Former Research In Motion boss Jim Balsillie was on to something with his failed 2009 bid to move the Phoenix Coyotes from the Sun Belt to the Hockey Belt.
Putting more Canada into the National Hockey League just might be the answer to the troubled economics at the heart of the player lockout.
NHL owners insist they need lower salaries and a bigger bite of revenues to survive. But what are they trying to save? A 30-team league that’s in way too many markets it doesn’t belong, that’s what.
Here’s a longer-term game plan owners and players should consider while they sit at home watching football and tallying their losses: Shrink the league from its current 30 teams, forget the Southern strategy and embrace Canada.
Expansion deep into the U.S. South in pursuit of the Holy Grail of a big national TV contract penalizes Canadian fans who generate a disproportionate share of league revenues.
So for every two U.S. teams that are shuttered, open one in Canada, or another northern U.S. city where hockey is already part of the economic and social fabric. Seattle, Milwaukee or Cleveland come to mind.
Two Canadian cities – Quebec City and Hamilton – have the minimum 500,000 populations that Conference Board of Canada economists Glen Hodgson and Mario Lefebvre say is required to sustain an NHL franchise. They predicted in a recent report that by 2035, both cities will have NHL teams, while the Greater Toronto Area will have a second team.
A 2011 study by the University of Toronto’s Mowat Institute, titled “The New Economics of the NHL,” argues that Canada could support as many as 12 NHL teams, up from the current seven. It suggests second teams for Toronto, Vancouver and Montreal, plus franchises for Quebec City and one for Hamilton, London or Kitchener-Waterloo.
The success of the Edmonton Oilers proves that a Canadian strategy can work. The city is one of the smallest markets in the NHL with a population of 1.1 million, but the team ranked fifth in profit with $17.3-million (U.S.) in 2011, according to Forbes magazine.
The Mowat study bases its conclusion on an analysis of the “hoser effect” – a measure of excess Canadian demand for hockey. Put simply: There are proportionally far more hockey fans in Canada than in the U.S. and a dearth of teams. So revenue generated by Canadian TV viewers subsidizes money-losing U.S. teams.
Canadian hockey fans are essentially paying Americans to watch Canada’s national sport. How crazy is that?
Canadian fans generate nearly one-third of the NHL’s revenues even though they have only 23 per cent of the teams. The study says a good chunk of those dollars – from Canadian ticket buyers and broadcasters CBC, TSN and RDS – gets diverted to marginal U.S. franchises via revenue sharing. And the owners want more in the current negotiations with players.
The winners are the owners of marginal U.S. teams and hockey diehards in places like Florida, Arizona and North Carolina.
This isn’t the Canada of the late 1990s, when professional sports teams were under assault in Canada because of the weak loonie. The Conference Board argues that the dollar’s new-found strength combined with Canada’s healthier fiscal situation make the country highly attractive again to professional sports teams.
“Canadian franchises will have little financial incentive to leave Canada for greener pastures south of the border,” Mr. Hodgson and Mr. Lefebvre of the Conference Board argue. “The 2011 return of the Jets to Winnipeg is a reflection of the changed economic conditions in Canada and bodes well for pro sports this side of the border.”
The benefits of a leaner, more Canadian NHL are obvious. There would be more viable teams and fewer money-losers. That would lessen the pressure to lower the salary cap and shift more revenues from players to owners – the two main issues in the current dispute.
But that’s not what’s likely to happen. Players will probably bend and accept deep concessions, further harming Canadian fans as more revenue flows south.
Angry? Channel your fury and demand that NHL commissioner Gary Bettman give the game back to its rightful owners – die-hard Canadian hockey fans. It’s the free-market thing to do.