NHL Lockout Kills Season, Local Businesses

UPDATE: The NHL announced on Thursday the cancellation of regular season games through Jan. 14.—Editor

Does no one understand math? The myopic individuals responsible for the NHL lockout have already lost more money because of the work stoppage than they will recover in a settlement.

Hockey is a $2.9 billion industry. Let’s assume that half a season lost has cost the league half its revenue, around $1.45 billion. Yet owners and players continue to fight over 4 percent of revenues. Owners offered a 50-50 split, reduced over three years; the players a 54-46 split, reduced over the next three years. Simple math shows that the sides are fighting over $116 million a year based on current revenues. That’s a total of $464 million over four years.

It doesn’t take a genius to understand that losing $1.45 billion—in any split—is more expensive than accepting your labor adversaries’ offer.

While the NHL lockout allegedly hurts owners and players, the real victims are businesses in or around arenas. Small businesses that cater to fans and are dependent on the league don’t have the luxury of losing over a billion dollars on principle. But who is really to blame?

Certainly, one side is holding up a good deal. The problem is the public can’t tell which side is at fault because there is no transparency in the negotiations. Unlike the fiscal cliff debate, where the Republican House is clearly holding up a deal, it is not so clear in hockey—although reports seem to indicate it is the owners.

The difference in this debate is that regardless of which side “wins” this contest, they will both come out wealthy and they will both have lost more money than they could have made by settling.

The average salary for a player is $2.4 million. The minimum salary is $525,000 per year. The average career is four years. So, the average hockey player is going to earn around $10 million. Even at the minimum, a player will make $2.1 million. After taxes, it is still a good living. If invested wisely, not much is needed to retire after four years.

But we can understand that a person who only has four years to make the majority of their lifetime income could be concerned about their potential chunk of revenue. The owners, by contrast, have no such burden; they’re sitting pretty.

The San Jose Sharks are “valued” at $223 million. Kevin Compton bought the team for $147 million in 2002. That is an $86 million capital gain over 10 years—not a bad return on investment. And the market value has been going up every year. But most owners don’t buy sports teams for the profit, and they shouldn’t. There are plenty of other more lucrative business deals. No, sports teams are bought for bragging rights. Compton wants a Stanley Cup; and Sharks fans want him to succeed in that endeavor. But he makes his “real” money as a venture capitalist.

While $223 million isn’t chump change to most people, Compton could make far more money in other endeavors—as I’m sure he would be the first to admit. But owning a hockey team, or any sports franchise, is pretty cool. Owners are guaranteed good seats while doing the community a huge favor—and owners, in most cases, modestly increase their wealth in addition to taking a tax write-off at the same time.

But the stakes could not be higher for small business owners that rely on fans coming to their establishments before, during and after games. These businesses are not hobbies or philanthropic endeavors. Few will retire after four years of labor. For them, hockey really does matter. And it is for this reason the lockout must end.

Owners, players: Make the deal and let’s play hockey.

Rich Robinson is a political consultant in Silicon Valley,

Rich Robinson is an attorney and political consultant in Silicon Valley.

13 Comments

  1. Unfortunately, the NHL is dead to me now.  I have been surprised at how well I adapted to life without the NHL, and I’ll wager that many now-former fans have adapted well too.  If the NHL finally does get its act together this season, I won’t be watching.  Maybe I’ll come back in a few years, but only with apprehension, or on TV or with free tickets.

    Local leaders should be lobbying or pressuring the NHL, and its local affiliate, to get its
    act together, or any subsidies will be cut back. 

    Sadly our local team’s management does not seem to playing any role in resolving this mess, so now they should be losing our respect too.

  2. I’m sure hockey people stay up nights worrying about the businesses losing money in San Jose.

    It’s all perspective though.  I love reading stuff about how the SF Giants are scum for only thinking about their own business interests and how Lee Wolfe is a decent civic-minded guy that just wants to do the right thing for San Jose.  The San Francisco 49ers likewise want what’s best for the South Bay community that’s paying for their new stadium.  That community will remain nameless though.

  3. 2 1/2 cancelled seasons in a 10 year period? Hockey is cutting its own throats, giving the fans a collective middle fingers and hurting the little people who depend on the business. Maybe Mayor Reed can negotiate a collaborative settlement.

    • Really ??? “Maybe Mayor Reed can negotiate a collaborative settlement” ? This Mayor refused to negotiate with all City employees., Imposed his will where he could and is being sued by the rest. Pending lawsuits will cost into the millions only to be beaten down in the courts leaving the Taxpayers of San Jose to foot the bill for the Mayors refusal to negotiate

      • Disgusted,
        My comment about Mayor Greed negotiating a collaborative agreement was sarcasm, wrapped in the irony of what Reed has done with the proposals by the San Jose Police and Fire associations which would have reaped millions of savings for the city right now, rather than have an illegal ballot measure shoved down their throats which will be overturned in court. San Jose police officers are leaving this city by the droves because of Greed, and staffing has already reached a level beyond critical, with no relief in sight. San Jose officers will soon be paying 40% of their gross salary into their retirement, and their salaries are already among the lowest in the Bay Area. You will have police officers in San Jose who qualify for Food Stamps, and that is not an exaggeration. You will have the remaining officers trying to live on $30,000 take home if Mayor Greed had his way. He has destroyed this police department.

  4. At least FieldofSchemes.com is calling bull on this article that completely ignores the substitution effect:

    “Just because people aren’t going to Sharks games doesn’t mean they’re not going out to eat or otherwise spending money. In fact, in all likelihood businesses in San Jose not near the arena are seeing at least a minor windfall of customers as local residents try to figure out what to do with all that refunded ticket money that’s burning a hole in their pockets”

  5. I have the feeling that society would be much more orderly and efficient if Rich were dictator.

    The Robinson regime’s Hockey czar would have greedy owners coughing up the bucks that the player’s union feels entitled to faster than you can say “Hockey czar”.

  6. We’re already subsidizing the billionaire owners and millionaire players. Why not kick in a little more?
    For the sake of the handful of politically connected businesses that strategically placed themselves so as to take advantage of this taxpayer subsidy, the City of San Jose should fork over the cash required to bridge the gap between the two sides. A new parcel tax ought to cover it. It would be a fantastic investment.

  7. Speaking of Lew Wolf…. So how bout those great garage sale priced land deals he got around the arena. Does he get to keep them and make millions more while the city cries broke and keeps lopping off the heads of its employees. I wonder if McEnery is feeling the pinch as his sweet deal in and around San Pedro Sq takes a hit. By the way the city waved hundreds of thousands in usage permits around the new square. They are all in bed together. Meanwhile peoples homes are ransacked daily and cars stolen at a record rate in SJ. The numbers dont lie, the stats can be pulled. DISGUSTED

  8. I would like for the City to disclose what subsidies the Sharks get annually for operating the Arena.  Seems that the subsidies are in return for a boost in the local downtown economy when events are held.  Now that events are not being held, the Sharks and Arena operators should not be the beneficaries of any subsidies, since they are not keeping up their end of the bargain. 

    If all other cities demanded the return of their taxpayer-funded subsidies as well, there would be a little more pressure on NHL owners to resolve this lockout and prevent future shutdowns, since they seem to be happening kinda regularly.

  9. The hockey goons are crazy and suicidal over the share of profits and definitely kill the NHL since they did the same thing back in 2003.  Strike 3- they’re out! and Gone!  This the 3rd lockout in the past 15 years.  It’s the obituary for NHL, period!  If this season is cancelled, which is about 98% chance, they will have to kiss it good bye for good.