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What the NHL May Teach Us About Markets

Rockefeller_fingerThe parties to the NHL dispute had better get their act together now. The novelty of the first loss of a full professional sports season creates entirely new risk, especially for the players. While NHL commish Gary Bettman is getting his fair share of blame and more, it is the NHL expansion strategy which is ultimately at risk. 

Fans blame Bettman for talent pool dilution, clutch-and-grab, and the lowest goals-per-game figures in 50 years. But most, if not all, of the NHL's woes can be traced back to the same hubris that drove the expansion aspirations of the NHL, believing the public had an insatiable desire for sports programing. (Are you listening, Mr. Stern?)

This is nothing new. Let's take a look at a different industry, other than the dot-com meltdown (where some of you might already have an opinion). Years ago, the real estate industry built too many malls, especially in markets like Denver and Dallas where it was cheap to build. There simply weren't enough compelling retail concepts to drive traffic, and ultimately the market corrected itself. It's instructive to note the market only turned around - and really took off - after the managers within the mall industry showed the investment community they had the discipline to manage themselves.

The public is tired of brawls that spill into the stands; or worse, end careers and ruin lives. The broadcasters and leagues are concerned that offensive advertising may have gone too far (but I'd like to think they realized they may have overcompensated recently). Ultimately, this is happening because cable and satellite owners are finding they can no longer just pass along increased sports programing costs to their subscribers. The genie is out of the bottle: let's see what ESPN and NBC decide to do with future hockey coverage in a week or so. 

Something has to give. Unfortunately, I think the NHL players are only the first in line.

A bit of trivia: Ted Leonsis, who backs the salary cap in his role as owner of the Washington Capitals, was also the driving force behind one of the first ad-sponsored search initiatives in the late eighties. His search product may have been on CD-ROM and not online, but at that time, most of us thought AOL was doomed to be roadkill to Prodigy.


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