Hockey & Cartels

So the season is canceled. It does appear that the Bettman-ownership stance was a hard cap or bust. Their supposed soft cap number was so low and inflexible as to be a non-proposal.

AP sports writer Jim Litke provides an excellent history of the last twelve years — the Bettman era. In a nutshell, Bettman’s plan was to expand the sport into new TV markets, supplying the league with a big cash payoff. As Litke observes, it looked like it might just work

New arenas were going up, the Nagano Olympics offered worldwide exposure and multimillion-dollar expansion fees were lining the owners’ pockets. It was easy to get swept up in the notion that once the NHL blanketed the U.S. map from coast to coast and locked up a big TV deal, enough money would flow in to cover up all the mistakes.

In the end, the TV deal fizzled along with Bettman’s grand vision.

Aside from a fan’s perspective, this is where things get interesting from in terms of the economics of cartels. Cartels are often unstable alliances because of intra-cartel differences in cost and revenue functions. The TV revenue bust creates a do-or-die situation for many of the struggling owners. The push for a hard cap was almost certainly a Bettman alliance with these owners. He brought them into the league. So far, in what strikes me as a surprising degree of solidarity, he has been able to keep the owners from the more financially viable clubs on board. The intoxicating aroma of “cost certainty” may have dulled their senses for the short term. I wonder how long they will remain in the Bettman camp. The Carolina owner already offered a soft criticism:

“We might be better off to stop chasing growth and revenue and play just high-quality hockey and let its popularity take care of itself …We don’t have to have compounded annual growth.”

The trouble is that because of Bettman’s past dealings, there are weak franchises in the league that will detract from this more restricted vision. In basic economic terms, there are still huge inter-team differences in revenue. Over the next months or years, it will be interesting to see how well Bettman is able to keep the lid on these internal conflicts among owners.

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Author: Brian Goff

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