NHL Economics Part III – To Be A Champion

It`s time for Part III of NHL economics and Part III examines the economics of winning and how winning is influenced by the salary Cap.

The ultimate goal of any athlete at any level of competition is to win.  More specifically to win a championship because it means that you have beaten the best and it signifies that you are at the pinnacle of your sport. Winning is a singular goal that transcends all sports both team and individual and it is present at every level.

In the four big North American Leagues it’s all about the Lombardi Trophy, The World Series, the Larry Obrien trophy and of course the greatest of them all the Stanley Cup.  Every player plays the game to win one of those trophies (Okay and the millions of dollars might work in their somewhere as well.  (AK27)) Every season teams battle it out to earn a right to compete for the top hardware but only one team can win.

For a league as a whole the championship is the bottom line.  The amount of teams making money affects the viability and success of the league.  As a fan you always want your team to win and for leagues they always want the best competition because it means more money and better TV ratings.  It also helps when there is a team that has a strong fan base that reaches across multiple markets.  (Red Sox Nation, Leaf Fans Nation, etc.)  Dynasties are also good for ratings and making a sport more popular.  Often casual fans will gravitate towards a dynasty or a really strong team because they win and it is fun to watch a winner.  Think about it if you are a casual hockey fan would you rather see a Red Wings game or a Coyotes game?

Even though the above ingredients are good for having a successful league the biggest ingredient is parity.  How many teams in your league have a legitimate chance at winning a championship every year?  Sure the odds mathematically are 1 out of 30.  But realistically that isn’t true, realistically there are usually 5 to 10 teams that could actually win the Cup.  Some teams are rebuilding some are building towards winning some are mired in mediocrity and some are contenders.  The formula for a fun sport is more contenders = better for watching.

To build a contender you have to spend money and not every market can spend the same.  So a question emerges how do you ensure there is a certain level of parity that makes sure teams have a reasonably equal playing field?  Well for three leagues the answer has been create cost certainty and bring in a salary cap.  The NHL adopted a salary cap after the 2004-2005 lockout.  Since then hockey`s Holy Grail has been awarded six times to six different teams.  Two of them were original six teams two were sunbelt teams and the is the Pittsburgh Penguins.  There have been ten different teams to play for the Stanley Cup since the lockout.

Stanley Cup Champions since lockout:

Conference Champions since lockout:

Playoff races are better because more teams have a chance and different teams are competing in the Stanley Cup finals and there is always a different winner.  So it appears that the in the `New NHL“ parity is king.  But how much of that is dictated by the salary cap?  That question is much more difficult to answer because different eras bring different levels of competition and different eras have different amounts of teams.  In the NHL the last expansion was from 28 to 30 in 2000.  Since 2000 the Detroit Red Wings and the New Jersey Devils have both won the Cup twice but nobody has won back to back since the Red Wings in `97 and `98.

Overall most people agree that the cap has helped increase parity and it gives more teams a chance to win the cup.  Those longer playoff races and playoff runs mean more fans are watching and for longer.  League revenues have gone up every year since the lockout so something must be working.

That concludes the three part look at the NHL economy and the CBA.  Make sure to go back and I and II as well and post comments and opinions.