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Contraction a necessary evil for survival of NHL says economist

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Old
12-09-2012, 11:28 PM
  #351
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Gee, thanks.

Columbus was awarded a team for the following reasons:
1) A long-running history of hockey
Really?

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12-09-2012, 11:33 PM
  #352
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Really?
Pro hockey had existed in Columbus going back to the 60s. But more than that, there's a unique relationship between the regions of Ohio. Huge numbers of people from Toledo in the northwest (less than an hour from Detroit) and from Cleveland in the northeast have always ended up in Columbus. Not just people looking for new jobs, but high schoolers entering college and wanting to stay in-state.

So the idea that Columbus is a bunch of rubes who couldn't tell a puck from a blimp when the Chill came in in 1991 is not the case.

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12-12-2012, 09:29 AM
  #353
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The point being, relocation is not what you do when a franchise is in a little bit of short term trouble, or can't draw for a few years in a row. Relocation is what you do when a franchise proves it can't recover from an extended period of struggling. And even then you only do it reluctantly. And contraction is not something a professional sports league ever willingly contemplates.

I know people recognize, intellectually, that contraction is unrealistic. But I don't think people realize JUST HOW unrealistic. When I say "nuclear option" I'm not kidding, Contraction is the red button. You only push it when it's either push the button, or face the total destruction of the entire league. Lockout and all, we're still nowhere NEAR that point.

Even if we were anywhere near the point where contraction might be a recognized course of action, every other possible course of action that could conceivably be taken with a franchise is always to be greatly preferred to contraction, no matter how disadvantageous that action itself actually is.

In the worst case scenario, even a bankrupt NHL would greatly prefer to temporarily suspend a franchise than outright contract them. And the league, as much as it's not profiting on the whole at the moment, is far from bankrupt.

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12-12-2012, 10:32 AM
  #354
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Contraction is not an option for the MLB, NBA and NFL. It should be for the NHL. The NHL is not on the same level as the other leagues. The NHL business model is a total failure. More revenue sharing wont fix anything. There are teams that have no hope of ever turning a profit. Keeping those teams alive because it has a bad stigma attached to it is irresponsible. You have to learn to cut your losses. Contracting a team won't effect the NHL since the NHL isn't viewed as a major sport in the states. TV execs and advertisers aren't going to leave because a team in a market that nobody watched disappears.

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12-12-2012, 11:02 AM
  #355
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I know that the owners will never contract unless there is NO OTHER OPTION AVAILABLE. Also, the players won't like it, either.

Let's leave Canadian cities (those that have teams, and those that want them) out of the convo, for a minute...

The NHL is too big, and there is not enough demand to support 23 teams in the US. If the city of Miami is halfway apathetic towards the Miami Heat, (and they're the reigning NBA champs!), how can you expect them to support the Panthers??? American hockey fans who don't live in big-time hockey cities, can root for the local minor league teams, or get DirecTV. The NHL shouldn't drag us all down so Miami can have a team nobody likes. Miami, Phoenix, Dallas, Tampa Bay, Nashville, and Anaheim shouldn't have teams. I mentioned the Ducks because LA only needs one team.

Share the money equally, and stop force-feeding hockey to people who don't want it!

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12-12-2012, 11:18 AM
  #356
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Contraction doesn't really fix the problem.

Let's say you contract two teams that were losing 15 million a year. Since NHL revenue just went up by 30 million, the salary cap goes up.

Except revenues didn't actually increase. The amount of money Toronto or Carolina or St. Louis is taking in didn't go up; negative receipts were taken away.

So the problem of having teams that can barely spend to the cap floor without losing millions isn't fixed at all.

And the difference between the haves and the have nots isn't the problem either. Every sports League on the planet has teams that make more money than others, due to market size, fan passion, constant success, a sexy logo, or whatever. The problem is that in the other 3 leagues in North America (well, this is a big issue for the NBA as well, so 2), the lower half isn't just behind the big markets: the lower half is losing serious money.

So to fix this, you need to either:
--Cut costs, or:
--Increase income (revenue sharing).

Contraction doesn't lead to either of those solutions. It just worsens them.

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12-12-2012, 11:30 AM
  #357
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Originally Posted by Plan The Parade View Post
Contraction doesn't really fix the problem.

Let's say you contract two teams that were losing 15 million a year. Since NHL revenue just went up by 30 million, the salary cap goes up.

Except revenues didn't actually increase. The amount of money Toronto or Carolina or St. Louis is taking in didn't go up; negative receipts were taken away.

So the problem of having teams that can barely spend to the cap floor without losing millions isn't fixed at all.

And the difference between the haves and the have nots isn't the problem either. Every sports League on the planet has teams that make more money than others, due to market size, fan passion, constant success, a sexy logo, or whatever. The problem is that in the other 3 leagues in North America (well, this is a big issue for the NBA as well, so 2), the lower half isn't just behind the big markets: the lower half is losing serious money.

So to fix this, you need to either:
--Cut costs, or:
--Increase income (revenue sharing).

Contraction doesn't lead to either of those solutions. It just worsens them.
The poorly performing outlets serve only as a salary cap hedge for the other owners. The players should in fact be vociferously arguing right now on behalf of the relocation of several franchises - given that their overall cut of HRR is set to fall.

Those poorly performing teams should indeed be given the opportunity to cut cost via a dropping of the cap floor as well. The answer isn't to tax other teams more though; additional taxation just creates a poorer overall economy.

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12-12-2012, 11:31 AM
  #358
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Contraction is not an option for the MLB, NBA and NFL. It should be for the NHL.
Holy hell, no. The NHL isn't on the same plane as the other three major leagues, but there's a world of difference between "not being as prosperous as the Big 3" and "being anywhere near bankrupt enough that contraction should be on the table."

MLS is probably beyond the risk of contraction for most of its franchises at this point. Just to put things in perspective.

The fact is that there is zero possibility that the people putting forward the idea of contraction are doing it out of any real concern for the financial stability of the NHL, because there is no overarching concern about the financial stability of the NHL -- the lockout isn't about the survival of the NHL, it's about whether most of the league's franchises are going to be prosperous or marginal. Therefore, anyone putting forward the idea of contraction either has an agenda themselves, or is the dupe of someone who does have one.

Contraction is only even being talked about because of a combination of media sensationalism (sell the dramatic solution and hope it sticks so you can sell more papers), and the kind of stupid nationalism that makes Canadians decide the whole sport is "theirs" and not wanting to share it with any American market given half an excuse.


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12-12-2012, 11:34 AM
  #359
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Holy hell, no. The NHL isn't on the same plane as the other three major leagues, but there's a world of difference between "not being as prosperous as the Big 3" and "being anywhere near bankrupt enough that contraction should be on the table."

MLS is probably beyond the risk of contraction for most of its franchises at this point. Just to put things in perspective.

Contraction is only even being talked about because of a combination of media sensationalism (sell the dramatic solution and hope it sticks so you can sell more papers), and the kind of stupid nationalism that makes Canadians decide the whole sport is "theirs" and not wanting to share it with any American market given half an excuse.
Well a lot of this stuff is predicated on stupid owners, the lockout, and the phoenix situation, if they moved Phoenix to Quebec, that solves the Phoenix problem. Contraction is far from necessary

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12-12-2012, 11:39 AM
  #360
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Yes, or Seattle, or Houston. Honestly I'm not sure Quebec should be tried before certain other untapped US markets. You need to go out there and compete for the money the rest of the United States can give this sport -- even if you're losing that competition right now, that does not allow you to fail to continue to compete for it.

You can't punt 3/4 of the money in the world's richest nation to the other three major sports just because Plan A hasn't worked yet. If the NHL is ever going to BE a major league sport, it needs the South and the West. If your current strategy isn't working to make that happen, develop a better one.

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12-12-2012, 11:43 AM
  #361
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Yes, or Seattle, or Houston. Honestly I'm not sure Quebec should be tried before certain other untapped US markets. You need to go out there and compete for the money the rest of the United States can give this sport -- even if you're losing that competition right now, that does not allow you to fail to continue to compete for it.

You can't punt 3/4 of the money in the world's richest nation to the other three major sports just because Plan A hasn't worked yet. If the NHL is ever going to BE a major league sport, it needs the South and the West. If your current strategy isn't working to make that happen, develop a better one.
No arena in Seattle, which makes it useless till the new one is finished and no owner yet as the basketball guy doesn't want an NHL team. Also hockey in Seattle becomes Sport number 5, it's going to be one hell of an uphill battle in that market

As far as I know there is no owner in Houston either.

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12-12-2012, 11:48 AM
  #362
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The poorly performing outlets serve only as a salary cap hedge for the other owners. The players should in fact be vociferously arguing right now on behalf of the relocation of several franchises - given that their overall cut of HRR is set to fall.
The NHL does not take an active part in relocation.

If an owner wants to move his team or sell it to an owner who will, he has to get it approved by the NHL Board of Governors.

The NHL would never force relocation on an owner. Doing so would set a very dangerous precedent that could easily come back to bite the owners as individuals.

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Those poorly performing teams should indeed be given the opportunity to cut cost via a dropping of the cap floor as well. The answer isn't to tax other teams more though; additional taxation just creates a poorer overall economy.
It depends. If the teams receiving revenue sharing are given incentives to invest the money (as they are under the current system), then taxation, to a degree, can be very beneficial.

If you just blindly hand out money, the owners will just pocket it a la baseball.

The Carolina Hurricanes would be better served using 2 million of the Boston Bruins' profit than the Boston Bruins'. If they invest it in the team or in marketing, than that money would come back at a greater return rate because it is much lower compared to the Bruins' investment (diminishing returns).

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12-12-2012, 11:48 AM
  #363
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It's an uphill battle in any new market. That's the only argument QC even has right now -- it's easy pickings for a lower-middle tier market that can spend to the cap floor unless said floor goes up too much. Any delusions that QC is going to be a big market are exactly that, but they do offer the comfortable stability of predictible mediocricy.

Houston has a venue that regularly hosts hockey, if the owner of the Rockets wants to add an NHL team to his holdings. If the CBA goes the owner's way and it's possible to make money owning a hockey team, that's more likely to happen.

Heck, if it's more likely to make money owning a hockey team you'll probably see a lot of comfortably marginal franchises reinvest a bit more in their product.

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12-12-2012, 11:57 AM
  #364
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It's an uphill battle in any new market. That's the only argument QC even has right now -- it's easy pickings for a lower-middle tier market that can spend to the cap floor unless said floor goes up too much. Any delusions that QC is going to be a big market are exactly that, but they do offer the comfortable stability of predictible mediocricy.

Houston has a venue that regularly hosts hockey, if the owner of the Rockets wants to add an NHL team to his holdings. If the CBA goes the owner's way and it's possible to make money owning a hockey team, that's more likely to happen.

Heck, if it's more likely to make money owning a hockey team you'll probably see a lot of comfortably marginal franchises reinvest a bit more in their product.
Quebec could easily be a top 10 franchise revenue wise so I don;t know where the mediocrity comes from. They are far better positioned than Winnipeg going forward and there is no particular reason for them to spend only to the floor, they could easily sustain near the cap if they wished. (based on the old model, might be more near the middle if the percentage is wider)

Has the rockets owner made any indication of desire to own an NHL team, if not it's a moot discussion, although the Houston Aeros numbers are very promising

Seattle worries me more because it's not a hockey market, and is going in 5th with 4 very popular other sports, They do have a ready made rivalry with Vancouver but other than that I really don't know if it could work

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12-12-2012, 12:05 PM
  #365
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The NHL does not take an active part in relocation.

If an owner wants to move his team or sell it to an owner who will, he has to get it approved by the NHL Board of Governors.

The NHL would never force relocation on an owner. Doing so would set a very dangerous precedent that could easily come back to bite the owners as individuals.
I said the players should be arguing on behalf of relocation to more lucrative markets. You replied with a non sequitur.

Quote:
It depends. If the teams receiving revenue sharing are given incentives to invest the money (as they are under the current system), then taxation, to a degree, can be very beneficial.

If you just blindly hand out money, the owners will just pocket it a la baseball.

The Carolina Hurricanes would be better served using 2 million of the Boston Bruins' profit than the Boston Bruins'. If they invest it in the team or in marketing, than that money would come back at a greater return rate because it is much lower compared to the Bruins' investment (diminishing returns).
The balance of the league would be better served if the Carolina Hurricanes used their own money, money generated at home, versus money taxed from other markets.

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12-12-2012, 12:30 PM
  #366
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The point being, relocation is not what you do when a franchise is in a little bit of short term trouble, or can't draw for a few years in a row. Relocation is what you do when a franchise proves it can't recover from an extended period of struggling. And even then you only do it reluctantly. And contraction is not something a professional sports league ever willingly contemplates.

I know people recognize, intellectually, that contraction is unrealistic. But I don't think people realize JUST HOW unrealistic. When I say "nuclear option" I'm not kidding, Contraction is the red button. You only push it when it's either push the button, or face the total destruction of the entire league. Lockout and all, we're still nowhere NEAR that point.

Even if we were anywhere near the point where contraction might be a recognized course of action, every other possible course of action that could conceivably be taken with a franchise is always to be greatly preferred to contraction, no matter how disadvantageous that action itself actually is.

In the worst case scenario, even a bankrupt NHL would greatly prefer to temporarily suspend a franchise than outright contract them. And the league, as much as it's not profiting on the whole at the moment, is far from bankrupt.
The NHL lags far behind the NFL and NBA in every measure, and they're the two leagues that have meaningful revenue sharing (and the mechanisms that prevent the RS check from being pocketed).

To me, the "cut and run" crowd is a lot like Ned Flanders' beatnik parents on discipline. "You gotta help us! We've tried nothing and we're all out of ideas!"

The NHL does not have meaningful revenue sharing; it's been enormously beneficial in the other leagues, but there are those who believe that it wouldn't apply in the NHL. And what better way to prove it than by simply not trying it in the first place?

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12-12-2012, 12:35 PM
  #367
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Quebec could easily be a top 10 franchise revenue wise so I don;t know where the mediocrity comes from.
It comes from the fact that there is no way in God's green earth QC is a top 10 franchise in terms of revenue. They'll gate well but they have no chance of matching the bigger markets in terms of media exposure. Fans will point to gate attendance as if it matters. And it does matter ti an extent, but gate is only part of what makes up a team's real revenue streams these days. And for smart franchises, it's an ever diminishing part.

The only place Canada can compete with the US even in hockey, is in gate attendance. That's the old model -- you know, the one that is failing and dying and causing the league to fail and die when we can't let go of it. No other major sport tries to dictate its success based on gate attendance anymore. Once you get past gate and into things like media exposure and arena revenue, the US is competitive in those things and many US markets can blow the any Canadian market not named Toronto and Montreal out of the water.

QC is going to be in the same boat as Ottawa, Winnipeg, and the other medium to small Canadian markets. Based on your excellent attendance, you'll have enough from gate to scrape by. As the league modernizes, the role of those Canadian franchises will diminish more and more and the big US markets -- hopefully including markets like Houston, Seattle, and Atlanta -- will start to carry more and more of the weight as the NHL finds ways to successfully compete for the vastly greater number of US entertainment dollars that exist.

I'm not making any of this up. Barring a major economic disaster or some other unforseeable event, this is pretty much what's going to happen -- because it's the same evolution other major sports went through. We're just going through it later than them because we got our heads out of our buns and expanded past the O6 era much later than other major sports leagues did. At first the expansion teams struggle and the retrogrades demand retreat, then some of them figure out successful models of how to be competitive in their own market, those models are emulated and improved on, and eventually widespread success happens -- to the point that the original markets start to regress in significance. Which is really what many of the retrogrades are actually afraid of, when you really dig down to the core of their motivations.

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12-12-2012, 12:41 PM
  #368
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The only place Canada can compete with the US even in hockey, is in gate attendance. That's the old model -- you know, the one that is failing and dying and causing the league to fail and die when we can't let go of it. No other major sport tries to dictate its success based on gate attendance anymore. Once you get past gate and into things like media exposure and arena revenue, the US is competitive in those things and many US markets can blow the any Canadian market not named Toronto and Montreal out of the water.
Operating income: 7 of the top 11 are the Canadian teams.

http://www.forbes.com/nhl-valuations...n:desc_search:

The Canadian national television deals dwarf the US deal on a per capita comparison.

It seems as if, counter to your claims, that the Canadian side competes quite adequately against the US market - in areas other than just attendance as well. Heh.

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12-12-2012, 12:53 PM
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Sure, on a per capita comparison. Did the fact that there's 10 times as many capitas to per in America escape you entirely, or are you deliberately ignoring you.

Sure you get more money per canadian than you do per American. That's because the NHL is failing to win -- and in a few cases failing to even compete for -- American attention. You seem to want that to mean that a full blown northern retreat is called for. It seems to me instead that that means the NHL is leaving money lying around when it fails to support its American franchises and promote the sport anywhere, any way it can.

Look what Phoenix has managed to do on the ice. Now imagine that the NHL supported it properly with a full court press to capture the imagination of the Phoenix market, instead of tepidly cutting checks and sitting in the background waiting for someone else to solve the problem. They seem to want to leave franchise territories to their owners. Instead the NHL needs to be out there aggressively competing with everything they have for every American dollar they can get, and this is a fight they can win even with Canadians afraid of losing their one area of significance trying to hold them back.

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12-12-2012, 01:01 PM
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Sure, on a per capita comparison. That's because the NHL is failing to win -- and in a few cases failing to even compete for -- American attention. You seem to want that to mean that a full blown northern retreat is called for. It seems to me instead that that means the NHL is leaving money lying around when it fails to support its American franchises and promote the sport anywhere, any way it can.
I'd appreciate it if in the future you wouldn't attempt to define for others what it is that I mean. What I believe is that the NHL should be located only in markets largely able to sustain themselves on their own - versus some now that only survive by annually taxing other capable markets. If that eventually resulted in the relocation of a few existing teams from the US and into Canada, so be it. If it means moving the Phoenix franchise to Seattle at the same time then I'm all for that as well.

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12-12-2012, 01:18 PM
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My position is that to look at only this particular snapshot of time is foolish. If you have no longterm plan beyond "pay for this year and see what happens" then there's no way you'll wind up in competitive footing with the other big leagues. Let's not forget that the NHL is playing catch up right now. They're going through issues that other leagues had the sense to go through 40 years ago. The fact that we're not on the other side of the instantaneously is almost beside the point.

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12-12-2012, 01:50 PM
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It comes from the fact that there is no way in God's green earth QC is a top 10 franchise in terms of revenue. They'll gate well but they have no chance of matching the bigger markets in terms of media exposure. Fans will point to gate attendance as if it matters. And it does matter ti an extent, but gate is only part of what makes up a team's real revenue streams these days. And for smart franchises, it's an ever diminishing part.

The only place Canada can compete with the US even in hockey, is in gate attendance. That's the old model -- you know, the one that is failing and dying and causing the league to fail and die when we can't let go of it. No other major sport tries to dictate its success based on gate attendance anymore. Once you get past gate and into things like media exposure and arena revenue, the US is competitive in those things and many US markets can blow the any Canadian market not named Toronto and Montreal out of the water.

QC is going to be in the same boat as Ottawa, Winnipeg, and the other medium to small Canadian markets. Based on your excellent attendance, you'll have enough from gate to scrape by. As the league modernizes, the role of those Canadian franchises will diminish more and more and the big US markets -- hopefully including markets like Houston, Seattle, and Atlanta -- will start to carry more and more of the weight as the NHL finds ways to successfully compete for the vastly greater number of US entertainment dollars that exist.

I'm not making any of this up. Barring a major economic disaster or some other unforseeable event, this is pretty much what's going to happen -- because it's the same evolution other major sports went through. We're just going through it later than them because we got our heads out of our buns and expanded past the O6 era much later than other major sports leagues did. At first the expansion teams struggle and the retrogrades demand retreat, then some of them figure out successful models of how to be competitive in their own market, those models are emulated and improved on, and eventually widespread success happens -- to the point that the original markets start to regress in significance. Which is really what many of the retrogrades are actually afraid of, when you really dig down to the core of their motivations.
QC had better attendance then many markets let alone the south, better than Winnipeg or Ottawa. QC will be fine. It will be a billionaires playtoy.

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12-12-2012, 01:53 PM
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Having said the above when the economy gets better(it will) Dojji will be right and all the small market Canadian franchises are in trouble, what happens then? If Edmonton goes they aren't getting another shot

But my question to Dojji is do you think winnipeg is a set back?

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12-12-2012, 02:08 PM
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Having said the above when the economy gets better(it will) Dojji will be right and all the small market Canadian franchises are in trouble, what happens then? If Edmonton goes they aren't getting another shot

But my question to Dojji is do you think winnipeg is a set back?
In the very long run? I absolutely think Winnipeg is a setback. As economic conditions normalize that move will look worse and worse. And even if everything were going to stay the way it is right now, forever, Winnipeg is STILL a setback. No way the NHL wanted to abandon the Atlanta media market -- one of the biggest and most influential media markets in the US, bigger even than its huge size -- in favor of freaking Winnipeg. No way gate revenue makes up for the lack of prestige of not having a toehold at all in that market.

For as long as the NHL is still trying to figure out how to transition from a gate driven league to a media driven league, moving from one of America's biggest and most prestigious media markets (seriously, Canadians will probably underestimate the influence of the Atlanta media market because it's not our biggest city, but a number of big US media companies HQ there, including CNN and TBS, so its impact is TREMENDOUS) in favor of a gate driven location with very limited upside, was one of the worst things that could have happened to them.

There's a world of this sport that goes beyond the bankbook. Losing a franchise in a big media market entirely is a lot worse -- a LOT worse -- than losing a lot of money. There's always a chance while you have a presence in a market for someone to come along who can figure out how to thrive there. Once you leave, that chance is completely gone.

No doubt in my mind the NHL will try again in Atlanta at some point. Heck, Ottawa took three tries to get it right IIRC. No way they let Atlanta go at two. Once other markets are better established and more prestigious around them, and can offer both support and real opponents worth playing in their division, they'll give it another shot.


Last edited by Dojji*: 12-12-2012 at 02:16 PM.
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12-12-2012, 02:16 PM
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Originally Posted by Dojji View Post
No doubt in my mind the NHL will try again in Atlanta at some point. Heck, Ottawa took three tries to get it right IIRC. No way they let Atlanta go at two. Once other markets are better established and more prestigious around them, they'll give it another shot.
Just a point, but it's not up to the NHL to "try" a market. It's up to someone in that market to pony up the money and then ask the NHL if they are willing to try that market.

According to Bettman, there were 23 tire kickers in Atlanta that all looked at owning a team there, but they all walked for various reasons. Atlanta may yet get another team, but it won't happen until someone else comes along and convinces the NHL that their vision can work.

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