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The NHL: Totals, Averages, and Marginals

2008 June 4
by John Palmer

From an article in the Trono Star,

A secret NHL report detailing the ticket revenues of its 30 teams reveals [that]… The six Canadian teams account for 31 per cent of the $1.1 billion (U.S.) in league ticket revenue, and have gone through league-leading double-digit increases over last season, according to the internal NHL report.

Overall, the league has seen its ticket revenue rise almost 10 per cent, but 11 of the 24 U.S.-based clubs were either revenue-flat or lost ticket income.

Twenty percent of the teams account for 31% of the ticket revenue, which doesn’t seem all that surprising to me — some markets are more lucrative than others.

Nevertheless, some people are using these data to argue that there should be more Canadian teams in the NHL. From the same source,

“This really makes the case for another team in Canada, whether it’s Hamilton, Winnipeg or Quebec City,” says former Vancouver Canucks owner Arthur Griffiths.

“I think Hamilton has the best facility, but obviously faces challenges in what it would have to pay Toronto and Buffalo. Winnipeg is a good possibility, but the market there has shown a resistance to paying top dollar for tickets, and you wouldn’t want to add a team that was going to be in the middle-of-the-pack for revenue, while Quebec City needs a huge infusion of investment for a new facility.”…

NHLPA executive director Paul Kelly has reviewed the document and said it highlights the importance of placing more franchises in Canada, instead of potential expansion cities such as Las Vegas, Houston or Kansas City.

“I think it would be a huge error not to relocate one of the existing franchises to Hamilton or Winnipeg,” Kelly said.

It might very well be the case that an NHL franchise in Hamilton, Winnipeg, or Quebec City or even Halifax would do better, in terms of ticket sales, than, say, the Phoenix Coyotes, who lost something like $30m last season. But the appropriate comparison is franchise-to-potential-franchise, and the fact that, on average, Canadian franchises brought in more ticket revenue than US franchises is entirely irrelevant.

Remember how, just a few years ago, many sports writers and others were decrying the state of hockey in Canada and worrying that perhaps only three or four franchises could survive in Canada? Remember how NHL teams left Winnipeg and Quebec City, not just because they received better offers from other cities but also because of the comparatively low fan turn-out in those cities? In fact the Canadian average revenue is so high for two big reasons:

  1. The largest revenue generator in the league is the Toronto Maple Leafs [despite their relatively poor performances of late] with Montreal a close second. Still from the same source,
    Atop the list of income winners is the Maple Leafs, who nudged out the Montreal Canadiens to lead the league this past season with $1.9 million worth of ticket revenue per game. Based on 41 home games, that’s $77.9 million a year – not counting revenue from pre-season games. A year ago, the Leafs generated $1.5 million a game, according the report obtained by the Star from several league sources.

  2. And keep in mind that these figures are all in terms of US dollars. The appreciation of the Canuck Buck during the past few years has played a major role in the rise in Canadian ticket-sale revenues. Even with no increase in Canadian dollar revenues, the Canadian teams would, cet. par., be reporting 20 – 30% more revenues in US dollars.
    The increase in the value of the Canadian dollar may be responsible for as much as half of the league’s revenue gains since the NHL went through the lockout of 2004-05, say several sources familiar with NHL finances.

    “If you take out the Canadian teams, which have done so well since the lockout largely because of the Canadian dollar, the league’s revenues are actually only growing at a 2 per cent clip per year,” says an executive with a U.S.-based NHL team, who requested anonymity.

Given these points, and given the potentially weak markets in possible 7th hockey cities in Canada, it is difficult to see how the fact that Canadian teams earn 31% of the NHL ticket revenue would support having another NHL franchise in Canada.

I, personally, would be thrilled to see a franchise in Hamilton or in Kitchener-Waterloo. And it might well be the case that even considering the losses that would inevitably be suffered by the Toronto Maple Leafs (and quite likely the Buffalo Sabres) if a team were to locate in one of these cities, a franchise in Hamilton or in K-W would do better than the franchises currently located in, say, Phoenix or Atlanta or Columbus or….

But if so, that has nothing to do with comparisons of average revenue per game in Canada vs. the US.

Cross-posted at EclectEcon

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