the other hand,  is already losing.

It’s one game, Garth.  Next year the NHL could schedule +1 ‘Winter Classic’ venues and make all that money back.

Why not schedule +2 Winter Classics next season and make money for the following year as well? May as well have 41 Winter Classics per year, seems silly to leave all that revenue on the board.

 

Posted by hockey1919 from mid-atlantic on 10/09/12 at 02:30 PM ET

WingsFaninCO's avatar

Next year the NHL could schedule +1 ‘Winter Classic’ venues and make all that money back.

How would this work?  is there a second New Years Day I am unaware of? Are you proposing they schedule the second game on the same day as the first (a sure-fire way to double revenue)?  Or maybe they schedule it on one of the other holidays not traditionally associated with another, more popular, league.  What about Thanksgiving…...

Posted by WingsFaninCO on 10/09/12 at 02:42 PM ET

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What about Thanksgiving…...

Christmas is still available.

Posted by hockey1919 from mid-atlantic on 10/09/12 at 02:53 PM ET

HockeytownOverhaul's avatar

I say make it on Festivus

Posted by HockeytownOverhaul on 10/09/12 at 03:30 PM ET

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Again the Devils were near default on their debt. The owner needed money ASAP, not promises of future revenues. The next CBA will help the “owners” in the long term,  just maybe not the current owners.

Hard to say, really.  I don’t think a new CBA or playing under the old CBA would have appreciably changed the financial trajectory of the Devils.  That team has been a pile of bleep for years now as far as the spreadsheets go.

Uh, no?  See the thing is, NBC is the #4 network, so can you honestly say that you think they’d be happy paying out for NHL content while the NHL takes its little break?  No, of course not.

Well, they’re pretty much SOL then, aren’t they?  Not only did NBC sign the deal, they signed it with a clause that paid the NHL this year whether hockey was played or not.  NBC went into this deal with their eyes wide open, and I would bet dollars to donuts that the first year payout clause came at a reduced overall payout for the contract.

Because that’s how it works, right?  Every dollar lost this season can just be added to the revenue that the league will get next season.

You are JJ-ing.  Your point was about the Winter Classic, yes?  There’s a difference between the revenue lost from all games and the revenue lost from A game.  Specifically, a game that can be done in 2014 as easily as it could be done in 2013, or where there could be 3 simultaneously instead of 2 or instead of 1.

In this specific instance we are talking about revenue delayed, not revenue lost.

I mean hell, no fans seem at all put out by this becoming-a-regular-thing labour stoppage, right?

That aspect has already been pretty much discussed though, right?  Everybody (and then some) came back after the last stoppage, and there is little to no reason to doubt everyone (and then some) will come back after this one, as well.

Of course fans are pissed off now.  They should be.  What the NHL and the NHLPA both know, however, is that as soon as the games start playing again ‘fans’ will be back.  Maybe not the exact same fans across the board as before, but just as many who will be willing to pay just as much… which makes the net financial impact pretty close to zero.

Why not schedule +2 Winter Classics next season and make money for the following year as well? May as well have 41 Winter Classics per year, seems silly to leave all that revenue on the board.

Let’s try not to hyperventilate, shall we?

How would this work?  is there a second New Years Day I am unaware of?

Are you familiar with the term ‘doubleheader’?

Posted by HockeyinHD on 10/09/12 at 04:13 PM ET

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Maybe not the exact same fans across the board as before, but just as many who will be willing to pay just as much… which makes the net financial impact pretty close to zero.

But this still is lost revenue even it is net zero. If they wouldn’t have pissed off so many fans the new fans would have been a gain instead breaking even.

May as well have 41 Winter Classics per year, seems silly to leave all that revenue on the board.

I had a math fail, I only wanted 15 Winter Classics per year, why can’t every team have one?

I don’t think a new CBA or playing under the old CBA would have appreciably changed the financial trajectory of the Devils.

What the Devils need is cash now, so it isn’t the tersm of the CBA killing them it is the lack of revenue due to the lockout. they can cut employees, but the stadium debt remains whether locked out or not.

Posted by hockey1919 from mid-atlantic on 10/09/12 at 04:28 PM ET

HockeytownOverhaul's avatar

I gotta say, losing 42 arena events isn’t going to help their cause.  Especially with how gate driven their profits are.

Posted by HockeytownOverhaul on 10/09/12 at 04:46 PM ET

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This time a lockout makes no sense.  Owners are damaging their own product. They cheated the cap not the players.  Also players are not a Union.  Union members don’t all make different wages. 

The rhetoric has to be toned down.  This is not a hard thing to fix.

Posted by 13 user names on 10/09/12 at 05:50 PM ET

WingsFaninCO's avatar

Are you familiar with the term ‘doubleheader’?

Yes I am, and since we are being sarcastic and intentionally obtuse I will reply thusly:

Does the term “doubleheader” imply double profits?

Honestly, I didn’t go into the details here because I assumed they were obvious.  I’m sure every fan has 6+ hours on New Years to dedicate to Hockey (when the league is already competing against Bowl games).  Also, not only are those fans able, but willing to do just that. That’s not even to discuss diminishing returns on corporate sponsors, gate receipts, etc. And of course, this all assumes NBC wants to air a hockey double header on a national holiday (I would be happy if there was sufficient demand, but I don’t know that it is a realistic hope).

 

Posted by WingsFaninCO on 10/09/12 at 06:15 PM ET

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But this still is lost revenue even it is net zero. If they wouldn’t have pissed off so many fans the new fans would have been a gain instead breaking even.

You have two choices with regards to an investment which comprises a portion of your portfolio:

A) Make 50 grand a year for 6 years.
B) Make 65 grand a year for years 2-6, but make no money in year 1.

Which do you choose, and why?

What the Devils need is cash now

They need millions and millions and millions of dollars right now, though.  They need about a years worth of gate revenue up front.  Immediately.  What difference would 15 home gates between now and the end of the year make?

This time a lockout makes no sense.  Owners are damaging their own product.

This lockout is precisely the same as the last lockout, done for the same reasons and with likely the same ultimate effect.  The last lockout didn’t cause any noticeable damage to the NHL.

Does the term “doubleheader” imply double profits

Obviously.  The money the Winter Classic’s make is gate revenue plus merch.  As far as I am aware the NHL doesn’t have a special broadcasting deal for WC games.  2 stadiums full of people and 4 cities buying special jerseys, hat and lanyards as opposed to 1 and 2 means more money.

The issue, obviously, is in guarding against watering down the novelty of the concept.  I have a hard time believing that in a one year one time situation having two WC’s instead of one would so fracture fan interest that you’d see a significant per event drop in profit.  I mean, will anyone in Detroit care about a WC held in Chicago on the day they are lining up to buy loads of crap at a sold-out Michigan Stadium?  Will anyone in Chicago care about a WC held in Michigan while they are lining up to buy loads of crap at a sold out Solider Field?

Heck, having a WC on before or after the one the fan is at just amps up the pre and post game festivities.

Posted by HockeyinHD on 10/10/12 at 06:18 AM ET

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You have two choices with regards to an investment which comprises a portion of your portfolio:
A) Make 50 grand a year for 6 years.
B) Make 65 grand a year for years 2-6, but make no money in year 1.

How about you need to pay your debt down within year one or your team will be foreclosed on and someone else will make the profits for the next 5 years?  I would normally take option B, but in this scenario I no longer own the team, so I am better off with option A.  The amount of interest I am paying on the accrued debt on year 1 far outweights the increased revenue I would generate in years 2 thru 6 if I have to re-negotiate the terms of my debt so that it is more favorable to the lender.  So yes I am making “more” money, but it is going to pay higher rates on my deficit. I would also need to know the return on my investment if I take that first 50 grand and re-invest it as well. 50 grand compounding over the next 2 to 6 years may make me more.

They need about a years worth of gate revenue up front.  Immediately.  What difference would 15 home gates between now and the end of the year make?

The lockout can last a year or more, and is of the owners making so the original question is there any owners applying pressure so to the answer it has to be yes. Would a creditor give you more time, when you have the option of paying even that trivial 15 - 82 games worth of revenue or not knowing it may be two years before they see another cent?

Posted by hockey1919 from mid-atlantic on 10/10/12 at 11:35 AM ET

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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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