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Various file photos of Toronto as seen from the Goodyear Blimp which was flying over Toronto at about the 400 metre height, give or take. (Fred Lum/The Globe and Mail)
Various file photos of Toronto as seen from the Goodyear Blimp which was flying over Toronto at about the 400 metre height, give or take. (Fred Lum/The Globe and Mail)

Why Not Canada? - Part 4

Why not Toronto? Add to ...

The Toronto Maple Leafs charge the highest ticket prices in the NHL and generate the league's greatest revenues. The franchise earned a $79-million (U.S.) profit during the 2008-09 season, according to Forbes magazine's annual report on NHL finances, and that was without making the playoffs and with a lower Canadian dollar value than during the past season.

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All the evidence suggests the Leafs could comfortably co-exist with another NHL franchise in the Greater Toronto Area, arguably without a dent to the bottom line. In April, research by IMI International conducted to gauge interest in a second franchise showed there are roughly 800,000 residents who consider NHL hockey "a passion" but who haven't been able to attend a live game in at least two years.

"There is massive demand for a second NHL team in Toronto," said Don Mayo, global managing partner for IMI in Toronto. "If there is more supply, there will [still]definitely be great demand."

The NHL, however, seems uninterested in tapping that demand. NHL commissioner Gary Bettman categorically denied reports that he has quietly calculated an expansion fee for a Toronto franchise, one that would fetch a whopping price. He claims a second GTA team is not on the NHL's radar screen.

"I have no idea," he said, when asked in an interview for the Why Not Canada? series, whether the league has considered viability of a second Toronto team. "It's not something we've looked at."

The most basic reason for the Leafs success is size of market. Hockey is the most popular professional sport in Toronto, a city that is home to more than 900 corporate head offices, almost double Montreal's total, more than three times that of Calgary and almost nine times Ottawa's. According to the research firm Environics Analytics, more than 2,300 businesses in Toronto employ at least 100 people and generate better than $20-million in sales, representing nearly 20 per cent of the national total of companies in that category.

"Without revealing the numbers, I would estimate you'd see the Leafs probably being close to equalling all the teams across the country in total [corporate sponsorship]" said Mark Harrison, president of TrojanOne sports marketing in Toronto. "Cleary they've got that opportunity with the corporate head offices here and a perfect venue [the Air Canada Centre, which is connected to Union Station in the downtown core]"

Maple Leafs Sports and Entertainment, owner of the Leafs, declined a request to be interviewed for this series. MLSE's presumed resistance to a second team could be rooted in the potential effect on its other business ventures, rather than hockey.

"The Maple Leafs would be fine," Mayo said. "The biggest impact would be on other sports teams, such as the [MLSE-owned]Raptors or the Toronto FC, or the Blue Jays [owned by Rogers Communications]because there's only so much money in a marketplace. It would also impact cultural and other events because people don't have unlimited funds."

MLSE, in a strongly worded letter to the NHL dated Nov. 29, 2006, claimed the right to a veto over another team within an 80-kilometre radius of downtown Toronto.

"The Toronto Maple Leafs do not agree that a relocation of another club into their home territory would be subject to a majority vote [of the NHL board of governors]" the letter to Bettman from a Leafs lawyer states. "They continue to believe that a unanimous vote would be required before a team could be relocated into their home territory."

A unanimous vote would include MLSE's own vote, and the legality of that position is murky, the outcome of a challenge difficult to predict.

Kevin Wright, specializing in competition and antitrust law at Davis LLP in Vancouver, believes the Canadian Competition Bureau would be "concerned if ... the reason a team wasn't being relocated to Toronto was not because of legitimate interest by the league [in]promoting another city, but rather because of the interest of one team. That is, a veto being exercised to prevent the move."

The NHL is on record disputing the Leafs' view of territorial rights.

"We do not believe they have any rights in that regard," Bettman said.

The Competition Bureau ruled in 2007 that the NHL's policies regarding relocation are not anticompetitive but it never acknowledged or addressed the Leafs claim to a veto.

In theory, MLSE could be compensated but an indemnity payment would come with a heavy price tag, often speculated at well over $100-million. Combined with an expansion and relocation fee and the expense of building a new arena, and the cost of putting a second Toronto franchise together begins to look prohibitive.

"You're talking about a pretty big number, probably pushing to $1-billion," said University of Ottawa sports business professor Norm O'Reilly, who assigned the viability grades for the Why Not Canada? series. "Knowing the Toronto market and how supportive it is for hockey and how it's been growing, there's no question a team could be viable year after year. But could you ever overcome that huge investment required up front?"

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