The 2008 All Star Game in Atlanta
The NHL is on pace for another record season in terms of overall revenue, ticket sales, average attendance, and TV ratings (the last since the lockout). The economy has reached new lows and every expert is forecasting hard times for the sports industry. How much danger is our sport in? A little, I think.
First, lets take a look at the Hockey Related Revenues of the past decade (click to enlarge. NOTE: the pre-lockout revenues are totals of team revenues, thus making them estimate/ballpark figures. Exact figures were not available to me):
Since the lockout, the NHL's revenue has grown just over 16% to about $2.6 Billion. Everyone has heard Commissioner Bettman's projections for this year, starting at definite growth to recent reports indicating flat or slight loss of revenue. In this economy, staying at a flat rate around the current $2.6 Billion would definitely be a great accomplishment. If the league comes through with a 1% growth as I have projected, it would be another added success for the league. But, until the economy recovers (which may take 3-5 years), I do not see the NHL growing more than 1-2% in terms of revenue per year. At the same time, if the NHL were to flatten or drop in revenue for the next couple of seasons, it wouldn't surprise me the least because I think the NHL is reaching a business peak either now or in the near future.
Why do I think this? As it says right on the homepage of this site, 43% of the leagues revenue in 2007-2008 came from ticket sales. The NHL is a gate-driven league, and I don't think anyone is in a position to argue against this. Take a look at the NHL average attendance over the years (click to enlarge):
The league average attendance is at an all-time high, and if the pace continues for the rest of this season, the league will set a new record along with most likely passing the NBA in average attendance. But, say the season ended yesterday and the 17,338 average stood for this season. The NHL does not have much room to move to expand in terms of attendance, as the average capacity in the NHL is 18,446 (take average of NHL Arena capacities). Thus, unless teams are selling over 100% capacity (which some do), the NHL average attendance cannot go any higher than 18,446.
So, what can the NHL do to continue/keep its growth and revenue going? There are simple and raw ideas everywhere such as relocation, contraction, expansion, and taking a cut to get back on ESPN. I have three keys that I think will keep the financial stability of the league up along with possibly fueling the league for future growth when the economy turns around.
- Be Very Cautious with the Salary Cap
Just google something about bad or worst sports contracts and you will get millions of opinions on the worst ones ever signed or how huge deals are killing sports. As a Ranger fan, I cringed when I heard the amount Wade Redden got this summer. The economy slow down which is no doubt having an influence on the cap might be the best thing for it, as a couple of seasons of the cap staying flat or dipping probably wouldn't be the worst thing to happen to the league. At the same time, don't get me wrong, a top NHL player making $7 Million a year compared to Manny Ramirez making over $20 Million a year isn't fair. But you have to consider the economies at scale.
- Get Creative with Television
Look, the NHL on TV is like a marriage for business purposes. Of course it helps and the relationship is OK, but everything is not there. I do not have any magic answers, I just wish the NHL would get creative and serious in exploring their options for broadcasting the league.
- The Obvious, Fix Two Franchises A.S.A.P.
In general, I think the league is looking up and is in good position to deal with the economic struggles. I see no real reason as to why playoff ticket sales will struggle (besides the markets being in the toilet), as many fans save up for this certain time of year. Bettman and company are saying the playoff tickets will be an indicator for next season. I somewhat agree with this, but retaining current season ticket holders will be an even bigger indicator. If many teams do not reach a flat level of retention, the NHL could experience its first drop in average attendance in three years.
Attendance: Andrew's Stars Page
Revenues: Andrew's, Daniel Tolensky
TV Ratings: Andrew's