Dear hockey fans in Hamilton, Quebec City, Markham, Saskatoon etc. dreaming of a National Hockey League team: Your prayers will not be answered any time soon.
The United States has a bunch of financially weak NHL franchises, and investors have long kicked those tires, trying to figure out how to move them to Canada, where the fans are. But Rogers Communications Inc.'s $5.2-billion, 12-year deal for the league's national Canadian television rights changes that game.
Those money-losing U.S. teams once at risk of being relocated north? They're getting a big cash infusion. NHL teams compete on the ice, but they equally share national TV revenues – and since 23 of the league's 30 teams are American, most of Rogers's money is heading south.
Rogers says it will pay just over $300-million in the first year, rising to "mid-$500 million" in the last year of the contract. That works out to roughly $10-million per franchise in Year 1, climbing to nearly $20-million by Year 12. Under the NHL's collective bargaining agreement, 50 per cent of that will end up being paid to the players. The rest, about $5-million a year with an annual escalator, goes straight to the owners' bottom lines.
The deal is the biggest in league history, and one of the biggest ever in Canadian media. It raises question marks about the business model of Rogers's main competitor – BCE-owned TSN, which is apparently shut out of national NHL broadcasts for at least the next decade. It similarly rewrites the script at the CBC, which will continue to carry Hockey Night in Canada for at least four years, but under a partnership agreement that appears to put Rogers in the driver's seat, creatively and financially. Canada's media landscape just got hit by an earthquake, and the aftershocks will be felt for years to come.
But the deal has the opposite effect on the NHL's foundation: It solidifies what had been a shaky status quo. After the Atlanta Thrashers moved to Winnipeg in 2011, ditching a money-losing U.S. market for a money-making Canadian one, there were hopes in Canada that more teams might be on the way. The U.S. Sunbelt is filled with teams that consistently fail to bring in enough paying fans. The Phoenix Coyotes were the most obvious candidate for the moving trucks; had the host city of Glendale, Ariz., not committed to providing tens of millions of dollars in subsidies, the Coyotes would have gone the way of the Thrashers.
But over the past year, the league's economics have changed. Player expenses have gone down. Revenue sharing has gone up. And now, the league has landed the biggest TV contract it's ever seen. Thanks to nothing of their own doing, Sunbelt teams are suddenly in much better financial shape.
The new collective bargaining agreement reached earlier this year lowered the players' share of league revenue from 57 per cent to 50 per cent. By my calculations, that's saving each team about $8-million a year. The new agreement also slightly increased the amount of league revenue sharing – the NHL's version of equalization – from $150-million a year to $200-million.
According to Forbes's most recent annual estimate of NHL finances, there are believed to be 11 teams that lose money. (And yes, they're all in the United States.). So let's guesstimate that extra $50-million in revenue sharing as being worth roughly $4-million per money-losing team.
The Rogers contract now puts another $5-million a year, and rising, on the bottom line of every NHL team.
All of these measures, taken together, appear to be enough to turn most of those money-losing U.S. teams into break-even propositions or better. According to Forbes, only one U.S. franchise (the Minnesota Wild) is currently losing more than $10-million.
Thanks to big subsidies from taxpayers in most U.S. cities, some give-back from the players and now a windfall from Canadian TV viewers, the NHL's Sunbelt strategy is more of a success than ever. And the day when the NHL grows to more than seven Canadians teams is growing more distant.
Tony Keller is The Globe and Mail's editorial page editor and author of the 2011 Mowat Centre study The New Economics Of The NHL.
Tony Keller