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The 2004-05 Lockout: Where is the NHL Ten Years Later?

Hockey
The 2004-05 Lockout: Where is the NHL Ten Years Later?

The 2004-05 lockout is considered by far to be the darkest moment in the nearly 100-year history of the National Hockey League. While it’s true that there were lockouts in 1994 and 2012 that shortened those seasons, the 2004-05 lockout resulted in the only occasion where a major professional sports league in North America cancelled its entire season for reasons other than war or a health crisis.

The 2004-05 lockout involved a heated dispute over salaries, losses and issues over whether or not the league could survive under its current financial structure. This led to an all-out war between the owners and the NHL Players Association.

The event proved to be a huge blow to the league. While hockey did return for the 2005-06 season, the NHL’s image was heavily damaged. These damages were especially brutal in the United States as the league lost much of its credibility as well as its television deal with ESPN.

Today, the NHL has recovered and its finances have never been better. However, several effects of the lockout have lingered, many of them coming in the form of rule changes on the ice. For instance, games no longer end in ties, goalies have smaller pads, two-line passes are legal and penalties like interference, tripping and slashing are enforced much more heavily.

Some of the effects also go beyond the ice. Salaries have been kept (generally) in check and the NHL’s American TV contract is on a network that doesn’t have as much of a reach as ESPN does.

So, why did the NHL lockout happen in the first place? Has the league truly recovered? Is there any potential for some of the post-lockout changes to the league to be reversed in favor of the way things once were? The only thing for certain is that the damage to the league was certainly significant, and it must keep working hard to prevent another disaster from happening again.

What Caused It?

NHL LOCKOUT

The NHL lockout started on September 16, 2004, as NHL commissioner Gary Bettman asked for players to accept a new salary structure that was based off of league revenues. The average salary value in the NHL had increased dramatically over the years from an average of $892,000 in 1996 to $1.83 million in 2004. It had gotten to the point where close to three-quarters of all gross revenues among teams in the league were spent on player salaries.

This was considered to be a serious threat to the NHL. To make things worse, it was estimated that NHL teams were losing close to $100 million per season as a result. In the 2003-04 season, the league had $2.2 billion in revenue but the teams lost a combined $96 million with the majority of them running at a deficit.

However, the NHLPA and its executive director Bob Goodenow refused Bettman’s imposed restructuring, stating that the NHL was trying to establish a salary cap. It proved to be a serious issue for the league and discussions began to be held.

There were several disputes over the potential to add this limitation on spending and over time the NHLPA proposed a $49 million cap. The NHL refused, insisting that the $42.5 million cap that the league wanted was the only option.

As a result of the ongoing disputes and with no end in sight, the 2004-05 season was cancelled in February 2005.

It would not be until July 22, 2005 that the lockout would end. A salary floor was set up and the salary cap was established, giving 54% of total revenues to the players. Also, player contracts would be guaranteed.

The Pre-Lockout Landscape

NHL LOCKOUT BIDING TIME

The average value of an NHL team was around $163 million before the 2004-05 lockout. The league itself had made $2.2 billion in revenues in 2003-04.

The NHL was also relatively steady in its attendance totals. The league averaged 16,534 fans per game in the 2003-04 season. This was a 0.3% decline from the prior year due to concerns over the future of the league.

The NHL’s television deal was relatively good as well. While the NHL had a good deal in Canada with CBC and TSN, the league had an American TV contract with ESPN and ABC worth $120 million per year. However, Disney, the group that owns ESPN and ABC, not only declined to renew the deal, but argued that the group had spent more than necessary and demanded a new $30 million deal which the league refused.

The Big Blow?

WEIGHT

There were several problems that came up after the lockout ended, but attendance wasn’t an issue. The American television deal was a big problem, however. The NHL was forced to find a new American TV home. Comcast came to the rescue spending $23.3 million per year for three years to get NHL broadcast rights on the ironically-named Outdoor Life Network which was rebranded as OLN and eventually became known as Versus; today it’s the NBC Sports Network.

The revenues that the NHL got after the lockout ended proved to be lower than what it was accustomed to. The revenues for the 2005-06 season were close to $2.178 billion, a decline of about three percent of the original value of hockey related revenue.

Post-lockout attendance saw a 2.4% increase over the previous season. The Pittsburgh Penguins and Carolina Hurricanes both saw increases of 25% or more with both teams attracting at least 15,500 fans per game. Much of this can be connected to the Penguins landing highly coveted star Sidney Crosby and the Hurricanes running to eventually win the first post-lockout Stanley Cup.

Still, nine teams lost attendance totals in 2005-06. The St. Louis Blues for example went from 18,560 fans per game to 14,213, a decline of more than 23%.

Where Did the Players Go?

JAGR HOLUB VISEK

During the 2004-05 NHL lockout, 388 NHLers went over to Europe to keep playing. This resulted in a great deal of controversy in many European leagues over NHL players stealing jobs from Europeans.

Some players never came back to the NHL after the lockout, opting to stay in Europe. Boris Mironov, Tommy Salo, Roman Turek and Arturs Irbe were among the players that never came back to North America. The lockout inspired several players to retire altogether including Scott Stevens, Ron Francis, Al MacInnis, Mark Messier, Adam Oates and Igor Larionov.

The NHL Today

APTR_Obama Stanley Cup

One thing that is for certain is that the NHL has experienced some significant gains over the near decade since that lost season. In 2008, the league had $2.6 billion in revenue and has experienced gains every subsequent year since then.

The total value of the salary cap has changed significantly as teams have become more apt at understanding how to generate revenue. The NHL had a $39 million cap in 2005 but it went up to $56.7 million in 2008 and then $64.3 million in 2011. The cap is expected to reach $71 million in 2014-15. It’s become clear in recent years that many teams are able to afford the money needed in order to stay competitive.

However, this doesn’t mean that all teams are benefiting from such changes. Eleven teams operated at a loss in the 2012-13 season. Only four lost more than $5 million, those teams being the Minnesota Wild (-$13.6 million), Phoenix Coyotes (-$8.9 million), Florida Panthers (-$7.7 million), and Tampa Bay Lightning (-$5.4 million). Fortunately, Increased revenue sharing was a larger topic of discussion during the 2012-13 lockout, and a more aggressive system has been put in place to help those smaller market teams that can’t produce the kind of cash needed to even reach the salary floor.

The average NHL team is worth much more today than it was 10 years ago. An average team is worth $413 million today and even franchises that were once thought to be in jeopardy have grown in size. In 2005, the Carolina Hurricanes were one of the poorest teams in the league with a value of $100 million. While they’re still near the bottom of the league in terms of value, the team’s worth has almost doubles at $187 million today.

The Pittsburgh Penguins had the biggest increase in value in recent years. The Pens were worth $264 million in 2012, a value that’s 161% higher than what it had been before the lockout.

However, four teams did lose value since then, including the Colorado Avalanche which is  nearly 20% less valuable than it was pre-lockout at close to $200 million. The other three teams that have lost value are the Dallas Stars, New York Islanders and (you guessed it) Phoenix Coyotes.

The Death of the Thrashers

Winnepeg Thrashers Hockey

The biggest casualty of the lockout might have been the Atlanta Thrashers. The Thrashers entered the league in 1999 but it never took off the way they should have. Overall it was a poorly managed organization, estimated to have lost around $130 million between the lockout and the team’s relocation to Winnipeg. The franchise also lost $50 million in value over its short lifespan.

This whole fiasco was due to a combination of many factors. In addition to the team’s attendance plummeting from 17,000 fans per game to 13,000, the team had struggled to reach the playoffs on a regular basis. The unsuccessful lawsuit that came from the Atlanta Spirit’s failed attempt to sell the team a few years earlier put them in a bad spot.

In the end, the Thrashers were sold to True North Sports and Entertainment in 2011. The team soon after relocated and became the new Winnipeg Jets. In addition to regularly making a profit, the Jets’ franchise value went from $164 million before the sale to $340 million today.

What About TV?

Finally, today’s television deals have become very strong when compared to their pre-lockout values. Today the NHL is getting $200 million per year from Comcast for American television rights.

This is a vast improvement, but nowhere near as big as the NHL’s Canadian deal which sees the league getting around $400 million per year in its new contract with Rogers.

In summary, the NHL has clearly come a long way since the lockout. The league’s revenues and television deal totals are high and the teams are more flexible than ever before. Still, the problems that came with the league before and immediately after the lockout truly did a number on the NHL as it almost caused the league to head into a deep downward spiral. It’s had a few hiccups along the way, but today’s NHL fans should be grateful for how the league has recovered since then.

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