Saturday, August 07, 2004

Or maybe a convenience store

If you think it ought to be easy to solve the NHL/NHLPA contract dispute, I invite you to consider this articulate summary of the problem, submitted by wise reader H. Jarms:

...sports business is predicated on three fairly antagonistic goals: (1) to beat the existing competition; (2) while at the same time preserving that competition, and (3) to make a profit. No competition = no league, No profit = no league. More than that, the goal is not only to beat enough of the existing competition to ensure that the company survives and makes a profit, but it is to beat all of the existing competition while at the same time preserving that competition. In this respect the relationships between (A) consumers and products and (B) between owners and the market are very different in the sports world and the non-sports world.

Indeed. Regarding (A), he notes that he's a Cheerios fan, and says: "Do I care if Cheerios is the #1, #5, or #25 best selling cereal in Canada? Nope, my only concern is that they make enough profit to ensure that their big yellow box is still on the shelf when I go to the supermarket." Pro sports teams don't have that luxury - their success at beating the competition is major determinant of their value (ah, the Leafs - so often the exception that proves the rule).

Part (B) is addressed a bit today at Babbling Brooks. Damian posits: "sports teams require competition. If I'm a grocery store, I'm trying to drive the grocer down the street out of business. If I'm the Edmonton Oilers, I'm certainly not trying to drive the Calgary Flames out...OK, that's a bad example."

You are right and you are wrong, sir. The Oilers obviously need other teams to play; plus, as a business, they benefit from a perception of a competitive league. The other side of the coin is, if you're a grocery store (hey, can I be a liquor store?), you don't need to drive the grocer down the street out of business. He can do 5 times as much business as you, every day for 10 years, and you may still be a very rich and happy man. Your value has no direct intrinsic relationship to how you perform relative to the competition (see: Cheerios) - not so with an NHL team.

Also, revenue sharing is no cure-all, nor is it something that can act as a de facto salary cap. Since you asked, Damian, too much revenue sharing leads to the Tragedy of the Commons. NFL revenue sharing works well for them, because so much of it is from national TV rights. If you start pooling everyone's ticket revenue, and then splitting it back 30 ways, the system collapses (every owner drops the ticket prices in their own building to $1.75 - why should they push their own fans for more bucks, when they only keep 3% of it).

Anyway, I could have stood to be a little more clear Thursday. I'm behind the players in the sense that their present rhetoric is less distasteful to me than that of the owners. However, as a fan (or as someone trying to answer the question How Do You Save the NHL), I heartily agree that the status quo is unsustainable. If the owners spoke more frankly, like they had a problem which requires a solution and they were welcoming input, I'd probably be foursquare behind them.

Just in case Mario Lemieux is reading, the problem is this: Pittsburgh cannot compete with Philadelphia, because Philly has more people with more money. Philly can jack ticket prices higher, and have a lousier team, before their ticket sales suffer. If you accept that this creates an uneven playing field (on average), what is an appropriate way to address it?


At 4:02 p.m., Anonymous Anonymous said...

I've stopped caring about the NHL. Watching the local PeeWees playing is much more satisfying. And much more real, for that matter.

-- Sean (


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