Owners: we don’t want to share, so could you give us more please?

I said awhile back that if Bettman is telling the truth and the league is in financial trouble despite record revenues, then he’s incompetent and has to go, and if he’s lying and it’s just a cash-grab, he’s corrupt and has to go. Here’s a nice break-down of what’s behind the lock-out, from Time Magazine.

Time: Hockey’s wealth redistribution problem

You may not have noticed that the NHL hasn’t started its season yet, which is arguably Problem #1 for the wannabe major league: Ice hockey is fourth in a three-horse race of  pro team sports […]. Problem #1A is the lockout […], which has resulted in the cancellation of nearly 550 regular-season games to date. […]

The NHL would like you to believe that owners give too much money to players. That was management’s position almost a decade ago […] when players were getting three-quarters of total revenues. After an entire season was voided, the NHL Players Association [agreed] to lower its members’ share of revenue to 57%. [Now] the owners want an even bigger piece of the pie, claiming financial hardship.

Don’t believe them, not for a minute. First, […] sports team accounting is misleading at best, given that club owners can claim to be losing money when a) the losses are on paper only; b) there are tax benefits from whatever losses happen to be real; and c) the value of their teams continue to rise.

The average NHL team, according to Forbes, is worth $282 million, an 18% increase from one year ago. It’s true, certainly, that sky-high values for a handful of mega-successful teams […] raise the overall average, […] but it’s also true that $282 million is higher than the price tag Forbes placed on the most valuable team in the league just a decade ago […]. And the average value for the bottom five teams today ($145 million) is […] higher than the price tag for […] half the league’s team in 2002. Few teams have struggled financially […] as much as the Coyotes, […] and yet their valuation over the past decade has increased 69% […].

Businesses don’t increase in value if the underlying model isn’t sound.

[However,] there’s a strong argument […] that there are too many NHL teams, or at least too many in places where ice hockey is not exactly a native sport. i.e., the American South. This is the fault of NHL commissioner Gary Bettman, long a champion of NHL expansion. But hockey in the U.S. is not a national sport; it’s a collection of regional enthusiasms […]. More to the point, contraction might not be necessary if NHL owners would only grow up. The problem in hockey […] is that NHL owners don’t share enough of their own money with each other. […] NHL teams […] share a far tinier proportion of their revenues than teams in other sports do, because NHL clubs rely much more on local media deals for money than on national TV contracts. […] So big-market teams, with lots of local TV money, spend more on player salaries, forcing small-market owners to choose between paying their players more than they can afford or putting a subpar product on the ice. […]

This has long been a problem […] for all major sport leagues. [The] way mature owners and strong commissioners have to deal with this imbalance is to share revenues between teams. [This] allows all teams to be competitive, ensuring a consistent and popular product. […] It’s not a coincidence that the most successful North American sports league also has the most rational approach to revenue sharing. Some 60% of the NFL’s $11 billion revenue pie is shared, which is why tiny Green Bay, Wisconsin can compete with big bad New York or Chicago. […]

The NHL, meanwhile, has been sharing 4.5% of its $3.3 billion revenue (with not much more on the table in current talks.)

So greed is the issue, [the greed of] owners in larger markets who refuse to recognize that sports leagues are in many ways socialist enterprises, in which the needs of the many fat cats should outweigh the few obese cats. […]

And all NHL owners would be wise to recognize their own culpability ASAP, [because the] NHL […] faces something none of the other major sports do: Russia’s KHL, an aggressive and surly rival league that has long resented how many European players in general and Russians in particular choose to play in North America […]. The KHL’s finances, like most things Russian, are a little murky, so it’s hard to know if the league could seriously compete with the NHL […]. But a surprisingly large number of iced NHLers are now playing in the KHL while they wait out the lockout, including a lot of North Americans.

You have to worry that at some point many will simply decide to stay for the long haul.


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