Saturday, August 16, 2008

Viability of the Russian sports market (read KHL)

This is something I've been meaning to post for a while, but now that it's getting ugly between the Kontinental Hockey League (KHL) and the NHL, it's particularly appropriate.

Whenever people talk about how much of a threat the KHL really is to the NHL, inevitably the question is raised of how many people are actually going to Russian games, because that shows long-term viability. We know a lot of money is being invested, but that won't last if there are not enough fans. Attendance is not very high now, but that could change quickly, if the trends in the feature below continue.

From a BusinessWeek special report:

[F]or the foreseeable future at least, few investors in Russian sports can expect to turn a profit. The size of the investments means most Russian soccer clubs still run at a big loss. And Russia has a long way to go before sports enthusiasm reaches the levels seen in the West. "The popularity of sport here is not comparable to Europe and especially the U.S.," says Sportima's Krasnov. "After the collapse of the Soviet Union it was a hard time, and people didn't have much time to think about sport."

That's starting to change. As incomes rise, and the corporate investments of recent years pay off in the form of greater success on the field, public interest in sports is rising. The current Euro 2008 championship is a case in point. According to TNS-Gallup, 67% of Russian adults watched the Russia-Sweden match on June 18, establishing a new record for any Russian television broadcast (even beating the President's annual New Year address). In comparison, the 2004 European soccer championship was followed by just 40% of the population.

The report seems convincing that spectator sports are on the upswing. It would be interesting to see some numbers on how hockey compares to soccer.

I came across another story that reminded me of the NHL-KHL struggle, this time between Hockey Canada and some upstart leagues. The most interesting wrinkle is that US colleges are now recruiting out of these new leagues. Something to keep an eye on.

Hockey Canada’s warning that it will punish players who sign on with so-called “outlaw” leagues has piqued the interest of the Canadian Competition Bureau, The Journal has learned...

For the players in the GMHL, the sanctions work in their favour. According to Russell, Hockey Canada has told the U.S. Colleges to go to the GMHL when looking for players, since athletes are now restricted from playing Junior for twelve months following a season in a non-sanctioned league. “The Colleges like it,” said Russell, adding the Lakers received seven College offers this year for players who couldn’t catch on elsewhere.

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