Short Term Gain vs. Long Term Growth

On the heels of the National Hockey League announcing record revenues for the just completed season comes an article by David Shoalts in the Toronto Globe and Mail entitled “Players Have Vested Interest in Full Arenas”. Besides the headline being a blinding flash of the obvious, the article posits that it is in the best interest of the game, its players, and its overall profitability to have a second team in the Greater Toronto Area (GTA) and forgo arenas that can’t fill up the seats. 

Specifically cited are Atlanta and Phoenix as examples of financially troubled teams that would be prime candidates for relocation to the GTA.  

There is no doubt that the GTA has enough rabid hockey fans that the area could support another NHL club. There are 5.5 million people in the GTA, most of whom have grown up with hockey and are passionate about the game. Selling out games to a second NHL franchise in that locale would be easy to do. 

But would it be the best thing to do? 

If the perspective one has in answering that question is a short term perspective, then the answer is undeniably “yes”. 

If however, the perspective is one of a longer term, and it involves the stability and growth of the franchises and their respective fan bases, then the answer might be “yes, but…” 

There is no doubt that the game of hockey thrives in Canada. The passion that Canadians have for the game are deep, remarkable, and enviable. There is a love for the game that is protective, and unfortunately, parochial. The “This Is Our Game” mentality, expressed so enthusiastically during the Winter Olympics, is a two edged sword. Yes, hockey is a Canadian game that is now transplanted into U.S. markets and taking root and growing. No, it is not “your game”- there are fans in the States that love it just as much and are just as passionate. 

The attitude of many north of the border is that hockey in most U.S. markets should be rooted up and transplanted somewhere back in Canada, where, in the mind of folks like David Shoalts, it belongs. 

Somewhere like the Greater Toronto Area. 

Here are the numbers that are really important: Canada is a nation of 34 million people; the United States has 307 million. 

Which market offers the most potential for growth? 

The problem is that the growth in the U.S. markets takes some time. Growing a fan base and sinking deep roots into a community does not happen overnight. The growth is slow. 

Sometimes, local ownership is inept, which stunts the growth of a franchise. Slow growth and weak ownership can plague an established franchise (see: Ottawa Senators, for example) just as it can a new franchise. The difference is that it takes longer for the fans to come back to the game in a non-traditional market than it does in a Canadian market. 

The fact remains that the fan base is growing, especially in markets that did not have teams ten years ago. The potential for growth is good in those markets. It takes talent in the front office as much as it takes talent on the ice. 

And it takes time. 

Shoalts cites in his article an “unnamed former NHLPA official” that says that the GTA needs another team now because it would put more money in the pockets of the players- more than Phoenix or Atlanta currently do. 

Fair enough. 

Again, look at the long term and ask if that is the right solution. Both franchises, with Jerry Moyes in Phoenix and the ownership group of Atlanta Spirit in Atlanta have been, um, shall we say, inept in the management of their franchises. And it has been reflected in how those franchises have been run and the attendance numbers. 

The issue of franchise relocation will always loom in the background in the game of hockey. Unfortunately, there will continue to be poorly run franchises and those that fall on hard times. Looking to move at the first sign of trouble destabilizes a franchise and its fan base over the long term and is detrimental to growth- both of the local market and the game in general. 

Perhaps most disturbingly, the issue of franchise relocation could portend very contentious labor relations after the expiration of the CBA at the end of the 2012 season. 

According to the unnamed official in Shoalts’ article, the problem for the players in the NHL is that there is no way to force the owners to do what the players think is best for them. Here is the money quote:

“As the agreement sits now, there is nothing in there that says the [NHL] has to keep a team in Phoenix. But you would think in spite of the agreement, the League would see the responsibility to their economic partners [the players] to make sure this is as glorious a situation as possible for all parties. The problem is the players don’t have a vehicle to put a gun to the League’s head and say, move these teams.”

 

Oh, really? 

So the players, or the Players Association, wants a vehicle to put a gun to the head of ownership and say move the franchise if they- the Players Association- doesn’t think the franchise is making enough money? 

Shnikey! 

The perspective of a player, and the union that represents them, is decidedly shorter term than that of the ownership of a franchise, and rightfully so. A player has a limited number of days to play and is attempting to amass the greatest amount of income over his playing days. 

An owner has a longer term perspective. What is good for the franchise now and five years, ten years, down the road, and how does the franchise continue grow is a perspective that the player and his representatives do not have.  

This sets up a potential clash between competing perspectives that can be contentious and disruptive. As hockey fans, we know all too well how disruptive. 

So we go back to the original proposition of uprooting an existing franchise and dropping it down in the GTA.  

Good for the game? 

In the short run, absolutely. More revenue and fan interest translates into more profit for the league and the players. 

Long term- not so good. Not only does it give the League a perception of instability in the States, it makes the fan base base wary of embracing the game we all love for fear of having a franchise ripped out their community. 

Even more importantly, it puts the long term growth and health of the game at odds with the short term benefit of tickets sales and revenues. 

It will be interesting to see the resolution of the short term perspective of the Players Association with the long term vision of the League and the owners for the growth of the game and its revenue streams. 

The long term health of the game could depend on it.

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About the Author: A native Nashvillian that grew up with minor league hockey, I'm now a devoted Predators fan and NHL follower. I have had the privilege of allowing my children to grow up watching the Predators and seeing the joy on their face when they are at a game. By day, I am a partner in an independent investment management company in the Nashville area. I played collegiate football and graduated from the University of South Carolina and graduated from the LSU graduate School of Banking. So yes, there are real true southern hockey fans in these non-traditional markets.

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  1. Mariposa Belle says:

    This article has the argument that the Mariposa Belle should, for the good of the craft on those sailing – should bounce from shoal to rock face to hidden hazards to strive to make it to port before the ship is overwhelmed by a tsunami of indefference.

    I’m not immune to your assertion that if you want to grow the game, you have to allow non-traditional markets to embrace a unique sport. The problem is that the NHL tried this before and the Governors lost their nerve (never having foresight) when they gave up on the Atlanta Flames.

    Since that capitulation, any franchise south of the Mason-Dixon line are treated as second cousins and, should they have a run of poor results, candidates in the hockey fanatic mind to relocate where people ‘appreciate’ hockey.

    I must admit I was sceptical of the viability of a franchise in Nashville. The financial machinations between city and owner did not help my belief that there was no sense in putting a franchise there.

    As passionate as you are regarding hockey and the impotance of promoting the best game on earth in ‘non-taditional areas’ – how long does the NHL team stay in an area when it could have a more stability elsewhere?

  2. David L. says:

    Interestingly enough:

    Total Population of Canada in 1927 = 9,637,000
    Number of NHL teams in 1927 = 10
    Total Population of Canada in 2009 = 33,507,506
    Number of NHL teams in 2009 = 30

    Obviously, this is just a coincidence, but one wonders, eh?

    I agree with the author of this article. Not all of the expansion teams should be painted with the same broad brush, as seems to be the common approach in the Canadian media.

    If we assume that these attendance figures for 2009-2010 are correct, then the Southern/Southwestern teams and/or “new” expansion teams are not all “problem” franchises.

    http://espn.go.com/nhl/attendance

    Just for example, the Lightning have the 21st best attendance, or higher than the Avalanche (former Nordiques) and Islanders. With the exception of the Ducks and Coyotes, the rest of the Pacific Division draws better averages than either the Penguins or Devils.

    The strongest correlation to attendance appears to be the W-L record and capacity, not franchise location. Only three teams from the bottom ten in attendance made the playoffs: Coyotes (30), Avalanche (27), and Predators (26). Significantly, this translated into average capacities of 75% (Coyotes), 77% (Avalanche), and 88% (Predators).

    While average attendance may be a good indicator of fan interest, it obviously isn’t the only factor in a franchise’s net worth. I don’t think any team could have made decent money with the Coyote’s previous stadium deal and 16,000 seat capacity. Similarly, it appears that Nashville could probably draw more fans for marquee games with a larger stadium, since the Bridgestone Arena only has a 17,113 maximum capacity for hockey. Of course, average attendance may be a very misleading figure in the case of teams like the Thrashers and Panthers, as I suspect that the bulk of their attendance comes from marquee road teams.

    In my opinion, the real problem facing the NHL is its poor television deals. Reportedly, NBC pays virtually nothing for NHL games, which it then buries on weekend afternoons. More importantly, Versus almost dropped off of the dial when it picked up the NHL contract. Apparently, subscription fees to the Outdoor Life Network were minimal. However, these fees went up significantly when the OLN became Verusus and picked up UFC, NBADL, and the NHL. As a result, only DirecTV now carries Versus in much of the U.S., and it is threatening to pull out as well.

    I don’t think the real problem is indifference to hockey in the U.S. The problems are: 1) poor media exposure; and 2) the death of regional teams due to overexpansion. In other words, the problem isn’t that hockey doesn’t sell in Florida, because Tampa Bay proves this wrong. The problem is having TWO teams in South Florida hurts BOTH of them. As I mentioned in another discussion thread, Atlanta used to be a more regional team, but perennial losing seasons and new franchises in Tennessee, the Carolinas, and Florida killed that potential.

    The problem doesn’t seem to be selling hockey in the South, so much as selling losing hockey in certain markets.