Changing values

Economics place league purchasing power in flux

27.08.2015
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Changing spending power: Since Metallurg Magnitogorsk challenged the New York Rangers for the 2008 Victoria Cup, the Russian Ruble has dropped by over 50 per cent to the U.S. Dollar. Photo: Vladimir Rys / Bongarts / Getty Images

What do currencies have to do with hockey business? Quite a lot actually, the best hockey players are paid with money in many countries on three continents, and no salary is immune to the changing values of these currencies.

The weakening of the Canadian Dollar is an issue for Canadian NHL teams, one that is often reported whenever such discrepancies arise to the U.S. Dollar. However, the biggest impact of the global currency fluctuations of the last two years is felt elsewhere in hockey.

Among the large-scale currencies that weakened the most is the Russian Ruble which, same as some other currencies, dropped due to falling commodity prices but also due to sanctions and counter-sanctions that followed due to territorial conflicts with Ukraine.

Each Ruble a hockey player earns in Russia is worth less than half the U.S. Dollar value it was worth two years ago. Also in countries economically connected to Russia, such as Belarus and Kazakhstan, this crisis was to a less drastic extent felt in the form of a currency drop. Both countries are also part of the Kontinental Hockey League that also includes one team each from Croatia, Finland, Latvia and Slovakia.

The crisis hit an industry where Russia is among the global leaders: sports. Especially Russian football clubs suffered as they signed players in hard currencies and needed more Rubles to fulfil the contracts.

In hockey Russian teams didn’t feel such an immediate financial impact on the expense side since the KHL demands salaries to be written down in Rubles, which means that players took the risk. And the fluctuation during the 2014/15 season was significant. If a player signed a contract in July 2014, his monthly salary in March 2015 was worth 43 per cent less in U.S. dollars, the currency many former NHL players have in the back of their heads when going east.

But not only the KHL was confronted with changing currency values. Many economic publications write about a “currency war” in which some currencies are deliberately weakened with measures such as quantitative easing to boost exports, such as the Japanese Yen that lost 18 per cent to the U.S. dollar.

And then there was the crisis in the Euro zone with countries needing bail-outs that also weakened the Euro and several other currencies on the continent pegged to it, which means that a contract signed two years ago in the Euro area is worth 14 per cent less today in U.S. terms.

To compare the changing values of currencies of the last two years we compared their fluctuation from August 2013 to today against the U.S. dollar for currencies from a selection of 26 countries where professional ice hockey players earn salaries:

British Pound +0.57%
U.S. Dollar 0.00%
Swiss Franc -2.10%
South-Korean Won -6.27%
Polish Zloty -13.48%
Croatian Kuna -14.00%
Euro * -14.02%
Romanian Lei -14.04%
Danish Krone -14.07%
Hungarian Forint -17.50%
Japanese Yen -17.84%
Czech Korun -18.47%
Canadian Dollar -21.03%
Swedish Krona -22.26%
Norwegian Kroner -26.99%
Kazakh Tenge -36.77%
Belarusian Ruble -49.29%
Russian Ruble -53.52%
Ukrainian Hryvnia -62.95%
* The Euro is used in several European countries including Austria, Finland, France, Germany, Italy, Latvia, Slovakia and Slovenia.

The country hit hardest is war-torn Ukraine where the KHL team Donbass Donetsk had to quit the league and the national championship last season was halted for several months due to the tensions and the financial crisis in the country. At the end of September a full-time league is planned to be in operation again.

The discrepancies, especially between the currencies from North America and from Eastern Europe, seemed to have an immediate effect. While all but one KHL club survived despite unsecure weeks for several other teams, several high-calibre players left the KHL to sign NHL contracts. This group includes the “usual traffic” in summer such as recently drafted Russian juniors or North American import players going to Russia or back.

However, this summer also an unusually high number of established Russian KHLers and national team players left such as Alexander Burmistrov, Artemi Panarin, Kirill Petrov, Sergei Plotnikov and Viktor Tikhonov, who all opted to sign with NHL organizations. Some players like Andrei Loktionov, Ilya Nikulin or former Latvian defenceman Arturs Kulda are still undecided whether to play in the KHL or move to North America when the NHL teams’ camps open in September.

Playing in other European leagues has also become more popular for import players who left the KHL, such as Slovak national team defenceman Ivan Baranka or Swedish national players Erik Gustafsson and Tony Martensson. Among the most popular destinations for such players were the Swedish Hockey League (SHL) and the Swiss National League A (NLA).

Despite these movements to the west fans in the KHL will still be able to enjoy some of the great Russian players who have stayed in the home country, such as Ilya Kovalchuk, Alexander Radulov or Sergei Mozyakin. But due to the changing purchase power, keeping up with NHL salaries for this calibre of players needs KHL clubs to get double the Rubles from their sponsors in a time where many of them are more cash-strapped than some years ago.

But there were also countries that ended up on the winner’s side. Apart from the NHL teams who enjoy a growing pool of world-class player on both sides of the Atlantic and easing financial competition, clubs from Switzerland, Great Britain and Korea have found it easier to keep up with the bigger leagues in terms of luring import players due to their own strong currencies.

The British pound was not affected by the currency crisis on the European continent and the South Korean Won is among the harder currencies in Asia, although these two countries are not on the top of the list in terms of salaries for hockey players.

Contracts signed in Swiss Francs have gained in value compared to other top European leagues since the Swiss currency, has been used as a save heaven for investors during the lengthy Euro crisis. It’s worth 20 per cent more in Euro terms than it was five years ago.

With the bigger purchasing power, Swiss clubs managed to sign more national team players from other countries in recent years such as Swedes Nicklas Danielsson and Fredrik Pettersson, and Finnish Sochi 2014 bronze medallists Jarkko Immonen and Sakari Salminen. And most recently the ZSC Lions Zurich made international headlines by signing talented American forward Auston Matthews, the prospective number-one NHL draft pick for next year.

The good news for countries hit badly on the financial market is that economic theories have it that over- and undervaluation of currencies will be levelled in the long term. Until then however, the changing purchasing power of clubs, and along with that the composition of their rosters, may continue to shift in the near future.

MARTIN MERK

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