Thin Ice?
The possibility of a lockout of players by National Hockey League franchise owners has current and potential sponsors skating on thin ice.
Ask the 87-year-old league’s corporate marketing department, and there’s not a cloud in the sky, despite the fact that the NHL and the NHL Players Association have yet to reach a new collective bargaining agreement (CBA). But some sports marketing experts feel that if the two sides don’t agree before the Sept. 15 deadline, it could hurt North America’s only major hockey league’s chances of landing future sponsors.
Andrew Judelson, the NHL’s group VP-corporate marketing, points out that several league sponsors have signed long-term extensions in the past year, and that brands such as Best Buy, Sirius Satellite Radio and Home Depot Canada recently came aboard as first-time sponsors.
“The over-arching message is that our sponsors and partners support us, and we’ve been able to extend the partnerships and the long-term viability of the NHL,” Judelson says. “They understand there may be potential distruption of play, but they know they will be on a great landscape when play resumes. They don’t seem to be concerned about the long-term effects of a work stoppage.”
Bill Daly, executive VP and chief legal officer for the NHL, said last month in a press conference that the league’s sponsors understand what the situation is, “at least from our perspective. I think they have been very supportive to date and I expect they would continue to be supportive.”
Judelson adds that the league has been forthright regarding its own financial state. Economics are the reason the NHL and the NHLPA are at odds over a new CBA. He says that this year’s sponsorship renewals are evidence that brands appreciate what the league is doing to return to economic stability.
NHL Commissioner Gary Bettman notes that the league’s revenues are not keeping up with rising player salaries. Bettman notes that player salaries have increased 240% since the last CBA was signed in 1995, while league revenues have risen just 160%. The average annual NHL salary in 1994-95 was $733,000, and was a little less than $2 million before the 2002-03 season.
The league wants to trim its losses, and the biggest number that stands out on its spreadsheets is player salaries. According to a report by former U.S. Securities & Exchange Commission chair Arthur Levitt, commissioned by the NHL, the league’s 30 franchises combined lost $273 million U.S. during the 2002-03 season.
From the league’s perspective, it’s in great shape when it comes to sponsorship renewals, says Doug Metchick, president and founder of Westport, CT-based Penfield Marketing Group. He feels that league sponsors will be protected in the event of a work stoppage, but thinks there will be less visible North American promotions and sweeps this season as a result of this season’s uncertainty.
For example, MasterCard Canada ran a giveaway and contest north of the border this past season; it allowed collectors to earn one of 10 special Priceless Moments trading cards by using their MasterCard at select restaurants. Prizes inserted into collector packs dangled a chance to win a trip for two to the Stanley Cup Finals or the upcoming World Cup Finals.
Though Toronto-based MasterCard Canada considered it one of its best-ever programs, it will take a wait-and-see approach before it decides to do an encore in 2005.
“We’re in the planning stages to run a similar program in the spring,” says MasterCard Canada spokesman Jason Ralph. “The customers that supported the program gave it some great positive feedback, and if the NHL is back on the ice, we will certainly run the promotion again.”
Kraft Canada runs the multi-faceted Shoot To Win sweepstakes, which offers consumers the chance to win NHL merchandise or score a goal and win up to $1 million after an NHL game. Best Buy was the title sponsor of the 2004 All-Star Fan Balloting program, and gave coupons for PlayStation 2 products to those who voted at in-store Internet kiosks in the U.S. Both companies were non-committal about their plans for the 2005 NHL season.
Jonathan F. Lese, a Stamford, CT-based sports-marketing consultant who worked for the NHL in the 1990s, points out that the NHL’s sponsors rely on fans seeing their name inside the arena not on TV, where ratings have slipped over the years. If fans aren’t in the arenas because NHL skaters are not on the ice, the sponsors become invisible.
“If you’re a sponsor in the league, you know you’re not getting an eight share on Fox on a Saturday afternoon,” Lese says. “Those sponsors are going in-arena after the diehard fans and their friends. It’s why the sponsorship fees are lower, and it’s great for someone who can do well with niche marketing.”
Sponsors are pretty savvy these days, he says. If a strike occurs, they’ll wait it out and most likely collect rebates from the league.
“At the same time, it’s a hard call because you make these marketing plans so far in advance, so you don’t know,” Lese says. “There could be some negativity there that would hurt them when they look for new sponsors down the road.”
The impact on sponsors would be greater today than it was in the 1994-95 season, when NHL team owners locked out players for 103 days before the season’s first puck was dropped, says Jeff Bennett, president of Waltham-MA-based Bennett Global Marketing. Sponsors rely on their relationship with the league not only to drive brands, but sales, he says.
“I think the impact right now on any sport looking at a lockout is quite devastating, because the sponsor has made a big investment in those teams or those leagues to actually get as much brand exposure and activation opportunity as they possibly can,” Bennett says. “If that’s shut down or taken away, it’s a bad thing for the sponsor.”
He adds that the NHL is much more dependent now on advertising dollars, and points to dasher board, or wall, advertisements as a classic example of its need to raise revenue. Those sponsors, Bennett says, want to have dasher board ads viewed not only by in-arena fans, but also by average sports fans watching replays on the 11 o’clock news. No live NHL hockey means no chance of sponsors touching the casual fans.
“Even though someone may be a diehard hockey fan, at the end of the day, something they are very loyal to is being taken away from them. They won’t have an ability to participate,” Bennett says.
“The minor leagues have gained in popularity and there is a very good brand of college hockey that is played in this country, and because of the interactive world we live in, fans playing video games or looking at old games and reels of past contests on cable TV is there. I don’t know if this is something that the league and the players are looking at, but if you look at the business of hockey, you can’t overlook the damage that can be done to the future of the sport. It’s not a monopoly anymore,” Bennett adds.
The possible lockout will occur at an interesting time for casual NHL fans, Bennett notes. Major League Baseball — which has rebounded from 10 different work stoppages (most recently in 1994, which included the cancellation of the World Series) — will be heading towards the postseason. The ever-popular National Football League will be heading into the second week of its regular season.
“The fear here is, will the NHL also eat itself? It’s tended to move to a niche sport. Will it retain its niche, or have a damaged niche, or is there a way to fix the economics to put it back on track? I think the longer it goes on, the less the successful track allows itself to happen,” Bennett says.
Metchick says the big brands like Bud Light, Coca-Cola, Dodge and MasterCard probably would not be swimming in rough financial seas in the event of a lockout. But he sees it affecting the smaller businesses that sponsor individual NHL clubs; those community relationships can make or break a company. He also believes the potential work-stoppage is hurting the individual players, who are hoping to leverage their skills into their own endorsement deals.
Though Bennett believes a work stoppage will cause severe damage to the NHL and its sponsors, Metchick is optimistic there won’t be a lockout. He also points out that fan memory and sponsor memory tend to be short when it comes to work stoppages.
“It will be a blip on the radar if there is a work stoppage,” Metchick says. “The league rebounded well in 1995, as baseball did after the 1994 stoppage.”
