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SBJ/20100607/This Week's News
NHL sharpens European focus
Published June 7, 2010
On Oct. 2, the Boston Bruins will put the strength of its city’s ethnic heritage to the test with a preseason game in Belfast against what will likely be a team of Irish all-stars at Odyssey Arena, marking the first visit by an NHL team to the Emerald Isle.
As the NHL pushes its game onto the European continent as never before, it’s interesting to note that the Bruins will be playing hockey in a venue that also hosts international darts competitions and is situated on the former site of the Harland and Wolff shipyard, which produced the Titanic. With a record 13 regular-season and exhibition games in Europe this fall, the NHL is hoping for slightly better luck than what befell the great ship.
For years, the popularity of hockey in Northern Europe has been the league’s hole card. Now it is hoping to cash in and build a foundation for a European business that would see increased distribution of NHL games, more international competition and expansion of its consumer products business, all possibly leading to European franchises in the future.
It’s not a new thought. The first tour of the continent by NHL teams was in 1938, when the Montreal Canadiens and Detroit Red Wings played nine games at three different arenas in Paris and London at the conclusion of the season.
Now, 72 years later, Europe’s influence on the game is greater than ever. The NHL has 230 European players under contract, more than one-quarter of its rosters. The Stanley Cup finalist Philadelphia Flyers have five Europeans on their roster, while the Chicago Blackhawks have seven. Around 20 percent of traffic to NHL.com comes from outside of North America, with fans from hockey-mad countries in Northern Europe like Finland, Sweden, Russia and the Czech Republic among the most-frequent international visitors, consuming more video than North American visitors.
No small catalyst for the NHL’s fall European invasion is that its current European TV rights deal expires after next season, the same time as the league’s U.S. rights. Since 2005, ESPN Americas (the former NASN) has carried three to five games a week across Europe and sublicensed to domestic broadcasters in 54 countries across Europe, the Middle East and Africa. The league’s strategy of syncing its U.S. and international TV rights was designed to appeal to international broadcasters, like ESPN and Fox, a move that could push up the value of those offerings.
“TV is the biggest marketing platform that any league has, and especially overseas, our brand is bigger than our business,” said the NHL’s John Collins, who recently added more international responsibilities to his role as the league’s COO. “Outside North America, it’s always been about our potential, but we can’t rest on that any more.”
The U.S. plan the league has pursued in recent years combines broad-based media supported by direct-to-consumer pushes in broadband, satellite and enhanced digital media and driven by big events like the Winter Classic outdoor games. It’s all supported by an uptick in corporate activation and dollars.
League officials say the European strategy won’t differ, but there’s some talk of adjusting starting times for select regular-season games in North America to accommodate a more viewer-friendly European schedule.
“There’s always been an abundance of potential,” said Ken Yaffe, a 16-year league employee who has been dedicated to international business longer than anyone at the NHL and is currently senior vice president, NHL International. “We’ve just reached the point where we are confident enough domestically as a league where we can now pay full attention to business development opportunities outside of North America.”
As Howard Baldwin, former owner of the Hartford Whalers and parts of the Minnesota North Stars and Pittsburgh Penguins, put it, “Europe is there more for the NHL than any league. Internationally, you’ve already got a level playing field in hockey.”
In advance of negotiating its new European TV rights, the NHL has quietly hired CAA’s sports media advisory unit as its negotiator. With Phil Lines, former English Premier League director of media operations and international broadcasting, as part of a CAA group that includes heavyweights like Peter Kenyon and David O’Connor, the NHL is clearly looking for a big multiple, though perhaps not as heady as the one Lines orchestrated when he increased broadcast revenue around 80 percent to $1.6 billion with the launch of a global EPL TV network this year.
The NHL’s last European rights deal doubled revenue, but what about this time around?
“The quality of the league’s European players is very good and getting better. We also see TV sports rights continuing to rise in a fractured media environment, so we’re excited about the NHL’s potential,” said Alan Gold of CAA Sports Media Venture, a partnership between CAA and Evolution Media Capital (EMC).
Of course, there are differing opinions. However bright the future looks, the NHL is now at the bottom of the big four leagues in international revenue, with $20 million in revenue from outside of North America.
“To use a football analogy, when it comes to building a European business, the NHL is closer to the red zone than ever but still nearer to midfield than the end zone,” said David Abrutyn, IMG senior vice president and head of global consulting, who formerly had sales and marketing slots with the Washington Capitals and at the NHL league offices. “But it’s moving in the right direction. When they come out of the next CBA [the current collective-bargaining agreement expires in September 2011], that’s when you’ll see the NHL and its associated partners really moving forward internationally.”
There are other numbers that make the NHL optimistic about European growth, as well. For all the NBA’s global prowess, this past season, with Yao Ming injured, the league had just two non-North American players in its 2010 All-Star Game. While hockey’s larger rosters make comparisons a bit unbalanced, the NHL had 14 such players in its 2009 midseason showcase. (The NHL did not stage a 2010 All-Star Game because of the Vancouver Olympics.)
The potential has been there perhaps as far back as that 1938 European tour, but more recently it’s been simply a matter of priorities. The league is less than six years removed from a lockout that canceled a season and literally rewrote the NHL’s rules on and off the ice.
Still, looking at the success the NBA has had in China, one can’t help but wonder if Northern Europe, especially the Nordic countries and Russia, can be for the NHL what China has been for the NBA. Some mitigating elements are the fact that the Nordic countries where hockey is king and the NHL is the top sports brand are relatively small, while Russia, the most populous hockey hotbed, has yet to produce a player with the broad fame that Yao enjoys both in his native China and in the United States. In addition, while economics dictate that the best Russian players will almost always play in the NHL, as a more developed economy than China and one with its developing Kontinental Hockey League, Russia is a more difficult proposition for the NHL than China was for the NBA.
All of the NHL’s fervent planning for European expansion comes as the hockey landscape on the continent has been shifting drastically. Leagues in Germany, Sweden, Finland and elsewhere have become more assertive and less deferential to their governing bodies. At the recent world championships in Germany, as many as 30 European clubs were talking about breaking from their respective leagues to form a pan-European super league.
Russia’s two-year-old KHL also has talked about a super league that would include both Russian and European clubs, but most European teams have rebuffed those overtures. That hasn’t made the KHL change its goals, as it’s added a Ukrainian team. At a recent state of the league address, KHL President Alexander Medvedev said, “We continue to expand, looking for new hockey clubs from Europe. And we are confident that this trend is irreversible and in a couple of years we will see a first-class pan-European hockey league.”
Relations between the upstart KHL and NHL have been strained over player-transfer issues, among other things. Recently though, tensions have loosened enough that NHL teams this fall will play in Russia for the first time in 20 years.
“We’re learning to coexist better,” said NHL Deputy Commissioner Bill Daly.
However, at his recent state of the league briefing during the Stanley Cup Final, Commissioner Gary Bettman cautioned not to place too much significance into the scheduled exhibitions. “You can conclude we’re not so mad at them that we never talk to them,” he said. “But this doesn’t signal a fundamental change in our relationship.”
It is onto this uneven European hockey landscape that the NHL will try to build a European foundation. The NHL is the only one of the four American stick and ball leagues without offices overseas, and the shifting European hockey politics could keep it that way for some time.
“We have to stand back and see how this plays out,” Daly said. “The politics are too complicated for us go in right now and set up our own operation.”
To support a new and expanded European TV deal and to flex its muscles during a time of factionalism in the global hockey world, the NHL needs to be as big as it can be in Europe. So, as Collins puts it, “The biggest question is, What kind of events do we want to create that will leverage our size and reach across from North America through Europe?”
While NHL players seem united in their support of NHL participation in the Olympics every four years, NHL ownership is not. Reflecting that ownership uncertainty over the Olympics’ benefit to the NHL, Bettman has said that Olympic participation in Sochi in 2014 is “up in the air.”
With or without the Olympics, one scenario gaining increasing support within the league is the resurrection of the World Cup, a league-owned and -operated event that was last held in 2004, when Mario Lemieux and his Canadian teammates topped Finland 3-2 in a tournament held just before the NHL’s season was canceled.
If there will be another World Cup, its place on the calendar is a key issue. Various industry sources say that a World Cup held during the season would bring in three times as much revenue as one held before the season. Accordingly, a World Cup tournament, which could be called by another name, staged during the league’s annual all-star break is one scenario gaining traction. Under the plan, which wouldn’t take effect until 2012 at the earliest and is subject to NHL Players’ Association approval, the NHL would extend its all-star break to seven days and play the tournament in one central city, with NHL players facing off on behalf of their countries. That type of competition could ultimately travel to Europe, where the AEG-controlled O2 arenas in London and Berlin are possible sites. AEG also owns the NHL Los Angeles Kings and two teams in Germany’s Deutsche Eishockey Liga: the Berlin Ice Barons and the Hamburg Freezers.
Holding that tournament along with, or instead of, an Olympic tournament, will be a tough balancing act for the NHL, which will also have to sell its players on the value of another mini-season.
“Players like to have any opportunity to wear their country’s jersey,” said Brendan Shanahan, who won three Stanley Cups in 21 years as an NHL player and who has been the league’s vice president of hockey and business development since December. “When the Winter Classic was first proposed, no one jumped on it. Now, everyone wants to be in one. I’m sure the same was true of the first Canada Cup [in 1972].”
However, for the NHL to expand its fan base in the region, it needs to convince European fans and players that the Stanley Cup is the “ultimate” hockey prize. Currently, that is not the case.
“Unquestionably there’s NHL interest in Europe, more than ever,” said one-time NHL goalie Mike Liut, a former NHLPA general counsel who now holds the same title with Octagon’s hockey division. “But Olympics are at the top of the pyramid there, and annually, the European hockey season is geared to the [IIHF] World Championships. For players and fans there, that is the pinnacle. Before the NHL can monetize there to the same degree they do in North America, that mind-set needs to change.”
Other ideas discussed include a champions hockey league, similar to the one in European soccer, where top clubs play each other in addition to their domestic schedule. While it’s clear which Euro soccer teams are the powers, the dilemma of which specific NHL teams would participate might be insurmountable. The NHL looked at buying the IIHF’s Champions Hockey League when the IIHF put it up for bid in 2009, hiring Dean Bonham to evaluate the opportunity, but it later decided not to bid because league officials didn’t believe financials for the CHL worked.
Later this month in Los Angeles, league officials will present a blueprint for international growth to the board of governors for approval.
“We know there should be a more robust business in Europe,” Collins said. “The biggest impediment there has been the lack of access to our game. We are the premier league in a global sport; we just have to act that way. There’s as much growth, if not more, for us outside of North America as there is here.”