Revenues rising, but NHL has more work to do
TFP Editor-in-Chief David Pagnotta reviews five issues facing
the NHL as it attempts to expand its revenue model.
(TORONTO, ON) -- The NHL may be on a high after
recording its greatest revenue-generated season in
2006-07, but it's still a few years away from basking in
the glory of being a multi-billion-dollar sports league.
Thanks, in large part, to increased ticket prices, not to
mention the dramatic strengthening of the Canadian dollar, the
league saw its revenues slightly increase last year. While
other teams have bumped up their price tags, league-wide
merchandise sales should provide a steady inflow of cash this
season from fans itching to get their gloves on the new Reebok
But a few extra million dollars here and there can only go so
far for a professional sports league.
The NHL still has a number of concerns it needs to address
before it can confidently say its numbers are heading in the
Questions continue to surround the league's national
television contracts and the stability of its current markets.
But these are just two of five important factors facing the
league as it attempts to maximize its revenue potential.
So what needs to be done? How can the league generate a
significantly greater revenue base? I'll tell you...
Get back on ESPN
According to the Sports Business Journal, the NHL has
held preliminary conversations with ESPN about
returning to its secondary network, ESPN2.
It's time to jump back on the national bandwagon, and
CBC and TSN do wonders in Canada providing extensive
coverage across the country, but the amount of
national exposure in the U.S. is less than impressive,
both on a rating scale and a financial one.
national television deal with Versus sees teams earning merely
$2 million each, per year, while it's agreement with NBC enables
both the league and the network to share ad revenues only after
NBC covers its production costs.
In comparison, teams in the National Basketball Association pick
up more than $30 million apiece from national television
coverage, every year.
For the most part, the league has done well in strengthening its
local television coverage. However, Versus can only hit a
limited audience. There's no doubting the fact a return to ESPN
would put the league in front of the everyday American sports
fan, whether he likes it or not.
"ESPN is an institution in the United States that will promote
the game, and we need NHL hockey on in airports and hotels
throughout North America," said agent Ian Pulver, who represents
such players as Scott Gomez and Bryan McCabe [www.pulversports.com].
"The league must get back to ESPN in order to get the message
"Hockey, generally, is a regional sport and the clubs do quite
well with their local TV packages, but ESPN is a national
blueprint for sports in America."
While the NHL appears to have shown an interest in returning to
ESPN, they may face a couple hurdles. Most notably, the league's
deal Versus expires in 2011. Although, sources believe Versus
would be willing to give up its exclusivity if it is given
incentives, primarily cross-promoting its coverage with ESPN.
"I think Versus has done a good job for [the game]," said Scott
Mellanby, former captain of the Atlanta Thrashers who recently
joined CBC as part of its hockey coverage. "Obviously, ESPN is
the best when it comes to sports [in the U.S.] as far as
viewability. That's something the league is going to have to
look at and make their decision."
A return to The Worldwide Leader In Sports should definitely be
a priority for the NHL. While the economics of such a deal are
unknown, the league needs to take in to account the exposure it
receives from being on such a network.
Awareness is everything, and without it, the league will forever
remain in the backseat of the other major sports leagues.
2. Stabilize your markets
recent talk surrounding market stability and whispers of
expansion popping up, the NHL has to ensure its current clubs
are successful in every aspect related to a professional sports
fans coming to the games? Is there local support from
businesses? Are people buying team-related merchandise? Is the
team talked about on local radio shows? Does anyone really give
These, among others questions, have to be answered in order to
ensure the strength of a franchise.
revenue sharing model helps those in need of a handout. The big
market teams pass on a percentage of their profits to the small
market teams in hope of achieving some kind of parity.
For teams like the Carolina Hurricanes, sharing a piece of the
pie has helped. The club has lost more than $130 million over 10
seasons, but financial stability seems to be around the corner.
"There's growth, but we still rely on [NHL] revenue sharing to
run our business," Jim Rutherford, Hurricanes President and GM
told the Raleigh News & Observer earlier this month. "This
franchise, in the next three to five years, has a chance to be
stable and operate on its own."
That's great news for one team, but not every organization is
experiencing the same success.
After almost selling out their home opener, the Atlanta
Thrashers' next two home games saw a 68-percent and 83-percent
turnout, respectively. In Florida, where they actually sold out
their opener, the Panthers witnessed their attendance drop
significantly to 56.3-percent in their second home game and then
rise back up to 82-percent in the third.
And in Nashville, where fan support is supposed to be alive and
vibrant, after recording a 93.5-percent crowd in their opener,
the team has yet to crack the 76-percent capacity barrier
following three more games on home ice.
"Before they run to new markets, the league needs to make some
real hard decisions with respect to the markets that they are
in," stated Pulver. "The salary cap was supposed to solve all
problems in the 30 markets that they are currently located.
"Gary Bettman, as part of the [collective bargaining]
negotiation, insisted that a salary cap will make sure that all
30 teams are healthy, strong and viable. They still have
persistent issues and problems in some of their Sunbelt markets
that they need to clean up before they determine whether they
should expand or not. It could be a possible relocation that's
in order; one or two of them before expansion.
"In order for the game to grow, they need to be in the right
markets. It's one thing to run around and sell teams for
expansion, and increase the size of the league, but if their 30
houses aren't in order, they should be very careful."
Granted, not every market is perfect. But the Hurricanes have
found a way to connect with their fans and encompass a local
vibe into the experience of attending a hockey game.
Winning certainly plays a giant role in the success of a
franchise, but teams must explore innovative methods of
attracting fans. For whatever the reason, the Thrashers and
Panthers haven't been able to effectively connect with their
community, and that's causing a lot of concern around the hockey
market can't be Toronto," Mellanby said. "There's teams in
baseball and teams in football that struggle more than others to
have success and to make money and to be a big draw. There's
always going to be some markets that have got to be worked on."
The Hurricanes were a work in progress, but they're on the
up-and-up. The Buffalo Sabres managed to avoid hard times back
in 2002-03 and reestablish themselves as a successful franchise.
Now, the focus is on the Predators, Panthers and Thrashers, and
if these organizations fail to improve from a fan-related
standpoint, relocation must be seriously considered.
"Nashville, with the team they've had, they have to draw
better," explained Los Angeles Kings television color
commentator Jim Fox. "Atlanta, in the next two- or three-years,
has to do something. They've got to make the playoffs, and if
that happens and there's no reaction to that as far as increased
attendance, you've got to consider [relocating them]."
I'm not saying teams like Nashville and Florida should give up
and move out -- although, Jim Balsillie is knocking on the
Predators' door again -- but if they continue to falter, the
league has no other choice but to sincerely contemplate the
prospect of relocation. And Kansas City isn't their only option.
"I didn't believe it before, because of economies," said Fox. "I
didn't think the NHL would look to go back to Canada, but now I
would say it might be a viable option.
"Now, the [Canadian] teams with their dollar can be competitive.
They were playing at a disadvantage [when the Canadian dollar
Added Pulver, "Wherever these teams end up going [should they
move], the bottom line is if there's not enough corporate
dollars in the community, combined with smart management running
the team and a successful product on the ice, whether you have a
salary cap or not, they're not going to do well."
3. Utilize your biggest asset: The athletes
Hockey players are arguably one of the most modest athletes
you'll ever come across and connecting them with the sport's fan
base is a no-brainer.
Following the lockout, the league came out with a shaky "My NHL"
ad campaign that left many scratching their heads. Last season,
they finally got it right with their "NHL players are just like
you and me - plus they're really good at hockey" campaign.
The league came out with a few television commercials featuring
Vincent Lecavalier and Brad Richards fighting over a video game,
Daniel and Henrik Sedin (Swedish Twins) invited to an all-guys
poker game, Joe Thornton having difficulties buttering his
toast, and a number of players causing ruckus at a hotel.
Hopefully, last year's creativity is a sign of things to come as
the league needs to build on that performance, especially across
the United States.
in general is one thing. Where the work needs to be done is in
the States," explained Hurricanes defenseman Mike Commodore. "In
order to help sell the game and get people in the stands, to
know the team is one thing, but you need to get some of your
players out there. For us, it's Eric Staal and Cam Ward; the
top-end players on our team, the guys with character. People
have got to get to know them on a league-wide basis."
Added Maple Leafs star Bryan McCabe, "Promotions are a big part
of our revenues. We've got to work jointly to put everyone's
face out there. We [the Leafs] are fortunate to be in a market
where people live and die for hockey here, but other markets
aren't like that. Down in Florida, they might have to do a
better job in marketing their young players."
Understanding that it takes a hefty amount of money to promote
anything these days, the league, as a whole, needs to step up
and keep the ball rolling in the right direction. Teams need to
dip into the pockets and take responsibility for their own
marketing. You cannot expect people to be interested in
something when they aren't aware of the product.
"In Atlanta, I didn't see enough Marian Hossa. I didn't see
enough [Ilya] Kovalchuk and [Kari] Lehtonen out there whether it
be billboards or stores," said Mellanby. "I think [the NHL] can
do a better job regionally and locally. But there's only so much
money in the pie that gets divided up and sometimes those
dollars just aren't there."
The NBA has done an excellent job selling its players to a
worldwide audience. More than a quarter of their $3 billion in
merchandise revenue last year came from outside the United
States. As the NHL moves forward in its third post-lockout
season, utilizing its athletes to connect to people across the
globe is essential.
"Connecting with the fans and potential fans is critical in the
evolution of the game," said Pulver.
Which leads us to...
4. Maximize the global market
I'm not trying to suggest starting up EuroNHL is necessary -- or
a good idea -- but being able to properly penetrate a foreign
market is vital when it comes to the overall growth of
After starting the 2007-08 season in London, England, the league
plans on opening the 2008-09 campaign in Prague, Czech Republic,
and there's already speculation the NHL will kick off 2009-10 in
think it's a good idea," said Pittsburgh Penguins phenom Sidney
Crosby. "It's obviously great for the fans, and for players it
would be a great experience. Two games as players, it's fine.
It's not like you're over there for a month. You're over there
for a week. It's a great opportunity for everyone."
While Sid the Kid is bang on, he does raise a very pressing
issue. If the league spends a week and opens its season
overseas, what happens afterwards?
"It can only be measured by market penetration," Pulver
explained. "If it's about going to play an opening game in
London, and 20,000 people come and leave and no one talks about
it anymore, it's a one-time spectacle. . . and we can all feel
good that we opened our season in Europe.
"If it's about driving and penetrating the European market and
connecting the players and the teams worldwide on a constant
basis, then the answer [to start the year in Europe] is yes.
But, one time shots and one time spectacles? What's the point if
nothing else is done about it?"
There's nothing wrong with ushering in a new year in a
hockey-crazed European city like Prague or Helsinki, Finland.
The NBA took four teams on an exhibition tournament throughout
Europe [NBA Europe Live] in an attempt to spread awareness
across a growing demographic. After visiting six cities in
twelve days, the league left behind hype and increased
enthusiasm that will translate into higher merchandise sales,
greater traffic to NBA.com and an overall excitement about the
"The main idea with it is to create a bigger fan base in Europe,
and have them enjoy the game like we do over here," said Maple
Leafs forward Alexander Steen. "I think it's a cool idea. I know
people in Sweden or Prague or Finland would love to have NHL
games come to their cities and open the season there. I think it
does create a lot of interest, wherever they would go."
The NHL, whom many argue has much higher fan support in Europe
than the NBA, needs to take advantage of their 'across the pond'
faithful and drive the league directly in their faces.
"It's like advertising," explained Mellanby. "Why does Coca-Cola
need to advertise? Because you do it to get your brand out
there. It is important to promote your product."
Forget about expanding to Europe, although that could be a
reality in 10 years once their current markets are stable. Start
slow, generate a buzz and watch the fans show their support by
purchasing apparel and increasing the traffic at NHL.com.
5. Viva Las Vegas?
back to expansion, if the league does decide to add two new
teams [and many believe it will happen within the next three- to
five-years], one of the markets it is supposedly very interested
in is Las Vegas.
In August, Harrah's Entertainment Inc. announced that it will
partner with AEG, a wholly owned subsidiary of the Anschutz
Company, to build a 20,000-seat arena in Las Vegas.
The $500 million arena will be located behind the Bally's and
Paris hotel-casinos on the Las Vegas Strip. Harrah's spokesman
Alberto Lopez confirmed that the building will crack group in
mid-2008 and is projected to open in October 2010.
While being the first of the major professional sports leagues
to come to Vegas is an exciting prospect, the NHL will have to
do measured research to see if the community will support it.
Casinos may want to purchase tickets as offer them to their
customers, but if people fail to show up, it will not look good
on the league.
"You'll need to do extensive research to determine whether
people want to go watch the Las Vegas NHL team play the
Nashville Predators when Garth Brooks is giving a concert or
Criss Angel is putting on a performance," Pulver explained.
"Will people flying to Vegas, from the hours of 7-10 at night,
pass on dinner, pass on a performance, to go see the Las Vegas
team play the Calgary Flames?"
There's no doubting the amount of people coming in and out of
Vegas on a daily basis will factor in to any decision, but will
they stay in the seats? In order for the league to succeed in
Nevada, they must make certain of corporate support. How
creative a Las Vegas NHL franchise gets will dictate how well
they perform in the public eye.
"The last thing in the world that the NHL can afford is to go to
Vegas and for it to be a bust," said Pulver. "If the NHL does
not survive in Las Vegas, that will not be good for the
blueprint going forward for the NHL.
"If they're the first to Vegas and Vegas works, it will be a
great move for the sport and the game. If they're the first to
Vegas and Vegas doesn't work, it will not be good for the game
and its future. If you bust in Vegas, it's not a good move. If
they go to Vegas, they better be right!"
The NHL is on the right track in terms of expanding its revenues
and creating greater awareness, but there is still a lot of work
that needs to be done.
Returning to ESPN is a must if the league wants to be front and
center in the eyes of the American sports fan, and utilizing its
players to connect with the everyday fan worldwide is extremely
With or without Las Vegas, if the league does not have 30 [or
32] strong, vibrant markets, the NHL will forever be surrounded
by question marks.
"The fact that the Edmonton Oilers are a revenue-share provider,
and considered a big market in the National Hockey League...
that doesn’t make sense to me," Pulver exclaimed. "The Edmonton
Oilers are a small market who should forever receive money in
any professional sports league. When the Edmonton Oilers become
a revenue-share recipient for the right reasons, that will be a
signal that the league is headed in the right direction."
David Pagnotta is the Editor-in-Chief of The Fourth Period
Magazine and covers the Toronto Maple Leafs and the NHL for
TheFourthPeriod.com. He is also a contributing writer for