Friday, December 01, 2006

Just another day at the office for Gary Bettman and the National Hockey League

Thursday was just another day at the office for Gary Bettman and his followers – those who run the National Hockey League. A report from The Toronto Star indicated the bottom has fallen out of Canadian television ratings. Earlier this week reports from Pittsburgh reminded everyone of the Pittsburgh Penguins uncertain future in the Steel City. The NHL is poised to continue their blissful ignorance of ESPN and extend agreement with the cable sports network with less awareness then the NFL Network. NBC is ready to extend their no money down (no money to the NHL) over-the-air agreement.

In short, Gary Bettman continues to sell the NHL as a league moving forward. The only problem, nothing could be further from the truth. Under Bettman’s leadership the NHL continues their inevitable road to the end of the world. And clearly one of the biggest issues remains a lack of understanding those in charge of the NHL have relating to where the NHL stands in the sports marketplace.

There are few selling points the National Hockey League can count on in marketing the league. One of those positive signs had been Canadian television ratings, key words ‘had been.’ According to a report in Thursday’s Toronto Star, Hockey Night in Canada ratings are off 19 per cent for the early game, and a whopping 33 per cent for the late one compared to last year. TSN's ratings have dropped 18 per cent.

In fairness as the Toronto Star mentioned, coming off a year without NHL hockey Canadian NHL fans couldn’t get enough NHL hockey. CBC had their highest hockey ratings in ten years and TSN set an all-time seasonal ratings record.

"We all thought the numbers would come down, but this is more than we thought," admitted Joel Darling, CBC senior executive producer in The Toronto Star report. "It's a bit puzzling.

"It's like a lot of things; sometimes the honeymoon isn't as long as we'd like it to be."

Bottom line – the bloom has worn off the NHL’s Canadian rose and it couldn’t come at a worse time. Its current Canadian TV contracts will expire at the end of the 2007-08 season. The CBC is paying the NHL $65 million-a-year and according to The Globe and Mail, and generates an annual profit of between $25-million and $30-million.

Bell Globemedia (CTV and TSN) is poised to reportedly make a bid for Canadian English and French language TV rights in the area of $140 million a year. The CBC are expected to bid at least $100 million to retain the lock they have as Canada’s over-the-air television rights. The NHL is well into their negotiations with both sides. Given there isn’t an over-the-air carrier prepared to spend a dime on American rights, its incumbent on the NHL to sell Canadian rights for as much as they possibility can. The good news, the offers are on the table. The bad news, with the bottom having fallen out of the NHL ratings in Canada, Bettman and the NHL better get a deal done sooner rather than later.

"Canadians aren't flocking back to hockey the way they did last year," says TSN president Phil King. "There was that giant `We missed you and welcome back' that's not there this season.

"It wasn't just the lockout. Half the players changed teams, Gretzky was coaching, rules had changed. There was a lot of interest in everything."

King is likely a key negotiator on behalf of Bell Globemedia. If King, as he suggests, believes Canadians have losing interest in the NHL, the NHL is in a great deal of trouble if the league ever hopes to get close the $150 million annually league officials are praying they’ll be offered. That bargaining chip no longer exists.

Which brings the NHL back to where they are with their two American television agreements. Versus, owned by Comcast are expected to extend their current agreement for one year. All that will serve to accomplish is illustrating how terrible the decision was to leave ESPN.

Versus reached 65 million homes a year ago. A year later, according to a Los Angeles Times report the fledging cable network reaches 70 million homes. Meanwhile ESPN and ESPN2 each reach more than 100 million homes. ESPN had planned on placing NHL games on ESPN2. ESPN has taken cable television to another level averaging more than 10 million viewers weekly through the first six weeks of ESPN’s Monday Night Football coverage. While ESPN and their family of networks report on NHL games, without NHL hockey ESPN canceled their nightly NHL magazine show “NHL Tonight” last year.

"ESPN provides the sort of Good Housekeeping stamp of approval," said Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon and a hockey fan in a Los Angeles Times report. The NHL, he said, "would be better off finding a working partnership between themselves and ESPN. If it were my decision, and not knowing the reason, this league needs as many symbolic attachments to maintain their position as a major professional sport."

A year ago, there was a belief Comcast was going to attempt to build a second national sports network to compete directly against Disney owned ESPN. Versus had talked about securing the last available NFL TV package, the eight late season Thursday/Saturday night games the NFL kept for themselves to build the NFL Network. Whatever reasonable opportunity Comcast had to create a major national sports cable network all but ended in January when the NFL made the best move they could for their cable network, putting actual live NFL games (sports most valuable property) on their own network. Cable operators are balking at paying the NFL the carrier rights the NFL is demanding to carry the NFL Network. Versus may be much cheaper but with a menu of NHL games and little else, Versus is doomed to failure.

"If we were going to grow, we needed to do something different," NHL Commissioner Gary Bettman said in defending the deal in a Los Angeles Times report. "While we gave up some distribution, the coverage was phenomenal. They will continue to grow over time and we think as a result, people will see better coverage of hockey."

Good intentions aside – if Comcast was really committed to creating a cable sports network they would have secured either the limited cable NFL rights the NFL Network has, and the regular season, and now LCS rights Turner Broadcasting secured Tuesday. The NHL can talk about being the ‘prince of Versus’ but when you’re the master of a domain that is empty – you still have nothing.

How terrible is the NHL’s agreement with Versus? This past week NHL fans rejoiced when something called The Hotel Network announced hotels and motels affiliated with The Hotel Network will carry Versus in more than 300,000 hotel rooms. Far to little and far too late, the NHL mistake of leaving ESPN for what amounted to pennies on the dollar will serve to haunt whatever legacy Gary Bettman leaves behind when he’s finally retired or fired.

And let’s not dismiss the value American networks place on NHL hockey – its worthless. With the NHL poised to sign a long-term extension with NBC, one that doesn’t guarantee the NHL any revenue, NHL rights are worth zero dollars. In an era when networks are throwing millions of dollars at any sports properties, the fact that the NHL can’t get anyone to pay the league anything for the leagues rights remains an embarrassment.

The NHL has passed the quarter point in their 2006-07 schedule. Gary Bettman had better hope St. Louis Blues owner Dave Checketts and his Sports Capital Partners have very deep pockets. Between 1999 and 2005 the Blues reportedly lost $285 million and that was with a sold out building every night. In the last two years, the Blues attendance has dropped by more than 40 percent. Checketts raised ticket prices by 10 percent this year, but with an empty building most evenings, the once strong St. Louis Blues are heading towards a very dangerous place.

"Last year, we set an all-time attendance record," said Bettman, resting his feet on the coffee table of his Sixth Avenue office in midtown Manhattan in a Reuters report.

"Part of that record was the strongest October we had ever seen... If you take away last October, we would have set an attendance record for October this year."

Bettman’s last remark shows how out of touch the man in charge of the NHL clearly is. Instead of admitting the NHL has some attendance issue, Bettman’s spin suggesting if October 2005 hadn’t taken place is ridiculous. Understanding the NHL enjoyed a ‘bounce’ after a year without hockey and realizing there would be an inevitable drop in attendance is what real leadership is about.

The good news, NHL attendance is down only about one percent from last year. It’s a silly to suggest the one percent makes a difference as it does to say there aren’t any problems. The one percent doesn’t matter, however, along with St. Louis there remain major attendance issues in Florida, Boston, Phoenix, Chicago, Washington, New Jersey and Long Island, New York. Along with bottom feeding St. Louis, eight NHL franchises haven’t sold on average more than 20 percent of their available ticket inventory. In a gate driven sports league, it’s great if more than two-thirds of NHL franchises are playing to arenas filled to at least 90 percent capacity. The NHL must deal with its eight weak franchises if the business is ever going to move forward.

A year into an NHL era of financial sanity (for that Bettman deserves the credit for getting the labor deal done), Bettman’s belief the ‘business of the NHL’ is strong is interesting as he told Reuters.

"The challenge moving forward with the foundation we have is, 'How do we grow new fans? How do we take casual sports fans and turn them into hockey fans?' That's what we're working on," he said.

"No one can question that this is a solid business, a strong league with an unbelievably strong brand. What other brand could shut down for a year and not lose its customers?

"Hockey fans are the most loyal fans in sports and for that we are so grateful."

One suggestion being raised, the NHL is poised to start streaming their games live online. Currently the NHL has an agreement with Google to show games on a tape delayed basis. Not all games are available, and despite reports in Sports Business News, Forbes, Buffalo Business First and The Globe and Mail, the delayed games are still free to view. (Another decision the NHL should be applauded for continuing).

It’s reasonable to believe reports of the NHL going to stream games live over the Internet are indeed true. As long as the NHL has the technical ability to video stream games live on the Internet, it would be a tremendous step forward in helping Bettman and his cohorts reach their goals of finding a bigger audience. And the NHL would be well within their rights to charge if they stream games live on the Internet. A move towards live streaming deals with the issues of the ill-conceived Versus agreement, allows the NHL some much needed exposure, offers displaced hockey fans an opportunity to follow the sport they love and can generate some revenue as well. In short – it’s a tremendous solution to many of the NHL’s issues.

Earlier this week Gary Bettman was in Pittsburgh making it clear that the Isle of Capri’s casino bid better be the one announced by the Pennsylvania Gaming Control Board as having received the sole gaming license awarded to one of three Pittsburgh applicants.

"Certainty comes to the future of this franchise with the Isle of Capri getting the license," Bettman said. "Without it, we will enter an era of uncertainty where a lot of things can happen."

"There is a lot of work that needs to be done to get this arena built," Bettman said. "But I don't think there are really any issues if Isle of Capri gets the license."

The fate of the Pittsburgh Penguins will be determined on December 20, when the Pennsylvania Gaming Control Board announces the winning bid. Wednesday, the gaming control board task force unveiled that the Isle of Capri’s bid would generate the least revenue from the three bids.

The so-called Plan B, the alternative plan to fund a new arena should the Isle of Capri’s bid fail is nothing more than political window-dressing. Plan B calls for new Penguins owner Jim Balsillie to contribute more than $120 million his own money, and for the winning Casino to give close to $200 million of their money. Each of the three bids guarantee a significant contribution from the winning bidder to the community. It makes no business sense whatsoever for any business to give away $200 million when they’re already making a significant contribution elsewhere.

The bottom line, at times it seems the NHL understands it’s not quite a major sports league, but much more than a minor sports league. The NHL has to stop believing it will ever be a league in the same class as Major League Baseball and the National Basketball Association (the NBA and MLB better realize their not in the same category as the NFL), and the NHL has to focus on staying a step ahead of Major League Soccer, the Arena Football League, and the WNBA. There’s nothing wrong with where the NHL is, there’s everything wrong if those in charge of the National Hockey League don’t accept and understand where the NGL is.

For Sports Business News this is Howard Bloom.

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