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Hockey in the Great Depression

Given all of the talk that sports are acyclical -- and indeed some pieces of evidence -- I found the following set of facts very interesting.

There's no question the NHL is now riding high, bolstered by increased co-operation among players and owners, which was cemented in the text of the CBA.

Revenues, profits, attendance and franchise values are all at record highs, says writer Kurt Badenhausen of Forbes business magazine, which issued its annual report on the NHL's economics last week.

The average value of an NHL team rose 10 per cent to $220 million US this year.

According to Forbes, the Toronto Maple Leafs are the league's most valuable franchise, worth $448 million US. The Montreal Canadiens are worth $334 million, while the Vancouver Canucks are at $236 million; the Ottawa Senators are at $207 million; the Calgary Flames are at $203 million and the Edmonton Oilers are valued at $175 million.

"Hockey is on a growth cycle in North America," says Oilers team president Patrick LaForge. "There's reason to be happy or excited about some of our larger markets."

It's worth nothing, however, that the NHL was also riding higher than ever in the 1920s before it faced its greatest contraction, when the league lost 40 per cent of its franchises in the period 1931 to 1942.

It's a widely held belief in the modern world of sports that professional leagues managed to thrive during the 1930s because folks needed an escape from the gloom and drudgery of their lives. While this was true of Major League Baseball, which lost not one franchise during the 1930s, it didn't work that way for the NHL.

In the mid-1920s, the NHL had moved from its small Canadian base of Toronto, Montreal, Ottawa and Hamilton to become an international league with new franchises in Boston, New York, Pittsburgh, Chicago and Detroit. It was a time of escalating franchise values. In 1920, an NHL franchise could be had for $5,000, but by 1926 the NHL decided that $50,000 was the new asking price, writes John Chi-Kit Wong, a University of Washington State sports business professor in The Lord of the Rinks: The Emergence of the NHL, 1875-1936.

In the years following the 1929 crash, four teams went into receivership: the Ottawa Senators, Pittsburgh Pirates, New York Americans and Detroit Red Wings. Only one of those teams, Detroit, found a new owner and survived.

One problem was that there was almost no revenue-sharing among NHL owners of that time. Teams got almost all of their revenue from game-day ticket sales, but just three per cent of the box office went to the visiting team.

Ottawa had to sell its top players. Its revenues dropped 36 per cent from 1927 to 1933. On average, NHL revenues dropped 31 per cent from 1929 to 1933, with the average box office take from an NHL game falling from $11,000 to $7,600.

In the end, Ottawa moved to St. Louis, while the failed Pittsburgh Pirates moved to Philadelphia, but the St. Louis Eagles and the Philadelphia Quakers survived only one year each.

The Montreal Maroons and the New York Americans also went under, leaving the NHL with just six teams.

Here's more, in a great story by David Staples in the Edmonton Journal. Staples argues that the NHL is currently better prepared for a serious downturn given the existence of long term contracts, and the increased sharing of gate revenue. Let's hope so!