On February 5th 2004, the NHL released Arthur Levitt’s review of the financial status of the NHL during the 2003-2004 season. While short on detailed data, we were told that eleven clubs made a profit, nineteen clubs were losing money, and perhaps most alarming, the average NHL team was losing $9.1 million.
The NHL cancelled the 2004-2005 season in an effort to resolve the issue of competitive balance and change the financial health of the league. Although we do not have another study from Levitt to tell us how the league is doing financially today, we can do some back of the envelope calculations with just the information gleaned from the media. First, as NHL Commissioner Gary Bettman stated, "… revenues will be at an all-time high for this league…" As we argue in The Wages of Wins, labor disputes have not been found to harm league attendance. With record attendance in 2005-06, the NHL experience this past season supports that story.
Profit is not just about revenue, but costs. And for a sports team, the primary cost is the players. The Levitt report stated that total player costs in 2003-04 were $1.494 billion. Team payroll data for 2005-06 has yet to be released, but we can estimate what the total payroll picture looks like. Let’s say that each team spent its entire $39 million cap limit. Okay, we know they didn’t, but let’s just say the teams did. With $39 million spent per team on players, total payroll costs would only be $1.17 billion. Taking Levitt’s payroll number as gospel, this tells us that teams saved an average of almost $11 million on player costs with the new agreement. So that move alone turns the reported loss before the lockout into a profit. Couple this with growth in revenue, and the NHL did quite nicely this past season.
Now making money for NHL owners was not the purpose of canceling a season. Fans were supposed to see improvements in competitive balance. As I explained in an earlier blog, the new CBA has not changed competitive balance as of yet. Clearly, though the average NHL team has improved its financial picture, and in the end, that is the real bottom line on the NHL’s cancelled season.
– Stacey
Wages of Wins Journal 
Mark
June 8, 2006
One interesting sidenote to this discussion is that the owner of the Carolina Hurricane was quoted the other day as sayinig that the team could not be assured of making a profit until deep into the conference final playoff round. If that is true, then the CBA has not done quite as much for the small market teams as it was supposed to do.
The intent was to make small market teams finanacially viable again, not just competitive from a game standpoint. If you have to reach the conference finals or the Stanley Cup to make a profit, then the model needs tweaking.
However, the fact that the final four were all small market teams shows that competitve balance has been restored and that is a major accomplishment. It doesn’t do much for TV ratings – NCAA softball outdrew the first night of the Stanley Cup – but that is what the NHL did to itself when it signed with OLN.