NHL owners yesterday gained the salary cap they had long coveted, as well as a crushing defeat of the players union, as the sport’s 301-day lockout ended. But rarely, if ever, has victory felt so hollow.
Completing a mission that began more than a decade ago, management secured a labor deal in which teams will be limited to a $39 million salary cap, as well as a maximum outlay of 54 percent of league revenues to players. But players, agents and industry analysts almost uniformly agreed yesterday it was a deal that could and should have been made months ago, long before fan interest in hockey shriveled to a fraction of previous levels and key business partners like ESPN took their business elsewhere.
“This deal is certainly real bad for the union, but it’s also bad for the league because the whole pie [of revenues] has gone down,” said Marc Ganis, a Chicago sports industry consultant. “The players completely miscalculated the fiscal situation of the league, the losses being incurred, and turned this negotiation into a competition in which they were determined to make the owners lose. It’s hard to think of how the players could have fouled up this situation any more than they did.
“And there’s no guarantee the new economic model is going to be a true panacea. The losses are going to be significantly limited, and that’s very important. But the NHL’s entire revenue situation is uncertain. We simply have no idea how many people are going to come back.”
The NHL, a $2.1 billion a year business before the lockout, could be diminished to between $1 billion and $1.5 billion according to some industry estimates. In May, ESPN declined to pick up an option extending its TV deal with the league, and if the NHL returns to the cable network, it almost certainly will be without an upfront rights fee.
Several key corporate sponsors, including Coca-Cola and Sony, have taken their dollars elsewhere or are staying with the league at lower, more cautious levels. Merchandise sales have fallen to less than half of 2004 levels. And nearly every team, including the Washington Capitals, has implemented wholesale ticket-price reductions to try to win back fans.
The recent history from hockey and baseball similarly provides little solace. After baseball’s bitter strike in 1994, which canceled the World Series that year, and the NBA’s lockout of 1998-99, each league needed at least four years to recover meaningfully. In baseball’s case, it took two truly historic events — Cal Ripken setting the record for consecutive games played in 1995 and the Mark McGwire-Sammy Sosa home run chase of 1998 — to recharge the sport.
Even before yesterday, the fallout from the NHL agreement was ugly. Several notable players publicly lambasted union chief Bob Goodenow, who for years told anyone who would listen that the players would never accept a salary cap and that the owners’ claims of financial distress were wildly overstated.
“We burned a year for nothing,” Los Angeles Kings forward Sean Avery said last week. “We didn’t win anything. We didn’t prove anything. We didn’t get anything. We wasted an entire season.”
One positive aspect does exist amid the wreckage: the opportunity for a complete relaunching and rebranding of the league. When play resumes, it will be with a series of new rules, including larger goals, smaller goalie equipment, shootouts to end tie games and other changes designed to open up the game, boost scoring and showcase skill players.
NHL officials also are developing a new advertising campaign, centered by the slogan “It’s A Whole New Game.”
NBC, which signed a no-rights fee deal with the league before the lockout, remains on board as hockey’s American network partner, sharing advertising revenue after production costs are paid. NBC Sports chairman Dick Ebersol said yesterday he is looking forward to the NHL moving “into what I believe will be an exciting new era.”
Said Jeff Citron, a Toronto corporate finance lawyer and sports industry analyst: “There’s a real opportunity out there for the league, and I do think there will be a meaningful rebranding and hopefully a true improvement of the product on the ice. You could easily make a case that in some markets before the lockout, the situation couldn’t have gotten much worse given what we saw with empty seats and so forth. So if the league comes back and there’s really a more competitive league and real hope for everybody to make the playoffs, that is something that can drive attendance and interest back to hockey.”