They have to help fans understand concepts like earnings before interest, taxes, depreciation and amortization (EBITDA, or operating income); gross economic impact and income multipliers when discussing team venues or major sporting events; as well as fast tax write-offs inducing new owners to purchase endangered franchises, like the Edmonton Oilers’s. In the next few years, as Canadian cities like Hamilton, Winnipeg or Quebec City will attempt to gain or regain an NHL franchise, while others will make sure that they preserve it, and as the construction boom induced by the the Vancouver 2010 Olympics will come to the forefront, the discussion is 3
most likely to stretch to include sporting facitilites building costs and who will get what revenues, as well as the contributions that sports venues are alleged to make to city core redevelopment. Although disillusioned Expos baseball fans could certainly argue otherwise, the biggest event in Canadian sports economics over the last few years has been the 2004-2005 NHL lockout. It made the headlines and was the source of an uninterrupted flow of stories for 300 days! Nearly any Canadian, whatever his or her ethnic origin, had an opinion about who to blame for the lockout, and many voiced their views about possible solutions. The present chapter intends to put the hockey lockout and the arguments of those involved in proper economic perspective. Once you will have read this chapter, you should be able to explain the economic motives and constraints that rule NHL hockey, and you should be able to understand the main dynamics of any future labour conflict in team sports. While studying the implications of the NHL lockout, we will also examine the changing fortunes of the Canadian NHL teams, comparing the economics of NHL hockey with those of the other three major leagues in North America – namely the National Basketball Association (NBA), the National Football League (NFL), and Major League Baseball (MLB). We will conclude by analyzing the impact of professional franchises and the possible involvment of the public sector. BACKGROUND INFORMATION The root cause of the 2004-2005 NHL lockout The quotes that open the chapter seem to be distorted by some time-warp. On first reading they would seem to apply quite well to the denouement of the 2004-2005 lockout that team owners imposed on players of the National Hockey League (NHL). After more than 300 days of lockout (a lockout is the mirror image of a strike, with the employer stopping its employees from working, to put pressure on the labour union), the negotiations ended in July 2005 with players taking an overall 24% pay cut, along with the imposition of the revenue-tied payroll ceiling that 4
the NHL players association (the NHLPA) had vowed never to accept [see Staudohar (2005) for a history of the lockout].
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