Thursday, December 6, 2012

Critical: Long Term Labor Peace for the NHL

It's critical. Absolutely critical.

The NHL and NHLPA should aim for a long term CBA. It is critical for the health of a league, and particularly so for the NHL.

We've heard that the NHL is proposing a 10 year CBA. Since negotiations started this summer, we have seen all kinds of terms proposed, including 6 years by the NHL and as little as 3 years by the NHLPA.

Health of a League

Long term CBAs are so important in promoting stability and growth of sports leagues. When there is extended labor peace, business partners are more likely to invest in a league long term. In those cases, leagues can more easily position themselves to secure long term deals on media rights, naming rights, season ticket sales, suite sales and sponsorships. The guarantee of labor peace provides business partners with the motivation to spend more for longer periods of time. 

And let's not forget that a long term deal makes it more likely that fans will buy season ticket packages. 

So extended labor peace means increases in revenue and attendance, while also promoting growth and stability. 

The NFL gets it with its 10 year CBA with no opt outs. The NBA gets it as well with a 10 year CBA with mutual opt outs after year 6. 

Record Profits for the Packers

Recently, the Green Bay Packers shattered earnings and revenue records in the year ended March 31, 2012. The team reported that revenue hit a record high of $302M, a $19.4M increase, while net income hit $42.7M, up from $17.1M.

In large part, what did team CEO and President Mark Murphy credit for this increase in revenue? The NFL's 10 year CBA.

"To me the fact we had guaranteed labor peace and a 10-year agreement probably was as meaningful as anything,” said Murphy. “At a local level, we have seen since the new CBA has been finalized, [the team] entering into long term agreements with sponsors, and a new preseason TV package that would have not have been possible without the labor deal.”

That's a pretty powerful - and true - statement - "[it] would have not have been possible without the labor deal". And bear in mind the Packers won the Super Bowl in 2011, which reasonably would have generated excitement, interest and revenue.

NHL Needs A Long Deal

The NHL and NHLPA should not want a long term CBA - they should feel like they need it. To say the least, fans are unhappy. Arguably, in 2005 fans were more likely to indulge the NHL because they recognized the business model was broken. There was no cost certainty with 73% of league revenue going to player costs. However, this time around, NHL fans are far less likely to indulge the NHL. Fans don't see a broken business model in need of an overhaul; they see the players and owners grappling over their share of revenue. This has resulted in an erosion of the NHL goodwill, and in some cases, may cause the NHL and its brand irreparable harm.

One way to try and repair the relationship with fans is by signing a 10 year CBA. This would send a clear message to fans that while negotiations did not go as planned, a real effort was made to avoid another labor disruption in the not too distant future.

As well, extended labor peace will help the NHL repair its relationships with its business partners. The reality at this point is that some businesses have allocated their marketing dollars elsewhere and some may not come back anytime soon. However, the promise of labor peace may be the olive branch that encourages disenchanted partners to return.

And the NHL needs it olive branches.

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