Revenues rising, but NHL has more work to do
Here's how can league generate a significantly greater revenue base
OPINION
By David Pagnotta
msnbc.com contributor
updated 12:01 a.m. ET Oct. 19, 2007
TORONTO - 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 jerseys.
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 right direction.
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...
1. 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.
Halleluiah!
It's time to jump back on the national bandwagon, and fast.
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.
The league's 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 out.
"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
With the 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 organization.
Are 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 a crap?
These, among others questions, have to be answered in order to ensure the strength of a franchise.
The NHL's 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 world.
"Every 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 was low]."
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."
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