Wall Street Collapse = NHL Collapse?

Spencer CallaghanAnalyst ISeptember 30, 2008

As brokers cry into their lattes on Wall Street and politicians spin themselves silly on Capitol Hill, the NHL season is about to begin. The question is: will all the teams still be standing by the end of the season?

In many NHL markets where hockey is not number one, or even number four, will people still pay for tickets and buy jerseys when their credit has dried up and their jobs are in danger?

But most importantly, how will the many U.S.-based NHL franchises, whose owners are reliant on credit to manage huge yearly losses, be able to withstand the coming financial storm?

According to media reports, as many as eight to 10 NHL franchises, mostly U.S.-based, and recent expansion cities, are either seeking new ownership, looking for equity partners, or are even in danger of folding outright.

With the exception of teams owned by billionaires or large corporations, most NHL teams are large business partnerships. The teams are run by people with money, but not enough money to subsidize huge losses without credit.

Absorbing multimillion-dollar losses in order to build a long-term following is a solid business plan when credit is cheap and easy to access. How anxious do you think banks are going to be, however, to hand another $20 million over to Florida or Phoenix to cover their debts during a time of economic instability?

The bottom line is that in the grand hierarchy of things, sports rank pretty low in people's priorities when economic times get tough. The NHL, being an afterthought at best in many U.S. cities, is in the unenviable position of being at the bottom of an already crowded entertainment industry.

Therefore, the NHL is usually the first to feel the economic pinch.

While the NFL and MLB will probably survive just fine, it is pretty hard to imagine that southern U.S. markets, those that are already struggling to fill arenas, can weather this storm.

So what does the future hold?

A report on Rogers Sportsnet here in Canada suggests that the Nashville Predators have already approached RIM CEO Jim Balsillie about taking an ownership stake. It continues to say that several NHL teams are in real danger of going bankrupt and being turned over to the league.

Personally, I think the NHL could stand to contract by about a half-dozen teams, but the nature of the coming situation is probably not the ideal way to achieve that goal.

One thing is for sure, with the U.S. financial meltdown upon us, it is hard to believe hockey tickets are going to be first on American minds.