Jan 19

The Silence of the Arenas: The Tangential Costs of Labor Disputes

The National Hockey League (NHL or League) lockout is over, having lasted 113 days.[1]  Since it began, the lockout has led to the cancellation of 510 games[2] and the annual Winter Classic game, which should have been played at the turn of the new year[3].  Hockey fans will once again be able to watch their favorite teams compete, as a shortened season is scheduled to begin this weekend[4].  Although it is now a footnote in the history of labor-management relations in the NHL, the most recent lockout has provided an important reminder of the economic impact labor strife can cause.

Of course, the League and the National Hockey League Players Association (NHLPA or Union) both stood to lose a significant amount of money as a result of the lockout.  In an uninterrupted season, over 1,200 games are played[5].  Each game represents an estimated $975,000 in ticket sales alone[6].  The math works out to a total loss of $497.25 million over the course of the lockout.  In addition to lost ticket revenue, the League is losing around a quarter of its sponsorship revenue[7].  The Union has also suffered economic losses.  As of early January the players had lost six out of the thirteen paychecks they usually receive during a season[8].

But there are often costs associated with labor disputes that reach beyond the primary parties to the dispute.  This was certainly the case with the NHL lockout.  In addition to lost revenue from merchandise and concession sales at the arenas during games, the businesses surrounding the arenas have been impacted by the cancellation of games.  In Boston, one parking garage operator estimated a revenue loss of $6,000 for each game that was not played[9].  The nearby bars and restaurants were losing approximately $1 million per cancelled game[10].  In Pittsburgh, it is projected that city businesses lost a collective total of $2.2 million per cancelled game on top of the roughly $15.2 million lost as a result of losing traffic from four preseason games that were not played[11].

Local businesses were not the only entities affected by the lockout.  The municipalities in which the arenas are located also felt the sting of lost revenue.  In New York, Nassau County, home of the New York Islanders, was expected to lose around $1 million from lost tax revenue if the entire season was lost[12].  The expected loss is based on the $1.12 million the County received in hockey-related revenue in 2010; the sources of the revenue included sales tax, parking fees, and concession sales[13].  In Ohio, Columbus and Franklin Counties, which share hosting duties for the Columbus Blue Jackets, projected tax losses between $3 million and $4 million if the NHL season was ultimately cancelled[14].  The losses would be the result of unrealized income and sales tax receipts[15].  It is unclear how much tax revenue was lost by the three counties as a result of the lockout.

The decline in revenue for local restaurants, bars and other businesses that resulted from the NHL lockout is important not only for the survival of individual businesses, but also for the strength of local economies.  Once businesses start losing money and owners are unsure of when, if ever, the source of the lost revenue will return, they must make some choices.  One of these choices may ultimately be to reduce the size of its workforce.  If this occurs, there will be a further impact on the economy of the area as a result of the now-unemployed individuals having less money to spend.  The decrease in revenue to local restaurants and retailers will also have a trickle-down effect on other businesses in the supply chain.  With fewer customers, and ultimately fewer dishes served, restaurants may not order as much food as they would when they are routinely overbooked in the hours before or after a hockey game.  Stores in the area that saw increased sales as a result of the foot traffic of individuals going to and from the games may not be able to turn around merchandise as quickly and, therefore, will not need to order from their suppliers as often or in the same quantities.  Similarly, municipalities that lost revenue as the result of the lockout may have to make tough choices about how to fill the budgetary gaps left by the lost revenue.  The municipality may have to decide to lay off workers, to cut back on providing certain services, or to raise taxes in order to replace the revenue while maintaining a balanced budget.

The costs of a labor dispute can be high for the parties to the dispute, with each side ultimately losing income in one form or another.  But, as the recent NHL lockout has illustrated, there are also resulting costs for other entities that rely on the continued business and operation of the relationship between the two parties in order to help generate revenue.  These tangential costs are often lost in the focus on the progress, or lack thereof, being made by the employer and union that are attempting to reach a settlement, but can have wide-ranging impacts on local communities.

[1] Katie Strang, NHL, union have tentative agreement, ESPN, January 8, 2012, available at http://www.espn.go.com/nhl/story/_/id/8817955/nhl-nhlpa-reach-tentative-agreement.

[2] Id.

[3] Pat Leonard, NHL lockout that’s putting Winter Classic on ice is costing more than just one game, New York Daily News, December 29, 2012, available at http://www.nydailynews.com/sports/hockey/winter-classic-killing-lockout-costs-game-article-1.1229608.

[4] Ira Podell, NHL Lockout Over, Training Camps Set To Open Ahead of 2013 Season, Huffington Post, January 12, 2013, available at http://www.huffingtonpost.com/2013/01/13/nhl-lockout-over-training-camp_n_2465497.html.

[5] Joshua Berlinger, This Is How Much the Lockout Has Cost the NHL So Far, Business Insider, October 4, 2012, available at http://www.businessinsider.com/the-nhl-just-cancelled-the-first-two-weeks-of-the-regular-season-and-its-going-to-cost-them-at-least-xxxxx-2012-10.

[6] Id.

[7] Gregg Krupa, NHL lockout’s true cost is staggering, Detroit News, December 24, 2012, available at http://www.detroitnews.com/article/20121224/OPINION03/212240356.

[8] Steve Zipay, NHL, players return to bargaining, Newsday, January 2, 2013, available at http://www.newsday.com/sports/hockey/nhl-players-return-to-bargaining-1.4396453.

[9] Associated Press, NHL lockout costs Boston businesses millions, Boston Herald, December 27, 2012, available at http://www.bostonherald.com/business/business_markets/2012/12/nhl_lockout_costs_boston_businesses_millions.

[10] Id.

[11] Staff, NHL lockout’s cost to Pittsburgh business: $2.2M a game, Pittsburgh Business Times, October 26, 2012, available at http://www.bizjournals.com/pittsburgh/blog/morning-edition/2012/10/nhl-lockouts-cost-to-pittsburgh.html.

[12] Robert Brodsky and Randi F. Marshall, Officials: NHL lockout could cost LI economy $60 million in revenue, Newsday, September 16, 2012, available at http://www.newsday.com/sports/hockey/officials-nhl-lockout-could-cost-li-economy-60-million-in-revenue-1.4008466.

[13] Id.

[14] Lucas Sullivan, NHL lockout has tax cost, The Columbus Dispatch, December 23, 2012, available at http://www.dispatch.com/content/stories/local/2012/12/23/nhl-lockout-has-tax-cost.html.

[15] Id.

1 ping

  1. Drop the Puck: An Overview of the New NHL CBA » LABOR AND EMPLOYMENT LAW FORUM

    […] « The Silence of the Arenas: The Tangential Costs of Labor Disputes […]

Leave a Reply