In general, strategic interaction describes the way in which two parties trade. In sports, these trades are known as sponsoring. For instance, people are confronted with sponsoring in sports seeing logos of companies on t-shirts of a club, by TV ads which are shown in breaks of sporting events or by products we buy in our neighborhood drug store that are “officially” supporting the players of a professional soccer league.
In the United States of America these phenomena of strategic interaction between companies and leagues, clubs or only team members are represented even stronger than in Europe. One main difference is the absence of TV timeouts in Europe. The main goal of this paper is to show how economic principles justify the introduction of these TV timeouts. First, it will describe the changes that have taken place concerning the advertising time outs in order to connect it to the underlying economic principles afterwards. Finally, it concludes with a summary of my findings.
TV timeouts are basically artificial breaks of the gameplay to show the television viewer commercials during a sporting event in order to reach an audience as large as possible. In return, the league and the clubs receive a certain amount of money from the particular companies that desire to use the setting of the sporting event to show their commercials. As a consequence, some people might hold the view that artificially stopping the game to show commercials is not only boring for the audience in the stadia but that it might even prevent a team from scoring a point. It is a commonly held view that the interruption of a certain match in favour of an advertising spot is able to heavily influence the outcome of this match. Hence the question arises why those time outs were actually introduced.
To illustrate the point, this paper takes into account the case of the NHL (National Hockey League) because given that example one can conclude that from an economic viewpoint it is perfectly justifiable to use TV timeouts to show advertising spots. When in the 1990s the NHL had some major revenue problems they came up with the idea to fulfill a longtime dream of advertisers. Their goal was to give the advertisers the chance to show TV commercials during the hockey games. The purpose of this was to prevent the viewer from changing channels in case he gets bored and to prevent that the spectator would miss parts of the game. Therefore they introduced the TV timeouts, which were integrated as rule 87 in the official rules of the NHL (NHL, 2014) and as a result, by the end of 1999 they had tripled their revenue (Los Angeles Times, 1999). As far as economic principles are concerned, I would like to make a connection to the 10 Principles of Economics (Mankiw & Taylor, 2011): Two principles are called “Facing a trade-off” and “Trade can make everyone better off”. To my mind, these two principles are reflected in this example of strategic interaction.
First and foremost, the NHL knew that the viewers would not like to see even more commercials during a game of hockey but nonetheless they were aware of the fact that they had to do something in order to increase their revenues. Therefore they decided to give it a try and “face the trade off”, thus they had to weigh the benefits against the reactions of the audience. As already stated, this concept worked out and lead to the second principle, because both the companies that paid for the advertisement and the NHL profited from their trade. Hence, the League and its clubs were better off and therefore able to buy more and better players, build new stadia to host more fans and give them a chance to watch a game live.
All those points considered, one can say that in the end the concept of the NHL helped a whole league to survive and to grow to a size of now 30 clubs. Moreover, from an economic point of view, the introduction of TV timeouts were beneficial to both parties involved and for me, it was surprising to notice how economic principles are applicable to actual cases in the real world. Personally, I would now like to take a closer look at how the public actually felt about the new advertising strategy in order to gain an insight into the social aspect of the topic.

References
NHL (2014). Official Rules – Rule 87: Time-outs. Retrieved November 1, 2014 from http://www.nhl.com/ice/page.htm?id=26510
Associated Press (1999). NHL’s Revenue Has Tripled in 90’s. Retrieved November 1, 2014 from http://articles.latimes.com/1999/nov/11/sports/sp-32376
Mankiw, N. & Taylor M. (2011). Economics. Andover, UK: South-Western CENGAGE Learning.