I've been working on a small project related to the sports expansion discussion that was had at the beginning of January. The other day, I was browsing Reddit and found an
article from 2015 that figured out a statistical equation to determine the optimal number of Big-4 (NHL, NBA, MLB, NFL) sports teams that a given region in the US can carry, based on the population and average household income. This shows some interesting results with cities that are overserved (Denver, San Francisco, Minneapolis, Pittsburgh, Cleveland) and cities that are underserved (San Bernardino, New York(!), Stamford, Austin, Los Angeles(!)). As we know, sports relocation or expansion depends on many varying factors that aren't just financial, but I like to think this kind of analysis can give a rough idea of viability.
I decided that I would replicate this study on the 15 largest CMAs in Canada, using population (2020 estimated) and average household income after taxes (2016), from StatsCan and the CMHC. I have converted the $CAD incomes to $USD using the current exchange rate of 0.78:1. Additionally, I did the same analysis on the provinces as a whole to determine general provincial media market viability. The original equation was built for the US, but since all of the leagues are based in the US, all assessments of Canadian markets will be seen through a US lens anyway.
So, getting down to the numbers, the general equation was produced through linear least-squares regression. Unfortunately, the article didn't show the math so the equation can be replicated, but from what I can see, the total number of franchises a city can support is determined by multiplying the population by a ratio of 0.532 franchises/1M people, multiplying the regional average household income by a ratio of 0.1123 franchises/10K $USD, and then adjusting the end result using a correction factor of -0.81 franchises. The equation looks like this:
Number of Teams = -0.81 + (0.532/1,000,000)*(population) + (0.1123/10,000)*(mean household income)
When this equation is applied to Canadian cities, it appears that in general, our CMAs are well-served with professional sports teams. From a CMA analysis, Canada can support approximately 10 Big-4 franchises, and it currently has 9. On a provincial level, using this analysis, the media markets would be able to handle a total of 18 Big-4 franchises. A clearer, regional image of viability would be possible if these markets were further broken down into sub-provincial regions (ie, Golden Horseshoe, Lower Mainland, Calgary-Edmonton Corridor, SW Ontario), which I might do in the future. These numbers are also heavily dependent on the exchange rate. When upping the strength of the Canadian dollar to its peak of 1.10:1, 4 more franchises become possible on both levels, with the greatest impact seen on smaller cities.
CMA w/Modern Exchange Rate:
CMA w/High Exchange Rate:
Province w/Modern Exchange Rate:
Province w/High Exchange Rate:
Some interesting (as well as unsuprising) conclusions from the data on professional sports viability in Canadian cities:
- Montreal should logically be the next Canadian city to be awarded a professional sports franchise, followed by Toronto
- Hamilton is a somewhat more viable market for the next new city to be awarded a new professional team than Quebec City, with Kitchener not too far behind. All, however, are weak markets on the CMA level. Cases for all of these markets are made much stronger with a better dollar exchange rate, and will strengthen as they grow
- Ottawa is adequately served
- Winnipeg is overserved on a CMA level, but is backed up by the Manitoba market as a whole
- Saskatchewan and Manitoba provincial markets both have similar capacities for supporting a professional team, but Saskatchewan is strung by its split population base with neither Regina or Saskatoon placing on the top 15 CMAs
- Calgary and Edmonton markets are adequately serviced, but Calgary would come closer to supporting an additional professional team with a better dollar exchange rate, as well as likely being backed by a strengthening Alberta media market, even with current exchange rates
- Vancouver is on the way to being able to supporting another professional level team on the CMA level, but a franchise granted in the near future would likely be backed up by a strong BC media market
- Atlantic Canada is largely unsuitable for fielding a professional team in its current state, but opting for an Atlantic regional approach strengthens their case
- Overall Ontario and Quebec media markets would likely be able to accommodate additional teams, even in weak CMA markets if a regional approach is taken (ie, a Hamilton or Kitchener team marketed towards SW Ontario)
- Ignore the territories, they are statistical anomalies because of the low population and high household income