My Take on NHL Lockout 2012/13

NHL Still has Work to Do on its
Biz Model/Improved Revenue Sharing Needed

Prof Bruce Video Interview on Sens Founding
with Algonquin College’s Giovanni Falcone

I
have been involved one way or the other with NHL hockey for a long time. First
as a kid when my Russian grandfather took me to games at the Forum in Montreal
then as an adult working successfully to Bring Back the Senators starting in
1987 with an idea that culminated in puck drop on the modern era for the Ottawa
Senators on October 8, 1992. Next was the construction of the Palladium (now Scotiabank Place),
a run to the Stanley Cup Finals and a role as a fan of our home team.

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Here
is (a tired looking) Prof Bruce doing a 20-year retrospective on the founding
of the Ottawa Senators. It is an outtake from an interview with Algonquin College’s Giovanni Falcone who is
putting together a show on the history of the Sens.

_________________________________________________________________________________________________

The
most recent lockout was almost certainly the most frustrating one as far as
fans, League partners and sponsors are concerned. Unlike the lockout of
2004/05, sympathy for the League is at an all-time low.

In
04/05, nearly all stakeholders with a love and concern for the game understood
that the system was broken. No organization can sustain 20, 25 or 30% annual
wage hikes* which the League was experiencing over a prolonged period. When the
Sens came into the League, its payroll including minor league affiliate (at the
AHL level) was $6.5 million CAD. The Canadian Dollar as at 80 cents. Six years
later team payroll at the National League level was approaching $50 million USD
and the C$ was hovering around 62 cents. There was no salary cap and small
market teams were doomed in Winnipeg and Quebec. A few years
later the Sens went into bankruptcy and gloom spread around the League. Change
was sorely needed.

(*
I asked John Ziegler, then President of the NHL, in 1992 what labour cost
inflation we should plan for. He told us, “Expect 10% p.a.” It was, of course,
multiples of that.)

Bruce Firestone and John Ziegler at the Dec.
6, 1990 Announcement of a Successful Bring Back the Senators Campaign

But
coming out of that lockout, League leadership proclaimed that their system was
fixed and, with rule changes opening up the game, revenues nearly tripled over
the next seven years.

In
the summer of 2012, Cyril Leeder, President of the Ottawa Senators, told me
that the team was on track to perhaps set a new highwater mark for season
tickets—about 13,000. There was real excitement about Norris trophy winning
defenceman, Erik Karlsson, and the over achieving team of 2011/12 under head
coach Paul MacLean.

All
that went down the sewer as lockout talk accelerated and it became a reality.

What
we now know is the lockout of 2012/13 served one over arching purpose—to get
player share of revenues down from 57% of hockey related revenue to 50%. It
took a long time to get there. Now why is that?

Here’s
my take—

1. Players want to play. They don’t
like sitting on the shelf; they’re not like wine, they don’t age well. The NHL
was counting on this as they did in the last lockout. I learned this from
Alexei Yashin years ago when he sat out for a year. I met with him in the
summer following his year long holdout and we talked. I reminded him what he
said to me at the draft (the very first draft that the Sens participated in
where he was their very first pick, 2nd overall.) “Me, Alexei, lead team to
Stanley Cup,” he said thumping his chest. I told him, “Alexei, whatever your
contract situation is, you were born to play this game—it’s a gift. You have to
play.” Two weeks later he reported to camp.
2. Never send two lawyers to negotiate anything. Lawyers are trained in BIG win
for me/TOTAL loss for you. Not exactly the skills that professional negotiators
need to bring to deal making. There would almost certainly have been no deal
without mediator Scot Beckenbaugh (deputy director of the Federal Mediation
& Conciliation Service). This is a lesson for all sports leagues—get pros
to negotiate labor deals not lawyers and not commissioners. “Beckenbaugh’s role
in ending the lockout cannot be overstated. The level of distrust between the
NHL and NHLPA was tremendous, with the league believing that (Donald) Fehr had
little interest in making a deal, and the union finding unadvertised poison
pills in proposal after proposal from ownership. While little separated them on
the key issues for the last month, actually getting a deal done required
putting aside greater differences. Beckenbaugh was the man for the job,” Jesse
Spector Sporting News,
https://aol.sportingnews.com/nhl/story/2013-01-06/nhl-lockout-over-scot-beckenbaugh-mediator-schedule-gary-bettman-donald-fehr.
3. In my view, the Commish (of any League) should be above the fray and
represent all stakeholders—players, sponsors, partners, fans, not just
ownership.
4. Damage to the National League is likely to be greater this time than in
04/05 since the League’s credibility is not what it was then.
5. The NHL needs more revenue sharing à la NFL—sharing local TV revenues,
ticket sales and in-arena revenues. When the Green Bay Packers, for example,
visit the New York Football Giants, they get a share of all these local
revenues. Without Jesuit-trained Wellington Mara, co-owner of the Giants, there
would have been no NFL equal revenue sharing of TV rights fees (starting in the
1960s) and no Pittsburgh Steelers or Green Bay Packers today. An NFL without
the Steelers or Packers is unimaginable.
6. I’m surprised that the NHLPA did not push this harder; they did last time
(to no avail). The National League is focused almost wholly on cost control; a
real revenue sharing model would have been helpful for longterm stability of
all member clubs.
7. Sponsors are not happy about this lockout; Molson’s sales, for example, are
down 10% and they are very disappointed. It will take time to heal these
wounds. Trust is the number one thing in life and business and there isn’t a
lot of trust in the NHL at this time.
8. Small and medium sized businesses are also suffering. Some losses, such as
lower bar and restaurant incomes, are obvious. Other impacts are more subtle.
For example, SMEEs often use suites and tickets to incent employees, entice
customers and reward suppliers. In Canada,
there are not a lot of other choices outside of Toronto which has the Blue Jays and Raptors.
9. Lots of Canadians have second jobs at these arenas to help them pay their
bills; they’re servers, security personnel, cleaners, parking attendants,
Goodwill Ambassadors, etc. It’s been a difficult time for them.
10. By 2010, the Senators Foundation had raised over $50 million in cash and in
kind since its inception to do good work in their community. They run a 50/50
draw that raises millions for charities. This year they are obviously far, far
behind their fundraising goals.
11. Owners don’t really own these franchises. They hold them in trust for their
cities, fans, sponsors, partners, even players. You just cannot lose a year or
part of a year of your business every seven or eight years. That’s like lopping
12 or 14% off your revenues and more since revenues are depressed after each
lockout.

I
expect fans in Canada
to return en masse to support NHL hockey; I also expect that SMEEs and some
large corporations will take longer to come back.

It’s
a great game but labour relations as practiced by the National League need
improvement and its business model is far from complete.

@ProfBruce

ps. If you would like to watch my
interview on CTV’s BNN about the lockout, please visit, https://watch.bnn.ca/#clip838259

Dr.
Bruce M. Firestone, Founder, Ottawa Senators; Author, Quantum Entity Trilogy;
Executive Director, Exploriem.org; Broker, Century 21 Explorer Realty;
Entrepreneurship Ambassador, Telfer School of Management, University of Ottawa;
Head, Learn By Doing School