The NHL bounced back last season after a yearlong lockout, but what's next?
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They came back. Boy, did they come back.
By several measures -- including attendance, overall revenue and a resurgence of offense -- the NHL might never have enjoyed a better season than 2005-06.
That probably seems odd considering a lockout obliterated the 2004-05 season, but measures that improved the on-ice product apparently melted hard feelings among fans.
Commissioner Gary Bettman yesterday went so far as to proclaim that NHL has "fixed" its economic picture and "energized the game with new rules."
The biggest question facing the league -- one with a sport considered, at best, fourth in line in North America at the pro level behind football, baseball and basketball -- is whether it has hit or is close to hitting its ceiling as a business.
"The national revenue outlook [for the future] is not good," said John Vrooman, an economics professor at Vanderbilt University who closely follows sports economics. "There's not much room for the NHL teams beyond luxury seat money, concessions and advertising from new arenas.
"As a matter of fact, the NHL had been cannibalizing itself by living off of five $50 million and four $80 million expansion fees in the overexpansion -- or Southern strategy -- of the 1990s. Adding the nine teams in nine years would, unfortunately, increase player cost more rapidly than revenues from expansion fees. This is what caused a big-time salary implosion at 75 percent of revenues that crashed the league in 2004."
The fans came back
Let's look at what's gone right as the NHL heads into the 2006-07 season.
Under the new collective bargaining agreement that was reached in August 2005, there is a salary cap. It was set at $39 million for '05-06 and will be about $44 million this season.
Players are entitled to 54 percent of hockey-related revenue.
Final numbers from last season aren't in, but, overall, revenues were higher than projected, Bettman confirmed, meaning the league will have to disperse the overage to players through the NHL Players Association.
"I think people underestimated the loyalty of the fan base, so the expectations were set too low," said Patrick Rishe, an associate professor of economics at Webster University in St. Louis and owner of a consulting company called SportsImpacts.com.
Rishe said the NHL is unique in its fan base, which is why, he believes, attendance increased coming off of a missed season.
Twenty-five of the 30 teams had an increase in attendance, led by the Penguins, who drew 33.07 percent more fans to Mellon Arena than in '03-04.
"This was a major pleasant surprise," Vrooman said. "I expected something like the 25 percent across-the-board drop in attendance after the [Major League Baseball] strike of 1994-95.
"The most amazing story, of course, is the tenacity of the Pens' fan base."
Only one team -- the last-place St. Louis Blues, whose attendance was down 23.42 percent -- saw a decrease of more than 6 percent.
As a whole, the league played to 91.7 percent capacity crowds and set records in total attendance (20,854,169) and average game attendance (16,955). Crowds were up 2.4 percent over '03-04 and 1.2 percent over the previous NHL record (in '01-02).
Rishe, unlike Vrooman, was not surprised by the increase.
"Hockey fans are more loyal than perhaps in other sports," Rishe said. "Why that matters is, if you're a diehard, you're more likely to forgive [after a work stoppage]."
Bettman also pegs the league's resurgence in revenue and attendance on what fans saw on the ice.
New regulations and stronger enforcement of existing rules led to more flow in games. Skill players were impeded less, and previously stifling defensive systems were less effective.
Seven players reached triple digits in scoring -- including Penguins center Sidney Crosby, one member of a strong class of rookies -- and five scored 50 or more goals.
The NHL also added shootouts for games that are tied after overtime.
"As important as the economics is the competitiveness of the game," Bettman said.
Selling the game
The ability of the NHL to compete with the more popular pro leagues is another question.
One of the biggest issues is television revenue. Although the NHL has deals with Versus cable (formerly OLN) and NBC in the United States, and TSN and CBC in Canada, they don't total near the kind of money that other pro sports leagues get.
In addition, hockey is not considered a television-friendly sport.
"Really, they'll never have the kind of revenue deal with TV that's close to other leagues," Rishe said. "They'll have to proceed accordingly."
Which, Bettman said, means working diligently to sell the game and its players.
This season, each team will have a business/marketing representative charged with increasing the game's exposure. The league also is pushing merchandise sales with its NHL Store concept.
But under Rishe's theory of hockey having such diehard fans, it could be difficult to expand the fan base.
"You see the same folks going to games," he said.
In large part, then, it is up to teams to find ways to be profitable with the aid of the NHL's new rules and business model.
Bettman was vague on individual team finances.
"Most of our teams made money," he said of last season. "We haven't done the final accounting, but I probably wouldn't give the exact breakdown anyway. Most of the teams that lost money lost far less than they did under the old system."
The Penguins, who did not make the playoffs, have said they expected $7 million in losses from last season, mostly because they play in antiquated Mellon Arena. Team ownership is trying to sell the franchise.
For the Penguins specifically, Vrooman and Rishe agree with club management that long-term success in Pittsburgh depends heavily on getting a new arena and being competitive.
"For the Pens, it's all about the future -- Sidney Crosby, Evgeni Malkin and Marc-Andre Fleury and the uncertain prospects of a new arena," Vrooman said.
The Penguins have an arrangement with Isle of Capri in which that gaming company will donate $290 million toward construction of a new arena if it gets the city's slots license; otherwise there is a Plan B proposal that uses a mix of funds from the team, the state and slots.
Vrooman said the Penguins are probably worth about $150 million, the same price the Blues fetched earlier this year, but that a new facility could inflate that.
"The value of a club is increased by about one-third when it moves into a new arena," he said. "So the value of the Pens with the Isle of Capri $290 million arena deal is worth perhaps even $190 million to $200 million and slightly less under Plan B.
"This all depends on how sweet the arena deal is for the new Pens owner. The prospective owner is paying for the Pens plus the option to move into a new arena, be it Isle of Capri or Plan B [in Pittsburgh] or the Sprint Center in Kansas City."
Rishe said with a new arena that includes things such as extra luxury seating, more and better concessions and other amenities, the Penguins could be profitable, if not every year, then over the course of several years.
"I do think this is going to get done with the facility," he said. "It will come down to the last second to see what the best deal is."
The Penguins are something of an exception because Mellon Arena is the oldest facility in the league and the other teams have the benefit of modern amenities.
So the big picture leaves Bettman in a grand frame of mind.
"I'm not saying everything is perfect," Bettman said, "but, with the competitive balance we enjoy and with the players able to show their speed and skill, we're able to head into the season focused on the ice, and that's a great thing."Peter Diana, Post-Gazette
The audience came back when the National Hockey League resumed, and the arrival of Sidney Crosby turned up the heat for Pittsburgh Penguins fans.
Click photo for larger image.
First Published October 4, 2006 12:00 am