It finally happened. the national Hockey League collapsed under the weight of its faulty economics. Sports fans — those who had been watching closely, those who had seen player salaries and ticket prices hit stratospheric levels in all levels of professional sports over the past 15 years or so — aren’t surprised.

We always suspected one of the four major North American pro leagues would self-destruct, and that funny sport they play on ice was the likeliest candidate of them all.

See, the NHL tried to run its business like its big-league brothers — the National Football League, the National Basketball Association and Major League Baseball — but didn’t enjoy their widespread appeal or strong economics.

Through the 1990s, the NHL played an elaborate pyramid scheme, expanding to 30 teams from 21, each time selling its franchises for greater and greater prices and dividing the fee among the already existing teams. Many of these expansion teams were located in the U.S. South.
Existing teams in Minnesota, Hartford, Quebec and Winnipeg — traditional hockey markets — moved to Dallas, Raleigh (N.C.), Denver and Phoenix, respectively.
New owners bought in, not for the revenue potential of teams but in the hopes of selling for more later.

Commissioner Gary Bettman, and the owners he represents, hoped that by giving the NHL a North American “footprint” (that is, representation in all major markets, whether the fan base existed there or not) they could deliver to broadcasters and corporate
sponsors a continent-wide audience.

For a time, it looked like the plan might work.
The NHL received a five-year, US$600 million broadcast rights fee from ABC and ESPN in 1999, the biggest contract it had ever gotten.

But expansion diluted the product. The NHL game was boring. The on-ice violence and mayhem appealed to some, but turned off more. The general managers who ran the NHL teams, often former players, were hidebound in their thinking. Efforts to change officiating patterns to eliminate the “clutch and grab” style of hockey always fizzled by mid-season.

Early in the ABC/ESPN contract, which ran out last summer, it became clear the NHL was headed for a fall — a big one.
Attendance was good, but television ratings in the U.S. were nowhere. Two teams, the Buffalo Sabres and the Ottawa Senators, had to be saved from bankruptcy by the league. The Alberta-based franchises, the Edmonton Oilers and the Calgary Flames, survived only because they were run frugally.
The Pittsburgh Penguins would have surely gone belly up or been relocated long ago if their legendary player, Mario Lemieux, hadn’t agreed to buy the team in return for unpaid back pay.

Against this backdrop, team payrolls continued to rise. The agents, with help from the union, played the franchises off each other to raise player compensation. The average salary during Bettman’s first full season (1993-94) was $558,000. Last season, it was $1.8 million.

Which is why the league had to be shut down. Although they were most responsible for the current mess, Bettman and the owners knew they had to completely reinvent the league’s economics, starting with player salaries. That’s the mess they’re in today.

But it’s not only their mess. For Canadians, it’s our mess, too.

It’s not just the lack of big-league hockey on our television sets — the lockout has had a ripple effect through the economy.

The most obvious drop has been in the bar and restaurant sector. Statistics Canada has blamed the lockout for a 2.1% contraction in the arts and entertainment industry during the third quarter of 2004. The agency says that an unexpected loss of 5,700 jobs across the country in January was partly due to weakness in the bar and restaurant sector, in turn attributable to the lack of NHL hockey.

Rick Powers, associate chair of the management division at the University of Toronto and a sports marketing specialist, says the industry hasn’t seen the worst yet.
“This is only the tip of the iceberg,” he says.
“A lot of people don’t follow the NHL that closely during the regular season. When it’s really going to hit is the spring, when the playoffs should be on. That’s when the bar industry will really feel it.”

Trouble in the bar industry has had a concurrent effect on the nation’s brewing sector. Statistics Canada reports a 12.1% drop in sales at beer, wine and liquor stores, which supply the bars, in December was in part due to the lockout. Labatt, a subsidiary of brewing multinational InBev SA, laid off 240 non-unionized workers in December.