ICED

12.12.12

Cancellation of NHL Games Has Negative Economic Impact

Americans may not notice that a lockout has canceled much of the 2012–13 NHL season. But businesses—from NBC to Molson Coors—have taken a hit.

What if you canceled a season and nobody noticed? Hockey, ranked seventh in popularity among professional sports, isn’t exactly America’s favorite pastime. And the lockout threatening the 2012–13 season isn’t helping matters. On Monday the league announced that it canceled all games through Dec. 30. Thus far 526 regular-season games (about 43 percent of the season) have been iced.

The lockout may not put a crimp in the day of the typical sports fan. But it does have an economic impact. While the NHL players and owners argue over the exact dollar signs to put on their future paychecks, stadium workers and small-business owners who serve fans each season are hoping they will still get one.

“The local economies are what get harmed,” said Dan Rascher, the president of SportsEconomics, a sports-business consulting firm. “The places around the [stadium] vicinity are going to have the strongest impact, because a good chunk of people who attend those areas aren’t from the city. They are new groups of people who spend money in areas they wouldn’t spend it in otherwise.”

Of course, the rich are suffering. Team owners and the players’ union are deadlocked over how to divvy up the $3.3 billion in revenue accrued from last season. According to Bill Daly, the NHL’s deputy commissioner, in the current wait, at least $230 million in revenue has been lost from canceled games.

“It’s not just the league that’s losing that money,” Daly told The Orange County Register. “The players are sharing on some basis in that. Some substantial basis ... The current situation hasn’t benefited either side, that’s for sure.”

Local businesses that rely on the traffic generated by hockey games are feeling the effects of the lockout. Many have had to enact deep cuts and lay off employees to stay afloat because of the lack of sports-going customers.

“My studies show that you get 10,000 to 11,000 people coming from out of town to a [NHL] game, and depending on the landscape around the facility, they are going to see a ton of business for those game nights,” Rascher said. “And a shocking number of people spend the night in hotels, so [the lockout] is really a big impact for those businesses.”

The lack of revenue has already affected jobs in the NHL. In the beginning of October, official NHL employees were placed on a four-day workweek and given a 20 percent salary cut. Sports-stadium workers, who would normally help at hockey games, are also receiving fewer hours of work because the venues cannot schedule other events to replace the lost games in case the lockout ends.

Both the workers and the stadiums are effectively held hostage. 

“What’s really difficult for those lockouts for an arena is they will really never know when the lockouts are going to start up again,” Rascher said, “So they can’t book monster-truck dates, etc. They are just waiting and waiting and waiting.”

Molson Coors is faring so poorly in the Canadian beer market that its CEO, Peter Swinburn, has said the company will seek financial compensation from the league when the negotiations are settled.

Boston is one city that has been hit hard by the lockout. Its team, the Bruins, is the fifth-wealthiest in the NHL and won the Stanley Cup in 2011. With games suspended, however, the Bruins are losing about $3 million in ticket sales for each game not played. The city is also reeling from lack of revenue generated by the sport. The Greater Boston Convention and Visitors Bureau estimated that local businesses and restaurants collectively are losing between $850,000 and $1 million for every missed game.

In some cities, the lockout has hit local businesses so hard that they have had to reach out to the government for financial assistance.

Both Sen. Kirsten Gillibrand of New York and Sen. Sherrod Brown of Ohio have written official letters to the U.S. Small Business Administration asking for aid. The senators wrote that the areas surrounding the stadiums of the Buffalo Sabres and the Columbus Blue Jackets needed significant help. 

In November, Gillibrand wrote, “At this time, the lockout has cost the local Buffalo economy nearly $2 million in lost hotel revenues alone, and with no end in sight is set to cost small businesses even more as games continue to be cancelled.”

Brown wrote that Columbus, Ohio, had been hurt not only by the lockout, but also by the cancellation of the 2012–13 NHL All-Star game, which the city was set to host. “Without these games, many businesses are scrambling to make ends meet,” Brown said in his letter. “The Greater Columbus Sports Commission estimates that the cancelled All-Star game will cost Columbus $12 million in lost revenue and an additional $50 million in media exposure.”

Additional markets hurt by the suspended hockey season are advertisers and television stations. Many companies, like doughnut chain Tim Hortons and Molson Coors, had signed on to sponsor games in 2012 and have had to rethink their marketing with the games on hiatus. Molson Coors is faring so poorly in the Canadian beer market that its CEO, Peter Swinburn, has said the company will seek financial compensation from the league when the negotiations are settled.

Broadcast network NBC is also struggling under its partnership with the NHL. In 2011 NBC signed up as the sole broadcaster of the live games and made $150 million last year, according to Kantar Media. Without this season’s games, NBC is projected to lose marketing profits as companies will likely advertise their products on other similar networks such as FX and Spike.

Sports economists worry that the effects of a lost hockey season this year may continue. This year’s lockout is the third in the NHL’s history, and numbers show that it took the sport years to grow in ratings and revenue after its last season-long lockout in 2004–05.

“Everyone attached to the business of sports wants and needs continuity to keep the cash flowing,” said David Carter, the executive director at the University of Southern California’s Sports Business Institute. “Once revenue leaves a business, any business, it is tougher to get it back. Given hockey’s history of labor disputes, more may be disenfranchised this time around.”

However, Carter says he thinks the NHL will bounce back. “The only issue is, just how long will it take?”