Power play: Lock up fans

The NHL is trying to avoid a sophomore slump, of sorts.

Now a full year removed from the owners’ lockout that canceled the 2004-05 season, the league is hoping that the good feeling surrounding last season’s return will carry over and help the sport grow, rather than simply survive.

League and team officials have climbed hilltops to point out the positives of last year: record overall attendance, new rules that sped up the game and dynamic rookies Alex Ovechkin and Sidney Crosby. But most importantly, they note that every team was able to decrease their financial losses or even make a profit, thanks to players’ willingness to slash salaries and a new collective bargaining agreement that placed a cap on team payrolls.

“We have a system now that allows all teams to make money and be competitive,” NHL commissioner Gary Bettman said. “It gives us unparalleled parity. We knew that if we did things right, we’d come back strong. Now, it’s all about growing the sport again.”

As this season approached, all but seven teams banked on growing revenues by boosting the amount of money spent on player salaries, and 14 teams increased payroll by 10 percent or more. While some observers credit the increase on an unusually high number of players winning arbitration cases, others point to the fact that the NHL revenue last year hit $2.1 billion, or about $300 million higher than the league predicted.

No one, however, contends that the NHL is out of the financial woods.

Teams boasted of their ability to cut financial losses last year, but acknowledged that the turnaround came because of decreased expenses, not higher revenues. In fact, despite high attendance in most cities, revenues actually dropped significantly because of lower ticket prices, less sponsorship money and lower television revenues. Furthermore, there remained a noticeable gap last year between the reported attendance and the number of actual fans in seats, and many teams struggled to lure fans to the arenas early and keep them until the games ended.

Meanwhile, ratings for the NHL’s nationally televised games were down noticeably from the pre-lockout years, as Versus (then known as OLN) began airing hockey games for the first time. On most nights, fewer than 300,000 fans tuned in, drawing about half the audience of ESPN, which dropped its hockey coverage after the 2004-05 season. National games on NBC also drew fewer than 1 million viewers. The league’s national television revenues are a fraction of those seen in other major sports leagues. The league expects to earn less than 5 percent of its revenue from national television rights this year. By comparison, the NFL earns about 70 percent of its revenue from national television.

“The hospital analogy would be that [the NHL] is in stable condition,” said Paul Swangard, executive director of the Warsaw Sports Marketing Center at the University of Oregon. “Their prognosis is good … they’re doing better in markets where they were close to putting up the two-by-fours and calling it done. They just need to be more aggressive now, because they’re not getting as much help from the sports media engine that’s out there.”

The Capitals were one of the most financially crippled teams heading into the lockout, losing tens of millions of dollars each year as payroll consistently topped revenue. Under the new system, the team lost $5 million last year, a loss that team owner Ted Leonsis said is easily tolerable in comparison.

“We’re now in a business model where every incremental dollar in new revenue we bring in, we can invest back into players,” Leonsis said. “We’re still losing a little bit of money, but it’s a little bit of money.”

He acknowledged, however, that the smaller financial loss came mainly as a result of the team’s league-low payroll, not increased ticket sales. The team reported a paid attendance of about 14,000 a game, the third-lowest in the league. The Caps now have about 8,000 season ticket holders, up slightly from last year, and Leonsis said he hopes to have a base of 9,000 by season’s end. But that’s still a lot of empty seats, leaving the team unable to justify any price increases that would boost revenue. Leonsis said he anticipates another good season from Ovechkin, the Caps left winger who was named NHL rookie of the year, will bring fans back.

“Our issue is season tickets,” he said. “We have no problems that 1,000 accounts with three season tickets won’t solve. If you can get that, then you have a scarcity and tickets and can raise prices.”

The problem of low television ratings could be remedied this season, as NBC expects to market its hockey coverage during its popular “Sunday Night Football” broadcasts. Versus, which fought to gain wide distribution last year, has increased its reach by about 7 million homes this year, and is now available to 70 million households. (Still 20 million homes less than ESPN and ESPN2.) Versus said it hopes to see a 20-percent increase in viewers this year.

Bettman said there is no desire by the league to partner with ESPN again simply to gain additional exposure. Versus, he said, can offer more games and deeper coverage than ESPN ever could because it has less to compete against.

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