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"Fear and loathing in Leafs Nation"
Bath, UK, YT • United Kingdom • 28 Years Old • Male
Just six months ago many a grapevine was carrying rumor of NHL expansion while I lamented the integrity of a revenue bound salary cap. Even into the new season few had foreseen the sheer gravity of the global economic downturn and its impact on jobs, housing, businesses and every facet of life down to sport. Now as international markets stutter into a depression that many an analyst believe could change the face of modern capitalism forever, the NHL seems to remain steadfast in addressing it’s minor successes as opposed to it’s crippling and potentially devastating financial model.

Last year saw league revenue growth of 12% forcing the salary cap up to $56.7 million and the salary floor to $40.7 million. Increases in attendance through October 2008 and upturns in market growth in towns such as Chicago seemed to suggest the NHL was back on track and bucking the ferocity of the economic climate. However with liberal projections putting revenue growth for this season at 1%, it’s clear that the NHL sans a major TV carrier is in dire straights.

Still if you thought the hockey was exciting this year, the off season should be even better. With eight teams within $1 million of the cap limit as well as countless promising talents all heading out of entry level contracts, any decrease or stagnation in the salary cap could cause chaos regarding contracts with an outlook of continued league revenue losses for years to come. Playing it safe would be one negotiating tactic on any long term contracts for those with cap space but spare a thought for the likes of Anaheim, Montreal, Detroit, Chicago, Dallas, Pittsburgh and Boston all of whom find themselves within half a million of the current ceiling. These teams and their GM’s are going to find the summer of 2009 extremely trying as they attempt to secure as much of their roster as is physically possible. Logic dictates that player wavering and contract buyouts will be common place with strong market franchises with cap room such as Toronto, Los Angeles, Buffalo, Vancouver, Colorado and Ottawa all likely to benefit from a healthy selection of free agents as well as trading block steals.

While the eight pressed to the cap limit will struggle to maintain their competitiveness through 2009-’10 they are all beneficiaries of strong followings and sensible management that will find a way to persevere as the gap between themselves and the likes of Ottawa close up and fiscal climbs worsen. For the teams in unfashionable markets, Bettman’s sunbelt footstep, the outlook is of greater concern. Of the nine teams currently exceeding the average remaining cap space, a still worryingly low $3.8 million, seven of them can be traced to American markets that have failed to buy into the NHL the way Bettman had envisioned. While a lowering in the cap limit would obviously lower the floor, many of the minority market teams were struggling to remain viable when the cap floor was at $25 million and will be unable to benefit from the cap pushing at the top like a Toronto can. Subsequently the likes of Atlanta, Nashville, Phoenix and Florida will stay uncompetitive and unattractive whilst much of the rest of the league gains parity.

It’s becoming clear that under the current financial climate the NHL will struggle to continue with 30 franchises if a major American TV deal, the saving grace of the NBA, NFL and MLB, cannot be secured. This is becoming a particularly touchy subject when held in context of the revenue sharing pool drawn into the CBA. With bottom feeding franchises unable to fill seats, the NHL’s primary source of revenue, it’s come unto the most successful franchises to effectively bailout teams operating at great losses. These escalating losses are now compounding the blips big market teams are experiencing, forcing league wide growth down and hampering the product more successful teams can ice as they contend with a revenue tied salary cap being driven down by the very same unmarketable franchises they are floating. While small market teams would be keen to reopen the CBA in an attempt to increase the revenue sharing pool bound to playoff profit from 9% to the 25% seen in the TV funded NFL, the NHLPA who have the option to re-open CBA negotiations are unlikely to do so at an economic nexus where owners will want to lower the players 56% cut in profits. Subsequently with the CBA probably locked up until the mandated reassessment in 2011 or 2012, league revenues are now trapped in a spiral as the economic downturn grips the leagues poorest-hardest and the collapse of the Canadian Dollar drives revenues lower still.

Little wonder then that talk of contracting and relocation has gained an audience. With the William Del Biaggio fiasco still running the Nashville Predators name through the dirt and tying up ownership issues, not to mention $62 million of investment, in bankruptcy court, Nashville is a poster boy for failing southern franchises. Elsewhere Phoenix are hemorrhaging money at an alarming rate and Atlanta are managing to reach just 70% of ticket sales with some games seeing less than 10,000 heads through the Phillips Arena doors. In Florida both franchises are struggling with the Florida Panthers recently announcing staff redundancies while Tampa Bay’s new management team of Oren Kroules and Len Barrie are negotiating a bailout on their next payment to the arena owning Palace Sports, a deal that could involve former owner Bill Davidson.

And the fun doesn’t stop in the south. In the NHL’s most geographically dense Atlantic division the Islanders are waiting on a deal to secure a new arena on Long Island with negotiations crawling to a halt and New Jerseys brand new Prudential Center arena is rarely near capacity as the Devils ownership battle Newark city council over utility bills. Even Detroit are having to put together low priced packages to get punters in the door as Hockeytown succumbs to the crash of the US motor industry and countless others in St. Louis, Columbus, and Carolina are relying on ticket packages to maintain market presence.

With Research in Motion’s co-CEO Jim Balsillie casting a long shadow over the NHL’s struggling franchises, one wonders how long it will be before a Southern team finds itself uprooted to the hockey friendly surrounds of Hamilton, Ontario. Hardballed in the past by an NHL committee who has little time for the way Balsillie has gone about his business, particularly the selling of season tickets for a Hamilton team conceived by a verbal agreement to invest in the Predators, Bettman is determined to keep all thirty teams in their current markets. However where the recent Winter Classic between Chicago and Detroit proved a marketing coup for traditional American hockey cities, a Winter Classic staging between Phoenix and Florida is unimaginable. So has the NHL come to its senses in regards to where hockey sells? If it has, expect protests from the Maple Leafs ownership group keen to maintain their TV monopoly to fall on deaf ears.

Nevertheless Balsille’s slew footing into The Hockey News top 10 people of power and influence is just one man, one savior for one struggling team. With the current economic climate likely to worsen and persist for some time a number of franchises are going to require substantial cash injections or relocation and as Quebec and Winnipeg proved; even Canada can sustain only so many teams. So is contraction a very real possibility? While the idea may be unpalatable, theory suggests the NHL is already over subscribed with a US market far hungrier for grass and hard-court sports and a talent pool that is stretched to breaking point. Removing red ink from unmarketable franchises in the revenue pool would prove a vote winner with bigger clubs and the relocation of teams to money spinning towns could bolster league coffers and reboot the salary cap.

This may all seem like rhetoric but the league has one eye on Russia and the KHL. While the NHL is bound to a salary cap drawn to league revenue, the KHL is a free market. If the salary cap continues to fall under the burden of weak franchises the NHL is going to see an increasing number of star names, particularly veterans whose cap hit cannot be waivered, defect to the still monetarily secure upper echelons of the KHL. This will leave the NHL filling roster space with none elite, low cap players and the overall integrity of the league as the worlds greatest will be lost. Bettman may want to keep his American footprint alive but as a businessman he has to realize that the current financial model he is peddling is failing and will continue to fail in the face of money leagues such as the Kontinental Hockey League. So will teams relocate and contract? As more and more avenues of salvation are exhausted at the nose end of a dramatic economic downturn don’t be surprised if the league starts to have a change of heart.
Filed Under:   Recession   NHL   Sunbelt  
January 4, 2009 6:26 PM ET | Delete
i am a nashville predators fan and love hockey but i must agree that we cannot get enough fans out every night to maintain a hockey team i blame part of this on the tennessee titans who came here just a year after the preds and took a lot of money that could have went to the preds i hate football because of this and maybe someday the people around here will give the preds the time of day before it is too late. go preds and i hope the ravens sqash the titans so people will spend some money on the preds maybe if poile will make a move to help us out on scoring and get rid of some of the losers like legwand who is wayyyyyyyyyyyyyyyyyyyyyyyyyyyyy over payed. i love the preds and hokcey but we need a real gm and coach and maybe a single owner who will invest in nashville one more time and give a chance to our kids to grow up hockey fans and not just red neck football fans. go preds love ya go weber best young defenseman overlooked by most.
January 4, 2009 7:34 PM ET | Delete
A great article here. Although Russia sometimes hands out money like candy they seem to have some very sketchy operations. I've heard that amalgemation is a possibility with some of the weaker revenue teams. I think another team in TO could work especially since the whole Buffalo Bills deal seems to be going down the toilet. One other hockey market in Canada would be nice but it's really hard to say where. There really seems to be very little many teams can do with the subtraction to the cap except waive or trade players for weak returns. I would like to see a 26 or 28 team league. I imagine if the 4 worst players on every team were gone, that would really improve the product on the ice. Just some of my thoughts
January 4, 2009 7:37 PM ET | Delete
Wow, I should have proofread that last post
January 4, 2009 8:37 PM ET | Delete
Excellent blog. I've been saying the same thing for a while, but have not seen all the facts and information you wrote about. Good job... and we can only hope Bettman cuts the league down to 24 teams before half the league fails and we are left with 12. Unfortunately, it's going to get to that point and it's not all that far off.
January 4, 2009 10:26 PM ET | Delete
With the collapse of oil demand due to the worldwide economic downturn and the resulting lower oil prices, oil revenues in Russia are way down and that economy is being affected as dramatically as the rest of the developed world. The KHL is unlikely to be as well-funded across the board as many feared.If the option is contraction that will lose roster spots for hundreds of players, does the NHLPA decide to reopen? Is it better in their eyes to maintain the 30 franchises, with everyone earning less or to find a way to bolster the salaries of fewer players by allowing contraction and maintaining the 56% cap?
January 5, 2009 11:09 AM ET | Delete
Bryjes: Nashville's problems are profound and resultant of the Del Biaggio farce that has left the ownership tied up in courts as opposed to the business of running a franchise, how it pans out is anyones guess. While I don't personally care for Bettman's attempts at spreading hockey into markets without a grass roots culture for the game I understand that there are passionate fans such as yourself out there, perhaps more so of Nashville, and that talk of your club relocating must be dreadful. In the end bad business acumen could be the slow long death crawl and it would be a shame because the Preds' are perhaps the most consistent team on the ice of those in trouble.Bcoop: the Leafs don't want another team in Ontario, save Toronto, that is not likely to happy because the NHL understands it has to protect its real blue chip franchises and the Leafs management have been particularly unhappy with Balsille's moves to put a franchise in Hamilton because of its effect on the Leafs TV monopoly. I would like to see a team in Winnipeg and Hamilton, I think two is just about as far as it would stretch, it would allow for conference reshuffling which is a need when you consider that Detroit and Columbus are playing out in the west, of course that would require winding up a couple of franchises as well and as you say that would allow for a better quality of player whilst also shifting the lead stone debt from the bottom of the NHL's revenues sheet.Plots4: I couldn't see the league collapse to 12, more likely Bettman tries to hang onto all thirty and they naturally drop off to 24-26, with all the debt taken away from the bottom of the league and the talent pool improved the product would ameliorate and a TV company could even come sniffing, if that happens the league is revived, at the moment the bottom feeders are running the league into the ground.Bodiva88: I don't think the KHL would require cross the board funding, it only requires an Ufa or Omsk to come through relatively unscathed to try and build a wonder squad akin to the New York Cosmos and take some of the NHL's elder statesmen. I don't think the KHL could supersede the NHL but if you start taking away prestige players struggling to acquire contracts as a none cap waiverable veteran and the shine begins to come away. Your second point is one avenue I didn't consider, if the league were forced into contraction then the NHLPA may consider reopening the CBA however with owners looking to slash the 56% cut and lesser GM's looking to increase the percentage of the revenue pool it all leads to one inevitable thing... another lockout with many players going to the KHL not the end of the NHL but embarrassing nonetheless.
January 5, 2009 11:15 AM ET | Delete
Very good take...I do think you overstate the impact the KHL is having/will have... there are teams not making payroll and the oil money the league was based on has dried up a bit...The economic uncertainty may have an opposite impact than you predict. The contraction will happen... simply in payroll... I don't expect a huge impact in the '09-'10 season, the cap mmay drop slightly... where it will hit is in the '10-'11, and team's that are in the bottom parts of the cap range will be well positioned to take advantage of talent that would've gone for higher prices.This may add to parity... not take away from it...
January 5, 2009 1:38 PM ET | Delete
Protecting a blue chip organization is one thing but capitalizing on demand is another. I wouldn't imagine the Leafs would like another team in Toronto but it seems two teams can work in major markets Clippers/Lakers, Jets/Giants, Cubs/WhiteSox, Yankees/Mets. I think the reason that Hamilton won't end up with a team is the affect that it will have on Buffalo. If Toronto were to support another team it would have to be North East of the ACC. I remain that the KHL will not be an immediate threat to the NHL. THe NHL in Europe could only come after massive contraction in NA. I don't see any major US television station offering the NHL a saving grace that's why I felt 8 teams in Canada in a 28 team league with a larger contract (from CTV) may help the NHL.
January 5, 2009 4:11 PM ET | Delete
amidst tundra you may be right about the team now but i am speaking about our original team here, there was a fire and spark when they first came and them can a nuke called the tennessee titans. this area is football area so therefore people gave all there time and money to the titans and not preds. if the nfl would have came five years after the preds instead of one year i think we could have built a fan base a lot better and therefore had a more striving team know and we would not even know who del biaggio is so you may be right about the current team but not our franchise.
January 6, 2009 6:50 PM ET | Delete
I think Nashville is in a slightly different situation. There seems to be a larger core group of diehard fans in Nashville than in Atlanta or Florida. Moreover, the Preds have a more consistent playoff history and have earned the reputation as underdogs. Atlanta just never proves to be a real sports city (see Atlanta Braves attendance during the 14 or 15 or whatever it was-straight division championships, also see the Hawks). Florida hasn't been a keen hockey state other than when ticket prices are cheap. Why is there no attention on the Islanders. They have a long history but have been one of the most inconsistent franchises in terms of attendance. A few times last year, they had under 9000 in their building. If it wasn't for Charles Wang, they'd be gone by now.
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