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NHL ARENAS & THE LOCKOUT: COPING WITH THE GREAT MELTDOWN
Published November 1, 1994
During any major league work stoppage, the primary focus is on the economic losses suffered by the owners and players. But, in reality, the financial losses do no stop there. Today, THE SPORTS BUSINESS DAILY begins the first of a regular series on the ripple effects of the baseball strike and hockey lockout with a look at how NHL arenas are coping with -- to this point -- one month of lost revenues. As Tim Murphy, general manager of the Pittsburgh Civic Arena, puts it: "Any tenant in a building is your partner, maybe it is not structured as such, but still you depend a lot on what they do. And right now, they -- like us -- have no income coming in from hockey games." For a more in-depth look at the issues facing NHL arenas, THE SPORTS BUSINESS DAILY spoke with Dr. Jack Vivian, the Director of the Sports Facilities Research Laboratory at the University of Michigan. THE DAILY: Is there any way for the arenas, or the communities in which they reside, to make up lost revenues? VIVIAN: This is money that is gone forever, this isn't a recoverable type of money. And, of course, the community loses as well because every worker that earns money in the facility spends it somewhere else in the community. So they have to tighten their belt. The economic impact of the lockout will be devastating if it continues much longer. ... Those dollars roll over so many times in the community. Some people use 6 times, some people use 3 times -- the multipliers are different in different regions. So it has a significant impact. THE DAILY: Is there any long-term effect on rates for in- arena ad signage? VIVIAN: All of the advertising is sold on the number of looks it is going to receive, the number of views that is going to be expected. So that is all based on attendance as well. The value of advertising is depreciated because of the lack of games and exposure. ... This is money that will impact what they can sell "the board" for next time. THE DAILY: Is there any effect of a hockey work stoppage on the construction of new facilities? VIVIAN: The new facilities that have been created in the last 10 years, because of the expansion of hockey and the NBA and all the other things, now these people are saying look at the money we spent and look at the revenue that is falling off, and we're going to have to go back to the taxpayers for some other form of funding the debt service on these buildings. ... [But] you'll note that a whole lot of the new facilities are being built by the pro teams -- or the people that are in partnership with the pro teams. Very few of the new arenas are citizen voted facilities. Very few of them end up to be funded from the general tax dollars. THE DAILY: Is there a specific figure that you can attach to the losses NHL arenas could encounter? VIVIAN: I would hesitate to give a figure, but if I was asked to guesstimate I would say a typical game would be worth $2 million or $3 million -- based on where the opponent is coming from and other factors. Even if you say a game is worth only $1 million, look at the equation.