NHL Lockout: The Pros and Cons of Revenue Sharing

Nicholas Goss@@NicholasGoss35Correspondent INovember 12, 2012

GLENDALE, AZ - NOVEMBER 16:  NHL commissioner Gary Bettman speaks during a press conference before the NHL game between the Phoenix Coyotes and the Tampa Bay Lightning at Jobing.com Arena on November 16, 2009 in Glendale, Arizona.  (Photo by Christian Petersen/Getty Images)
Christian Petersen/Getty Images

Revenue sharing continues to be at the forefront of the labor negotiations between the NHL and its players, and just like the rest of the major issues that the two sides are discussing, there is still plenty of work to do before this topic is finalized.

Here's a quick update on where the league and its players stand on the issue of revenue sharing (via James Mirtle of The Globe and Mail and Pierre LeBrun of ESPN.com)

Was told that six teams would receive huge chunk of rev share under NHLPA system: Phoenix, NY Isles, Columbus, Florida, Nashville, Carolina

— James Mirtle (@mirtle) November 8, 2012

Told that NHL upped its total money in its revamped revenue sharing model today, north of the $200 M that was in their Oct. 16 proposal

— Pierre LeBrun (@Real_ESPNLeBrun) November 9, 2012

As we wait for the two sides to figure out a way to increase revenue sharing and allow more teams to be eligible to receive funds from the program, let's look at the pros and cons of this issue.


PRO: Struggling teams get some of the financial help they need

There are several teams who are in dire need for more money from revenue sharing in order to improve their financial situation.

Nine teams lost $7 million or more during the 2010-11 season, according to Forbes.com, and to help these clubs make a profit, revenue sharing must be improved.

Without revenue sharing, making a profit or breaking even would be a real challenge for several teams.

Since almost two thirds of the NHL's teams lost money in 2010-11, both sides will make sure substantial improvements are made to the previous revenue sharing system in the new CBA.


PRO: More teams will have the opportunity to be competitive

Having a larger revenue sharing pool will give teams a bit more money to be competitive in the playoff race. The problem for some teams is that without more revenue sharing, it will difficult to invest more money in the free agent market.

If teams have a better on-ice product, fans will be more likely to invest money in things such as tickets and merchandise.

It will be interesting to see if the new CBA includes a rule forcing teams to spend a certain percentage of the money they receive from revenue sharing on player transactions in an attempt to improve their roster.

Better revenue sharing will also help small market teams keep their star players when they hit free agency, which could prevent them from having to rebuild every five to seven seasons.

When small market teams are able to re-sign their best players and not lose them in the free agent market, a foundation for long-term financial success is built.


CON: Teams with low attendance year after year will still struggle

The NHL is a gate-driven league, which means ticket sales and attendance are more important to NHL teams than franchises in other sports such as the NFL and NBA.

Despite the fact that the NHL has a good television deal with NBC Sports, teams cannot rely on TV revenue to help their bottom line.

Even if you give teams more money through revenue sharing, if these same clubs' attendance numbers don't improve, the chances that their financial situation gets better will not be good.

Revenue sharing can help a team invest more money into signing and trading for quality players to give fans more reasons to come to games, but unless they show up each night, these franchises won't be able to prosper in their current markets.

If revenue sharing doesn't help teams with poor attendance draw more fans, other options such as relocation must be explored.


CON: Revenue sharing can be a temporary boost for teams that should be relocated

Even though there's a strong chance that the amount of money poor teams receive through revenue sharing will significantly increase in the next CBA, many of these same clubs will continue to struggle because they aren't in a traditional hockey market.

Instead of collecting large amounts of money through revenue sharing, teams like the Phoenix Coyotes and Florida Panthers should just be relocated so they can play in a real hockey city where they have a better chance for financial success.

It's good that the league and its players are trying to help struggling franchises with higher revenue sharing, but the most logical solution to some of these teams' problems is relocation.

Revenue sharing won't be enough to help some teams make money, and if they continue to suffer losses, moving the franchise is the only option.

Why give teams a yearly boost through revenue sharing when making money is incredibly hard because of the market these franchises play in?


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