Conclusions (Part IV)  by: Matt Witting     10 February, 2003

"Our revenue picture is very bright - the best of times, at the same time - the worst of times - the players' salaries have increased during the same period at an even faster rate…Everyone knows the issues, my goal, my focus, is to … have the union join with us to work out these problems in a way that is fair to everyone. Certainly, the players, who should be paid fairly; the fans, who should be able to afford a reasonably priced ticket; and the owners, who should have the opportunity to operate their business without constantly having to infuse additional funds."
-NHL Commissioner Gary Bettman at the International Sport Summit, 19 January 2003

So, what's to be done in the NHL? Theory doesn't do much for the Ottawa Senators (who can't make payroll), or the Buffalo Sabres who are going into bankruptcy shortly. It is this writer's opinion that a combination of the following actions would alleviate the troubles in the NHL.

1) The league and owners can oppose any demands for a cap, sharing of local revenues, or other restrictions on the cost of labor. As this essay has shown, the measures currently in place in the NBA and NFL do not produce the desired results and have had significant negative consequences to boot. NHL Commissioner Gary Bettman was instrumental in designing the ineffective NBA cap and has indicated that any actions he endorses will resemble those he took in the NBA. The numbers show that, contrary to popular perception, the NHL is highly competitive and that big-market teams are not the only ones competing for the Stanley Cup. Based on historical performance, instituting an NBA style cap will not benefit the league and has the possibility to hurt competitiveness at the highest levels.

2) Contract 2-4 teams. This will be very painful for fans in those markets, it would be a real black eye for the league to admit they made a mistake in over-expanding over the last 15 years, and it would cost the NHL Player's Association 50-100 jobs or so. Contraction is guaranteed to infuriate all the parties directly involved, but would nevertheless improve the health of the league.

· Teams would play more games against better opposition. Candidates for contraction like Anaheim, Atlanta, Phoenix, and Florida don't draw crowds at home or on the road. Not having to play those four teams a combined 12 times a year would mean extra games against the Flyers, Red Wings, Maple Leafs and Rangers, all top draws. Even the Islanders draw better on the road than the four named above. Contracting teams would result in more games against better teams, resulting in better rivalries and bigger gate revenues.
· The overall skill level in the league would increase slightly. Each of those four teams has several top name players (Kariya, Kovalchuk, Luongo, Amonte for example), as well as a number of 2nd tier stars. Assuming each has just 6-7 quality players then every other team in the league could upgrade at least one position. Increased skill level would result in slightly less clutching and grabbing and a slightly more exciting game. The NHL wouldn't see the second coming of Gretzky's Oilers, but it would see a slight improvement (at the coaching ranks as well).
· Salaries would decrease. Picture the old supply (NHL caliber players)/demand (NHL jobs) curve. Now shift the demand line to the left as the net number of jobs is decreased by 50-100 (given that 735 players were on NHL payrolls to start this season, that is a significant number of jobs). Assume the supply line remains in the same place (although the supply of potential NHL skaters increases slightly every year), and the new intersection of the two lines is lower on the price axis. In simple terms, more people are competing for fewer jobs and so employers don't have to shell out as much cash to get good workers. The number of truly great players available won't change, so their salaries will remain high, but the cost of mid- and bottom-level players will be reduced.
· TV profits would increase. ESPN and ABC don't pay to broadcast Anaheim games, they pay for Pittsburgh, Philly, Detroit and Colorado. With more premier matchups and fewer poor ones, the networks would be more willing to buy broadcast rights and would be able to sell more advertising during the games. In addition, there would be two-to-four fewer mouths to feed in the NHL so the profits from the sale of national broadcasting rights would be divided among fewer owners.
· The mere threat of losing 2-4 teams will encourage owners to operate successful businesses, and will mobilize fans of teams that are borderline to help keep the team afloat. Some owners seem to operate on the assumption that they are entitled to a team, regardless of the success/profitability of the franchise. When the team encounters financial difficulties, certain owners then run to the government, the league or other owners for a bail-out. That's not how a successful business is run outside of sports, and shouldn't be the case within the sporting world either.

3) The league should strongly encourage present and future franchise executives to undergo formal business education and training. Most GMs are lawyers, former players/coaches, or league officers rather than holders of MBAs. An NHL franchise is a business first and foremost. The sports background is vital, for those in charge of making personnel and on-ice decisions, but the business side is equally important for the front office staff and few people are experts in both. Ensuring that all GMs, Assistant GMs and team Presidents have a thorough grounding in the economics and business/marketing side of the sport would have significant and immediate benefits.

4) Owners should consider reducing the cost of tickets, concessions and other expenses at games. Joe Sheehan of the Baseball Prospectus makes a vital point on this issue in his article about a proposed salary cap for MLB: "The price of tickets is not set to recoup costs, but to maximize revenue". The cost of a limited commodity in a competitive market is determined by demand (anticipated demand, in the case of pro sports) for the commodity. Judging from the number of fans showing up to games disguised as empty seats in some cities, owners have overestimated the demand for the product at a given price. Reducing the cost of certain seats, having game day sales, or any other device to get fans in the seats will help the sport's finances as well as the fan base. The goodwill generated by such a move among fans would be an intangible benefit. Some teams already work along these lines by instituting variable pricing (high profile and weekend games cost more at the box office than low interest or mid-week match-ups).

5) Franchises carrying significant debt should aggressively rid themselves of it, assuming that they don't have the financial stability to maintain it. Accruing debt can be a valid business strategy, but isn't always. It's one thing for billionaire Ted Leonsis to carry $50 million in debt on the Capitals, another for nowhere-near-a-billionaire Mario Lemieux to do the same for the Penguins. The league and owners need to take some responsibility for debt problems as they allowed the Ottawa Senators (currently in bankruptcy) to originally be bought by a group that had to borrow the $50 million initial ownership fee.

6) Owners should be encouraged to, when the time comes, construct their own arena in partnership with the local NBA franchise (if there is one) without the use of public funds. Teams that own their own arenas are in better shape than those that rent the space. Owning an arena allows the owners to collect from the Britney Spears, Wrestle Mania, and Disney On Ice shows that may happen there during the off-season, resulting in significant additional revenue streams.

7) Fans can get more involved. If ESPN got a letter from every NHL season ticket holder demanding that more hockey games be shown, they would listen and so would advertisers. If more of the fans who expected players to take less money, or owners to try to make less, instead made a financial sacrifice of their own and went to one or two extra games a year, ticket and concession sales would go up. Many fans do this already, particularly season ticket holders, but too many of those complaining don't. Get involved with the National Hockey League Fan Association (NHLFA)(even though they support a salary cap and such. Take your friends to a game or two. Go to some road games. Few teams are without a close geographic rival. The large number of Capitals fans showing up in Raleigh when the Capitals and Hurricanes play benefit the Hurricanes (more seats/concessions sold, encouragement for local fans to buy up tickets so Caps fans can't get their seats next time around), the Capitals (showing a stronger fan base, increased awareness and visibility for the team, Canes fans begin traveling to the MCI Center), the fans (this is how rivalries are born, it makes the game more interesting), the corporate sponsors (greater visibility for their ads) and the league (a good rivalry, a loud and full arena makes for good TV).

There is no quick fix for the NHL or for any of the major pro leagues. Complicating matters is the attitude that cities have a right to a pro franchise no matter what, and that franchises have a God-given right to make a profit, whether they earn it or not. As long as the leagues are professional they must abide by the realities of business. Some cities cannot (or will not) support a hockey team, some can support two or three, just like some cities can't (or won't) support an opera company, a Tiffany's, a 40-screen movie theatre or a military base. Amateur sports are not immune to the problems of the NHL, NFL, NBA and MLB. All Division I schools play by very strict rules governing scholarships and recruiting. Every year, though, Duke has a dominating basketball team while Penn State, a much larger school, does not. Every year Miami, Michigan, and Oklahoma have great football programs while other large state schools are almost always below average. No matter how hard we try to level the playing field it will still slant. Some programs/franchises are more attractive to players for whatever reason (financial, prestige, historical greatness). Some do a wonderful job of hiring their staff of coaches, scouts and administrators. Some have great fan bases, great buildings, or great weather. Some are just lucky. Eliminating the advantages that teams can generate over other teams results in a league of mediocrity. There are benefits to that strategy, as the NFL will tell you, but it is this writers position that the costs far outweigh the potential gains.

Part I: Overview
Part II : Salary Caps 101
Part III: The Real World
Part IV: Conclusions

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