Monday, December 15, 2008

KHL In Trouble?

1) As recently as early October the prevailing sentiment around North America was that the KHL was a league that was to be reckoned with. A possible alternative for players, especially European born, and of course for Russians to play or at least use as contract leverage. The sentiment was reinforced by rhetoric used by league officials stating that they would allow players to play in the KHL even if they were already under contract to play in the NHL (Radulov). Many postulated over the summer that the KHL might eventually evolve into a true competitor of the NHL.

2) It seems today only 6 months later from many of those pronouncements that not only is the KHL not even close to being a NHL competitor, but it may significantly shrink or even fold before it 'gives the NHL a run for its money'. As we predicted back in October the KHL was going to have to overcome some major obstacles to not only compete with the NHL, but to remain in business at all. We also discussed the KHL threat in detail back in July-

3) As we mentioned back then, we discussed how the collapse of the price of commodities, specifically oil was going to seriously hurt the Russian economy. We talked about how many of the KHL owners were either directly or indirectly tied to oil. Back then the price for a barrel of crude was $75. Today it has eroded further, trading this morning near $45-50. There is now clear cut evidence that the Russian economy is in recession (along with the rest of the world it seems) and their banking system is on the precipice of collapse.

4) With all that in mind and the fact that the league can NOT be carried by fan attendance (ticket prices) the KHL will likely have to significantly cut back in several areas. Most notably in salary expenditure. We probably won't see too many teams throwing millions at mid/low level (former) NHL players. As importantly, we have been told that a couple of the less well funded teams may have to fold. Currently there are 21 teams. A source in Russia told FR that "if conditions don't improve next season they very well could be down to 15 or fewer teams, and from there it could get worse!". Some of the bigger franchises have too much cash behind them to evaporate anytime soon, but the smaller less funded ones are on the precipice NOW! Add that to the negative PR the league received when one of its young stars Alexei Cherepanov died of what has been declared a "preventable tragedy" and you can see why the NHL isn't exactly shaking in their boots over the KHL.
5) We also have to end this post with caution for the NHL. When we did some research for this post many told us that we would be better served looking into possible problems HERE. That things were far from as rosy as Mr. Bettman wants to portray to the media. WE are working on that and hope to publish that before the holiday. Meanwhile the X-mas trade freeze will commence Friday! As always, keep it here for all the latest!

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