More Plus than Minus: Examining the NHL’s Decision to Skip the Winter Olympics

01 February 2018 Publication

To repurpose a quote attributed to the late Olympic ice hockey player and head coach Herb Brooks for the 2018 Olympic ice hockey tournament, the name on the front of the jersey is definitely going to be more important or at least more recognizable than the name on the back. In early April 2017, the National Hockey League (NHL) decided that it would not send its players to participate in the 2018 Winter Games and, as a result, viewers tuning into the PyeongChang Games in the next few weeks will not see the names Crosby, Oshie, or Ovechkin lined up at Olympic center ice, as they and the rest of their brethren will stay at home and play NHL regular season games.

This marks the first time in 20 years (five consecutive Winter Games) without full NHL participation. While obviously disappointing to some hockey fans, a myriad of reasonable business considerations (discussed below) likely contributed to the ultimate decision.

The Insurance

In early 2016, the International Olympic Committee (IOC) announced that it would no longer cover insurance and travel costs for NHL players to participate in the Games, which would end a benefit the league had enjoyed since its first Olympic participation in 1998. This change clearly had a significant impact on the NHL’s thinking (though the IOC has never extended this benefit to any other professional sports league, e.g., the NBA).

This insurance premium goes beyond general player health insurance, which the NHL Clubs already cover under Paragraph 5(d) of the Standard Player Contract (SPC). Under the Collective Bargaining Agreement (CBA), the Clubs are also required to fully meet contractual obligations to players injured while participating in Club activities. To protect the Clubs, the NHL has a league-wide insurance policy that allows the Clubs to recoup up to 80 percent of an injured player’s contract, i.e., the amount of guaranteed or protected compensation to be paid under the contract during the period of injury. However, regardless of the insurance payout, the Clubs must meet all contractual obligations.

The post-Olympics, guaranteed NHL compensation scheduled to be paid to expected 2018 NHL Olympians was an estimated $3.5 billion. For the Sochi Olympics, the IOC spent $7 million on premiums just for player contract insurance coverage, and these costs were projected to reach $10 million for the 2018 Olympics.

In the face of the IOC’s announcement, national hockey federations and Olympic committees were reluctant to step in and foot the bill. However, the International Ice Hockey Federation (IIHF) offered to pay up to $20 million to help cover expenses (including insurance premiums) usually taken care of by the IOC – though this did not sway the NHL and its owners.

While the IIHF’s offer would more than cover the projected insurance premium, it did not go far enough to address the NHL’s concerns about the event. First, the IOC’s assistance did not always cover practices for national teams. For example, in 2009, Hockey Canada reportedly paid $400,000 (based on $875 million in contract obligations) to permit Team Canada to hold a couple of practices before the 2010 Vancouver Olympics. This elicited concerns about how teams were practicing and taking care of players for activities not covered in the policies purchased by the IOC (or the IIHF in its place). Finally, and significantly, the NHL cited concern that the IIHF’s offer would divert needed resources allocated to the sport at the grassroots level.

It seems entirely reasonable for the NHL to seek assistance in paying player contract insurance premiums. Under Paragraph 7 of the SPC, each player agrees to refrain from participating in other sports that “may impair or destroy his ability and skill as a hockey player” – including hockey events – without the Club’s consent. In accordance with these limitations, the CBA allows the NHL and the National Hockey League Players’ Association (NHLPA) to create procedures to permit players to participate in international events – including the Olympics. For example, the CBA allows a player who is not competing in the NHL playoffs to participate in the IIHF World Championships, but requires that the player’s national team provide insurance covering the remaining value of the player’s SPC. Given that the Olympics is a comparable event, it would not be inconsistent for the NHL to request similar support.

The Prospective Injuries

Olympic hockey insurance premiums appear to be a sticking point for good reason – in the 2014 Olympics, four players sustained season-ending injuries and at least three other players missed significant regular season games due to Olympic injuries. And, as some Clubs noted, while insurance covers player contracts, it does not extend to revenues that could be negatively impacted by player injury, such as ticket sales.

In addition to potential injuries, “Olympic Fatigue” has been a concern for many NHL Stanley Cup contenders. Again, in the 2014 Olympics, the Red Wings sent the most NHL players (10) to the Olympics, but did not even make it through a playoff round. By contrast, the eventual Stanley Cup winners, the Los Angeles Kings, sent half as many players. This mirrors the results from the 2006 Torino Olympics.

The Geography

Geography for the Olympics impacts both NHL players and fans. Naturally, the NHL might have concerns about the effects of travel on its players and, in past Games, accommodated them by altering the schedule – usually with a 17-day break in play when the Olympics was held outside North America.

Perhaps most important to the NHL is when the games will be shown in North America, as its largest markets are the United States and Canada. Pyeongchang is 14 hours ahead of big east coast markets like New York, Boston, and Montreal. The current Olympic schedule has the majority of hockey games being played at 2 a.m., 7 a.m., and 10 p.m. Eastern Standard Time (EST). Not exactly prime time viewing for many NHL fans. Even the Men’s Gold-Medal Game (usually the closing event of the ceremonies) won’t begin until 11:10 p.m. EST.

The 2002 and 2010 Winter Games, held in Salt Lake City and Vancouver, respectively, presented the optimal geography for the NHL in terms of travel and time zones. Unsurprisingly, the NHL considered these more successful than those held in Torino and Sochi.

The Dark Period

To participate in the Olympics, the NHL must virtually shut down its season at a time when two of its major viewing competitors, baseball and football, are no longer in season. In return, it is loaning its own players to a tournament that is devoid of all NHL branding.

The NHL has tried to move the sport to the Summer Games to coincide with its offseason to create a similar (and arguably simpler) scheduling situation that the NBA enjoys. However, these efforts have been unsuccessful due to the interpretation of the Olympic Charter, which prescribes that “[o]nly those sports which are practi[ced] on snow or ice are considered winter sports.”

Looking at the opportunity costs, the NHL benefits from being able to continue its season and its games in prime time, where there will be a decided lack of live Olympic hockey in North America.

The Inelastic Fan Base

When evaluating whether to send players to PyeongChang, the NHL surveyed its “avid” American and Canadian fans. According to the survey, 53 percent of Canadian and 73 percent of American hockey fans were against the Olympic break in play.

Additionally, while Olympic hockey games have garnered huge ratings, the NHL has not realized this gain in viewers. For example, the 2010 Gold-Medal Game between the United States and Canada was the most-watched hockey game in the United States since the two final games of the 1980 U.S.A. “Miracle on Ice” team, and the most-watched television broadcast in Canadian history. Unfortunately, these massive numbers have not translated into significant and sustained viewership gains for the NHL.

The Olympic Advertising

Some have suggested that the NHL turned down the IIHF’s reimbursement offer because it was seeking more of a partnership status in the Olympics. As it stands, the NHL has never earned direct revenue from the Olympics. And historically, the IOC has not allowed the NHL to join in promoting or participating in the event.

At least this year, despite some early doubts, NBC, the official network of the Olympics, will continue broadcasting live NHL games during the Winter Games. This will mark the first time in the last 20 years that Olympic and NHL brands will be active simultaneously.

The Competitive Parity

When the IOC first struck a deal with the NHL to allow its players to participate, international hockey had a much different landscape. The Soviet Union (and later the nations resulting from its dissolution) dominated Olympic hockey. Much of this domination was attributed to the IOC’s definition of “amateurism,” which permitted the state-sponsored, elite Soviet athletes to compete, but not their arguable counterparts from other nations that had “turned professional” by entering leagues such as the NHL.

As a result, the Soviet Union was always heavily favored, and except for U.S.A. Hockey’s “Miracle” win in 1980, the Soviet team dominated competition until its players began entering the NHL in 1989. The Olympics’ slow acceptance of professional players in the 1990s, culminating with full NHL participation in 1998, allowed for all of the world’s elite players to compete on international ice. Not surprisingly, it leveled the ice for Team USA and Team Canada, which commonly sent their best players to the NHL, thus making them unavailable for Olympic play. This is hardly the case now, with the world’s best players ascending to the NHL.

The Alternative International Play

Despite sitting out this Olympic Games, the NHL will continue its international efforts. This season, NHL games were held in China and Sweden. As mentioned above, the NHL already allows limited participation in the IIHF World Championships, and in 2016, it revived the World Cup of Hockey with the NHLPA.

The Lack of Stakeholder Cooperation

Finally, and likely most importantly, the major stakeholders – the IOC, the IIHF, the NHL, and the NHLPA – could not come to an agreement. The NHLPA expressed disappointment and frustration with the NHL’s decision, but, as the NHL pointed out, was not willing to engage in a discussion that would “make Olympic participation more attractive to the Clubs.”

Parallel Events Impacting Olympic Hockey

In early December, the IOC, in an unprecedented decision, barred the Russian Olympic Team from competing in the 2018 Games due to the discovery of “systematic doping” by the country. The Russian Men’s Ice Hockey team, an expected 2018 medal contender, had medaled in each IIHF World Championship Tournament since the 2014 Winter Games. A team of Russians will still compete as part of the Olympic Athletes from Russia (OAR) team.

This decision also impacted whether the Kontinental Hockey League (KHL), considered second in quality only to the NHL, will permit its players to attend. The Moscow-based league had previously announced that it would support the participation of its players in the Olympics, but then recanted and has made no express commitment. While it has yet to officially confirm its support, the KHL has listed its Olympic participants on its website.

As the Olympic Games approach, the NHL’s decision to stay home has been overshadowed by the chaos surrounding the Russians’ participation, but it also looks prescient given the impact that the Russian scandal may have on the quality of the competition.

Looking Forward

The NHL will not entertain discussions about the 2022 Winter Games until after PyeongChang. The IOC has suggested that NHL participation in the 2022 Games is conditioned upon the league’s agreement to take part in the 2018 Games. So, the NHL’s Olympic future will remain undetermined at least for the present. However, Major League Baseball will face a similar decision in the next few years concerning player participation in the 2020 Tokyo GamesMajor League Baseball and the Major League Baseball Players Association have both expressed doubts that they will work out an agreement to allow player attendance.

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