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SBJ/20081222/This Week's News
NHL defies economy, projects rise in revenue
Published December 22, 2008
The NHL projects a 2 percent increase in league revenue for the 2008-09 season despite facing one of the worst economic crises to hit North America since the league contracted from 10 to six franchises around the time of the Great Depression
League officials shared the projection with owners and team executives at a board of governors meeting in Florida Dec. 8-9. According to attendees, league revenue will increase 6 percent in aggregate, but because of the decline in the Canadian dollar the league will realize only a 2 percent increase in total revenue.
The projected 6 percent increase is down slightly from the 7 percent increase league officials told the board to expect before the start of the season. After accounting for the Canadian dollar’s decline, league revenue is projected to rise to $2.65 billion during the 2008-09 season from $2.6 billion in 2007-08.
“That’s a variable based on whether the projections hold and a variable based on what the Canadian dollar does,” Deputy Commissioner Bill Daly said last week. “It confirms what [NHL Commissioner] Gary [Bettman has] been saying, which is that at least for this year the economy doesn’t seem to have had a large impact on our expected revenue growth. That doesn’t mean it won’t take hold at some point during this season, or for next season.”
If the projections held true, the floor and ceiling of the league’s salary cap probably would remain relatively flat during the offseason. Daly said he doesn’t expect the salary cap to increase or decrease by more than $1 million or $2 million, adding, “I don’t think the cap will change much if at all.”
That’s far different than what the NHL Players’ Association expected. The union set player escrow fees at 13.5 percent of players’ salaries this season, the highest percentage set by the union since the current collective-bargaining agreement was instituted for the 2005-06 season.
At the time, NHLPA Executive Director Paul Kelly said the union preferred to be conservative in the current economic environment rather than have members “cut checks to owners” to cover any shortfall if salaries account for more than 57 percent of hockey-related revenue over the course of the season.
Daly said the league plans to meet with the union in January and review clubs’ revenue projections then. He expects those projections to show “real revenue growth.”
“Fortunately for us, a large portion of the revenue is contractual revenue,” Daly said.
At the same meeting, the board of governors authorized the league to begin exploring “strategic sourcing” by finding preferred service providers like hotels or charter plane companies that will offer discounted prices to all 30 of the NHL clubs. The system would work similar to an HMO, allowing teams to save money by using companies from which the league gets preferred rates.
“Our teams buy a lot of the services that are the same,” Daly said. “Can you create efficiencies by offering service providers bulk business? Certainly, there are other industries and models where that’s the case.”
An outside consulting firm recommended the strategy to the NHL. Daly doesn’t expect the system to be in place until the 2009-10 season, but added, “At this point, anything that can produce savings for clubs on other costs is worth pursuing.”