Speaking during the National Hockey League lockout, Winnipeg Jets forward Olli Jokinen said, “It is very frustrating that it is such a big business right now.” Relax, Olli. Now that the games are back, you can focus on improving your backchecking, and leave it to the mouth-breathers of talk radio to perpetuate myths about the “big business” of our national obsession.
Here’s a news flash for them: The arenas could be empty for 10 years and it would hardly make one iota of difference to the economy. Sure, some folks would be affected – players and club owners would be poorer, and certain drinking establishments and broadcasters would have to find new ways to draw a crowd. But professional sports teams qualify as big businesses only to people with a poor understanding of what that phrase really means.
A few months ago, Forbes declared the Toronto Maple Leafs to be the first hockey team worth $1-billion (U.S.). The magazine based this on the price Rogers Communications Inc. and BCE Inc. paid for a controlling stake in the Leafs’ parent company. That valuation is quite a bit higher than the No. 2 team, the New York Rangers, at $750-million, or third-place Montreal Canadiens, at $575-million. (This is surely the only time the Leafs will be first at anything for a long while.)
Now let’s pretend that Hogtown’s unlovable losers were a public company. They’d rank about 200th on the Toronto bourse, alongside such household names as engineering firm Genivar Inc. and Secure Energy Services Inc. Big business? The Leafs are decidedly small cap. The NHL’s total revenues, including all 30 teams, were $3.3-billion last season – about what Loblaws pulls in at the cash registers every six weeks.
This may seem odd. But it isn’t because hockey is a niche sport, globally. It is the story of pro sports everywhere: large fan base, mediocre revenues, tiny profits. The most valuable franchise in the world, according to Forbes, is English soccer club Manchester United, which went public last year, trades in New York, and was worth $2.3-billion as of early January. If it were in the Standard & Poor’s 500, it would be right at the bottom of the list. Millions of fans, dozens of trophies, all that TV money...and analysts expect Manchester United PLC will make a grand total of $98-million in operating profit this year.
Financial Times journalist Simon Kuper and economist Stefan Szymanski sought to explain this in their terrific 2009 book, Soccernomics. “Soccer is neither big business nor good business. It arguably isn’t even business at all,” they wrote. Their reasons were many. Professional soccer clubs tend to be run by stupid people. Some of them are owned by Russian oligarchs or Middle Eastern oil barons who can spend as much as they want on players, with no regard to the bottom line. But above all, the soccer market is only so large, and there’s only so much teams can do to suck cash out of their followers.
There may be an enormous amount of interest in professional sports – but only a relatively small number of people turn that passion into the purchase of a $450 seat (the top price for a Leafs game last season) or even a $55 seat (the cheapest). The real money in sports is in television, where big games can still draw the large audiences that advertisers crave.
But even this power is often exaggerated. When the Vancouver Canucks made a run to the Stanley Cup final in 2011, about 8 per cent of the country watched their playoff games. In 2012, when no Canadian team made it through the first round, CBC’s ratings plunged. When the Toronto Blue Jays went on a spending spree in the fall, acquiring several high-priced players, the move was explained by rising fan interest. Yet an average Jays game draws about 600,000 TV viewers – about two out of 100 Canadians over the age of 10.
Even in the richest television market in the world, professional sports barely make a ripple in the economy. The estimated size of the American sports industry is about $435-billion – about 2.7 per cent of U.S. economic output–according to Plunkett Research Ltd., a market research and data firm. The largest slice of that is not in watching sports, but in playing them. Retail sporting goods sales are worth $41-billion, says Plunkett; health club memberships, another $21-billion. The revenues of the largest and most successful American pro sports league, the National Football League? Try about $10-billion.
And yet, despite all the evidence that pro sports are financially insignificant, team owners still manage to bully the public for stadium subsidies, claiming phantom “economic spinoffs.” Politicians fall for it only because sports are potential vote-getters. They know the truth. If professional sports mattered to the economy, they would never allow a 113-day NHL lockout. They’d intervene. Instead, the politicians wag their fingers at greedy owners and players – tsk, tsk, boys – and then turn their attention to something that actually counts.