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NHL Labor Standoff Looms as Devils Face Kings for Stanley Cup

A Stanley Cup championship won’t necessarily keep the New Jersey Devils or the Los Angeles Kings from losing money, and the winner may have to wait a while to defend its title.

The Devils, who missed an $80 million debt payment in September and took a $10 million loan from the National Hockey League this year, host the Kings in tonight’s opening game of the best-of-seven Stanley Cup Final at Prudential Center in Newark, New Jersey. The finalists are among 18 NHL clubs that lost money last season, according to a Forbes study.

As a possible work stoppage looms for the league, things are so bad for the Devils, owned by Jeff Vanderbeek, a former member of the executive committee at Lehman Brothers Holdings Inc., that banks may seize the team and force a sale, said Rob Tilliss, founder of Inner Circle Sports, an advisory firm based in New York.

“I don’t see why they wouldn’t use the hammer,” said Tilliss, whose firm represents buyers and sellers of pro teams.

Vanderbeek didn’t respond to an e-mail seeking comment. Curt Ritter, a spokesman for CIT Group Inc., the team’s lead lender, declined to comment on possible moves. Kings spokesman Mike Altieri declined to comment on team finances.

League revenue, buoyed by a 10-year, $2 billion television contract with Comcast Corp.’s NBC, swelled to an estimated $3.2 billion this season from $2.2 billion in 2006, according to the NHL.

Market Spread

Clubs still have a hard time turning a profit because too many markets can’t sustain a team, Andrew Zimbalist, a sports economist at Smith College in Northampton, Massachusetts, said in a telephone interview. The situation has league and union officials, agents and players girding for another lockout in the NHL, which in 2004-05 became the first major professional sports league to cancel a season over labor woes.

“Hockey is a difficult sport for most franchises -- other than the Rangers, the Blackhawks, the Red Wings and the Canadian teams, the general predicament is that teams lose money,” Zimbalist said.

The Kings had revenue of $101 million and lost $2 million last season, according to Forbes, a deficit that may be erased with the team’s success this year. Los Angeles averaged 100 percent attendance at its 41 home games this season, and Zimbalist said the deep playoff run may add “several million dollars” in revenue, plus increased tickets sales the following year.

Devils’ Finances

The Devils had $100 million in revenue and lost $6.1 million last season while facing $260 million in debt, roughly 144 percent of the team’s value, according to Forbes’s November valuations.

The team missed an $80 million debt payment to lenders in September and has worked out an extension, the New York Post reported, without saying where it obtained the information. The league loaned the team almost $10 million this year, the newspaper said.

Among the other money losers cited by Forbes are the Washington Capitals, Nashville Predators and Phoenix Coyotes, who in 2009 were purchased out of bankruptcy by the NHL. The league is close to selling the club to former San Jose Sharks Chief Executive Greg Jamison.

The NHL, as required, notified the players’ association this month of its intention to seek changes to the collective bargaining agreement when it expires on Sept. 15.

Commissioner Gary Bettman said in a telephone interview yesterday that he expects negotiations to begin “in the not- too-distant future,” declining to disclose the financial health of the league’s 30 teams.

“The message will be delivered first to the union,” Bettman said. “We’ve managed over the last seven years to see growth in the game.”

Disproportionate Growth

The growth of the NHL, while steady, has been disproportionate, Tilliss said, with some teams seeing larger gains than others. He said negotiations may hinge on a more comprehensive revenue-sharing system and a narrower range for player salaries -- a lower payroll ceiling that satisfies owners and a higher floor that benefits players.

“You have various markets, some are under-performing and some are over-performing, so you need a fair share that is going to stabilize all teams in the league,” Tilliss said.

Hockey owners, Tilliss says, may seek an agreement similar to the one in the National Basketball Association, where a lockout this season resulted in an agreement that gives 50 percent of revenue to the players, down from 57 percent. National Football League players also accepted a reduced percentage of revenue in their most recent labor talks, which also came amid a lockout.

Cost to Players

If NHL revenue rises, a similar decline to 50 percent from 57 percent would cost the players more than $224 million per year.

“The players need to be loaded for bear,” said former NBA Players’ Association General Counsel Bob Lanza, now chair of the sports and entertainment group at Hiscock & Barclay. “The deals that the NBA and NFL were able to get set the standard. The owners again will be willing to lose a season to get their deal.”

Don Fehr, executive director of the NHL Players’ Association, was unavailable to comment immediately, said Andrew Wolfe, a union spokesman.

No Paycheck

Agents are preparing players for life without paychecks.

Allan Walsh, who represents San Jose Sharks forward Martin Havlat at Octagon, said in an e-mail that he’s tailored clients’ cash flow to cover living expenses for an entire season. Jerry Buckley, founder of Buckley Sports Management, whose clients include Coyotes defenseman Keith Yandle, said some younger players are waiting to buy homes until there’s labor peace.

“Players know what’s coming,” Buckley said in a telephone interview.

In addition to shaving labor’s share of revenue, the owners, like their basketball counterparts, might seek to limit the allowable size and length of contracts.

“When an industry is hitting record-setting profits, the New York Rangers and Los Angeles Kings are going far in the playoffs and TV ratings are up on NBC, things are pretty good from the owners’ perspective,” former NHLPA General Counsel Ian Pulver, now an agent, said in a telephone interview. “Players want to be treated with fairness and respect, and that’s the bottom line.”

To contact the reporters on this story: Eben Novy-Williams in New York at enovywilliam@bloomberg.net

To contact the editor responsible for this story: Michael Sillup at msillup@bloomberg.net

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