The financial hardships of the COVID-19 Pandemic have ushered in an NHL Advertising Frenzy which, to the consternation of some fans, is actually a net positive for helping to keep the 2020-21 season financially viable.
As anticipated, the NHL appears to be in full court press mode with their advertising efforts ahead of the 2020-21 season. On top of the helmet decals that each NHL team will sport this coming season, the league announced on January 5th that it has sold the naming rights to the newly aligned divisions to four corporate sponsors for the upcoming campaign.
— NHL Public Relations (@PR_NHL) January 5, 2021
The newly aligned divisions and names are as follows:
The Honda West Division (ANA, ARI, COL, LAK, MIN, SJS, STL, VGK)
The Scotia North Division (CGY, EDM, MTL, OTT, TOR, VAN, WIN)
The Discover Central Division (CAR, CHI, CLB, DAL, DET, FLA, NSH, TBL)
The MassMutual East Division (BOS, BUF, NJD, NYI, NYR, PHI, PIT, WSH)
The announcement comes as no surprise considering the league will be operating a 2020-21 season without (for the most part) its largest revenue stream: ticket sales. Unlike other major professional sports leagues across North America, the NHL relies far more on having fans in the stands to remain financially viable, which makes the restrictions set in place by local governments across the globe in an effort to curb the spread of the novel Coronavirus, feel more like a stranglehold.
According to Forbes, during the 2017-18 season, over 75% of the annual revenue generated by the NHL came from ticket sales and other gameday sales of merchandise and concessions. This has now evaporated. Compare that figure to the total revenue generated by ticket sales in the NFL sitting at roughly 16% in the same year. The biggest contributor to the NFL’s dominance is overall fan viewership which means that they hold the cards to be able to negotiate massive television contracts that other leagues just can’t muster; it’s simple supply and demand. This is precisely why the NFL’s financial situation, while impacted by COVID-19, was far less severe than what the NHL is facing. According to Variety and to further illustrate the impact of having such a major foothold in the American television market, of the top-100 most-watched television programs during 2020, 69 of them were NFL games. Not a single spot in the top-100 belonged to an NHL broadcast. Woof.
With no fans in the stands to close out the 2019-20 season and starring at a more ominous horizon in 2020-21, the NHL’s hand is being forced to be more creative with how it can generate revenue, even if at a fraction of what would be brought in during a normal year. Depending on the size of the market, an individual team can generate between $1.5 million and $3 million in ticket sales per home game, according to the Athletic. Extrapolate that figure by 41 home games played by each team during a typical season and 31 total league teams and the figure grows to anywhere from $1.8 billion to just under $4 billion in ticket sales per season. For a league whose annual revenue sits in the $5 billion neighborhood, that is a massive chunk of bread that has now completely vanished thanks to having to operate a fan-less season. On Monday, NHL Commissioner Gary Bettman was able to provide a little bit of color into the magnitude of the loss the league expects by the completion of the 2020-21 season.
Gary Bettman on the financial hit the NHL will take this season: “The magnitude of the loss starts with a ‘B.’ We’re out of the ‘M’ range.”
— Joshua Clipperton (@JClipperton_CP) January 11, 2021
Enter more advertisements. Chicago-based consulting and analytics firm Navigate was asked what NHL teams could realistically look to bring in from adding advertising to helmets and they pegged their estimate to be “roughly $2.5 million in fair market value for an average team.” This would mean that the league would only garner roughly $80 million in total, hardly enough to makeup for the overall loss. On the flip side, it’s tough to pinpoint exactly how much the league will be able to generate from the division sponsorships on top of any further advertising to come, including advertisements on jerseys themselves. The league is still expected to bring in about $500 million in national television revenue from its deal with NBC (which expires after the upcoming season), but the sum of these revenue streams pale in comparison to what’s being lost because of the cobwebs that continue to grow from seat-to-seat inside NHL arenas.
Like most businesses, the largest expense for an NHL franchise is its payroll. Even with the flat salary cap sitting at $81.5 million and remaining in effect for a number of seasons as well as pro-rated pay for players because of the shorted season, teams cannot possibly make up for the massive hit they’re taking by opting to move forward with this season without a little give and take.
Many fans across the league have expressed their disapproval with the recent announcements as the overwhelming sentiment appears to be that the league’s decision to increase advertising is purely a cash grab.
BREAKING: Seriously gross news from the NHL, which has sold off the names of its divisions to corporate advertisers. pic.twitter.com/SH5ogXPjAD
— Paul Lukas (@UniWatch) January 5, 2021
Many appear worried that the league is taking an opportunity to usher in a new revenue stream which they can continue to leverage down the line under the guise of financial hardship imposed by the COVID-19 crisis. In a typical year, there would be some credence to these claims, but this year is anything but typical. Analyzing the data and with the knowledge of the sheer size of the elephant in the room that is managing a season with no butts in the seats, it’s easy to understand these moves had to be made. At the end of the day and like it or not, the NHL is a business not a charity; we shouldn’t shame businesses for doing exactly what businesses are supposed to do.
While this is probably one of those situations where the proverbial toothpaste isn’t going back into the tube, these advertising moves could very well have been the difference between having hockey in 2021 or not. Call us corporate sellouts, but getting hockey back and something to look forward to, especially after a year that’s been more challenging than any of us could have ever anticipated, is more than worth it even if we have to watch Nathan MacKinnon rock a large Papa John’s logo on his helmet.