Delay of Game? NHL Wastes its Potential

Delay of Game? NHL Wastes its Potential

For once, everything seemed to be going the NHL's way. The league had clinched a hefty new TV contract with a big U.S. network. A major-market American team captured the Stanley Cup, creating lots of buzz. Blue-chip companies were lining up to sign sponsorship deals. And revenues were at an all-time high. Then the owners and Gary Bettman got together and locked out the players.

Of course, that was back in 1994. A fleeting moment when HOCKEY seemed poised to break through into the American sporting mainstream, which ended up being washed away by months of bad press and cancelled games. That damage was only exacerbated when the owners again locked out their employees a decade later in an even more rancorous dispute, becoming the first--and so far only--pro sport to scuttle an entire season. In fact, in many ways, it's taken 18 years for the NHL to get back to where it once was. And now, on the heels of last year's landmark TV deal with NBC, in the wake of the L.A. Kings' cup victory in June and after seven straight years of record revenues, the league again seems intent on skating backwards. Unable--or unwilling--to come to terms with the players on a new contract as "LOCKOUT III" enters its sixth stultifying week. It is, as the saying goes, déjà vu all over again.

The fans are angry. But maybe the more appropriate response is sorrow. Sadness that those who run the game, and those who play it, can't break a cycle that continually wastes its potential.

"I think they had tremendous momentum going in the U.S. market," says Brian Cooper, the president of S&E Sponsorship Group, a Toronto firm that brokers arrangements between sports leagues and businesses. "They have the winter classic, where they claimed New Year's Day for themselves. They had the HBO series. They were getting under the helmet and putting faces to the new stars of the game. And now we have momentum interruptus, and that's not good for any brand."

But with talks between the NHL and its players' association at a standstill, there are indications that things are about to take a decided turn for the worse. Already upset by the league's decision to go public with its latest offer, the union became apoplectic this week when Bettman allowed his owners to reach out directly to their players and discuss its contents. With a Nov. 2 deadline to preserve the entire 82-game season fast approaching, no talks are scheduled. And there are whispers that the league will pre-emptively cancel months of its schedule--including the showcase outdoor New Year's Day classic--to deny the union "leverage," unless significant progress is soon made. "It comes back to a mutual desire to get a deal done," Bill Daly, the NHL's deputy commissioner told Maclean's. "We've made a lot of moves. We've tried to be creative and respond to their concerns. And the frustration is that it seems to be a moving target."

Blame game aside, what's mystifying to outsiders is that the two sides don't actually seem to be that far apart. Unlike the 2004-05 lockout, where the owners succeeded in imposing a salary cap system that the players abhorred, there is no vast ideological gulf. Yes, the NHL's latest proposal for a 50-50 revenue split--down from 57-43 in the just-expired agreement--would see the players' share reduced by as much as $1.6 billion over the life of the deal. But the NHLPA counter-offers have already indicated its willingness to at least head toward an even split. The fighting is about how soon and by what mechanism. By some estimations, the difference between the parties now stands at $130 million a year--a little less than four per cent of the league's $3.3 billion in revenue in 2011-12.

In many big enterprises, that sort of gap would be bridgeable, without ever having to resort to strong-arm tactics. But pro sports, it seems, operate in their own labour microclimate. Last season, the NFL, the richest league in the world with close to $10 billion a year in revenue, decided it wanted to give the players less and promptly locked them out. Ditto with the $4-billion-a-year NBA. When both succeeded in reducing their players' share to 50 per cent or below, the template for the NHL's current round of negotiations was pretty much set in stone. "I think leagues view lockouts as effective devices to extract benefits from players," says Michael McCann, the director of the Sports Law Institute at the University of Vermont. "Fans come back, and they mostly get what they want."

The sponsors may not be happy, but every agreement with the NHL contains a work stoppage or interruption clause. In the case of NBC's deal with the league, for example, the league will still get its full $200 million this season. (The network will receive a pro-rated discount down the road if there's a reduced schedule, or an extra year if the full season is wiped out.) Bettman and his colleagues are good about keeping their partners in the loop, says Cooper. And while sponsors are frustrated, they have little choice but to be understanding. "This is part and parcel of sponsoring professional sports leagues or teams," he says. "They signed up for it."

If past experience is any indication, there may not be much cause to worry. When the NHL returned from its lost 2004-05 season, it set records both in attendance and revenue. Similarly, last year was one of the best in the history of the NBA at the gate and on TV, despite shortening its season by two months.

But the question is how much the NHL and its players can take for granted, given that this is the third time they've disappointed their fans and sponsors over the past two decades. Ed O'Hara, a senior partner with SME Branding in New York, helped oversee the NHL's efforts to recover and re-ingratiate after the last lockout. That strategy emphasized the unchanging values of the game--competition, the pursuit of the Stanley Cup--rather than the players or the clubs. But this time it might prove even harder to tap into fans' shrinking reservoirs of goodwill. "It's ominous, for sure. The owners may have miscalculated," he says. "It's about greed and who's going to get more and who's going to win. It's not pretty."

Worse still, it's only just getting started.

Maclean's November 5, 2012