(CapsCast Exclusive) The NHL Lockout From The Owners Point Of View – by Usvaldo de Leon
For many, the looming lockout is a mystery. The league is in its strongest position in years, with rising popularity in all sectors. There are new stars on every team, creating a state of competitive balance where perhaps a dozen teams could be seen as potential champions, and perhaps another half a dozen can hope to at least make some noise in the playoffs. Edmonton can at last look on the future with hope, while Winnipeg and Ottawa can dream that the future is now. Even D.C. can dream: if Braden Holtby is as good year round as he was in the playoffs; if Ovie can shake off the doldrums; if Adam Oates and a healthy Mike Green can reinvigorate the power play, then this could be the Caps year as well. The entire league fan base brims with hope and anticipation. Well, except for the Blue Jackets and Islanders. Those guys are screwed.
But with everyone else at least able to eagerly look forward to something, why are the owners and the players so ready to kill the golden goose, cook it and fight over the wishbone? Surely the players understand that, after the capitulation of the NBA and NFL players, they are going to lose badly in this round of negotiations? Surely the owners must realize that if there are no games they’ll lose even more money than they claim to be losing now? And surely everyone gets that starting the next season not on October 11, 2012 but on October 12, 2013 would only be slightly less catastrophic than the looming Mayan apocalypse? Right?
Yes they do, but unfortunately that isn’t the guiding imperative. It is important to look at this from a business point of view, because that is certainly how the owners are viewing it. They are certainly doing well for themselves. Of the current $3.3 billion in revenue that the NHL is generating, the owners retain 43%, or $1.42 billion. Here’s where it becomes imperative to see things from the owner’s POV. Let’s assume that the owner’s end up winning, getting the 57% of revenue they originally asked for, but it causes another season to be lost, and total revenue to be cut by 25% How much would the owners retain in that scenario? $1.41 billion.
So the owner’s calculation is this: If we pay no more than $300,000 per team, we get to claim the lion’s share of the pie. Viewed in such a fashion it is easy to see why they would be stubborn. They have much to gain, and not a lot to lose – particularly since revenues did not decrease after the lost season. Certainly it did not feel that way – fans were angry, the sport receded in public consciousness, but at the fundamental level for owners – money – they got a big win last time and see no reason to tinker with the formula now.
For revenues will not decrease, nor even stay the same: they are going to continue increasing substantially – perhaps to as much as $5.5 billion by 2018-19. Based on their last offer to the players of a 53-47 split in the owners’ favor, the owners cut that year would be 105% higher than their cut today. The owners stand to gain over $2 billion more than the current split, the equivalent of getting to keep all the money from the recent NBC/NHL TV deal.
Ultimately, owning a hockey franchise is a business, and in business the bottom line means all. While Coca Cola or Apple are pleased consumers have enjoyed using their products, it is in part because this increases the likelihood of consumers giving them even more money in the future. The NHL is similar: almost all the teams who might win the Cup stand to gain little from it, because they are already enormously successful with their consumers. The Kings were a recent exception to this. Owning a team is an exercise in prestige and profit for wealthy people, but make no mistake: these are gentlemen who did not become wealthy making deals that were not in their best interests. And their best interests are not always aligned with the interest of those who buy their products. Nowhere is that more true than in this present conflict with the players.