National Hockey League Business Information, Profile, and History

Company Perspectives:

We are proud of our Canadian heritage, our international presence, and of the fact that an increasing number of NHL players come from outside North America, with many countries now represented among the ranks of our players. In recent decades, the NHL's challenge has been to move beyond being perceived as a cold weather sport generally confined to the Northeastern United States and Canada, and into a league that is truly national in scope and operates throughout North America.--NHL Commissioner Gary Bettman.

History of National Hockey League

The National Hockey League (NHL) is a nonprofit corporation, based in New York, that serves as a trade association for its 30 franchises; six of its teams are located in Canada and the remaining 24 are U.S.-based. The NHL is unrivaled as a premiere hockey league, attracting the world's best players. Although hockey is Canada's most popular sport, and the NHL enjoyed rapid growth in the United States in the 1990s, hockey still ranks a distant fourth among the four major North American professional team sports in terms of revenues and television ratings.

Origins

While early forms of ice hockey may be traced to 17th-century Holland, the origins of modern ice hockey may were established in the late 1800s, when the sport became especially popular among university students in Ontario, Canada. In fact, Kingston, Ontario, is reputed to be the site of the first amateur hockey league, which consisted of four teams. During this time, the English Governor General of Canada, Lord Stanley of Preston, had a son who was a fan of the growing sport. Stanley was convinced by his son to purchase a silver bowl and donate it as a trophy to be awarded to the winning amateur hockey team in an annual playoff. Thus, the Stanley Cup championship trophy actually predated the NHL. Lord Stanley never attended a championship game, let alone award his cup to the first winners in 1893. He had already returned to his native England.

The Stanley Cup helped drive Canadian interest in hockey. Seeds of the game were then planted by Canadian college students attending Yale and Johns Hopkins, making New Haven and Baltimore the first homes to hockey in the United States. It was the Americans who introduced professionalism into the sport. Adhering perhaps to a British preference for amateur sports, Canadians seemed content to compete for an amateur cup, although a few players were known to accept money under the table. The Americans, however, seemed more interested in turning a profit from the game. The first professional league was formed in Michigan's Upper Peninsula, and the best Canadian talent was imported.

In 1910 the National Hockey Association (NHA) was created out of two rival Canadian 'amateur' leagues that were at the time raiding one another's players, offering as much as $1,000 for a single game. The Pacific Coast Hockey Association (PCHA) was soon formed and began luring players away from the NHA. By 1912 the NHA and PCHA champions were playing for the Stanley Cup, and any vestige of the original intent of awarding the trophy to the best amateur team was long forgotten.

World War I Leads to Birth of NHL

World War I disrupted play, especially in the NHA, when a team representing the 228th Battalion of the Canadian Army was ordered overseas. This left five teams in the league and an unbalanced schedule. To rectify the problem&mdash well as to rid themselves of Eddie Livingstone, the unpopular head of the Toronto franchise--the owners of the NHA hoped to drop the Toronto team and redistribute its players. In the end, however, they adopted a simpler solution; they formed a new league and left the NHA to Livingstone. Thus, on November 22, 1917, in Montreal's Windsor Hotel, the National Hockey League (NHL) was created.

The champions of the NHL and PCHA now vied for the Stanley Cup. By the early 1920s, however, the PCHA was suffering financially and so joined forces with the Western Hockey League. WHL franchises were generally located in cities too small to generate the revenues required to match player salaries offered by the NHL. When the NHL began to expand to wealthy American cities, WHL players were sold to the new franchises, rather than be lost without compensation in the player raids that were sure to come. By 1926 the Stanley Cup had become the exclusive property of the NHL.

The Boston Bruins became the first American-based franchise in the NHL, beginning play in 1924. The following year, the Hamilton franchise was sold and relocated to New York, where it was renamed the 'Americans' and rented Madison Square Garden for its games. Another new franchise, named the Pirates, was awarded to Pittsburgh. In 1926 three more American-based franchises were awarded. The owners of the Madison Square Garden, impressed by the success of their tenants, purchased their own franchise and named it the Rangers. Also added were the Chicago Black Hawks and the Detroit Cougars (eventually renamed the Red Wings). By the late 1920s, the NHL consisted of ten teams. With six playing in the United States, the balance of power began a gradual shift to the south.

To accommodate the large crowds necessary to support the growing NHL, the country also saw a golden era of rink construction in the 1920s. In addition to Madison Square Garden, several other storied arenas were built: the Montreal Forum, Boston Garden, Detroit's Olympia Stadium, the Chicago Stadium, and in 1931, Toronto's Maple Leaf Garden.

The league was also bolstered by the growing popularity of radio. A newspaper reporter named Foster Hewitt began doing radio broadcasts of Toronto games, and in 1933 a network of 20 Canadian stations was created to carry NHL games on Saturday nights. By the end of the season this network had grown to include 33 stations. It was estimated that an impressive 72 percent of all radios in Canada were tuned to the weekly game. American-based teams soon began to broadcast their games as well.

The Depression, followed by the uncertainties of World War II, resulted in NHL franchises transferring to other cities, and the eventual abandonment of some teams. Pittsburgh moved to become the Philadelphia Quakers, and the Ottawa Senators became the St. Louis Eagles. Both teams soon folded. Despite winning a Stanley cup, the Montreal Maroons withdrew from the NHL following the 1937-38 season. The New York Americans, at an economic disadvantage to the Madison Square Garden-owned Rangers, moved to Brooklyn, suspended operations for the duration of World War II, and never returned to league play.

The Original Six: An Era of Stability

The era of the 'Original Six' teams--consisting of Montreal, Toronto, Boston, Chicago, Detroit, and New York--ran from the 1942-43 season to 1966-67. For most of this period, from 1946 until his retirement in 1977, Clarence S. Campbell headed up the NHL as league president. Despite strong attendance following the war, the NHL resisted expansion, rejecting bids for new franchises from Philadelphia, Los Angeles, and Cleveland. Television initially had an adverse effect on attendance in some of the American cities in the early 1950s, especially in Chicago and Boston. By the end of decade, however, both franchises were again prospering.

NHL hockey was first broadcast on television on October 9, 1952, from the Montreal Forum, where the Canadiens hosted Chicago in the season opener. The following month Foster Hewitt provided the first telecast from Maple Leaf Garden. The popular Saturday night radio broadcasts in Canada were now superceded by the Hockey Night in Canada telecasts that quickly became a national obsession. Hockey Night in Canada would one day become the longest running television show in North America. While American-based teams began to televise their games locally, success on a national basis in the United States eluded the league. The first attempt was made by CBS with its 'Game of the Week' package that began with the 1959-60 season. Several years later, NBC would purchase the rights for slightly more than the $2 million-a-year that CBS had been paying. Hockey ratings were poor, lagging well behind ABC's Wide World of Sports and CBS's NBA basketball telecasts. By 1974 no U.S. television network was interested in broadcasting NHL hockey.

After 25 years of maintaining a six-team league, the NHL was more than ready for expansion in 1966 when six additional cities were awarded franchises, at a cost of $2 million each, to begin play in the 1967-68 season. The new teams were the Los Angeles Kings, Minnesota North Stars, Philadelphia Flyers, Pittsburgh Penguins, Oakland Seals, and St. Louis Blues. In one stroke the NHL became a coast-to-coast league. By 1970 two more teams joined: the Buffalo Sabres and Vancouver Canucks.

As more North American cities sought entry into the NHL, the franchise price rose to $6 million. While two additional teams joined the league in 1972, the Atlanta Flames and New York Islanders, a group of Canadian promoters formed the World Hockey Association. They charged only $500,000 for a franchise, a significant savings that the WHA urged its team owners to invest in, enticing established players away from the NHL. Although the NHL did not take the threat seriously at first, it quickly found itself in a war with the WHA, which was preparing to play its first season in 1972-73. The average player salary in the NHL was $25,000, but with competition from the WHA, the numbers quickly escalated, despite efforts to hold the line. When the WHA Winnipeg Jets signed Chicago superstar Bobby Hull, the new league gained instant credibility, which led to more NHL players switching leagues, including Detroit's legendary Gordie Howe. Clarence Campbell assured the NHL Board of Governors that the WHA would fold before the start of the 1973-74 season. He was wrong in that prediction and every one he would make over the next several years about the imminent demise of the rival league. Despite the crippling effects of the league war, the NHL continued to expand, adding the Washington Capitals and Kansas City Scouts for the 1975-76 season.

During this period, NHL players met the Soviets in an eight-game Summit Series, which led to the 1976 Canada Cup tournament that featured four European national teams. The EuroSoviet style of play came as a revelation to the North Americans. Although Soviet players were forbidden from leaving their country, the Europeans were eager to sign on, and the WHA was eager to sign them. The NHL was slow to follow suit, but soon its scouts were also searching for talent in Czechoslovakia and Scandinavia.

The war with the WHA lingered on, and one of its casualties was Clarence Campbell. After serving 31 years as president of the NHL, he was eased out, replaced in 1977 by John A. Ziegler, Jr., The most pressing matter for Ziegler to address, of course, was the war with the WHA that was crippling owners in both leagues. Several NHL franchises were forced to relocate and try their chances elsewhere, but it was apparent that North America simply could not support 32 major league hockey teams. After much back-channel negotiating, the war finally came to an end in 1979 when four WHA teams were added to the NHL: the Edmonton Oilers, Hartford Whalers, Quebec Nordiques, and Winnipeg Jets. Although the transaction was called an expansion, the effect was a merger between the two leagues.

The NHL spent the next decade essentially marketing a former WHA player: Wayne Gretzky. His trade from Edmonton to the Los Angeles Kings in 1988 arguably saved that franchise and created the momentum for later expansion of the NHL to the Sun Belt cities of the United States. The rise of in-line skates also served to popularize the game of hockey in warm weather cities. Nevertheless, the NHL still lagged well behind the other major North American team sports, and still had no network television presence in the United States. It was a local broadcast and cable-only product.

New Leadership in the 1990s

The NHL suffered its first labor disruption in April 1992 when a players' strike interrupted play for ten days. Although Ziegler saved the season, the strike cost him his job. He was replaced as league president in October 1992 by Gil Stein. Several months later, in February 1993, Gary Bettman left the NBA to become the first commissioner of the NHL. Because most of the clubs were losing money, Bettman initiated talks with National Hockey League Players' Association executive director Robert Goodenow to negotiate a salary cap in an effort to curb escalating costs. In the meantime, Bettman was forced to deal with a strike by on-ice officials in November 1993. The strike lasted 16 days and was resolved when a Collective Bargaining Agreement was reached on November 30, 1993. The situation with the players reached a head before the 1994 season. At the end of training camp, Bettman announced that the start of the season would be delayed. He and the owners believed that only by depriving the players of their salaries would the NHL be able to gain the relief it felt it so desperately needed. Goodenow and the players assumed that they were being locked out, but Bettman carefully avoided using the term, because the standard player's contract did not give the club the right to lock out a player and not pay him his salary. A player could give notice of default, and if not paid in three weeks become a free agent. According to Gil Stein in his book, Power Plays, 'Had the default notices been served, Bettman was prepared with a backup plan. He would try for three weeks to negotiate a new CBA with Goodenow, and then save face by announcing that, since he was satisfied with the progress of talks, the season would start.' Not realizing he could have bargained from a position of strength, Goodenow made major concessions in order to salvage the season, and Bettman made sure that the standard player's contract was amended so that the NHLPA would not be able to prevent a future lock out.

Bettman aggressively positioned the NHL for the next century. As the league expanded into the West and South with new teams in Colorado, Dallas, Phoenix, Miami, Tampa Bay, the Carolinas, Nashville, and Atlanta, revenues rose rapidly. Annual sponsorships increased from $25 million to $300 million within five years. Grassroots efforts to attract children to the game were also stepped up. Street hockey tournaments were created, and equipment and instruction provided.

After 20 years without a network presence on American television, Bettman landed a five-year, $250 million deal with Fox. Ratings steadily increased, and it appeared that the NHL was poised to attain unprecedented popularity for hockey. The numbers, however, began to slide. In its first season on Fox, the NHL averaged a 2.0 rating, but by 1999 the numbers had dipped to 1.4, prompting Fox to drop hockey from its schedule. ABC, partnered with ESPN, signed a five-year, $600 million deal that began in 1999-2000. Rather than the broad-based marketing approach that Fox employed, ABC targeted hockey's existing core audience. The early ratings showed promise, and the NHL was further encouraged by ABC's willingness to promote hockey on its prime-time schedule, a commitment that Fox had been unwilling to make. The NHL also took an aggressive position with the Internet, becoming the first major profession sports league to bring its Internet business in-house when it bought out partner IBM. According to league studies, hockey fans were more Internet-oriented than those of other sports. Furthermore, the NHL's web site attracted 30 percent of its hits from outside of North America. With the possibility of someday broadcasting its games over the Web, the NHL was unwilling to share future profits with a partner.

As the league continued to expand, adding the Columbus Blue Jackets and Minnesota Wild for the 2000-01 season, to bring the number of franchises to 30, the pool of player talent changed in composition. Once dominated by Canadian players, hockey by the end of the 20th century was truly an international sport. Nearly a quarter of NHL players came from Europe, representing 16 nations. The change in the All-Star Game format was indicative of this shift. Beginning in 1998 the game pitted 'North America' versus 'the World.'

Facilities were upgraded across the league. Not only were expansion teams moving into state-of-the-art arenas, replete with the luxury boxes that generate the income crucial to the economic viability of team sports, but the older franchises also saw a wave of construction. New arenas were opened in Montreal, Toronto, Boston, Chicago, Philadelphia, St. Louis, Buffalo, and Los Angeles.

Despite many promising signs, the NHL faced some serious challenges at the end of the century, mostly involving small-market Canadian franchises that were saddled with a number of economic disadvantages. The U.S.-Canadian exchange rate was crippling, because players insisted on being paid in U.S. dollars, but the clubs' received most of their revenues in weaker Canadian currency. They also had to pay far more in national and local taxes than U.S.-based teams. In fact, the Montreal Canadiens and Vancouver Canucks each paid more in taxes than all of the U.S. teams combined. To help these Canadian franchises, the NHL adopted an assistance plan in 1996. Efforts to provide public assistance, however, received little support from Canadian voters.

To keep pace with rising players' salaries, ticket prices rose steadily across the league, often driving away many traditional fans. To some observers, the economics of hockey entered a rarefied state at the close of the century, as corporations replaced gentleman owners. Although most teams lost money each year, the value of an NHL franchise increased in value. According to former NHL president and CEO, Gil Stein, 'The hockey business may not be a money-maker, but the arena business seems to be. And the presence of an NHL hockey team appears to be a necessary component for operating a successful arena. ... So large corporate entities whose core businesses benefit from a hockey team should continue to covet owning one, provided, of course, that their other businesses (arena, cable TV, beer sales, and so forth) are successful enough to absorb the annual hockey deficits. However, the continued rise in losses generated by NHL clubs does not augur well for the viability of small-market teams where that corporate synergy does not exist.'

Principal Divisions: NHL Enterprises, L.P.; NHL Enterprises Canada, L.P.; NHL Europe; NHL Productions.

Principal Competitors: The National Basketball Association;

The National Football League; Major League Baseball.

Chronology

• Key Dates:

• 1917: National Hockey League organized in Montreal.
• 1924: The Boston Bruins become the first U.S. team to join the NHL.
• 1943: NHL teams pared to what becomes known as the 'Original Six.'
• 1967: Six new franchises granted, doubling size of league.
• 1972: World Hockey Association begins play and challenges NHL supremacy.
• 1979: Four World Hockey Association teams join the NHL.
• 1991: Play suspended ten days because of players' strike.
• 1993: Gary Bettman is named first NHL Commissioner.
• 2000: Two new teams join the NHL--the Columbus Blue Jackets and the Minnesota Wild--and the league totals 30 franchises.