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The NHL’s Finances and How They Affect CBA Negotiations

February 8th, 2012 at 8:58 AM
By Matthew Heimlich

Forbes has published some of the NHL's financials, and they show some interesting insight into the fiscal well-being of the league.  The good: team values are at an all time high and total revenue's increased 5% in the 2010-11 season from the year prior. The bad: total league operating income is down 21% from the year prior ("operating income" is basically a team's revenues minus its expenses).  While some of that can be contributed to abnormally large losses from the Phoenix Coyotes and Columbus Blue Jackets, the fact remains that 18 of the league's 30 teams were operating at a loss in 2010-11.  Not only were the majority of NHL teams losing money on a day to day basis, but a closer looks reveals that the large market teams are among those operating in the negative.

Surprisingly, the Pittsburg Penguins and Washington Capitals were two of the teams operating at a loss last season. Not only do these two teams have the biggest stars in the NHL with Alexander Ovechkin and Sidney Crosby, but their attendance numbers are at or over 100% capacity for their respective stadiums.  Additionally, teams like the Boston Bruins and Philadelphia Flyers are barely operating in the black while averaging sell-out crowds.  So why are teams who sell out their stadiums losing money? Forbes points to increases in player salaries.

Player salaries increased 11% in the 2010-11 season, up to $59 million (and will likely increase again for the 2011-12 season because of the higher salary cap).  The NHL's salary cap, set at 57% of revenue, appears to be too high to allow some teams to be profitable.  Compared to the NFL and NBA, NHL players have a very favorable revenue-sharing agreement with the owners, and this is going to be a major point of contention heading into the next CBA negotiations. The NFL gives its players 47% of revenue, while the post-lockout NBA shares its revenue 50-50 between owners and players.

In order to fix the operating income situation, either revenues need to be increased or expenses need to be cut.  To increase revenue, teams could raise ticket prices and concessions, though those prices have already been increasing across the league for years now.  The average non-premium ticket league-wide is $57.10 for the 2011-12 season, up 4% from the previous year.  19 teams increased their ticket prices while only 3 teams' average ticket prices decreased.

The obvious solution in the eyes of NHL team owners is a revenue sharing deal similar to the NFL and NBA, which would then adjust the salary cap accordingly.  While the overall numbers for the NHL are positive: the game is growing, making more money and reaching a wider audience than ever before, the NHL needs to find a way to control costs in order for teams to be profitable.  This issue of revenue sharing, as it was in the NBA and NFL labor negotiations, like likely be at the heart of this summer's CBA talks.

 

 

Tags: NHL, Salary Cap, Sports, Sports Law

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