Wednesday, December 19, 2012

NHL Armageddon 2012: at the edge of the abyss (cliff)

The National Hockey League lockout the league’s third in the last twenty years, the second prolonged work stoppage in 19 years has caused irreparable damage to the NHL’s brand. Regardless of whether the NHL and the NHL Players Association reach an agreement on a collective bargaining agreement (CBA) in time to save part of the current NHL season, when the NHL returns, the league will never completely recover for the harm that has been inflicted on the NHL by the league’s owners and players.

“My clients are beyond frustration with what’s happened, “ Brian Cooper, president and CEO of S&E Sponsorship Group which handles significant NHL sponsors told Canada’s Globe and Mail. “The public has soured on them. Better to wait till the brand is forgiven. By then, it’s probably next summer at the earliest before people will consider the NHL brand again.”

“As a brand or sponsor there’s no time to do whiz-bang plans for half a season. We have back-to-business plans in place in case they settle, but they’re diminishing by the day. You can’t replace the dollars taken away, even if the NHL comes back tomorrow.”

Eight years ago the NHL lost the entire 2004-05 season to a work stoppage, the first major professional sports league to lose an entire season to a labor dispute. Wednesday, the NHL set a mid-January deadline for there to be a settlement or the entire 2012-13 NHL season will be canceled.

Last week President Obama suggested it was time for the two sides to reach an agreement. Tuesday Canadian Prime Minister Stephen Harper who has been working on a hockey book for several years told Quebec broadcaster TVA the NHL was “risking its brand and relationship with sponsors as a result of the impasse.”

The NHL suffered few if any ill effects from the 2004-05 lockout. Hockey fans returned in record numbers. The league made several key changes to NHL rules; however that wasn’t the cause for the league to succeed after a season long work stoppage. Hockey fans came back believing the game they loved had been fixed. The NHL is well aware the league has the smallest fan base of the four major North American sports. However it also has the most loyal fan base.

Hockey fans care deeply about their sport. When the last work stoppage began on September 15, 2004 Gary Bettman and the league did a masterful job in selling hockey fans on the importance of a salary cap saving the NHL. Players’ salaries accounted for 73 percent of league revenues, two franchises the Buffalo Sabres and the Ottawa Senators had filed for bankruptcy protection during the 2002-03 NHL season, the league was bleeding red ink. The NHL was broken and Gary Bettman promised to fix the league for hockey fans.

As upset as hockey fans were eight years ago when they had to live without their sport for an entire year, NHL fans believed in what the league was selling eight years ago, a salary cap represented salvation.

In the eight NHL seasons hockey fans enjoyed before being forced to once again endure a lengthy lockout that again threatens an entire NHL season, NHL revenues rose from $2.1 billion to $3.2 billion annually. The NHL signed a 10-year $2 billion contract with NBC. It was clear to NHL fans the league needed a salary cap eight years ago, eight years later the league is telling fans the league it didn’t get it right eight years ago.

The NHL counts on gate receipts more than any of the four major North American spectator sports for revenues. NHL fans were filled to 96.7 percent capacity when at the end of the 2011-12 season, record attendance for the NHL.

NHL sponsorships are at record levels. On February 22, 2011 the NHL announced an eight-year $375 million sponsorship with Molson and Miller for North American beer rights.

"Whether it's people not actually physically going to the venues and consuming there, consuming in venues around the outlet before that, or indeed having NHL sort of parties at home, all of those occasions have disappeared off the map and you just can't replicate them," CEO Peter Swinburn said in a November interview.

"It's a national sport, the whole of Canada is glued to it one way or another so there's no real regional difference at the moment that we can detect."

What the NHL doesn’t seem to appreciate – the NHL is a very small fish in a very big pond. Molson the league’s biggest sponsor is upset, but what about smaller retailers and businesses, how do they feel about the NHL and the labor lockout?

"Our NHL business is off substantially," Mitchell Modell, CEO of the 150-store sporting goods chain which bears his family name told the Sports Business Journal. "The dollars are small relatively, but the percentages are big. Thank God for the NBA, because it came back strong last year [after that league's lockout] and they are more than offsetting our NHL sales."

Seven of the NHL’s 30 franchises are based in Canada. Most NHL observers believed there would be little if any impact when the game finally returns in Canada, fans will return and support a game ingrained in Canadian culture. That might not be the case.

“There’s a compounding effect to this, fool me once, fool me twice and all that,” said Bruno Delorme, a sports-marketing expert at Montreal’s Concordia University in a Globe and Mail report.

There appears to be little trust between the NHL, the NHLPA and hockey fans. The Globe and Mail reported: “Level5 a 10-year-old company based in Toronto that has done “brand” analysis for such major enterprises as the NFL, NBA, 3M Co., Rogers Communications Inc., Canadian Tire Corp. Ltd., Second Cup Ltd., and BCE Inc. believes that regardless of when the NHL returns the league faces a tremendous challenge in marketing the league. The company based its findings on a series of interviews they conducted in the last few weeks.

“We found damage at levels we have not seen,” Level5 chief executive officer David Kincaid told the Globe and Mail. “It’s quite alarming, really.

“If anyone thinks that the lockout can end and everyone will come back to Happy Valley, it ain’t going to happen.”

When the NHL returns the league had taken it for granted Canadian fans would return, along with hockey fans in several traditional American markets (fans of the New York Rangers, Boston Bruins, Philadelphia Flyers, Chicago Blackhawks and Detroit Red Wings) nearly half of the NHL’s 30 franchises.

Kincaid was surprised by the results when it came to how Canadians feel about the NHL in December 2012: “If we had done this study 10 years ago, 20 years ago, we would have seen half of Canadians or more say they were passionate about the game.

“Think what this means to the sponsors of hockey,” Kincaid told the Globe and Mail. “For almost one-third of Canadians, you are wasting your time on them. You’ve lost them. They are not going to become even ‘neutral.’”

Clearly hockey fans are angry. When the current lockout is settled, regardless of the outcome the NHL and the NHLPA are going to need to make major changes in their leadership. Fans, the league’s corporate and broadcast partners have had enough of the current cast of characters.

Gary Bettman has been the NHL’s commissioner for twenty years will likely leave the NHL shortly after a settlement is reached, along with deputy commissioner Bill Daly. Both men have done admirable jobs, however both men have been the NHL’s face for the two major work stoppages and in Bettman’s case three.

Don Fehr was retired before becoming the NHLPA’s executive director a few years ago will return to private practice.

What the NHL and NHLPA need is new dynamic leadership that sends a clear and concise message to hockey fans, NHL sponsors and the league’s broadcast partners. The NHL and the
NHLPA once hockey returns are going to work together as partners. An eight year CBA, a ten-year CBA isn’t going to matter if when the next CBA expires the NHL and the NHLPA are going to be where they are now, as warring parties holding the hearts of hockey fans hostages.

For Sports Business News this is Howard Bloom

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