Sharing the Wealth in the "New NHL": The Implications of Revenue Sharing for Competitive Balance, Payroll Spending, and Profits

Taylor F Brinkman

Abstract


The National Hockey League was in trouble at the end of the 2003-04 season. Not only were teams losing money, but many fans, especially in the non-traditional small-markets, were losing interest. In response, team owners and player representatives collaborated on a new collective bargaining agreement that included a brand new economic system for the League. In addition to instituting a salary cap to help small-market teams remain financially viable, the League sought to improve competitive balance by devising a complex revenue sharing system. After explaining the system in detail, this article identifies how revenue sharing will affect ownership behavior in the hockey players’ labor market, concluding that the system’s large negative effect on the marginal revenue product of small-market teams will render it ineffective at achieving its goal of a higher level of parity.

Keywords


Economics of Professional Sports

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DOI: http://dx.doi.org/10.15695/vurj.v2i0.2736

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