The other day, SportBusiness International had an interesting story depicting the brand value of teams in the National Hockey League (NHL) and a comparison between the brand value of the NHL and other major sports leagues in the US, cf. NBA, MLB and NFL. This story is especially interesting because it touches upon the recent ‘lockout’ and how this incident has impacted NHL’s fanbase and brand value.
As prominent sports business researcher Stephen Greyser from Harvard Business School states, “fans are the foundation of the business of sports world……..They support the entire apparatus: with their bodies at games; with their eyeballs watching on TV; and with their wallets for tickets, for cable and pay-per-view fees, and for merchandise, publications, videos, fantasy leagues fees, and equipment, as well as the sponsors’ products and services. Whether attending events, watching sports and sports-based TV, or shopping for sports items, fans devote time to sports. For most fans, their engagement with sports also embraces their hearts.” (Greyser, 2006, p. 23). From business and financial angles, the lockout has resulted in negative changes in fan appeal. According to the article in SportBusiness International, 30 % of the most passionate fans and 40 % of fans with neutral feelings about the sport have mentioned that they will be less connected with the NHL due to the lockout. This goes not only for the rest of this season, but also applies to the next two years. That is devastating news for the league in the sense that the importance of fans is the commercial heart of a sport, which is also aligned with the thoughts of Stephen Greyser.
Studies conducted by Brand Finance Canada and Level5 Strategy Group, a Toronto-based company, reveals that the lockout, which reduced the current schedule from 82 to 48 games, caused the NHL to lose approximately $300 mio. in brand value as it refers to the value of all future cash flows linked to the brand. According to this study, NHL’s most valuable teams have been most significantly hit by the reduction in games and fan appeal tied to the lockout. As the reader can see in the tables below, this lockout has meant essential changes in $-value. The estimated brand value of the NHL was $1,888mio. in January, 2013, but due to the lockout the value has decreased by 17%.
|Brand Value of ‘The Original Six’ National Hockey League Teams|
|Without Lockout ($mio.)||With Lockout ($mio.)||Loss in Value ($mio.)||% change|
|Toronto Maple Leafs||167.0||140.9||-26.04||-16%|
|New York Rangers||149.1||120.4||-28.70||-19%|
|Detroit Red Wings||97.6||76.0||-21.52||-22%|
|Total||743.4||595.8||– 147.6||– 20%|
(Brand Finance Canada, 2013)
|Brand Value of Major North American Sports Leagues|
|Average per team ($mio.)||52.0||91.1||147.0||285.4|
|Top Brand Value team ($mio.)||140.9||204.9||397.9||510.5|
|Bottom Brand Value team ($mio.)||16.9||41.3||85.2||172.9|
(Brand Finance Canada, 2013)
So where does this leave the commercial show of the NHL? No matter what, it will take some efforts to re-build the value and to re-connect with fans. The current situation has damaged the revenue streams of the NHL in the range from revenue-generating exposure on social media to ticket & merchandise sales and the attraction of televised games. Now, the league most do what it can to ‘create a sense of unity’ around the sport. It is not enough to hand out the responsibility to the teams. Batchelor and Formentin (2008) addressed NHL’s work in terms of ‘re-branding’ when they investigated NHL’s promotional activities over a longer period of time. They found that the league’s focus on ‘My NHL’, an integrated marketing and branding set-up, did add positively to the ‘re-branding’ process although this process needed constant maintenance to successfully ‘re-brand’ the NHL. This is also where the NHL finds itself again due to the lockout. Simply, an integrated effort between the league, its teams, and other corporate stakeholders (i.e. sponsors, media etc.) is needed to bring the NHL back on track. The latter is in harmony with my own research regarding the ‘hybrid nature’ of sports brands (Cortsen, 2013), which emphasizes that a single branding or ‘re-branding’ initiative cannot stand alone if the aim is to succeed in the highly competitive and dynamic sports business where athletes, products, and organizations are evaluated on the field at a daily or weekly basis. Carefully chosen strategic partners capable of adding extra brand value to the brand must surround a brand so that this is basis, at which the NHL must work from to solve this matter.
From a different standpoint, the SportBusiness International article projects that ice hockey related revenue for the this season will still be at a relative high level ($2.4 billion) and that the lost games did not result in a total commercial catastrophe due to the fact that these games were also the least attractive games with the lowest attendances (these games also compete with the NFL, collegiate football and MLB’s play-offs, the opening of the NBA and other activities). To sum it up, take a look at what the manager of Brand Finance Canada (Edgar Baum) says, “The NHL now has a 20 year history of creating periods of lost revenue during its lockouts, and in each case the NHL brand value has been slow to return before rising again…..The current valuation shows any value gains made in the 2011-2012 season – including the signing of a 10-year U.S. television contract – have been offset by the recent lockout.” (Brand Finance Canada, 2013). However, Edgar Baum points to the fact that the NHL had made essential gains in value since the last lockout, with important increases in revenues and a return to prominence of a number of historic teams. That takes away some noise for the NHL although a lockout is not a positive thing for the sport and it has definitely not sparked the popularity of commissioner Gary Bettmann!
For more information about Brand Finance Canada’s report, click this link. Some of the report’s key findings are listed below:
Post NHL Lockout Brand Valuation – Key Findings (according to Brand Finance Canada):
- The NHL has a 20 year history of having periods of lost revenue at each collective bargaining period, that was slow to return before rising again.
- The league had made significant gains in value since the last lockout, with substantial increases in revenues and a return to prominence of a number of historic teams.
- The current valuation shows any value gains made in the 2011-2012 season – including the signing of a 10-year television contract – have been offset by the recent lockout.
- When examining the roles of individual team brand values comprising the NHL portfolio, Brand Finance Canada found a significant imbalance. The bottom third of the league represents less than 20% of the overall value, with the lowest team representing only 1.08%.
- Sponsors of the NHL or the individual teams have had a significant disruption to their sponsorship programs. Any sponsorship agreements that anticipated a continued growth in the strength and value of the NHL experienced in the past five years may be in for a frustrating experience in the coming few years as many of the gains have been lost and recent growth rates need to be restored.
- The unfortunate impact of the Lockout is that the NHL and individual team management will now have to focus on restoring the brand reputations and values instead of directing efforts at expanding the brand to international markets as their North American Major League counterparts have had success doing in the past decade during a period of relative labour stability.
Batchelor, B. & Formentin, M. (2008). “‘Re-branding’ the NHL: Building the league through the ‘My NHL’ integrated marketing campaign”. Public Relations Review, 34, pp. 156-160.
Brand Finance Canada (2013). – link to report. Retrieved from http://brandfinance.com/images/upload/brand_finance_nhl_brand_values_february_2013.pdf on April, 19th, 2013.
Cortsen, K. (2013). “Annika Sörenstam–a hybrid personal sports brand”. Sport, Business and Management: An International Journal, 3(1), pp. 37-62.
Greyser, S. A. (2006). The Business of Sports: A Perspective from Harvard. In Foster, G., Greyser, S. A., & Walsh, B. (2005). The business of sports: Cases and text on strategy and management. Thompson South-Western. Mason, Ohio, the US.
SportBusiness International. (2013). “Breaking the Ice”. SportBusiness International. 188 (April, 2013), pp. 14-15.