Should the NHL be thinking about contraction?

[Bear of Bad News]

Dr. No and saskganesh: ESPN does not equal leaguewide success, but it does equal a heck of a lot more potential eyeballs than OLN/Versus.

That's not necessarily true. If ESPN doesn't promote the product, then no one is going to watch.

If things could not be worked out with ESPN, then I would have expected Bettman to try to work something out with FOX Sports, since not only do they have a strong regional network (which holds the local TV rights to many NHL teams) but also have experience televising the NHL.

You have no idea what Fox Sports offered, or even if they offered anything.

 

[mfw13]

You're right, I have no idea if Fox offered anything or even got involved in discussions. But my point is that once negotiations with ESPN broke down, Bettman should have sought FoxSports outright and spoken with them, which to the best of my knowledge he did not.

Right now NHL hockey is being shown on a virtually anonymous network that reaches 25 million fewer households than ESPN2, isn't even on basic cable, that very few people know even exists, and that most people couldn't find on the dial even if they did have it.

To say that this is anything but a monumental failure of business execution on the part of Bettman is to have your head buried in the sand. Under his leadership, the NHL's TV exposure has decreased, and I challenge anyone to figure out how decreased television exposure is a good thing.

 

[geezette]

If a team doesn't win, it just doesn't draw. Mr. Average Joe family of 4 must really be excited about his team to justify that much cash out the door to go to a game. With the league at 30 teams, only about half the teams make the playoffs. So, half the teams are branded losers. And, if you go on a constantly rotating basis, your team will make the Stanley Cup finals once every 15 years, and win the Cup once every 30!
So, I think the league is too big to have a team exist on it's own gate and ad revenue plus a small national TV contract. If the league contracted to 24 teams, 2/3 of the teams make the playoffs and your odds are a little better for finals and Cup wins.

Mfw13, Are you old enough to remember the prior Commish? Lets just say there was no drop-off in talent or effort when GB took over.

 

[mfw13]

Yes Geezette I do remember Ziegler, and you're right, he was just as bad as Bettman. At least he didn't lose a whole season to a lockout, though.....

 

[OpAck]

And will someone please explain why three of the leagues proudest franchises (the Blackhawks, Bruins, and Islanders) have been allowed to disintegrate under horrible ownership? A better commissioner than Bettman would have put together new ownership groups that actually had a clue about how to run a hockey franchise to buy out Wirtz, Jacobs, and Wang. Or do you think the NHL can afford to have flagship franchises in three of its biggest markets continue to be mismanaged?

Again, Wang is not a horrible owner and the Islanders aren't disintegrating. I think the same can be said for Chicago and Boston. Sure, Wang's made decisions with his two marquee players that is very questionable...and he's trying a new management style that is not of the traditional system with sports franchises. Will it work? Who knows, but he's exactly what the league needs...a dedicated owner that is committed to supporting the league and supporting his team on Long Island. He's also committed and has come the closest to renovating the existing Nassau Coliseum and the surrounding hub area. After all the money Wang is pumping into his franchise, you think Bettman and the NHL should "buy" him out? Not a chance.

It's one thing if Wang is slashing payroll to a measily $15 mil...telling the GM to conduct a fire sale where you're giving up your only real assets (Palffy, Berard, etc) and putting unproven, cheap minor leaguers in their place. And also using scare tactics to threaten the county, league, and arena management company with lawsuits in order to condemn the Coliseum lease. And also, not spending a cent on upgrading the franchise since their only intentions are with the real estate the Coliseum sits on, and not developing a good, quality hockey franchise.

That was the Isles' previous owners...and the owner before them turned out to be a con man who fooled just about everyone into thinking he was a billionaire...and even before the con man, there was a "management committee" blindly running the franchise that had such "great" ideas like changing the Isles uniforms to the fisherman unis and letting Don Maloney trade our star player (Turgeon) for someone that had no intentions of playing here and letting that get out of hand. Each one of those years, between the time John Pickett stopped paying attention to the franchise and after Wang's first year as owner...the Isles never made the playoffs.

Believe me, the Isles are far from disintegrating and I'm actually thankful Wang came in and has poured his millions into developing a solid product. And again, the arena (especially the new arena) will be full when this team is working hard and winning.

 

[Bear of Bad News]

Yes Geezette I do remember Ziegler, and you're right, he was just as bad as Bettman.

But you just said this:

Gary Bettman (and I'm sure this is going to be a controversial statement) has been probably the worst commissioner of a major US sport in quite some time.

So by "quite some time", you mean since the early 1990s? Golly.

 

[mfw13]

OK Dr. No....Ziegler was ALMOST as bad a Bettman. Are you happy now?

 

[Ted Hoffman]

And IrishBlue and Dr. No....if Bettman is not responsible for the league getting dumped off ESPN then who is?

Please point out exactly where I said Bettman wasn't responsible for the NHL leaving ESPN. Perhaps you misread "Bettman isn't responsible for at least 3 teams filing for bankruptcy."

If you want to challenge something I said, fine ... but get the quote correct when you do.

 

[mfw13]

Sorry....I misquoted you quoting Dr. No.

 

[Bear of Bad News]

Sorry....I misquoted you quoting Dr. No.

And when did I say that Bettman was responsible for ESPN dumping the NHL? Be specific.

 

[mfw13]

You didn't. I'm the one who said that Bettman screwed up the TV rights negotiations, which you countered by saying "...and this is largely hyperbole, as well as being false...", thus implying that he was not.

If you also think that Bettman screwed up the TV rights negotiations, then we are on the same side of the argument.

 

[alanschu]

I'm curious, is 80% attendance bad?

 

[Bear of Bad News]

You didn't. I'm the one who said that Bettman screwed up the TV rights negotiations, which you countered by saying "...and this is largely hyperbole, as well as being false...", thus implying that he was not.

I'll give you a hint - your statement I was disagreeing with had multiple parts.

 

[Timmy]

I'm curious, is 80% attendance bad?

It depends on the latitude of the city.

If a traditional market has a crappy team and doesn't sell out, smart fans are punishing bad ownership and management.

If a non-traditional market has a crappy team and doesn't sell out, fans are ignorant and will never embrace the sport at the level required to sustain a franchise.

 

[kdb209]

You guys can nitpick my posts to death if that's what turns you on, but anybody who thinks that the NHL as a whole is better off right now than it was when Bettman took office in 1993 has their head stuck in the sand.

Let's see. Before Bettman, the NHL did not even have a national broadcast deal and hadn't had one since the Peter Puck days of the 70's. Bettman got the Fox deal in '94 and the followup ABC/ESPN deal in '98 which paid 10x what the league was getting from ESPN before Bettman took over. Even just today's OLN deal is five times what the NHL got from ESPN pre Bettman.

http://www.andrewsstarspage.com/NHL-Business/nhl-broadcast.htm

NHL U.S. Broadcast Deals
Network 	Years 	Cost/Year 	Total Cost
SportsChannel 	1989-1991 	$17 million 	$51 million
ESPN 	1993-1998 	$12.5 million 	$75 million
Fox 	1994-1998 	$31 million 	$155 million
ABC/ESPN/ESPN2 	1999-2003 	$120 million 	$600 million
NBC 	2005-2007 	Revenue Sharing 	Revenue Sharing
OLN 	2005-2007 	$67.5 million 	$135 million

In fact, it was the growth of TV revenues under GB as well as the influx of expansion monies that fueled the rampant salary growth and the disparity between the haves and have-nots that led to the lockout.

In fact, Bettman tried to fix those problems in '94 and institute a salary cap back then, but was out voted by the big market teams. The '95 CBA was approved over GB's objections. That was why he had the supermajority clause put into his contract - a 75% majority was required to approve a CBA without GB's OK, and only 50%+1 with GBs approval. He was not going to let 2005 be a repeat of 1995.

 

[mfw13]

Kdb209....thanks for the data, although I think it is incomplete. I distinctly remember watching the 4OT Isles-Caps playoff game on ESPN, and that was back in 1987. However, it may be that at that point in time, ESPN was not paying the NHL anything for broadcast rights.

I agree that Bettman did well in securing the initial ESPN deals, but as you can probably tell, I view the move to OLN/Versus as being a major step backwards because it reduces the number of potential eyeballs exposed to the NHL.

 

[mfw13]

Timmy,

For most teams, leagues, and sports, 80% attendance is just fine. However since NHL teams are heavily dependent on gate attendance to generate revenue (as Kdb206 has shown, teams only get just over $2 million a year from the national TV contract), the 80% barrier is to me the proverbial "canary in the coal mine". When you see teams that have been consistent Stanley Cup contenders, like New Jersey, down below 90% attendance, that tells me that they are headed for 60-70-80% attendance when the team is playing poorly, such as what has happened in Chicago (although a lot of that has to do with Bill Wirtz' poor management), and is in the process of happening in St. Louis. Consider that for most teams, a ten percent drop in attendance reduces their revenues from $3-5 million, which is often the difference between making a profit or losing money.

Making the playoffs is also hugely important financially, as every home playoff game adds approximately another $1 million to revenues.

 

[One Day A Lion]

Kdb209....thanks for the data, although I think it is incomplete. I distinctly remember watching the 4OT Isles-Caps playoff game on ESPN, and that was back in 1987. However, it may be that at that point in time, ESPN was not paying the NHL anything for broadcast rights.

I agree that Bettman did well in securing the initial ESPN deals, but as you can probably tell, I view the move to OLN/Versus as being a major step backwards because it reduces the number of potential eyeballs exposed to the NHL.

Yeah. While OLN/VS may offer more money, many people don't have it and many of the people who do don't know the network exists. At my college here in Virginia, there is no VS so if I want to watch hockey on TV I have 3 options:
1) watch the Comcast SportsNet telecasts of Capitals games and to tell the truth I don't care aobut the Caps and the commentators suck and the boradcasts seem amateurish

2) Wait until the playoffs

3) Wait until I go home for breaks so I can see the FSN telecasts of the Stars (a team I like and the boracast quality is much better) or so that I can actually watch VS.

 

[Nalyd Psycho]

(as Kdb206 has shown, teams only get just over $2 million a year from the national TV contract),

The mistake you're making here is forgetting that the NHL is in two nations. You are also forgetting the NBC deal. Since NHL gets profit sharing with NBC, there is no set amount, but that increases income. And then, as has already been pointed out, revenue for the eclussive broadcast rights on Saturday in Canada is equal to the national deal in the US. Then there is also the deal with TSN which covers weekday games, non exclussively but with first choice. Not sure how much that's worth. Then there is NHL Centre ice, again, not sure how much that is worth.

Not sure how the split is between Canadian and US deals but it works one of three ways.

1. The US deals are split 24 ways not 30 ways.
2. US deals are split 30 ways but Canadian broadcast deals also send revenue to the US
3. US deals are split 24 ways and Canadian broadcast deals send revenue to the US

And then on top of that there is the effect of revenue sharing on the many regional deals, many of which are negociated in bulk packages. (Such as Roger's Sportsnet's deals with Canadian clubs.)

Is the NHL TV deal as good as the NFL's? No. Of course not. But the NHL TV deals are a complex network of deals that are harder for simplistic analysis due to the multi-national nature of the league.

 

[Gnashville]

It would cost appx 150 million to buy out a owner and probably 50 million to the city that loses it franchise plus leagle fees. The league would almost have to contract 2 teams each time to keep the balance in the league.
to contract 2 teams X 200 millon = 400 million divided over 28 teams is 14,285,714.29 per team
to contract 4 teams 800 million divided over 26 teams is 30,769,230.77 per team
to contract 6 teams 1.2 billion over 24 is 50,000,000 per team
It's just not fesible at all to contract any teams.
Plus each time a team is contracted players contract would have to absorbed the top line guys on any contracted team would still demand top dollar so teams payrolls would skyrocket.

Contraction will never happen end of discussion

 

[kdb209]

Kdb209....thanks for the data, although I think it is incomplete. I distinctly remember watching the 4OT Isles-Caps playoff game on ESPN, and that was back in 1987. However, it may be that at that point in time, ESPN was not paying the NHL anything for broadcast rights.

I agree that Bettman did well in securing the initial ESPN deals, but as you can probably tell, I view the move to OLN/Versus as being a major step backwards because it reduces the number of potential eyeballs exposed to the NHL.

Yes, that list was incomplete. ESPN broadcast the NHL from 1985 to 1988 before the debacle of the Sports Channel America deal. Before that there were network deals with NBC and CBS in the 70's and before.

Keep in mind that US national broadcast and cable deals are not and never have been significant sources of NHL revenues and that the US national deals are only a small fraction of total NHL broadcast dollars - even at their peak they were small compared to the total of US cable rights on local RSNs (MSG, Fox Sports Whatever, etc) and the local and national Canadian broadcast/cable deals.

2002-03 numbers from the Levitt Report:

Levitt Report Numbers
 
2002-03 NHL Season
Revenues 	Regular season 	Playoffs 	Total
Gate receipts 	$886 million 	$111 million 	$997 million
Preseason and special games 	$50 million 	$0 million 	$50 million
Broadcasting and new media 	$432 million 	$17 million 	$449 million
In-arena revenues 	$401 million 	$14 million 	$415 million
Other hockey revenues 	$82 million 	$3 million 	$85 million
Total revenues 	$1,851 million 	$145 million 	$1,996 million

Gate receipts accounted for about 50% of revenues, total TV revenues about 22.5%, and luxury boxes/arena advertising another 20%.

This was at the peak of the horribly overpriced ABC/ESPN deal, but the Mouse's $120M/yr accounted for only 27% of total broadcast revenues and only about 6% of total league revenues.

Yup. That Gary Bettman has been a complete disaster. He has just increased revenues almost 3x since he started. Revenues have increased every year except for the lockout and the strike shortened '95 season. And after the lockout, total revenues actually matched/exceeded pre-lockout levels.

Yes, the sky is falling.

http://www.andrewsstarspage.com/NHL-Business/nhl-revenues.htm

NHL Revenues
1993-94 to 2003-04
(Source: NHLPA)
Season 	Revenues 	Teams
1993-94 	$732 million 	26
1994-95* 	$568 million 	26
1995-96 	$936 million 	26
1996-97 	$1.105 billion 	26
1997-98 	$1.141 billion 	26
1998-99 	$1.285 billion 	27
1999-00 	$1.566 billion 	28
2000-01 	$1.769 billion 	30
2001-02 	$1.875 billion 	30
2002-03 	$1.996 billion 	30
2003-04 	$2.083 billion 	30
2005-06** 	$2.178 billion 	30

 

[pitseleh]

It depends on the latitude of the city.

If a traditional market has a crappy team and doesn't sell out, smart fans are punishing bad ownership and management.

If a non-traditional market has a crappy team and doesn't sell out, fans are ignorant and will never embrace the sport at the level required to sustain a franchise.

 

[OG6ix]

I'm curious, is 80% attendance bad?

For the NHL? Yes, for the NBA,NFL,MLB no...

Why? Because the NHL relies on its gate, no gate no revenue. The other leagues have well paying TV rights, the NHL's TV deal gives teams like 2 million dollars or something. That's like an Aki Berg contract. You can add the other extra peanut rights (pepsi, xm radio etc) too if you want, still isn't substantial.

 

[Nalyd Psycho]

2002-03 numbers from the Levitt Report:

Levitt Report Numbers
 
2002-03 NHL Season
Revenues 	Regular season 	Playoffs 	Total
Gate receipts 	$886 million 	$111 million 	$997 million
Preseason and special games 	$50 million 	$0 million 	$50 million
Broadcasting and new media 	$432 million 	$17 million 	$449 million
In-arena revenues 	$401 million 	$14 million 	$415 million
Other hockey revenues 	$82 million 	$3 million 	$85 million
Total revenues 	$1,851 million 	$145 million 	$1,996 million

Gate receipts accounted for about 50% of revenues, total TV revenues about 22.5%, and luxury boxes/arena advertising another 20%.

This was at the peak of the horribly overpriced ABC/ESPN deal, but the Mouse's $120M/yr accounted for only 27% of total broadcast revenues and only about 6% of total league revenues.

Yup. That Gary Bettman has been a complete disaster. He has just increased revenues almost 3x since he started. Revenues have increased every year except for the lockout and the strike shortened '95 season. And after the lockout, total revenues actually matched/exceeded pre-lockout levels.

Where are sponsorship deals and merchandising revenue on that list? Is that included in the other section or one of the other ones?

 

[Jazz]

...I think Seattle falls into Vancouver's market zone. ....

I agree with most of what you say, but I am 99% sure that this is false. The Canucks would welcome a close rival.