Anticipating Another NHL Lockout.

The NHL has returned from it’s incredibly stupid lockout with a shortened 2012-13 schedule, and the fans have come flocking back.

Rather than facing lower attendance and television ratings from supposed hoards of hockey fans angered at the NHL for staging its third lockout in eighteen years, the league enjoyed sellouts and high ratings for its opening weekend.

NBC (which carried NHL games nationally in the United States) reported an overnight rating of 2.0 for last Saturday’s opening day, the highest for regular season NHL coverage (excluding the Winter Classics) in eleven years.

In Canada, CBC’s Hockey Night in Canada saw a record 3.3 million Canadians tune in for the Toronto Maple Leafs-Montreal Canadiens season-opener, the highest for a Leafs-Habs debut since 2007.

The Ottawa Senators-Winnipeg Jets matinee reached 1.5 million viewers, the highest audience for an HNiC afternoon game, while the Anaheim Ducks-Vancouver Canucks tilt later that evening drew 48 percent more viewers than the network’s ‘Prime West’ debut game from last season.

Meanwhile, the first 17 home-openers were sellouts, ranging from traditional hockey markets like Montreal, Philadelphia and Boston to the non-traditional in Tampa Bay, Los Angeles, Florida and Nashville.

If those numbers are anything to go by, concern over post-lockout fan reaction was for naught. The attendance and ratings figures bode well for the league going forward this season, and in the coming years under its new collective bargaining agreement (CBA).

Those numbers are also a reason why I’m anticipating another NHL lockout, possibly before the expiration of this new CBA.

Entering the recent lockout, the team owners were unconcerned about the effect upon its fan base.  Commissioner Gary Bettman chalked it up to the league having “the greatest fans in the world”. Those fans are so devoted to the NHL product, they’re willing to forgive the work stoppages and return in huge numbers.

Should the NHL owners decide to exercise their option in September 2019 and “opt out” of the current CBA, they won’t fear damaging their fan base by doing so. They know the fans will come back, because they always have.

Under this new CBA, the NHL succeeded in achieving a 50-50 split in hockey-related revenue with its players, but it only marginally improved its revenue-sharing plan to aid clubs in struggling, non-traditional markets.

Furthermore, the salary cap remains tied to league revenues. While it will drop to $64.3 million for 2013-14, if league revenue should rise by five percent annually over the course of the CBA, the cap could by Year Eight reach $80.9 million, while the cap floor would reach $62.9 million. By the final year of the CBA, the cap ceiling could reach $89.5 million, the cap floor $66.2 million.

Of course, eight to ten years is a long time, and any number of unforeseen factors could slow revenue growth, in turn slowing the increase of the cap floor and ceiling.

Then again, no one foresaw the annual seven percent increase in revenue over the course of the previous CBA; the final four years of which came in the midst of a massive global recession and the slow recovery of the United States economy, where most NHL teams are located.

A contributing factor to that growth was a strong Canadian dollar, on par with the American dollar for most of the past four years. If it remains that way, the seven Canadian teams will continue to account for roughly forty percent of the league’s revenue. Should another NHL team end up in Canada via relocation or expansion, that’ll provide another substantial boost to league revenue.

The NHL’s lucrative national TV contract with NBC Sports will also be a factor, as will new local television contracts for several American-based NHL clubs. One team is the Washington Capitals, whose owner anticipates a new contract could in a few years turn his team from a receiver of revenue-sharing dollars into a payer.

Should continually rising revenue drive up the salary cap, by Year Eight struggling clubs will once again find it difficult to keep pace, losing more money than they take in to meet the salary obligations to their players.

Another reason to anticipate another NHL lockout is the owners are unlikely to improve labour relations with the players to avoid future work lockouts.

As long as someone like the Boston Bruins’ Jeremy Jacobs (chairman of the NHL Board of Governors) remains among the league’s influential owners, another lockout seems assured.

In a press conference prior to his Bruins’ home-opener on Saturday, Jacobs placed the blame upon the players for the recent lockout.

As per Pat Leonard of the NY Daily News:

“When asked why a deal didn’t get done in time to open the season on Oct. 11, Jacobs said: “You’d really have to ask the other side that.” Then he incorrectly said the new collective bargaining agreement was “pretty much substantially” the same as the NHL’s offer to save an 82-game season made on Oct. 16. 

Jacobs was confronted on his statement that this same deal was on the table in October, at which point he backtracked slightly but in the process called the discrepancies between the offers “peripheral issues.” 

They were not peripheral issues at all.

The league was looking to reduce the upper cap limit to $59.9 million in October and had no ‘make whole’ offer on the table. Instead the ‘make whole’ money was scheduled to come out of player salaries later in their contracts. Issues of unrestricted free agency eligibility, salary arbitration, entry-level deals, and contract variability all were much different and standing in the way of an agreement.

But Jacobs said “there was no expression of desire to make a deal, to move forward” from the union.

“If somebody wanted to make a deal they could have made a deal,” Jacobs said.”

Jacobs then finished up with a parting shot at the players,

I think the players thought they lost before,” Jacobs said of the 2004-05 work stoppage, which ended up growing player revenues in the long run but only after reducing player salaries in the short term – not to mention costing the NHL a full, cancelled season. “I hadn’t recognized it, but they thought they had lost – irrespective of the facts – and I think they probably felt much better about themselves going forward. I think they feel unity and a bond and hopefully they do. And hopefully they move forward with this.”

What Puck Daddy contributor Ryan Lambert took from Jacob’s remarks, and the numbers of fans returning to the NHL post-lockout, is the owners will be emboldened to lock out the players any time they please.

“Make no mistake, Jacobs’ words show the owners’ stance is validated, now and forever. They have always viewed fans as nothing but ATMs with day jobs, and now they’ll never have to stop. This return from the lockout, while fraught with various small-time discounts as a means of mending fences, is nonetheless an opportunity to simply hold their supporters upside down and cut their wallets open like that first shark from Jaws, to see how much they can get to spill out.”

Despite the 50-50 split in revenue, the possible higher escrow payments, and the limitations placed upon salary variance and contract terms, the players will do well by this new CBA.

Meanwhile, money-bleeding franchises will continue struggling to keep up with an ever-increasing salary cap, lacking sufficient funding from revenue sharing to off-set their losses. Their richer peers will remain reluctant to assist them. As a result, the league will once again stage another lockout to extract more concessions from the players, forcing them to carry more of the burden of bailing out the struggling teams, while the gulf between richer and poorer clubs widens.

That’s why I’m contributing to a lockout contingency fund now, in anticipation for the owners inevitable announcement of their next lockout in September 2019, or when the current CBA expires in September 2022. Barring a significant change among those running things on the league side, or radical improvement in labor relations between the owners and players, another lockout appears certain.

3 Comments

  1. I think i’d be more convinced of the attendance if there were still sellouts a month from now. There were 2 non-sellouts opning night and ALL opening night games had heavily discounted tickets throughout the league.
    When those incentives are gone, the attendance 4-6 weeks from now will be more telling than a 1 week sample.

    (Especially with all of the tweeted photographs of empty sections of arenas in Toronto, LA, Miami, etc. already this 1st week.)

    But the fact is, just based on Jacob’s statements, the owners are going to lockout the players next time, too. They are already laying the groundwork – no matter the fan reaction. Arenas could be empty and force a team to relocate – it would only give the owners more impetus to lock out the players and try for a “better deal”.

  2. “That’s why I’m contributing to a lockout contingency fund now,…”

    Lyle,

    Is this something I should be talking with my financial advisor about?

    Anyway, Jacobs won’t be around forever. Maybe they will have some different owners involved next time and it will be more bargaining than hills to die on.

    Cheers,
    Hillybilly

  3. Two games in, I too think that give it a month and see where we are at. I’m not surprised about the tv ratings. I, along with my former season ticket holding friends all said the same thing “I’ll watch on tv, but never again a penny for tickets, concessions, or merchandise.” I saw that many otehrs felt this way from comments on boards during the lockout, so let’s see if it happens. I’d rather give my money to the local bartender and the girls sereving up hot food than the likes of Jacobs any day.