NHL Lockout Kills Season, Local Businesses
Posted by Comments (13)on Thursday, December 20, 2012
The San Jose Sharks have not taken the ice this season due to the NHL lockout.
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,
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