For the fourth time in 20 years, the National Hockey League has entered a work stoppage. This also marks the third time in current commissioner Gary Bettman's tenure that fans have seen a lockout. With the regular season originally set to begin on October 11, and negotiations far apart, it appears certain that some amount of NHL games will not be played this season. Fans of the NHL will also remember that the entire 2004-2005 season was not played due to a lockout, marking the first time one of the four major sports missed an entire season due to a lockout.
Players were so confident that a deal would not take place by Saturday's midnight deadline that they began searching for places to play overseas. Teams were so confident a deal would not take place that they sent handfuls of players down to the American Hockey League, the minor leagues of hockey.
As I have previously written about stocks impacted by the recent NBA lockout and NFL labor dispute, I thought it was fitting to add in my commentary on stocks that could see short term declines or poor earnings results due to a lack of revenue from hockey for an extended period of time. Keep in mind, most of these are short term trades of companies that do not rely exclusively on revenue from the National Hockey League.
Madison Square Garden (MSG)
Madison Square Garden could be one of the companies hit hardest by missed games of any length. The company owns the New York Rangers, and the iconic Madison Square Garden where the Rangers play. In the NHL, teams play 41 home games. This is a company that counts on ticket sales, advertising revenue, concessions, and merchandise throughout the season. Along with its ownership of the New York Rangers and New York Knicks, the company owns a media segment that owns the Madison Square Garden network. Without hockey games to air, TV ratings will likely be down during the year.
Madison Square Garden has seen its share price soar since being spun off from Cablevision. In the last fiscal year, the company reported revenue of $1.3 billion -- an increase of 8%. This number included a shortened NBA season that ultimately consisted of 66 of 82 games played. In the fourth quarter, the company's sports segment saw revenue increase 74% from the prior quarter. A total of 13 home playoff games were included in the quarter between the Rangers and Knicks, of which 11 came from the New York Rangers. The additional playoff games added $17 million to the top line for the fourth quarter.
Rogers Communications (RCI)
Rogers Communications is one of two large players in the NHL media segment in Canada, where hockey is of course, the number one sport. Rogers purchased 37.5% of MLSE, the group that owns the Toronto Maple Leafs. The Maple Leafs have sat atop Forbes' list of most valuable NHL teams for several years, and clocked in with a value of $521 million in 2011.
Rogers owns Sportsnet, a television channel that airs live sports programming. The channel has relationships to air regional NHL games for the Ottawa Senators, Toronto Maple Leafs, Calgary Flames, Edmonton Oilers, and the Vancouver Canucks. A fair amount of games not being played will definitely hurt Rogers Communications' media segment.
Rogers Communications also owns the Toronto Raptors, Toronto Blue Jays, Toronto Marlies, and Toronto FC, along with ownership stakes in the two biggest arenas in Toronto. I wrote in 2011 about Rogers having an undervalued sports segment along with its television and telecommunication assets.
Bell Canada (BCE)
Bell Canada operates similarly to Rogers Communications with its ownership of an NHL team and media assets. Bell Canada also owns a 37.5% stake in the Toronto Maple Leafs. The biggest difference between Rogers and Bell for the sake of this article, is Bell Canada's ownership of two NHL teams. Bell owns a minority stake in the Montreal Canadiens, along with its 37.5% ownership of the Maple Leafs. Bell owns 18% of the Canadiens, who had a value of $445 million, according to Forbes in 2011. Ownership stakes in two teams, along with media assets, gives Bell control over television rights and contracts. A loss of a full season could hurt Bell Canada as it attempts to meet earnings estimates this year.
Bell also owns TSN (The Sports Network), which airs games played by the Montreal Canadiens and Winnipeg Jets. The network remains Canada's most popular English language channel in the country. Luckily for TSN, they are 20% owned by ESPN through a joint venture and air many shows featured on the leading U.S. sports channel to consumers in Canada.
Comcast has been attempting recently to compete with ESPN, the leading sports channel from Disney (DIS). Through its acquisition of NBC, Comcast now has the NBC Sports Network. The NBC Sports Network has gone through several changes -- it has also been known as OLN and Versus. In January 2012, the network was re-branded as NBC Sports, and Comcast began shopping for live sports programming to air on the network. The channel has been the home of the NHL since 2005, when ESPN chose to not renew its existing contract with the league. NBC Sports has the rights to 58 regular season games, the All-Star game, and many of the games throughout the Playoffs. Comcast bet heavily on the 2012 Summer Olympics and aired several events on its NBC Sports Network. The Women's Soccer Gold Medal game became the most watched event on the network, with 4.35 million viewers. A 10-year deal was signed in 2011 with the NHL, and any amount of games not aired inhibits NBC Sports Network's ability to compete effectively with ESPN.
Aside from its ownership in the NBC Sports network, Comcast also has an ownership stake in Comcast Spectator. Comcast Spectator is the parent company of the Philadelphia Flyers hockey team. Along with the Flyers, the group also owns New Era Tickets and Ovations Food Services. Both of these businesses have deals with the Flyers, and would be hurt by a missed season. Comcast owns 63% of Comcast Spectator, while the Flyers' original founder owns the remaining 37%.
Electronic Arts (EA)
Electronic Arts has the exclusive rights for video games using the National Hockey League. Thankfully, the company has already released NHL '13 prior to the lockout. With the game out before the lockout, it could have a very small impact on sales. Worldwide, the NHL '12 game sold 0.61 million copies for the XBOX 360, and an additional 0.48 million for the PlayStation 3. When the NFL lockout occurred, sales of the Madden franchise suffered, as fans did not have as much interest in playing the video game during a quiet period.
Adidas bought the Reebok brand in 2005, giving it new positions in sports like hockey. The Reebok brand sells training footwear, performance apparel, and also player equipment. The company has key relationships and endorsements with the NHL and players. Reebok is the sponsor for NHL jerseys for teams throughout the league. A lockout will mean fewer NHL jersey sales for the year, which could hurt this Adidas subsidiary. Players endorsed by Reebok include: Sidney Crosby, Roberto Luongo, Carey Price, Marc-Andre Fleury, and Pavel Datsyuk. Reebok was the official jersey sponsor of the National Football League, until this year, when Nike took over with a lucrative new sponsorship deal.
Nike (NKE) sold off its Bauer Hockey brand, leaving Adidas as one of the only large sportswear companies with an interest in the National Hockey League. Under Armour (UA) had also been branching into the hockey market with equipment and apparel. Under Armour was probably ready to sign endorsement deals and further its expansion, but those would appear to be on hold as the company focuses on its key markets, like football and running.
With no actual games missed to date, the NHL could still save the season. However, with both sides oceans apart in negotiations, it appears that part of the season will most likely not be played. New reports have come out that some in the industry believe that the lockout could last up to a year and a half, which could put the companies above in the spotlight, and in jeopardy of lost revenue, for an extended length of time.
However, all of the companies listed above have other assets to protect their value. Madison Square Garden, Bell Canada, and Rogers Communications all own arenas that host concerts, as well as other sports team and media assets. Comcast is one of the largest cable providers in the nation, and its ownership stake in the Flyers is not a key driver of revenue. Electronic Arts has a large portfolio of social games and an existing portfolio of video game franchises, all of which sell better than the NHL series. Adidas is a large player in the soccer market, and relies heavily on other sports besides hockey. Of the companies listed above, Madison Square Garden, Bell Canada, and Rogers Communications would represent the best near-term shorting opportunities, in my opinion.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.