Shake Your Moneymaker - Canadian Teams Make the Cash

by Bob Wage on May 31, 2008 2:19 AM EDT

There has been a lot of talk around the hockey blogosphere recently about this article put out by Toronto Star reporter, Rick Westhead, who somehow got his hands on a top secret NHL report which shows how much ticket revenue each team earned. If you believe this report, the 6 teams based in Canada bring in over 30% of the ticket revenue for the league.

Each of the Canadian teams showed substantial increases in revenue from the previous season, from a 20% increase by Edmonton, to 31% by Toronto.

Of course the columnist, along with most other Canadian writers, are using this information as proof positive that the league should immediately move or add more teams in Canada.

Again, if the report is true, (and at this point it is an assumption because the NHL has not validated it), there are a lot of other factors involved that need to be analyzed before you can just assume that another Canadian market will generate just as much revenue as the current ones.

First of all since the report is based on US dollars, the rise of the Canadian dollar must be taken into consideration for comparisons like this. I did a little research, and I would estimate that 15% of any increases shown for the year can be attributed to currency fluctuation.

Are you going to move franchises around the globe based upon a temporary glitch in currency rates?

If you subtract 15% from each of the Canadian team's increases, the highest would be Toronto's 16%, which would be 2% lower than the legitimate 18% increase by the New York Rangers.

Suddenly, the huge increases begin to fall more in line with some of the American franchises which had good years.

Let's look at expansion.....

The city of Hamilton is often mentioned as a target franchise, but I have a couple of questions about a team being moved there.

Would Toronto ownership object? Right now, they bring in more revenue than any other franchise, would they be willing to risk losing a small portion of that to Hamilton?

What about Buffalo? It's hard for me to believe that having a new team and venue in Hamilton would not affect Buffalo attendance and revenue. The Sabres are in bad enough revenue shape as it is. Even though they sold out all of their regular season games and averaged over 100% capacity for the year, they were still too low when it came to revenue generation.

Owner Tom Golisano says he is losing money.

If an owner can't make money even though they sell out every game, something is not right with his business model. Regardless, I sincerely doubt that said owner would be very receptive to having new competition for revenue, move in right next door.

Another market being bantered about is Winnipeg. The city is obviously hungry for NHL hockey again, but is it feasible? They have a brand new rink that holds about 16,000 seats. They could probably sell out every game, but would the mostly blue-collar crowd be willing to pay big city prices to watch hockey?

In order to generate 1 million per game in revenue which would equal the lowest team revenue in Canada, (the Oilers), they would need to have an average ticket price of $62.50, which is higher than what the current average is in Ottawa.

I haven't got time to post it tonight, but I created a spreadsheet showing each team's revenue, attendance, and average seat price for 2007-08, and there is some pretty startling information. For instance, even though Buffalo sold out every event and seems to be doing well, Carolina has a higher per ticket price than they do, and almost matched their per game revenue even though the Sabres outdrew the Canes by 3,000 fans per game.

The average ticket price for Carolina is $42.09 while the average for Buffalo is $37.59. Here are some of the numbers.

Team___per game revenue___per game attendance___per game average ticket

Carolina ____$700,000_________16,633____________$42.09

Buffalo_____$750,000_________19,950____________$37.59

Tampa Bay__$800,000_________18,692____________$42.80

Ottawa_____$1,200,000________19,821___________$60.54

Same story for Tampa Bay. While they averaged 18,600 per game, they only averaged revenue of 800K per game. That came to an average ticket price of $42.80.

I am going out of town tomorrow, but when I get back on Sunday I'll post my entire report and delve more into this.

The Black Crowes

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4 questions / points:

1 – What is the research you have that shows that the currency situation is a temporary glitch? The Canadian dollar’s real glitch was in the 90’s when it feel to a huge low. Prior to this the dollar was at par and occasionally higher than the US dollar. Given the weak US economy and the credit crisis, neither of which have occurred in Canada (where unemployment is at a 35 year low), the dollar situation is more of a normalization than a glitch.

2 – Why do you think that Winnipeg hockey fans would be a ‘mostly blue collar crowd’? Have you ever been to Winnipeg?

3 – In my opinion, the population of a city is what largely determines the success of their hockey franchises. Also, the willingness of an owner to invest in the franchise plays a big role. For example, Quebec City is not a big town. In top of that, Aubut refused to invest in the arena. I was at the Colisee for the World Championships this year, and there is no way you could ever host a modern NHL franchise in that building. It is a minor-league arena.

4 – Don’t forget that Canadian franchises operate with almost no assistance from local or provincial governments in the form of tax breaks or subsidized arena costs. That does NOT happen here, especially in the big city markets like Toronto, Montreal and Vancouver. As a result, it is much more expensive to operate franchise in Canada that it is in the US, factoring in our much much higher taxes and corporate taxes. I mean, our taxes would probably make you lose your mind :p

by Benjamin repenttokyo on May 31, 2008 2:23 PM EDT reply actions

Did anyone notice asshole commissioner Gary Bettman being interviewed last night (it was on CBC) saying that the Hurricanes didn’t receive a larger portion of league revenues because they didn’t achieve 8% growth, which in his words was a ‘very healthy rate in this climate’. Um, is Bettman completely oblivious to the economic problems swirling in the air?

by Benjamin repenttokyo on Jun 1, 2008 2:37 PM EDT reply actions

Ben-

Good questions, sorry I have been away for a bit and it’s taken me awhile to answer them.

1. By “temporary glitch”, I am referring to the 15% increase in the value of the Canadian dollar over the US dollar during the past couple of years. I think that part of those increases in revenue by Canadian teams can be attributed to the higher exchange rates since the money is being taken in using Canadian currency, yet being compared in US dollars.

I also think that it is unrealistic to feel that there will be a continuous valuation fluctuation year after year. Perhaps the values will level off to be somewhat equal, or maybe the US Dollar will rebound causing a reversing trend. It seems dangerous to me to think about moving franchises based upon numbers which, in part, are fluctuating because of different currency valuations.

2. No, I have never been to Winnipeg. My wife and I went to Minnesota during the lockout to watch the World Cup, and we had the pleasure of meeting a couple of guys from Winnipeg at a bar across from the arena. We probably chit-chatted for an hour or two. The guys seemed more blue collar than white collar to me, (and would probably happily admit that), but I probably shouldn’t categorize an entire demographic based upon a meeting with 2 people.

I was just trying to compare their demographic with that of Toronto and Ottawa and based upon their populations, I would guess Winnipeg was less apt to spend as much money, but of course I am just going on my opinions and I could be wrong.

3. Arenas are certainly important. I’m sure the Hurricanes would have never moved to Raleigh if there wasn’t a promise to build a new arena in the works. I know that Winnipeg has a brand new arena, but I’m not sure about Hamilton.

4. I understand what you are saying and while I don’t know the specific numbers, I’m sure that Canadian teams would need to take in much more revenue in order to be profitable than US teams would. That would be another reason not to move teams back to Canada unless the NHL is absolutely sure that they have a business model that will work.

5. Unfortunately, I don’t have the CBC feed and missed Bettman’s interview, but it sounded like he was recognizing that it would be tough to achieve 8%. (healthy increase=big increase, in this economy)?

But I don’t know since I didn’t hear it.

I guess that is why the Canes raised most season tickets by 10, trying to make sure they get the 8 this year. It will be tough though if they lose ticketholders along the way.

by Bubba on Jun 2, 2008 12:48 AM EDT reply actions

1) Bubba, you are of course correct in your conclusion/opinion that moving teams to Canada soly based upon their recent growth would be foolish. Especially when a large amount of that growth is from the current currency situation.( It wasn’t long ago when the NHL gave compensation to 4 of the 6 Canadian teams because of the currency disparity)
2) We have seen the pendulum swing in both extremes in the past decade. The Loony going from less than .70/Greenback to over 1.10 at times. It will likely go back down (perhaps not as low as before) at some point. Economies ebb and flow as we all know. To base your business’s future on a ‘house of cards’ such as this would be fool hearty
3) That said, its hard to imagine that Ontario couldn’t support another franchise. Even if it were placed in Toronto itself (though that’ll never happen) If the NYC metro area can support 3 teams, why couldn’t Ontario support 3?

by fauxrumors on Jun 2, 2008 7:56 AM EDT reply actions