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Greed, Indeed
Jay Greenberg
October 07, 1991
In its expansion strategy, as in too many other matters, the NHL has shown a passion for fool's gold
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October 07, 1991

Greed, Indeed

In its expansion strategy, as in too many other matters, the NHL has shown a passion for fool's gold

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These are critical times for the NHL. After achieving modest prosperity through the 1980s, the league now finds its future in jeopardy because of a host of woes—no U.S. national television contract, a nasty labor dispute, skyrocketing ticket prices, snags in expansion. And the league can thank its own greed for many of these bedevilments.

The absence of a league-wide TV deal in the U.S. is just one example of how the lords of hockey have let their lust for immediate riches blind them to the big economic picture. Three years ago, the NHL went for the bucks when it shunned ESPN and its 50 million subscribers to sign a more lucrative television deal with SportsChannel America, a fledgling cable outfit that reached only four million homes. The league figured that SCA would narrow the audience gap between itself and ESPN, but that hasn't happened. When its three-year, $51 million pact expired after last season, SCA sharply reduced the amount it was willing to pay for hockey, and other TV networks have scarcely been more forthcoming. The NHL, to its dismay, may well start the '91-92 season without a national U.S. TV contract.

The resulting diminution of TV revenue comes even as player salaries, which were up 19% last season, continue to rise. Because of the need to meet growing payrolls, ticket prices have gone up sharply, too. For instance, the New York Rangers have increased their top ticket price this season from $45 to $65. Adding uncertainty to the league's economic outlook is the newfound militancy shown by the NHL Players' Association in negotiations for a collective-bargaining agreement to replace the one that expired on Sept. 15. For the first time the NHLPA is seriously pushing for an easing of the league's notoriously stiff restrictions (five first-round draft choices for a quality free agent?) on player movement. Prospects for a quick settlement dimmed last week when players angrily walked away from the bargaining table. You can bet that when a new contract is finally signed, salaries will continue to escalate, which in turn will drive ticket prices higher still.

Obviously, NHL owners need an additional revenue source lest the cost of attending games further weaken the sport's fan base. And they've found such a source—expansion. But here, too, the owners are going for the loot with little regard for the long term. In fact, the NHL's approach to expansion is a case study in shortsightedness.

Since the absorption of four World Hockey Association clubs in 1979, the NHL has been a 21-team league. Its self-proclaimed "vision of the nineties" calls for expansion to 28 teams by the year 2000. The first of the new teams, the San Jose Sharks, begins play this season, and conditional franchises have been granted for '92-93 to Tampa and Ottawa. The addition of San Jose and Tampa is intended to move the NHL toward its goal of becoming a truly national entity in the U.S., as it already is in Canada.

Unfortunately, in executing this grand scheme, the NHL brass has been looking myopically at the horizon without first consulting the rearview mirror. Little has been learned from the past, when the NHL's growth was stunted by its eagerness to beat the WHA into virgin territory and to collect expansion fees in the process. Between 1967 and '74, the league added 12 teams, but it often awarded franchises to owners ill-equipped to run them. Worse, it didn't allow the new clubs to claim enough solid major league players in the expansion draft to achieve quick respectability.

Soon enough, franchises in Kansas City, Oakland and Atlanta had to be transferred. One of the transplanted teams, Colorado (from Kansas City), had to be moved again (to New Jersey). Another, Cleveland (from California), failed. Desperate for immediate help, new teams traded high draft choices to established clubs, causing the gap between the haves and have-nots to widen. Far too few games were competitive.

Today the NHL is making those mistakes again. Instead of giving its new clubs the means to turn into winners within, say, three or four years, the league is using them as trash heaps for unwanted players. Too many teams are being brought in too quickly. The NHL is also overcharging for the expansion clubs, increasing the possibility that they will be undercapitalized. Teams are going to owners who may not be able to afford them—and, in two instances, to those who have done poor jobs running other franchises.

George and Gordon Gund spent 12 seasons running the Minnesota North Stars into virtual ruin before they struck a deal with the NHL to sell the Stars and run the expansion club in San Jose. The Tampa team was awarded to a group headed by Phil Esposito, who as general manager of the New York Rangers from 1986 to '89 made 43 trades in 34 chaotic months without improving the club. The Ottawa franchise has named as its general manager a 36-year-old former player, Mel Bridgman, who has never run a team.

By charging $50 million per team—$18.5 million more than the NBA charged each of the four new clubs it approved in 1987—the NHL has frightened away responsible prospective owners. Instead of pricing new franchises fairly and giving them a chance to become profitable within a reasonable number of years, NHL owners have used expansion as an artificial means to inflate the worth of their own teams. Nobody is being fooled, though. The New York Islanders have had the for-sale sign up since last February, but owner John Pickett has yet to receive a worthy offer.

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