Wednesday, August 22, 2012

Potential NHL Lockout Could Affect More Than Just Fans

The last time the National Hockey League locked out its players, I was 17 years old. I had just graduated from high school, and was beginning my first semester at Dawson College. As someone who watches upwards of 120 NHL games each season, a year “off” was probably the best thing that could have happened to my GPA. At least, that was how I looked at it. I was young and had no grasp of how the lockout affected anyone but myself. When it was all said and done, and a new Collective Bargaining Agreement was reached, I did a happy dance, oblivious to the fact that this was apt to happen all over again in just seven years. After all, seven years was awfully far away, right?

WRONG. On September 15th 2012, the CBA comes to an end, and Gary Bettman has made it clear that if a new agreement is not reached by that date, the NHL will lock out its players once again (despite the fact that Donald Fehr, the executive director of the NHLPA, stated that the players were willing to continue playing under the current CBA beyond the September 15th expiration date, while continuing negotiations, as long as it meant the hockey season would start on time.

Being that there was a lockout just seven years ago, one would think that Gary Bettman and the owners must be out of their minds to resort to losing an entire season’s profits, just to stick a few extra bucks in their already fat wallets. However, the owners have little to fear. The NHL’s annual revenue increased by 52% after the last lockout, going from $2.1 billion a year, to $3.2 billion a year.

My next idea was that perhaps a lost or shortened season would be financially beneficial to smaller market teams, like the Phoenix Coyotes (who, we all know, Gary Bettman loves so much). So I decided to do some research on the operating costs of an NHL arena. Fortunately for me, the city of Glendale, Arizona had already commissioned someone to do the research earlier this year. Based on their report, it’s reasonable to assume that the annual gross operating cost of an NHL arena falls somewhere between $15-$20 million (Comparison of Operating Costs for SimilarArenas, TL Hocking and Associates, January 2012, p. 6).

Then you need to factor in the annual revenue amassed (different for each organization). The sample season I used was 2002-03. That season, 19 teams reported operating losses for a combined $273 million (the largest loss by a single franchise was $40.9 million). That same season, 11 teams reported operating profits for a combined $1.996 billion (the largest profit reported by a single franchise was $14.6 million). The average profit margin of the 11 profitable teams was $6.4 million, and the average losses of the 19 other teams was $18 million. (Levitt Report, February 2004, p. 2-21). Based on this information, my conclusion is that it isn’t in the NHL’s best interests to lose a season, however a shortened season would likely be beneficial to smaller market teams, particularly given the revenue sharing agreement. This further supports the theory of a January 1st 2013 start date (not to mention that dramatic and exciting story line of commencing a new season with the Winter Classic).

So that’s all well in good, but then I decided to look into how a lockout would affect everyone who doesn’t own an NHL franchise or play hockey professionally, such as waiters, waitresses, and bartenders. Anyone who has ever gone to a bar to watch a hockey game on a Saturday night knows how busy it can get. If your local team embarks on a playoff run, you’re apt to get turned away from over-capacity bars unless you arrive two to three hours before puck drop (I can personally attest to this, as during the Habs 2010 playoff run, I would arrive at an already crowded downtown sports bar between three and four o’clock in the afternoon in order to get a table for a seven o’clock game).

That being said, I spoke with Stuart Ashton, the general manager at McLean’s Pub on Peel (admittedly my favourite watering hole in Montreal) about the direct correlation between the NHL and their patronage. 

On an average Saturday night during the off-season, the bar will see approximately 500 patrons over the course of the evening. That number doubles during the hockey season if there’s a home game (the bar is located near the Bell Centre, so they get a rush of clientele for dinner before and after home games, however the post game rush is contingent on whether or not the Habs win). 

When asked if a lockout would affect the bar’s profit margin, Ashton said “the hockey season is a bonus.  We are a sports pub, but the sporting events are an entertainment that we have no say over.  It would be unwise as a business owner to depend on something we cannot control. That being said, we have to adapt, we have to be fluid, we cannot be stagnant.  We've gone through it all before and have done well regardless. Of course it will hurt, but it would hurt a lot more if we just depend on hockey for our success and we do not!” Ashton does not foresee any layoffs in the event of a lockout, however there will be fewer shifts available for his employees.

A Montreal waitress (who chose to remain anonymous), disclosed that she would easily earn $300 in tips during a four hour shift on game nights at the sports bar she works at. “The customers tend to be in a better mood [on game nights]. A lot more generous. They also buy a lot more booze. If the game night fell on a Saturday night, the place would be packed from the entrance to the back. Even when we’d have an afternoon game, there would still be a sizable crowd.” On nights when there was no game, there would be a significant drop off in crowd size. “The only other event that would even compare was UFC,” she said. When asked if her livelihood would be affected by an NHL lockout, she said “definitely! There's absolutely no comparison between a regular night and game night.”

So my message to Gary Bettman and Donald Fehr is simple. Get a deal done, and get it done quick. Your greed affects the little guys, and the fans who put the dollars in your pockets. Perhaps revenue increased after the last lockout. Maybe fans won’t be so forgiving this time around. Is that a chance you're willing to take?

Post script: In the event of a lockout, my advice would be to choose a QMJHL team to follow. Ticket prices are reasonable, and you won’t pay $10.75 for a beer at the Centre d'Excellence Sports Rousseau (home of the Blainville-Boisbriand Armada).