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Pittsburgh Penguins captain Sidney Crosby raises the Stanley Cup after his team beat the Detroit Red Wings to win Game 7 of the tournament finals last June in Detroit. (Paul Sancya)
Pittsburgh Penguins captain Sidney Crosby raises the Stanley Cup after his team beat the Detroit Red Wings to win Game 7 of the tournament finals last June in Detroit. (Paul Sancya)


Tale of two leagues: How the NHL succeeds despite itself Add to ...

By just about any business measure, the National Hockey League and its leading franchises are skating through the economic slump like Sidney Crosby in a game of shinny.

Sure, some teams are battling weaker revenue. As in all sports, sponsors are cutting back, consumers are spending less on non-essentials and corporate customers are paring costs. And the NHL brand has taken a serious beating over the bankruptcy mess in Phoenix, and the latest snub to Canadian hopes for another franchise. Ownership and financial woes at a handful of other U.S. teams don't help either.

But as the league embarks on its 92nd season, indicators point to a sport that is more than holding its own in the increasingly fierce battle for the shrinking entertainment buck.

League revenue stands at a record high. Ticket sales are holding steady even as prices rise in some markets, and star players are drawing big crowds. The sport is enjoying a resurgence in some old hockey towns such as Chicago and Boston, while the Montreal Canadiens sold this year for a record price. Television ratings are picking up.

The NHL's surprising resilience to recession provides a golden opportunity for the league to deal with its chronic problem teams once and for all and build a lasting foundation for long-term business success. The economic tailspin has cemented the misfortunes of the southern U.S. teams, adding urgency to the league's need to face reality and declare its winners and losers, industry experts say.

"The solution is both obvious and extraordinarily difficult," says Marc Ganis, president of Chicago-based Sportscorp Ltd. "Namely, reduce the number of teams and then visit expansion later" when the league is on a sounder footing.

"In many ways, it's the best of times and it's the worst of times for the NHL," says the sports industry consultant, channelling Dickens.

Today's NHL is indeed a tale of two leagues. Despite widespread joblessness, established teams like the cup-starved but cash-rich Toronto Maple Leafs can count on their rabidly loyal fan base. Even Detroit, ravaged by waves of auto sector layoffs, remains one of the strongest franchises.

Yet at the same time, the NHL is saddled with terminally ailing U.S. franchises that lose fistfuls of money in good times and even more in bad times. Most are in the southern states, and their owners are rapidly losing interest in the sport now that their other businesses are feeling the pinch.

"The strong teams will remain strong. The weak teams will get weaker. That's what will lead to contraction or relocation," says Richard Powers, associate dean at the University of Toronto's Rotman School of Management.

Protecting the bottom line

As the public battle over the fate of the hapless Phoenix Coyotes showed, the NHL can ill-afford to carry these weak links indefinitely, without hurting its bottom line and further tarnishing its reputation.

Over all, though, the league's finances appear sound. League revenue in fiscal 2009 reached a record $2.6-billion (U.S.). That's not far from the National Basketball Association's total of about $3.2-billion.

The sport's revival in such traditional markets as Chicago and Boston has turned games there into hot tickets again. A cadre of young stars such as Sidney Crosby and Alexander Ovechkin are drawing big audiences and driving merchandise sales here and abroad. Despite slower consumer spending, most teams have maintained or even increased prices.

Even the once sad-sack Washington Capitals are poised to turn their first profit in their history next year. And in Canada, where the NHL enjoys unchallenged supremacy as a spectator sport, team operators might well be asking: "What slump?"

Usually anemic U.S. TV ratings hit a 36-year high of eight million viewers for the deciding game in last season's Stanley Cup final. And the Internet, where the league has been building a strong following, may finally provide the global platform the NHL has long craved.

To be sure, all pro sports tend to weather economic storms better than most businesses that rely heavily on people forking out discretionary income for non-essentials.

"They get hit like everybody else," says Baltimore investment banker John Moag, whose eponymous firm specializes in sports valuations and transactions. "But you don't see the dramatic downturns in revenues that you see in a lot of businesses."

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