America loves an underdog, particularly when it comes to sports. This is one reason why teams such as the Yankees and Cowboys are so polarizing. It also explains why an upset, especially in a series format, is often so celebrated. However, there is a downside to upsets, in particular the most surprising ones where very low seeds beat very high seeds in early rounds. This downside is mainly in the form of economic losses which occur due to the premature exit of the favored team.
Interestingly, many of the biggest upsets seem to occur in hockey. A recent example of this phenomenon provides a suitable case study. Last week the Montreal Canadiens, this year's eighth and final seed in the NHL's Eastern Conference, won game seven of their first round series against the Washington Capitals, a team boasting the best record, and arguably the best player, in the entire league. Tomorrow night, the Canadiens will suit up for a second round matchup against the Penguins while the Capitals' most intimate experience with Lord Stanley's Cup this year will occur courtesy of their cable boxes.
While long-suffering Caps fans are undoubtedly still nursing their wounds, the greatest impact of the Caps' first round exit could be the economic loss it has led to, both locally and nationally. As the top team in the league, the Caps were expected to go very deep into the playoffs, if not win the Stanley cup. This would have meant weeks of home games, excited fans and a boost to the local economy as well as higher sales and sponsorship revenues nationally. Instead, the area hosted four home games, and the league has lost its best player for the remainder of the season. What does this mean in economic terms?
The impact is very difficult to estimate in dollar terms, but a quick rundown of the effected parties and a little common sense should be enough to draw some conclusions. Let's assume that the Caps would have made it to the Finals. Since they had home ice through the playoffs, any long series would have resulted in four games at home. For the sake of argument, lets assume that there would be at least three home games played every series. This means that, after the first round, there would have been another 9 to 12 games played by the Caps on home ice at the Verizon Center. Taking these games off of the schedule impacts a number of people directly linked to the operations of the facility, such as janitorial staff, ushers, and ticket takers. It also impacts the outside vendors of food and alcohol and their distributors. Then there are the individuals in ticket sales, both of the legitimate and black market variety, that are missing out on revenue. There are probably more than a few local police officers who are missing out on overtime pay as well. These only represent the front lines, however.
Next in line are the local businesses which had been gearing up for a long playoff run and the increased staff necessary for high volume nights. Bars and restaurants have been hit hard as kitchen staff, bartenders, waiters and door staff, many of whom depend on tips, all lost hours and income due to the exit. Local hotels have also taken a hit, particularly as many potential later round opponents hail from cities such as Boston, Pittsburgh and Philadelphia; close enough to make the trip, but maybe a little too far to avoid the overnight stay. Along these lines are the local cab drivers and ticket sales agents at local bus and train stations. These individuals, as well as the individuals at the businesses they patronize, have all suffered.
Thinking a bit more broadly, one could easily claim that the broader national economy has been hurt by the loss. For example, Alex Ovechkin jersey sales have been hurt by the exit. Because his is one of the best selling jerseys in a league with revenue sharing, this means that the whole NHL has suffered due to the exit. One of the best inter-conference story lines of the past few years has also been prematurely thwarted as Ovechkin will not have the chance to face arch-rival Sidney Crosby for the right to face a Western foe. This undoubtedly hurts the marketing of the league and therefore sponsorship dollars, both this year and possibly in the future. Not having what is arguably the most recognized player in the league on the international scene in the playoffs will hurt the NHL brand globally as well.
It is true that some of these losses will be made up for in other cities, particularly Montreal, where the win likely sprang as many celebrations, if not more, than Washingtonians missed out on. Additionally, some of the national implications could be alleviated by other matchups. However, businesses in DC were expecting the season to go on, and it is this contravention of expectations that makes the loss all the more economically painful; people had depended on at least a few weeks of extra hours. Additionally, the game is missing one of its biggest stars, a fact which impacts the brand both nationally and globally by both reduced sales and lesser interest.
It is tough to put dollar numbers on all of these factors, and nearly impossible to determine the net economic loss of the Caps' first round exit when countered with potential gains in other cities. However, it is clear that the team and its fans are not the only ones who have been impacted by their first round exit.