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The Globe and Mail

Hockey's franchise value in eye of beholder

The NHL has returned to Winnipeg; that was made clear when commissioner Gary Bettman stepped to the lectern at The Forks on Tuesday to make it so.

But cloudier than ever is the true picture of what an NHL franchise is worth these days.

Two thriving businesses, the Vancouver Canucks and Boston Bruins, began battling for the Stanley Cup on Wednesday.

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League revenues were up in 2009-10 to $2.9-billion (U.S.), with the expectation that revenues will top $3-billion for 2010-11. The league recently inked a 10-year U.S. television deal valued at $2-billion and the last team that sold in Canada, the Montreal Canadiens (along with the Bell Centre) went for more than $500-million two years ago. It was an NHL record and nearly double what the package sold for in 2001.

All this and now Bettman can boast of adding David Thomson and his $23-billion fortune to the NHL's ownership stable. (Thomson is a partner in True North Sports & Entertainment Ltd., which purchased the Atlanta Thrashers and brought them to Winnipeg. Thomson's family company also owns The Globe and Mail.)

Not bad. But the successes can't gloss over the reality that NHL teams - at least some of them - seem to be getting cheaper all the time.

The transaction to bring the Thrashers to Winnipeg is valued at $170-million, with $60-million of that a relocation fee the new owners will be paying to the league. The result is a price tag on the franchise itself of about $110-million.

"I can't believe that the guys in Atlanta got that much for it," one NHL insider and former league governor said.

The franchise had been for sale since 2007, but no local buyers could be found - at least at the price True North was willing to pay, which was consistent with the reported $93-million in cash paid by financier Jeff Vinik for the Tampa Bay Lightning in 2010. The Tampa price tag was about half what had it sold for previously - and that price includes 5 1/2 acres of real estate surrounding the St. Pete Times Forum.

"The reality is, the value of the franchises these days is totally a reflection of the individual team being sold, not the league as a whole," the source said. "Sometimes, owners are valuing based on the relative cost of filling up their building for an additional 40 or 50 nights. Sometimes, it's being valued like any other business based on cash flow. And sometimes, it's being looked at as a vanity investment - what is a wealthy individual willing to spend to spend on a toy?"

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The Buffalo Sabres sold for $170-million, plus the assumption of about $20-million of debt in February. With as many as a half-dozen other franchise apparently for sale and with a limited pool of apparent buyers, some industry experts feel Bettman has done well to maintain a floor of about $100-million in a league where owners will have to spend a minimum of $45-million on salaries next season.

"There's no doubt that some of the these teams have traded at prices below what the league would like them to be, but to me, each situation is different," long-time NHL player agent Tom Laidlaw said.

The Thrashers sold for a steep discount to the $135-million they were pegged at by Forbes Magazine in their most recent ranking of NHL franchises. That mark had them 29th overall, ahead of only the Phoenix Coyotes at $134-million.

The Coyotes' eventual price tag would seem to be lower than that - the NHL bought them out of bankruptcy for $140-million in 2009, and suffered a reported $37-million in losses in 2010-11. A deal to sell the team, in which the City of Glendale was going to front $100-million of the apparent $170-million purchase price for Chicago businessman Matthew Hulsizer, has fallen through.

"There are certainly cases right now across the league where franchise values have plummeted but, really, franchise value is a mutually exclusive thing," University of Ottawa sports management associate professor Norm O'Reilly said.  "It really depends.

"You're talking about the Toronto Maple Leafs and [parent company Maple Leaf Sports and Entertainment]being worth somewhere between $1.5-billion and $2-billion. The Philadelphia Flyers are appreciating, the Boston Bruins are appreciating, the Vancouver Canucks are appreciating, and then these other ones are going down in value," he said.

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"You have to look at it on an individual basis of the market, the teams and the players. We've shown there are 48 different factors that have been shown to influence the value of a franchise and its business success."

Bettman deserves credit, O'Reilly says, and the commissioner's task of maintaining the value of the league's weak sisters is helped by the presence of a new (again), eager market.

"Obviously, Winnipeg is helping them. A city coming in with this kind of passion and this kind of interest helps. Attracting David Thomson is an enormous boon to the league and really sends a message. Bettman must be excited to have someone like him joining their board," he said.

"The only time the franchise values of the teams in the top half of the league might be affected [by the falling values of those at the bottom]would if the league's viability itself was threatened," O'Reilly said. "If one or two teams are struggling, that's normal business. Any business has some products that do well and some that struggle and some in between. Overall, the NHL is growing, revenue is the highest it's ever been."

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