Canadian professional ice hockey, basketball and baseball teams could beef up rosters and make more money if Canada's dollar , up nearly 20 per cent this year, moves above the U.S. dollar and stays there.
The biggest single expense for Canadian sports teams - salaries - is priced in U.S. dollars, while revenues are mostly in Canadian dollars. Historically this has left them at a disadvantage versus U.S. teams when hunting for talent.
But last week the Canadian dollar shot to its highest level in nearly 15 months versus the U.S. currency, putting it within striking distance of rising above the greenback for the first time in over a year.
This is welcome news to Canada's six National Hockey League teams, Major League Baseball's Toronto Blue Jays and the National Basketball Association's Toronto Raptors, whose bottom lines will benefit if the Canadian dollar stays high.
"If there's a 10 per cent move upward in the Canadian dollar versus the U.S. dollar then that effectively reduces their payrolls by the same percentage," said Marc Ganis, president of Sportscorp Ltd., a Chicago-based sports consulting firm.
Experts say a prolonged rally means teams not bumping up against league salary caps can offer lucrative contracts to big name players. The NHL and NBA have salary caps, while baseball does not.
And teams that have little or no salary cap space can pay down debt, or put more money into coaching and upgrading facilities, Mr. Ganis said.
A stronger Canadian dollar could also help cities hoping to lure back NHL teams lost to the United States in the 1990s when the curency sank towards a record low.
"We definitely want a stronger (Canadian) dollar because it means your U.S. expenses don't cost you as much in Canadian dollars and therefore you have more available Canadian cash," said Ian Clarke, chief financial officer of Maple Leaf Sports and Entertainment, which controls the Maple Leafs and Raptors.
"But many of the clubs, including ourselves, try to protect against fluctuations in the dollar so in cases like drastic increases we do not capture the full benefit, but in worse times you don't get hurt to the same extent either."
A recent Reuters poll showed currency market experts expect the Canadian dollar to trade comfortably above 90 U.S. cents for at least the next year.
Of the major North American sports leagues, experts agree the NHL, with the biggest Canadian presence, would be the main beneficiary of a rallying Canadian dollar as Canadian broadcast and sponsorship deals generate high U.S. dollar returns.
The currency's surge could also help hockey-starved Canadian cities looking to land an NHL franchise, as smaller markets become more viable and relocation fees more manageable.
Quebec City recently said it plans to build a new arena with the aim of landing an NHL team. Its former team, the Quebec Nordiques, moved to Colorado in 1995.
Winnipeg, Manitoba, is often mentioned as a city seeking a team. Its Jets moved to Phoenix in 1996.
But the prospect of a seventh Canadian NHL team hit a block last month when a court rejected a bid by billionaire Research in Motion executive Jim Balsillie to move the Phoenix Coyotes to Hamilton, Ontario.
This is not the first time a rallying Canadian dollar has raised hopes for professional sports teams. In 2007, the Canadian dollar rose above the greenback for the first time since 1976 and held near parity for about 10 months before eventually falling to a four-year low.
Some experts say such volatility may curb the enthusiasm of teams that were cheering on the currency's rise and contemplating moves to improve their rosters.
"I think you'll see Canadian teams becoming a little more active in the market for free agents," said Michael Cramer, professor of sports management at New York University and a former president of group that owned the Texas Rangers and Dallas Stars.
"But I have to say, if I am a Canadian team owner I'd remain very cautious for a season or maybe even longer because it's hard to project what's going to happen with the dollar and you don't want to put yourself in an unstable position."Report Typo/Error