Kukla's Korner


Shadow Looms Over BOG Meeting

This week, the NHL’s teams will converge in Florida for the board of governors meeting, with plenty to discuss.

There will likely be talk about Avery, head shots, and even Sundin, as an initiative will be brought forth to put a UFA signing deadline in place, even as it will need clauses for injured players, but not for those needing a year to ponder retirement, or drum up some profit in online poker ads.

The biggest issue, of course and without doubt, will be the economy, and how to get the League back on track, something that the League can tackle, if it is willing to make the new, harder choices.

Wherever you read about the meeting, the story breaks down nearly the same in every case, with the Globe and Mail providing a fine example.

The slowing economy has owners concerned that fans will turn away from games, eating not only into profits, but into the ability of some teams to reach the minimum attendance levels required to gain access to revenue sharing, even as the Florida Panthers have gone so far as to offer up free tickets to anyone who has yet to attend a Panthers game, and also as a part of prize packages on radio stations and for bloggers to give away, not to forget the staff they’ve let go recently.

Not only that, but newspapers are starting to lay off their writers, notably trimming their sports sections or even gutting them, a process started with the decline of newspapers and only accelerated in these tough times. Suddenly, another major source of coverage is gone, and the League will have to fight harder to get into the collective consciousness, especially in the States.

As for the concern of the flagging Canadian dollar, let’s put this into perspective, using Forbes’ NHL Team Valuations. Together, the six Canadian teams pulled in $684 million, which is 25% of the League’s total $2.747 billion. Or, if you take operating income, “Earnings before interest, taxes, depreciation and amortization”, the Canadian franchises represent $149.1 million of the $224.6 million dollars totalled between franchises with positive operating incomes, a whopping 66.4% of all positive figures, with a dozen teams having negative operating incomes.

Suddenly, the $1.30 or so it costs to change a Canadian dollar into an American one, in which all salaries are paid, is frightening. Just considering the fact that the teams pay salaries in USD, and with all Canadian teams rubbing close to the cap, there’s over $90 million more required to pay those salaries, over 60% of that operating income, eaten up just because of the exchange rate. That plunges Calgary, Edmonton, and Ottawa all into negative operating income territory. With only Edmonton’s average attendance being below 100%, according to ESPN’s numbers, there’s little more Canadian franchises can be asked to do.

One way that I always look at the League is by comparing it to a clothing franchise. Yes, perhaps bizarre, but give it a chance. Take a franchise, and you’ll find many stores across the country, selling the same wares. Even as they sell the same wares, there are different classes of store. At the top are ‘A’ stores, the ones on Bloor in Toronto or not far from 5th Avenue in New York; big, expensive stores, but ones that sell in huge volume. But they are not the only kind; there are only so many 5th Avenues, after all.

Going down, you get to lower ranking B, C, D, and so on stores, with the lowest ranking representing the smallest franchises, the ones in towns of 10,000, with a small show floor in the local mall. These are the stores that sell just enough to break even, to cover the cost of the goods sold, the salaries, and the bills, in order to eke out the smallest of profits for its owners, rather than the riches afforded to the powerhouses. But these small stores still serve a purpose: they spread the word about the brand, get people excited, allow for bulk discounts and widespread adoption of products. See where we’re going?

The League will likely never be 30 teams swimming in piles of money. But as much as some franchises will toe the line between red and black, they are still necessary. 30 teams, and we have great competition night after night, 1230 games a season before the playoffs start. Take away a single team, and you’ve put athlete’s out of work, you’ve taken 82 games (which when sold out can represent over $82 million at the arena), and the product loses its penetration. Suddenly, there are fewer games to watch, to get excited about. Players might start heading overseas with greater frequency, paving a smoother path for the Leagues there to grow. Pretty soon, 16 teams making the playoffs in a 24 team League (six franchises reportedly being in danger right now) makes little sense, and the game gets further chipped away.

It’s time to start acting, making the League more stable. Revenue sharing was a great idea, a concept that has worked well elsewhere, but could be better used than to prop up cap floor salaried franchises. Owners fought to get their teams, they were not forced upon them, and they should be able to bring their team back to success, enduring only occasional losses, not systematic ones. Revenue sharing would be better used to help during those rough years, but primarily to ensure that the cap floor isn’t where teams aim to be. You can get all the high picks and star players, but you do need to flesh out a team to have success, to be able to sign the veteran mentors and give players a reason to stay. I hate to bring it up, but relocation will likely be mentioned at some point this week, but it’s far from an easy deal to work out.

Yes, there are cities that might be more willing to support an NHL franchise than certain American ones, say Florida and their free tickets to reach revenue sharing averages for example, or Phoenix, reportedly in line to lose $35 million this season. The flip side is how do you relocate during a recession? Unless you’re Las Vegas, with an arena waiting, how easy would it be to build a $200+ million facility, let alone quickly, to house a team? Or, trying to move into southern Ontario, how easy would it be to swallow the hundreds of millions teams like Detroit, Toronto, and Buffalo could be asking for in franchise fees?

Reaching out is what the League needs to do. Avery may have chosen the worst words to put to the cameras (something about how it would be like old times, Cuthbert watching him from the stands, would have been far less toxic, with plenty of other options open to him along the same lines, but without suspension ensuing), but promoting the League is completely necessary. Think about it: why do Sens vs. Leafs matchups sellout at the highest prices, but battles with far more powerful teams have trouble drawing? The rivalry, the hate, the heroes and enemies, precisely what Avery sought to promote.

How easy has it become for fans to even follow their team? Ottawa Senators games are on CBC, TSN, Sportsnet, NHL Network, other broadcasters, and sometimes not available at all; that’s a large package to swallow to try and stick with the team you support, let alone how difficult it becomes when you are outside Ottawa, or inside another team’s zone? GameCenter Live is a good step, but nonetheless expensive, and frustrating when games are blacked out or unavailable, especially if it’s your team. Take a look at the AHL package; you can pay for live games only, live and archived, and you can even go on a game by game basis. If CTV, the Discovery Channel, and the Comedy Network can offer me every episode they show, surely the League can reach out to fans, collecting profit from both them and advertisers looking for that captive, targeted audience. Network deals should allow this, should seek to enrich the League, serve the fans, and make the game available to all.

There are plenty of options for the League in tackling these issues, and it’s high time they took aim at them, rather than dancing around them with half-solutions.

Filed in: NHL General, NHL Media, NHL News, | SENShobo | Permalink


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About SENShobo

Native of Northern California.  Hockey fan since 1998... sort of... there's a hiatus in there that I still can't explain.

I want to know about anything and everything related to the sport and the spectacle.  I watch, I react, I write it down.

My interest in the Sharks was initially a matter of geographic convenience and regional loyalty because that seemed to be how it worked.  I had no prior interest (at all-- AT ALL) in professional sports of any kind.  When I met hockey, it might have set off a chain reaction of general sports fandom.  It hasn't, I don't think it will.  At all.

Since then, that interest developed into full blown (mostly sort of usually almost completely) exclusive loyalty to the Sharks.

I started blogging a couple years ago on wordpress. I still occasionally put things there that I don't think fit here because they are not about the Sharks. Wherever my words wander, here on Kuklas Korner, they will (usually) hang on to a teal thread.

I can be found in cyberspace on Twitter @petshark47, or emailed at talkingstick@petshark.net