The Contrarian: Olympics Edition

The Contrarian: Olympics Edition
April 4, 2017, 12:37 PM ET [8 Comments]
Peter Tessier
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The Contrarian: Olympics Edition


First, let’s get something out of the way. Olympic hockey is good (al least after the round robin mis-matches). In fact it’s the only replacement that comes close (it may exceed) the Canada Cup of years gone by. That’s because it’s the only tournament that puts a best-on-best scenario together where the players are playing with a level of passion and pride rarely seen.

Who doesn’t want that?

The NHL apparently, but also the IOC.

The point the NHL has stood by is: that the league wants to share in the benefits of Olympic participation either through sponsor level with use of Olympic rings or revenue sharing in some capacity. That seems fair when you look at this purely as a business. These aren’t interns who should work for free to get ‘exposure’ in an industry. The NHL is the industry.

The other side to the problem is that fans are deprived of something great, something they love and will support. Unfortunately that is of no interest to the NHL right now because it does not solve some problems, the main one being the assumption of risk. While the IIHF has offered to cover costs of travel and insurance it does not make up for the risk of losing a player like John Tavares for the rest of the season as happened in 2014. No insurance policy covers that loss of talent on the ice.

The NHL is not set in this position though as with the league money always talks. They were okay with this risk, that of losing a player(s) due to injury if the NHLPA accepted an extension of the current CBA. It’s so interesting when you hit the right dollar amount almost anything can be ‘overlooked’ isn’t it?

With all that being said, the NHL still plans to have two exhibition games in China next year, so one could surmise that Korea just isn’t a big enough market?

The angles of criticism surrounding this decisions are immense but they are also presumptive.

Game Growth and Development

Many have suggested that the league is missing a chance to tap into the huge Asian market and get a foothold in there to grow the game. Some, such as Stephen Burtch, suggested that if you support a sport enough financially you likely will help it succeed in new markets. This is a fair statement and likely true but where is the evidence? Burtch cited basketball, baseball and soccer as examples and he’s correct but these are low cost sports, easily accepted and supported by any income or socio-economic class. They also translate well to a market that generally has warmer climates.

Now the contrarian would ask how much money is needed and the time horizon to realize returns? Look at the sunbelt teams already within the NHL as an indicator of the current board of governor’s appetite for risk. How much money has been sunk into Arizona, Sunrise Florida, Anaheim, and Carolina to grow the game to new markets? Do we think the NHL has not learned a bit about proceeding with caution to populous new places? Perhaps not, because the league seems to struggle with learning from past mistakes.

Growth of the broadcast market.

Hockeybuzz’s Ryan Wilson presented something via Twitter which was not noted before: digital streaming rights. The NHL knows a market when it sees one, and the lone league without a huge TV rights deal in North America will forever chase one especially when the English Premier League signed a 3 year deal for $700 million in China. This included broadcast, PPV and streaming rights. Bettman must be salivating.

Soccer however is a far cry from where hockey is internationally. That’s the argument to participate, keep five previous Winter Olympics participations relevant. But back to Burtch’s point, this requires development i.e. money at the grass roots level, and the NHL has said that they would rather the IIHF use the money for NHL Olympic participation for grass roots hockey.

However, with a niche sport like hockey, seeing how a transglobal deal like the Premier League works might be prudent. Sports are a live event. It’s too hard not to be spoiled in the results now. So while current fans will get up at all hours, like they did for Nagano in 1998, to watch hockey would the participation for streaming games live or delayed be the same? Certainly not right now, but that’s why putting the best-on-best is so tantalizing for growth. It’s too bad that’s not really what the product is after the Olympics.


The Reality

This decision is wholly a business one. And while there is much to be said that businesses need to invest to grow the NHL seems confused about how the Olympics makes a far better investment than the lacklustre World Cup of Hockey produced by the NHL. The risks to owners were still the same in terms of damage/injury to assets. Again, that decision came down to who kept the big pile of money at the end.

The point that seems to get missed for so much of this debate around growth and the cost of growth is that Olympic participation is not reality. It’s like tasting a fine vintage wine from France and then sipping on some plonk from a start-up hobby winery belonging to a rich guy.

If that rich guy wants to invest in the vines and grapes 10 years before the product ever reached production he might have a chance at something better but what fun is that? This is a time of instant gratification and few would ever want to wait that long. The counter argument is that without showcasing it how do you develop grassroots growth to get anyone interested in that new wine.

That is the crutch of the argument, it’s a chicken or the egg type debate. Does the NHL participate in the next two Winter Olympics in Asia as the method to increasing interest in the Asian market or does it devote resources to grass roots growth without risks to product? It seems to want to test the waters with the two exhibition games there, so why not do it in Korea too?

It would not be too silly to suggest that the NHL has a view of the end game for it in regards to growth and awareness of the sport as it relates to the Asian market. That is likely sponsorship dollars. Remember the tryout of the SAP logo on those World Cup jerseys this past fall? Now take a look at how Asian sponsorship works in the English Premier League then look at the numbers involved. The Premier league is no sooner going to put a team in Asia than they are in North America, it’s exhibition all the way, but that has not stopped Chinese companies from betting heavily on brand association.

The NHL likely has a lot of information on where they can push their brand and leverage revenue from it and they may have pulled nearly all the water out of the North American well. There’s vast untapped one across the Pacific and the diving rod is about to be used to see what’s really there this coming fall.

Still the question as to why the NHL would not get some free visibility via the Peyongchang Olympics is curious. Look at the Calgary Flames though for an example of similar thinking and behaviour. Help pay for our new stadium or we’ll leave. It’s the same mantra used in cities like Phoenix, Pittsburgh, Edmonton, New York (Islanders) Florida and more, ‘big tax concessions or we can’t do it’. The NHL is only following it’s own firmly held belief within it’s board of governors, the owners of franchises who want tax breaks for taking a risk.

That is the cold hard reality and growth of the game be damned. It’s damn expensive to grow hockey; already $500 million plus in Las Vegas. When does the return on investment for the NHL come? 20 years later when a Vegas version of Auston Matthews arrives?

The NHL doesn’t need to grow the game in Asia, they need to convince Asia that companies there can grow by investing in the NHL via advertising dollars. We’re just at the beginning of this journey but like all things with business just follow the money and you’ll find your logic and end game. The NHL knows it can do this without the IOC but does anyone believe it can do it effectively? We’re about to find out.