Kukla's Korner

Lower highs leading to higher lows?

The current economic situation presents a challenge for the NHL, in light of the relatively new salary cap and revenue sharing mechanisms that govern the financial flows between teams and players.  An entire generation of sports fans has grown up without having actually experienced a serious recession, so uncertainty has spawned a range of reactions; from apocolyptic visions of multiple teams collapsing to GM’s having to gut their squads as a falling salary cap forces their hand.

Just this week, James and Tom over at The Rink Podcast talk at length about the possibility of contraction in their latest episode, and James Mirtle waxed incredulous over Gary Bettman’s claim that the NHL’s business, for now, remains healthy, and that the storm clouds are still on the horizon.

One has to remember, however, that an economic recession doesn’t necessarily hit all industries in the same fashion, and there are factors at play here that could shield the NHL from the worst of the financial damage.

General Motors, for example, plans to reduce its annual advertising spend by $600 million over the next few years, with Chrysler and Ford following suit.  Those three, and their associated dealers at the local level are all major sponsors of the NFL.  GM also appears to be scaling back its participation in the Super Bowl advertising scramble, an orgy of revenue for the NFL and its broadcast partner in typical years.

What was the NHL’s maneuver in this regard?  They dumped Dodge as an automotive sponsor and instead entered a 3-year deal with Honda, a much healthier partner.  Let’s give Bettman and the league office some credit there.  On the local level, the Nashville Predators recently inked a new sponsorship deal with Nissan, in spite of the general economic headwinds. 

As Chuq notes, while there are certainly some NHL markets that could be doing better at the gate, the league compares favorably to the NBA, and mechanisms are in place that deal with the possibility of declining revenues.  While the escrow system has its limits, it does indeed appear to be able to handle a scenario involving flat or moderately declining business.  Just because specific teams will find themselves in salary cap trouble, that doesn’t mean the system is broken.  Quite the contrary, it will correctly punish GM’s who may have assumed that the cap would spiral ever higher.  There’s a reason, you know, many people consider some of these long-term contracts to be ludicrous.

In the end, it’s that aspect of the NHL which has long lagged behind that of the NFL and NBA (television ratings and corporate sponsorships) which may well insulate the league from the worst effects of the recession.  It won’t be clear sailing, certainly, but the NHL is more heavily dependent on gate revenue than the other major sports, and most of those tickets have already been bought and paid for.  It stands to reason that the NHL’s business prospects, for this regular season at least, aren’t likely to be as dire as that of the other sports leagues.  Hockey may have missed out on the best part of the great sports boom of the last 20 years, but it may well hold up during bad times better than most.

Filed in: NHL Commentary, | On the Forecheck | Permalink


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