The return of the National Hockey League will prevent about $700-million from melting away from the Canadian economy this year.
That figure comes from Douglas Porter, deputy chief economist with BMO Nesbitt Burns, who had earlier estimated that the loss of an entire hockey season would shave a 10th of a percentage point off GDP.
“Since a bit less than half the season looks to have been lost, the economic damage will be contained at less than 0.05 per cent of GDP,” Mr. Porter said. “That loss would have been fully absorbed by now, and we should see a slight bump in January growth – in the arts, entertainment and recreation category.”
The economies of smaller markets such as Edmonton, Winnipeg and Calgary will benefit most from the return of the sport’s highest rung. But the exact economic impact is hard to measure because many fans merely shifted their spending to other entertainment options. Another complication: Much of the money spent on hockey alternatives stays in the local community, which is not the case for a large chunk of the revenue collected by NHL teams.
Indeed, the $700-million estimate of avoided losses is far too high, said Robert Baade, an economics professor at Lake Forest College near Chicago, who has been researching the economic effects of pro sports leagues for more than two decades.
Fans would have spent a like amount even if the NHL season had been cancelled outright, he contends.
“To say there is $700-million in lost revenue is to completely ignore the fact that people are going to be spending this money on other entertainment activities,” Mr. Baade said. “They are not just going to sit at home waiting for the NHL to resume, especially if they are miffed at the behaviour of the NHL, which they are.”
After sifting through tax data, Mr. Baade found no change in net spending in the U.S. cities directly affected by the previous NHL lockout, which wiped out the 2004-05 season. “It’s an absurd notion to say: ‘If hockey isn’t in town, that means people are spending much less.’ What we find is that there’s a significant substitution of spending, and within the entertainment industry.”
And even when teams are playing, the positive economic impact of all pro sports on their host communities is grossly exaggerated, he said.
Along with other top-level leagues, the NHL increasingly draws its players from an international labour pool. Few, if any, of these millionaires spend much of their income in the cities where they earn it. And player salaries will absorb half of league revenues under the new labour deal.
“Players repatriate earnings to their primary residences,” said Mr. Baade, who pays close attention to financial flows in the sports business. “Money passes from resident fans and taxpayers to non-resident players and sometimes owners. There clearly is a significant outflow of funds.”
With the NHL shut down for almost half a season, more money may actually have stayed in the community, because it was being funnelled into local entertainment or sports activities. Apart from establishments located close to empty stadiums, hotels, restaurants and bars also did just fine without hockey.
Statistics Canada numbers show a slight increase in overall restaurant and bar revenues for October from the previous month. But the performing arts and spectator sports were plainly lower, and merchandise sales also suffered.
But the slight improvement from the NHL’s return will not turn into “a meaningful economic catalyst,” Mr. Baade said. “That’s just way off the mark.”