Hockey on Thin Ice

0
556
The Daily Campus’s Karthik Iyer writes that the solution to making hockey more profitable lies in the marketing toward kids. Photo by Anton Belitskiy from Pexels

There is one aspect all the world’s major sports have in common. They all have relatively low barriers of entry. A sport can only be as popular as its accessibility and the excitement kids have to play it on a local level. Hockey is the most expensive widespread youth sport, averaging $7,013 to play per capita annually. That is 11.1% of the average household income in the United States. It is approximately seven times more expensive for a kid to play organized hockey than basketball. With families trying to curb spending during the pandemic’s economic downturn, global warming shortening the outdoor playing season and rising competition from other sports, does hockey have any contingency plan to save the sport?

The crux of hockey’s problem is that it is more expensive than other sports, has less opportunity to play and there is less money to be made by playing. In 2017, Conner McDavid signed a National Hockey League contract that would net him an annual salary of $12.5 million which would make him the highest paid player in the league. He was considered such a valuable asset by the Edmonton Oilers that it was a legitimate debate whether the team should have paid him or allocated their limited salary cap in favor of a more balanced roster. Juxtaposing McDavids salary that year to that of superstar NBA guard Stephen Curry, the highest paid NBA player in 2017, it is clear that McDavid’s salary is meager at best in comparison to Curry’s $34.7 million annual salary. Curry’s 5 year, $201.2 million contract also guarantees him over $40 million for the last three years, each year earning him a larger payday as an incentive to stay with the Golden State Warriors. 

The disparity in pay among the players widens when analyzing average player salaries, which is $3.0 million dollars per year in the NHL and $7.7 million dollars per year in the NBA. This discrepancy stems from the NHL making less money as a whole and due to the league being extremely top heavy. A Forbes statistical analysis of franchise values trends in the NHL reveals that the top five out of 31 teams in the league — the New York Rangers ($1.65 billion), the Toronto Maple Leafs ($1.5 billion), the Montreal Canadiens ($1.34 billion), the Chicago Blackhawks ($1.085 billion) and the Boston Bruins ($1 billon) — account for approximately 25% of league revenue.Without these franchises, the league would lose roughly $50 million annually. This means that the success of the NHL is predicated on localized media networking rather than national televised platforms. These limited channels of league endorsement limit the athletic talent pool of those striving to play in the league from a young age and undermines the sport’s growth potential. Analysts have debated whether cutting teams from the NHL could benefit the sport as it would stop diluting financial resources, but abandoning struggling franchises forfeits those fan markets to other sports, potentially irreversibly.

Financial hits from the pandemic have already caused the average NHL franchise value to drop by 2% to a meager $653 million with few signs of bouncing back in the short term. Drew Dorweiller, a managing director at Montreal-based investment bank IJW & Co., states that “NHL franchises will be challenged to find creative ways to offset the impact of pandemic-inflicted operating losses” and that “one of these strategies will likely be to raise capital through sales of minority stakes in NHL teams to investors.” However, with operation revenue already down 68% and the league showing dire vulnerability to absorb economic shocks, does the NHL really come across as an appealing investment? 

Investors make decisions based on estimated return on said investment which factors in several variables such as risk, market size for their endorsed product, sustainability of profit generating inputs and required time to start generating profit. The problem of hockey players not being paid as much disappears if the NHL starts expanding and making more money. This is thanks to the 50-50 split of hockey related revenue between the league and players as per the terms of their collective bargaining agreement. 

The solution to making hockey more profitable lies in the marketing toward kids. The league has to invest in indoor facilities as global warming trends shorten the outdoor playing season. The reality is most middle class individuals just can’t afford it. Hockey is entertainment, a pastime not looked at as a priority by budget-strapped families. The sport is already disadvantaged by the fact that the majority of the United States cannot play hockey in winter but now warming summers have begun limiting the playable days in the northern U.S. and Canada. According to Sports Illustrated, “From the late 1950s to the early ’80s, Toronto averaged between 35 and 42 of those days; recently, that number has fallen by 25% and projects to fall another 33% by the year 2090”. The existential threat to hockey is simply one more reason to take global warming seriously. 

With a ripple effect expected to ensue even following the return of fan attendance at games, hockey will have some hard decisions to make. Should they start pulling the plug on franchises that consistently file for bankruptcy? Do they need to subsidize the hockey equipment market? In addition to addressing all these concerns, it is of top priority that hockey begins fostering better connections between the amature and professional levels and develops a lifeline to continue as a major sport in years to come.  

Leave a Reply