Melting Ice: Economic Impacts of the 2012 NHL Lockout

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NHL Commissioner Gary Bettman isn’t exactly the most popular person on the planet. Maybe people’s views of him are a bit unjustified; he has, after all, increased hockey-related revenues from $400 million in 1993 when he joined the league to more than $3 billion today. He has grown the league from 26 to 30 franchises, and recently negotiated a media contract with Comcast/NBC for more than $2 billion. But there’s one thing fans and players alike don’t approve of when it comes to Gary Bettman: lockouts.

Now in his twentieth year with the NHL, Bettman has led a league through two lockouts in 1993-94 and 2004-05, and is currently in the midst of a third. The ’93 lockout caused the league to shrink its schedule from 84 games to just 48, while the ’04 lockout lasted 310 days and resulted in the cancellation of the season. According to Forbes, NHL franchises lost $96 million during this lockout, and hockey lost some of its valued fans.

Commissioner Bettman has announced the cancellation of games through November 1, the last day before the NHL must officially shrink their schedule of 82 games. The league has lost nearly $100 million in revenue by canceling the first few weeks of the season, and many fans are left thinking “Not again…”

Many hockey fans are upset and frustrated. Frustrated at the owners for demanding a larger share of the profits. Frustrated at Bettman and NHLPA executive Donald Fehr for failing to negotiate. Frustrated at players for going to Europe to play during the lockout. Frustrated at the fact that the NHL proposed a 50-50 split of hockey-related revenue, and the players union still will not accept the offer.

Owners are seeking to gain a larger share of hockey-related revenue (HRR) through the negotiation process. Under the 2004 collective bargaining agreement, players gained 54-57% of HRR, yet the NHL sought to reduce that percentage to 43% in the early stages of negotiation. What hurts the players more is a proposed reduction of contract years and salaries. This would affect superstars like Sidney Crosby (12 years, $104.4M), Alexander Ovechkin (13 years, $124M), and Ilya Kovalchuk (15 years, $100M), who are committed to long-term, incredibly lucrative contracts.

As a result of the lockout, many players have taken their talents to Europe, most notably the Kontinental Hockey League (KHL) in Eastern Europe. Some of the NHL’s best, including Evgeni Malkin of the Pittsburgh Penguins and Alexander Ovechkin of the Washington Capitals, have indicated they may not return to the NHL if the new CBA limits their salaries or shares of revenue. For teams to lose their superstar players to European league would be an economic and athletic setback that would take teams years to recover from.

Also at risk is the NHL’s signature event, the Winter Classic. Held annually since 2008, the Classic is an outdoor hockey game held in large stadiums that have attracted crowds of up to 80,000 fans. The Classic has been so popular that its TV ratings mirror those of the Stanley Cup Finals, and has earned the NHL a five year partnership with Bridgestone that will earn the league nearly $6 million. 2012’s Winter Classic, held in Philadelphia’s Citizens Bank Park, attracted 46,967 fans and earned the Philadelphia area more than $30 million in related revenues. 2013’s Classic, expected to be held at the University of Michigan’s “Big House”, could draw a record crowd of 120,000 fans, and earn Southern Michigan businesses up to $70 million.

Never thought hockey was such a lucrative sport, did you? As negotiations between the NHL and the NHLPA continue, tensions rise, and hockey fans across North America collectively bite their nails, hoping for an ounce of hope and a piece of good news. Until then, arenas remained closed, teams remain at home, and fans continue to hope for the best. Simply put, the NHL cannot afford to lose another season.

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