- NHL Chief Business Officer Keith Wachtel told CNBC that the league hopes to have its virtual advertisement technology for the 2021-22 season.
- The NHL has worked with a London-based tech firm to develop the virtual ads.
It wasn't easy and most likely will result in hundreds of millions in losses due to Covid-19. Still, the National Hockey League completed its bubble experiment and crowned a champion on Monday.
The NHL awarded its famous Lord Stanley's Cup to the Tampa Bay Lightning after a six-game series with the Dallas Stars. The ratings were down from last year's Boston Bruins-St. Louis Blues series, but viewership aside, league executive Keith Wachtel told CNBC the NHL is positioned to generate additional revenue after its bubble play.
Wachtel, the NHL's chief business officer, said the league would explore in-arena fan engagement experiences with its new 5G partnership with Verizon, including exclusive 4K camera experiences. The NHL will also look to accelerate its in-game virtual signage technology that Wachtel said would be the "biggest game-changer that you can have in sports."
NHL used a mixture of national and local advertisements on its dasher boards to help offset lost game-day revenue, including ticket sales. NHL commissioner Gary Bettman said game-day income makes up 50% of the NHL's annual revenue, which was roughly $5 billion in 2019.
"We missed out on significant revenue from a ticketing standpoint, especially in the playoffs where our games are filled every night," said Wachtel in an interview Wednesday.
Wachtel said bubble crew in Edmonton and Toronto replaced the dasher boards with team-level local sponsorships after each game. He called the ad space "valuable inventory."
Wachtel said the NHL wants to maximize the "signage on a global basis and in individual markets."
Wachtel said the current dasher boards have "limited messaging," and some brand logos are located "in a cluttered environment," which impacts exposure.
After testing what he called the "Digitally Enhanced Dashboard (DED)" at the NHL's All-Star contest in January, Wachtel said the league could be ready to add the virtual banners for the 2021-22 season.
The "perimeter signage" technology allows the NHL to replace physical, in-arena sponsors on the boards with interchangeable virtual ads during telecasts. The NHL invested in London-based company Supponor to develop the ads, which Wachtel said will allow brands to have ownership of what appears.
"You can provide [corporate sponsors] messaging, social media, but you can also provide production elements," Wachtel said. He added the technology would "change the way leagues and marketers look at signage for sports properties."
The challenge of adding the tech is scaling "it for every game, every night and across the world – it's taken a lot of time perfecting it," Wachtel said. "There's a lot that has to be tested and worked through."
The NHL wants the virtual slots to help expand global partnerships, and if effective, it could allow clubs additional sponsorship income. Teams would be able to sell virtual spaces – even for road games – that replace in-arena dasher board ads with "signage specific to the local market," Wachtel said.
"While there is some value to the opponent's signage and those markets, a lot of it is waste," said Wachtel. "That local [advertiser] sponsoring the Pittsburgh Penguins doesn't care about having the signage seen in Columbus, let alone Toronto."
The NHL also incorporated puck and player tracking technology as its bubble play advanced in the postseason. Viewers were able to identify players, track their ice time and game puck speed.
Wachtel said broadcasters "picked their spots" on when to display the analytics as "they wanted to make sure that they didn't intrude on the viewing experience."
Expect the NHL to include the extra stats in the coming seasons. It's another revenue source that can help the league's "hat trick" of partnerships with sports betting operators, including FanDuel.
With sports wagering increasing in the U.S. and the rise of the micro-betting market, the NHL will monetize the player-tracking data via its media rights deal and could add mobile app options, too.
And the NHL wants to develop in-arena augmented reality options to increase fan engagement and draw spectators back post-pandemic. It's here the NHL's partnership with Verizon kicks in as the league needs 5G to add new digital features.
Wachtel didn't get into specifics of the Verizon partnership but said the deal is a "long-term, multiyear" agreement that doesn't exceed 10 years. The telecommunications company will establish its 5G network in NHL arenas.
The NHL is still undecided about how it will proceed with its 2020-21 campaign, leaving its six years of projected labor peace in jeopardy. The league has already decided a repeat bubble will not suffice.
Should the NHL fail to reach a deal with its players' union on how to return next season, it could trigger a force majeure, destroy the current collective bargaining agreement and lead to another lockout.
That set of events could harm any leverage the NHL has entering a new round of media rights negotiations as the league wants to increase its roughly $200 million per year deal with NBC Sports. The current agreement expires after next season.
But should the NHL sustain its labor peace and attract a substantial media deal package that includes its virtual ads, Wachtel said the NHL would be a "stock to buy."
"The business is strong," he said, projecting "a few more multiyear deals in the coming months" and factoring in the Seattle expansion team, the Kraken, that will debut in 2021-22.
On the league's ratings front, the Stanley Cup Finals viewership went from one of the most-watched in 2019 (5.3 million viewers) to roughly 2 million viewers for the Lightning's win. But this year's final did include two non-traditional hockey markets, and all four U.S. major leagues were still in session, which assisted the ratings decline.
"We don't concern ourselves with television ratings right now," Wachtel said. "There is a gluttonous of sports that are going on – most sports are down. We see this year as an outlier, and we continue to grow our ratings year-over-year."
Correction: An earlier version of this article said DraftKings was an NHL partner. The company is FanDuel.
Disclosure: NBC Sports is owned by NBCUniversal, the parent company of CNBC.