The Tier III Bubble Is Going To Burst
Tier III or pay to play hockey is about to experience a crash that will only be rivaled by the great 2008 housing mortgage bubble that burst.
The mass expansion of pay to play hockey began roughly a decade ago. A decade ago there was a need for more junior hockey in the United States. A decade ago, the growth of youth hockey in the United States made it pretty clear that because of limited junior opportunity, many players who would be “late bloomers” were getting phased out of the sport.
A decade ago, credit was easy to obtain, and many people appeared to be flush with cash. That all changed in 2008 when we found out that people were living on credit, and there were not many that were flush with cash.
That didn’t effect the pay to play hockey market though. By that time, players and parents were hooked. They believed that they had a “right” to play junior hockey. The were determined at that point to make sure that their child had the opportunity.
So, leagues expanded, and the product became watered down. In recent years, the product has recovered somewhat, and the pay to play level has risen to what it once had been in many cases.
So why is the pay to play market about to crash?
There is expansion at the Tier II level of hockey this year. Not only does the USPHL now have the NCDC, but there are more Tier II teams, and other free to play options in Canada.
When you take those instances, and couple them with yet more pay to play expansion; roughly two dozen teams. You have the perfect combination for a massive crash at the pay to play, or Tier III level.
Certainly there are more than enough highly skilled players to fill more Tier II or free to play teams. Many of those players would have been forced to pay to play hockey without the expansion of Tier II or free to play hockey.
When you remove those players from the pay to play market place, you create a vacuum. That pay to play vacuum will effect every pay to play team except those with stellar and long standing reputations for moving players to higher levels.
Don’t believe me? When teams that were only a few years ago being sold for $400,000.00 are now being sold for $150,000.00, it is a telling financial marker. When teams that were purchased less than three years ago for $130,000.00 are now being sold for $70,000.00 or less, it is a telling financial marker.
Business operations that are healthy and profitable do not depreciate in value.
With more than a dozen new free to play, or nearly free to play teams, and two dozen more pay to play teams, something has to give.
It does not take an economics professor to figure out that when presented with a free to play opportunity, or reduced fee to play opportunity, that players will take the free to play or reduced fee option over pay to play every time.
So, these free to play teams will fill their rosters, followed by the reduced fee teams, and then Tier III or pay to play teams will battle over who is left. The established and successful teams will fill rosters first. Then the carnage will begin.
New teams that hired well will have players sign more quickly. The definition of hiring well in this case means hiring someone who can recruit pay to play players and has a track record of doing so. Even then, some teams will struggle to fill their rosters.
After that, you will have all of the teams who traditionally cut corners. Those teams that have reputations of not promoting players. Those teams that for what ever reason couldn’t find success if it were placed in the palm of their hand. And then you have the poorly prepared expansion teams.
All of those teams will scramble to recruit. Some will get close. Some will scrape by to start the season. Then there will be enough teams that don’t get enough players to play, but they get enough players to screw a lot of other teams who should survive.
This will be the collapse. This will be the bubble that will burst. It is already beginning. Pay to play teams are already struggling. Many are already offering discounts to players because they are feeling the pressure and recognize the market pressure.
In 2008 when the real estate mortgage bubble burst, there was a lot of collateral damage. Banks went under, business’s associated with the industry went under, and people lost a lost of money.
Be careful this recruiting season. Do not put yourself in a position to become collateral damage.
Joseph Kolodziej – Publisher