The NHL's $400 Million Opportunity

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Friends,

For those of you who aren’t aware or just simply don’t follow the sport closely enough to realize, the National Hockey League (NHL) is experiencing financial trouble.

Rather than waste your time, here are three stats to prove it:

• After seeing average franchise valuations rise from $148 million to $667 million from 2000 to 2019 — an increase of 350% — the average NHL franchise declined for the first time in two decades last year — falling 2% on average to $653 million (Source).

• With new TV deals and increasing popularity, the NHL saw their annual revenue increase from about $3 billion in 2010 to more than $5 billion in 2019 — an increase of 66%.The bad news?Due to COVID-19, NHL revenue fell to $4.4 billion in 2020 — a 14% drop and numbers they hadn’t seen since 2016.NHL Revenue2010: $3.1 billion2015: $4.1 billion2019: $5.1 billion2020: $4.4 billion

• Last year, billionaire Vincent Tan sold 20% of his Los Angeles Football Club stake — a Major League Soccer team in LA — at a $700 million valuation, which is more than the valuation of 21 out of 31 NHL franchises — despite the NHL having a 100-year headstart.

Simply put, the financial pressure applied by the COVID-19 pandemic has put the NHL in a position they’ve never been before.

Their solution?

Creativity.

Let’s run through it…

After missing out on crucial gameday revenue with the remainder of the 2019/20 season being completed without fans in attendance, the NHL has become the latest North American major professional sports league to open up new sponsorship inventory for its franchises.

First up, helmet sponsors.

Details:

• Each team is allowed a 2.25 by 3.75 inch logo on their helmet.

• Teams can sell both gameday & practice helmet sponsorships.

• High-profile markets should command ~$1 million for the sponsorship, with lower-level teams bringing in less.

My take?

Given the NBA has allowed jersey sponsors for years, which have generated more than $150 million in new revenue, this isn’t exactly innovative — but it’s certainly a good start.

Since the decision was announced, more than a dozen NHL teams have already announced helmet sponsorship deals.

In addition to new team-specific sponsorship opportunities, the NHL surprised everyone with another announcement yesterday.

After COVID-19 travel concerns and restrictions forced the NHL to realign their divisions, the league has now agreed to sell the naming rights for each of their four divisions for the first time in history.

While the sponsorship price is unclear, ESPN reports that the NHL views the selling of naming rights to its divisions “as a one-year-only campaign."

Again, it’s an additional revenue stream for the NHL.

While some have criticized the NHL’s apparent willingness to monetize everything they can — perhaps looking tacky in the process — their reasoning is actually quite simple.

The NHL has three main revenue streams:

— Media Rights

— Tickets & Merchandise

— Sponsorships

The only problem?

Media rights are fixed — due to long-term contracts — and ticketing & merchandise income is essentially non-existent without fans in the stands, which leaves sponsorships as the only variable left for the league to exploit.

The part no one is talking about?

The upcoming media rights negotiation.

The NHL signed a 10-year, $2 billion deal with NBC in 2011, which pays them $200 million annually for exclusive broadcasting rights in the U.S., but a new deal has the potential to bring between $400M-$450M per season — more than 2x the size of their current deal.

With ESPN looking to get involved and NHL Commissioner Gary Bettman reportedly wanting to split the TV & digital rights among multiple media partners to maximize rights fees, that’s what I’ll be watching.

In the end, media rights are where the NHL will move the needle — not $1 million helmet sponsorships.

Have a great day, and we’ll talk tomorrow!

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Extra Credit

Speaking of hockey, here’s a fun one.

For those that don’t already know, the NHL hosts a few outdoor games each year — typically at large venues like Citi Field, Heinz Field, or Busch Stadium.

This year?

They’ll be at Lake Tahoe, choosing to please TV viewers with a great view rather than an empty outdoor stadium.

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