NHL's future lies in Canada, reports say
Matthew Coutts, National Post
Published: Saturday, November 29, 2008
Jim Balsillie's most recent attempt at NHL franchise ownership seems to indicate his intention of bringing another team to Canada hasn't waned, despite NHL commissioner Gary Bettman's sticking to the vision of growing the game in non-traditional U.S. markets.
But when looking at the economic case for a new team in Canada, compared with struggling U.S. franchises, sports economists routinely suggest there is no comparison.
"If you just look at the way things are right now, Canadian teams are in a better position than they have been at any time in the immediate past," said Ian Hudson, an economics professor at the University of Manitoba.
With a combination of a stronger Canadian dollar, revenue-sharing and salary-cap systems born from the NHL's 2004-2005 season lockout and a struggling economy that has forced people to focus their entertainment dollars, mid-sized
Canadian cities such as Hamilton have become a sounder bet for long-term success.
"A place like Southern Ontario is no worse off than most of the United States. So if you are hunting for a franchise, you don't have to necessarily be fantastic, you just have to be better than other places that the franchise could go," Mr. Hudson said. "So if the economy is tanking in Southern Ontario, chances are good at least that it is going to be tanking in the United States."
As reported in the National Post last week, Mr. Balsillie is set to purchase a 27% minority stake in the struggling Nashville Predators NHL franchise. It will be the Research in Motion co-founder's third attempt to buy into the league. Previous attempts to buy a team - the Pittsburgh Penguins in 2006 and the Predators the year after - collapsed at the last moment after the league opposed his intentions to relocate the teams north.
Mr. Bettman recently said expansion and relocation were not on the league's current agenda but conceded placing another team in Southern Ontario was worth consideration, when the time comes.
While several Canadian cities have expressed interest in hosting a team and have a history of supporting hockey - such as Winnipeg, Kitchener and a hockey-starved Toronto desperate for a second option -
Hamilton remains at the top of the list for many who see northern expansion as a logical step.
City councillor Whitehead has been a part of past attempts to land an expansion team and heads an ongoing grassroots campaign designed to keep Hamilton in the mix. He said it is politics, not questions of financial viability, that keeps Hamilton out of the league.
"Unfortunately, politics is getting in the way of a team being in the strongest, densest market in Canada. It's not about viability. I get tired of hearing that argument," he told the National Post. "We all know. Any of the pundits know. This is not about viability; this is about politics, and unfortunately politics don't always make good business decisions. We need to take the politics out and realize that there is a hunger in Southern Ontario that needs to be fed."
A recent study by Chicago-based Sportscorp suggests a second team in the Toronto area would be the third most valuable team in the league before even setting a skate on the ice - as much as US$600-million.
Sportscorp's Marc Ganis said he reached the number after factoring in what the Maple Leafs are worth, whether the market could absorb a second team, the general climate for sports franchises and the valuation of other teams in the NHL.
"Toronto is a unique market. Its size, its strength, its visibility its corporate base. The wealth of individuals. Just the sheer population size makes it a bit different," he said. "I think it could absorb a second team very well."
Other sports economists say hockey-mad Canada is better prepared to support a team than struggling southern markets, such as Phoenix and Nashville.
Nashville, a city of more than 550,000, has been struggling to support its NHL franchise since it arrived in 1998 as part of the NHL's push into non-traditional U.S. hockey markets.
The original owner, Craig Leipold, had to sell the franchise in 2007 after losing US$70-million over the first nine seasons.
He was open about the lack of corporate support for the Predators. According to Maury Brown, the president of the Business of Sports Network, the team remains in a "state of flux."
"Given the state of the economy, it's a lot more difficult mostly on the sponsorship side.... Renewal of sponsorships are going to be a problem" for bellwether teams in any league, he said, specifically for the struggling Sun Belt teams in the NHL.
Mr. Brown added that the Predators are also competing for corporate and fan attention with the NFL's Tennessee Titans, which are having an excellent season. "That makes it difficult to sustain it."
The focus on NHL expansion into southern U.S. markets has been met with middling success. Franchises such as Anaheim and Dallas have landed on solid footing while others, specifically Phoenix and Nashville, remain in a state of financial uncertainty.
Forbes magazine currently ranks the Predators as the 23rd most valuable franchise, valued at just over US$160-million. According to Forbes, the team lost US$1.3-million last season. Meanwhile, the attendance at Predators games is down to an average of 13,800, the third lowest in the league and a drop of 600 from the same time last season.
By comparison, the health of Canada's six current teams has never been stronger. Forbes ranks Toronto as the most profitable team in the league. Montreal, Vancouver and Ottawa are not much further down the list, while Edmonton and Calgary - two teams struggling to survive pre-lockout - are turning an annual profit.
No Canadian team is receiving money from the league's revenue-sharing assistance program, which takes money collected from the top 10 money earners and shares it among the most financially challenged teams, including Nashville.
"One of the surest investments right now, I think in the world, would be a second NHL franchise in Southern Ontario. Everyone I have talked to, and any economist report, tell us it is a job creator and it's a profit maker," said Oakville MPP Kevin Flynn, who is preparing to petition the Ontario government to push for a second NHL team in the Greater Toronto Area.
"It really is the centre of the hockey world. This is what we are known for."
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