The case for Canada: NHL would be well-served to shift its centre of gravity northward

If the National Hockey League relocated three of its weakest southern U.S. franchises to Canada, their individual franchise values would increase by more than 50 per cent and the league’s average team valuation would jump by $11 million US.

The combined revenues of the three relocated franchises would rise by $100 million per year, jacked up largely by average attendance of 6,000 more fans per game – or a total of 738,000 more per season – and regional television audiences at least 20 times larger than what they are now in the U.S. sunbelt.

Those are the blue sky conclusions of a study comparing major financial and sport business indicators for NHL clubs in Canada and the United States. Released today by The Vancouver Sun and TheSportMarket.biz, it paints a picture of lucrative franchises north of the border and money-bleeding teams in the southern U.S., mainly in the troubled sunbelt markets of Phoenix, Atlanta and Miami.

It reflects the much-publicized economic and political crisis facing the Phoenix Coyotes, who remain under the stewardship of the NHL after it purchased the team out of bankruptcy last fall, along with the legal and financial problems of other sunbelt clubs such as the Atlanta Thrashers and the Florida Panthers.

Yet more than anything, it makes a compelling case for the landing of at least one more NHL team in Canada. Plain and simple, the numbers clearly show how the NHL, its member franchises, broadcast partners and other corporate stakeholders – not to mention fans of the game in Canada – would be well-served if the NHL shifted its centre of gravity northward.

The general sentiment is nothing new but it has only grown in magnitude in the five seasons played after the NHL lockout cancelled the 2004-’05 campaign.

Since the lockout, all six Canadian franchises have become stronger; at least off the ice in areas such as attendance, box office revenues, sponsorships, merchandising and television audiences. At the other extreme, teams such as Phoenix, Atlanta, Florida, Nashville, Tampa Bay and Carolina have incurred significant losses over the past five years; despite the new salary cap and Stanley Cup victories by the Lightning in 2004 and the Hurricanes in 2006.

It is true that the general business health of the NHL is better overall and arguably stronger than it has ever been, but that has been driven entirely by the six Canadian clubs and the northern U.S. markets. The league has been buoyed by the return to glory of the Chicago Blackhawks and dynamic turnarounds in markets such as Washington and Pittsburgh, where the Penguins rebounded from bankruptcy to reach the Stanley Cup finals twice and win last year. It is also true that U.S. television ratings have shown some traction, especially on the shoulders of the NHL Winter Classic and the Stanley Cup playoffs.

However, those facts only amplify the urgent need for the NHL to address practical solutions for the teams it allows to wilt under tremendous red ink in the sunbelt.

Imagine an NHL where a second team valued in the $350 million range operated in southern Ontario or even in Toronto, which in terms of sheer economics should be the first choice for NHL relocation. Imagine half-empty arenas in Phoenix, Atlanta and Miami replaced by packed houses in southern Ontario, Quebec City (if and when a new arena is built) and Winnipeg (where the MTS Centre could be renovated and even slightly expanded to better serve NHL fans).

Imagine the dynamic created by two NHL teams in Toronto, a renewed rivalry along the Montreal-Quebec City corridor and the cross-border proximity of teams in Winnipeg and Minneapolis.

With the average Canadian franchise valued at $268.5 million US (according to valuation lists compiled by Forbes Magazine), now is the time to strengthen the NHL and its brand footprint. The average Canadian team is valued $45.92 million US more than the NHL average, $57.4 million more than the average U.S. club and -- here’s the kicker -- at least $100 million more than the soap operas in the sunbelt.

The time for relocation is ripe when it would almost certainly mean more clubs driving over $100 million in annual revenues (the Canadian average is $112.5 million US, $18.6 million more than the NHL average and $23.2 million more than the typical U.S. franchise). It would mean Canadian attendance that is close to 3,000 fans per game more than the average U.S.-based clubs and 6,000 more than the league’s southern members.

Relocating the three weakest links to Canada could deliver an aggregate of up to 1 million more viewers per game than the average number of 57,900 viewers who watch the Coyotes, Panthers and Thrashers combined. It would increase the size of the average NHL regional telecast by about 40,000 viewers (from a current average of 140,741 to a projected 177,127 per NHL club), something the league could leverage into a stronger and wider national television platform.

It’s time to make a move when the Panthers need to play 49 games on FSN Florida to reach the average regional television audience of one Toronto Maple Leafs game on Rogers Sportsnet Ontario (or 30 games to match one Vancouver Canucks telecast on Sportsnet Pacific); when the Coyotes average 11,389 fans despite having the fifth-best regular season record in the league this year; and when the NHL All-Star game is the 18th most-watched television show in Atlanta when it’s hosted by the Thrashers.