Parties eye potential impact of lockout
With the NHL’s collective-bargaining agreement set to expire on Saturday, the prospect of what could be the league’s third lockout since 1994 had both insiders and industry experts making note last week of likely areas of impact.
Formal talks between the NHL and NHL Players’ Association broke off on Aug. 31. No further talks had been held as of Wednesday.
Team training camps were slated to open next week, and the league’s regular season is scheduled to begin Oct. 11.
While the Calgary Flames, as of last week, were the only club to so far publicly acknowledge that they will roll out salary cuts for employees in the event of a lockout, other teams are keeping a close eye on their bottom lines.
“We haven’t had any work-stoppage-related layoffs yet, and I haven’t heard of cuts around the league besides what the Flames announced,” said one senior vice president with an NHL club who requested anonymity. “What we’ve told our employees, and I’m hearing it’s the norm around the league, is to not spend a dime without approval. We want to protect our staffs as long as possible, so being prudent about expenses only makes sense. Who knows what the cost of a lockout will be?”
AJ Maestas, president of Chicago-based Navigate Research, pointed first to the NHL’s casual fans.
“Not only would another lockout become a major challenge to win more fans, I believe the NHL would lose casual fans and not regain them for an extended period of time,” said Maestas, whose firm conducts research, measurement and analysis of sponsorships in sports and entertainment. “Our research after the last lockout [2004-05] showed the passionate fans quickly returned to the arena but a long lag time for casual fans to return to attending games and watching on TV. Given that TV ratings are one of the greatest challenges for the NHL, this is not good.”
Financially, the NHL’s agreement with NBC calls for the league to be paid by its U.S. television broadcast rights holder during a lockout. Any extended time lost — time that could not be made up during a 2012-13 season — would be added to the end of the contract, a 10-year, $2 billion deal signed in 2011. Similar payments were slated for the NFL and NBA from their rights holders during those leagues’ labor battles last year.
Media expert Neal Pilson noted prospective gains for both NBC and the NHL from the arrangement.
“The clause gives the league cash flow during a lockout,” said Pilson, the former president of CBS Sports and currently CEO of his own sports media company, Pilson Communications. “The network pays now, but gets a year at the end of the deal. When you consider the rate of inflation, that’s a significant benefit. In this case, NBC solidifies its relationship with the NHL by backing them financially during a lockout and could get an extra year a decade from now. Let’s face it: Paying the NHL for possibly a year is not going to drastically affect the balance sheet of a company like Comcast, just as it wouldn’t for Disney or Fox in the other sports.”
NBC Sports Group spokesman Chris McCloskey said NBC was “hopeful that the labor situation will be resolved with no disruption to our programming.” If there is an absence of NHL games, NBC will have replacement programming that will include soccer, boxing and college football, as well as minor league, college and international hockey.
NHL Deputy Commissioner Bill Daly said last week there is no standard answer for how league sponsors would be handled in the event of a lockout.
“All of the contracts are different and contemplate different packages of rights, and each will be impacted differently by any work stoppage,” he said. “As a general matter, league sponsors will not have to pay for things … that we are unable to deliver on.”
As for teams, Daly said the league will work with clubs on protocols for season-ticket holders and other customers, but most such actions will be driven by the franchises themselves.
“The league provides general guidance to the clubs on its dealings with season-ticket holders in the event of a work stoppage and the cancellation of games, but each club is generally free to develop its own policy depending on the unique circumstances in each different market,” Daly said.
Elsewhere, the NHL with a lockout could see a drop-off in coverage from newspapers and websites. Lynn Zinser, an editor, reporter and Web producer for The New York Times, said the canceled 2004-05 season exacted a cost.
“The last lockout gave sports editors, who were almost all looking for ways to cut their budgets in an unfriendly newspaper economy, an excuse to cut hockey coverage,” Zinser said. “This lockout would do that again, in an even less-friendly media economy. In that regard, this comes at a terrible time for the NHL. The league will fall like a rock down the list of priorities of things to cover for U.S. media.”
For its part, the American Hockey League is poised to help fill any game-action void for fans. The AHL has a deal in place with Sportsnet in Canada to broadcast an additional slate of games if NHL games are canceled. It also has begun discussions with NBC Sports Network and several RSNs about replacement broadcasts. Still, AHL Commissioner David Andrews said his league hopes the NHL resolves its labor issues soon.
“While there may be a short-term bump for our league,” Andrews said, “there’s no question that the NHL playing is more important to us. It’s the best league in the world, and we are partners in the development of players and in the growth of the sport.”
According to Andrews, the AHL did see attendance gains during the 2004-05 lockout, especially in regions close to NHL markets. “We had a higher quality of competition,” Andrews said, noting that future NHL stars such as Eric Staal, Jason Spezza and Dustin Brown played in the AHL while their rookie NHL seasons were postponed by the lockout. “Marquee names attract media coverage and fans.”
Russia’s KHL also could benefit from an NHL lockout. Many of the country’s star players, including Evgeni Malkin of the Pittsburgh Penguins, have said they would keep their skills sharp during any prolonged lockout by playing in the league.
KHL President Alexander Medvedev last week said that each club could sign up to three NHL players for the duration of the lockout and that those players would not count toward the KHL’s salary cap. In addition, KHL games between Moscow Dynamo and SKA St. Petersburg at the new Barclays Center in Brooklyn on Jan. 19-20 could serve to satisfy the needs of some fans to watch high-quality hockey should there be an NHL work stoppage that extends into 2013.
As for the ultimate cost to the NHL brand, league Commissioner Gary Bettman has cited the loyalty of fans as the primary reason for his lack of concern. In the year after the failure to agree to a collective-bargaining agreement led to the cancellation of the 2004-05 season, 24 of the NHL’s 30 teams averaged at least 15,000 fans for its home games. Only the St. Louis Blues, whose attendance dropped from 18,560 to 14,213, experienced a steep decline, while many clubs saw increases.
Pilson also sounded an optimistic tone.
“I’m encouraged by the way the NBA came back [last year],” Pilson said. “Fans may not like it, but the new media has helped explain why there are work stoppages. I know the NHL is not the NBA, but when you consider the amount of social media coverage hockey gets, I predict a strong recovery for the NHL.”