Will Hockey Survive Another Player-Owner Face-Off?
Senior Editor, CNBC
With the passing of the self imposed deadline for the National Hockey League to reach an agreement with players — and putting the full 82 game schedule in doubt — the question is how will the NHL survive another labor cross-check.
At least one expert said there's little question the sport's fourth lockout in 20 years will leave long-lasting damage.
"I think it's devastating to the league, the players and the fan base," said Mark Conrad, associate professor and director of sports specialization at Fordham University. "It took a long time to recover from the last lockout (2004-2005 season) and this one seems worse."
The current lockout began in September with the expiration of the labor agreement. Negotiations between the National Hockey League Players' Association (NHPLA) and league owners have broken down.
The most recent deadline passed on Thursday. The impasse left all preseason games canceled and now some 135 hockey games up to Nov. 1 have been canceled. (update: The NHL said on Friday that it has canceled all games through November 30— losing some 326 regular-season games so far.)
Now, the rest of the season hangs in the balance. (Read More: Obama Says Settle Dispute)
There are several contentious labor issues — including terms of player's contracts and years needed before a player can file for free agency. But the biggest stumbling block has been agreement on the amount of revenue share to be distributed to players.
Owners want the prior amount of 57 percent for the players cut to 46 percent. The NHPLA recently countered with a 50-50 split, but the owners and league president Gary Bettman have rejected it.
The NHPLA says a lower percentage of revenue split would mean lower salaries for players, and they've already taken a 24 percent pay cut with the previous labor agreement.
"Players want revenue sharing and owners want to cut costs," said Robert Boland, professor of Sports Management and Sports Business at New York University. "The problem for the owners is that there's not enough national revenue because of the small market teams, like Nashville. The bigger market and more successful teams don't want to underwrite those smaller teams."
The NHL, with 30 teams in Canada and the U.S., had record revenues in the 2010-2011 season of $3.3 billion. It was the fifth-straight season of revenue growth, according to Plunkett Research. But some 16 teams reportedly lost money during the season.
Meanwhile, NHL players had the third-highest salaries of the four major sports leagues — with an average salary of $2.4 million.
As revenues and salaries increased in the last four years, more fans flocked to the sport. On NHL.com, unique visitors increased 25 percent in the 2010-2011, and video starts more than doubled, up 128 percent, according to the NHL. Gross sales at Shop.NHL.com were up 12 percent, including its second-highest grossing day ever, the day after Thanksgiving in 2010—with a 153 percent increase over 2009.
"The last three or four years were great for the NHL," said Boland, pointing to the television deal with Comcast and NBC as a major source of revenue.*
"The league used team expansion to get TV exposure and gave them a national presence. And the NHL had some momentum after the 2010 Vancouver Olympics. Now that momentum is gone," Boland said.
But while the lockout is putting a deep freeze on players and owners — and the related businesses that help support them — not every expert sees an end to the league even if the entire season is canceled.
"Will the current lockout put the NHL out of existence? The short answer is no. Lockouts in sports have become pretty much standard operating procedure," said Exavier Pope, an entertainment and sports attorney and principal owner of The Pope Firm.
"The constant 24/7 coverage through the media helped the NBA and NFL during their lockouts keep fans interested and actually helped increase revenues when the lockouts ended, " said Pope. "The NHL is more or less banking on the same thing."
What fans are banking on right now are other ways to get their hockey fix, said Erica Sandberg, a personal finance author and hockey enthusiast who just started playing the sport.
"Frustration about NHL lockout is the buzz, but something good has come of it: a serious appreciation for the teams that are playing," said Sandberg, who lives in San Francisco. "The SF Bulls (a minor league team affiliated with the NHL's San Jose Sharks) are rolled out this year and they are generating so much redirected excitement."
So far, the canceled games have resulted in approximately $100 million in lost revenue for the teams. Cities — with businesses like hotels, restaurants and bars around hockey arenas — are losing, too. Officials in Pittsburgh, home to the Penguins, said it's costing the city $2.2 million in revenues for every game canceled. (Read more: Lockout Icing Business)
And as the lockout continues, both sides risk doing serious damage to themselves and the sport, said Boland.
"If there's a full season canceled, a generation of players could be lost by not playing. Foreign players may say there's no reason to play in the U.S. with all these lockouts," Boland said. "Owners could end up losing a franchise or two because of this. Fans would probably come back when this finally ends, but it will likely take a long time for the NHL to get back to where it is now."
*CNBC is part of NBC Universal, which is majority owned by Comcast.
—by Mark Koba