by PuckStopsHere on 10/29/08 at 06:03 PM ET
If a company has massive layoffs and makes multiple policy changes to save money such as stopping matching employee contributions to employees 401(k) and banning overnight and express mail, then it is usually a sign that the company is on shaky ground and may not be around much longer. The Florida Panthers are doing this according to George Richards’s blog.
The economy is taking its toll on the NHL and the weaker NHL markets will have some trouble. Most of the more recent NHL markets including Florida, Nashville, Phoenix and Atlanta will be tested. In good times, these markets have had trouble financially. In bad times, they may not all make it.
It is not impossible to imagine multiple NHL teams failing if there is a prolonged economic downturn. The NHL has strongly invested in the idea that franchises will be stable after losing a season to the lockout. They have already been tested, most strongly by the Nashville Predators, but so far no teams have moved.
In a worst case, if multiple teams’ ownership fails it will be hard to find multiple new NHL owners. At the very least, it could fill potential expansion markets with relocating teams.
The NHL will be strongly tested by a protracted economic downturn. The weakest markets (which are generally the Gary Bettman expansion markets) may not survive. If several of them fail, it would leave the Gary Bettman legacy as one of error.
As for the salary cap, since it is tied to revenues, many are predicting large drops in the salary cap. I do not think this is true. Sure the economy has weakened (especially in the US) and the Canadian dollar has weakened, but teams have already banked their season ticket revenue, a good portion of their advertising and sponsorship revenue and a good portion of their television and radio broadcasting revenue. Though the salary cap may drop this year, the worst is next year if conditions don’t improve. The biggest salary cap drop should come if these economic conditions remain in place through next season when season tickets and advertising will have to be re-sold.
The biggest financial test of Gary Bettman’s NHL is upon the league. There are a few weak markets that have struggled in the past. This struggle will be worse in tougher economic conditions. We will likely see a few teams making undesirable moves to try to survive. The Florida Panthers move of yesterday is the tip of the iceberg. The worst will come when ownership groups start to fail.
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