Sunday, September 30, 2007

Rangers Sue NHL Over Marketing

In the first major break between individual franchise owners and the Gary Bettman NHL since the lockout, the New York Rangers are suing the NHL. They claim the NHL is acting like an illegal cartel.

The dispute is related to marketing. The NHL feels it should have control over the promotions held by Madison Square Gardens relating to the New York Rangers. Specifically, the NHL says they should have control over the New York Rangers website and other promotions.

The NHL has insisted that they should have control over the Rangers independently run website and turn it into the "cookie-cutter" websites of the other NHL teams that can be linked to from When the 2007 playoffs began, the Rangers began making New York Rangers merchandise available through the website instead of through a catalogue.

As punishment for their non-compliance, the NHL fined Madison Square Gardens $100,000 a day. When they refused to pay, the league withheld $200,000 from third-party (escrow? merchandise sales?) funds. Madison Square Gardens temporarily submitted to the NHL demands because they did not want this issue to detract from the playoffs and hoped (apparently incorrectly) that a solution could be negotiated later.

The problem is a symptom of the NHL CBA. If big markets grow their revenues, they lose a significant chunk of the extra money they produced to revenue sharing payments to keep the smaller market teams alive. Naturally, they are looking to find new revenue streams that are outside this restriction.

When big markets do grow their revenues, it increases the salary costs for the smaller markets, who may have problems paying them, since player salaries and NHL revenues are linked. Thus some of the small markets would be happy to see the biggest NHL markets revenues fall flat or even drop.

This is the fundamental reason that will limit the success of the current NHL CVBA from a business point of view. If strong financial teams are limited in what they can do because they have to support the weak teams and if weak teams are forced to spend beyond their capability to receive this support, a schism is inevitable. This is a problem of big versus small market. A problem that cannot be fully solved without killing off the small markets that cannot keep up (they can still have hockey but not in the top league in the world since it has shown they cannot support it financially). I think this will lead to more labor issues in the future. The Gary Bettman NHL will try to force further changes through to try to patch up these problems and probably cast it as a problem brought on by greedy players (when it is actually a problem brought on by greedy owners).

From a fan's point of view, independent NHL websites is a good thing. The more independent views at the NHL available the better. Some might provide some intelligent incite that is not available elsewhere. The NHL wants to shut that up and have complete control over their marketing. The silenced voices might be interesting voices to the fans.

Here is a Larry Brooks article on the lawsuit. It touches on many other NHL marketing issues that Madison Square Garden CEO Jim Dolan is unhappy about. He claims the NHL is not maximizing their marketing potential in many areas outside this lawsuit.

I agree, this is going to lead to a significant split between big and small market teams. As I've previously suggested on my site and column, the next big labour war might not be between owners and players but rather owner against owner.
Gary Bettman is an idiot. The only thing he has done for the NHL is ruin it.
If it is an unworkable model, what is going on in the NFL? There is only an issue because of the lack of a good tv deal. This may be achieved in the future and is NOT dependent on ridding the league of small market teams. With a strong on-air product delivered by a major network, it does not matter whether there is even a team in New York. It doesn't matter where the teams are. It only matters to New Yorkers. God forbid we disappoint them.
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