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Canada’s Money Heads South

from Tony Keller of the Globe and Mail,

Dear hockey fans in Hamilton, Quebec City, Markham, Saskatoon etc. dreaming of a National Hockey League team: Your prayers will not be answered any time soon.

The United States has a bunch of financially weak NHL franchises, and investors have long kicked those tires, trying to figure out how to move them to Canada, where the fans are. But Rogers Communications Inc.’s $5.2-billion, 12-year deal for the league’s national Canadian television rights changes that game.

Those money-losing U.S. teams once at risk of being relocated north? They’re getting a big cash infusion. NHL teams compete on the ice, but they equally share national TV revenues – and since 23 of the league’s 30 teams are American, most of Rogers’s money is heading south....

Thanks to big subsidies from taxpayers in most U.S. cities, some give-back from the players and now a windfall from Canadian TV viewers, the NHL’s Sunbelt strategy is more of a success than ever. And the day when the NHL grows to more than seven Canadians teams is growing more distant.

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Filed in: NHL Teams, NHL Talk, | KK Hockey | Permalink
 

Comments

Red Winger's avatar

Phew, another article penned by a Canadian feeling sorry for himself and his country, as the big, bad US of A takes the NHL away from them.

It’s been a good 24 hours or so since the last one.

Posted by Red Winger from Sault Ste Marie on 11/27/13 at 09:18 AM ET

Avatar

The thing that cracks me up is that this argument gets simplified so much. Take Florida, Phoenix, Carolina, Tampa, and Nashville and find them a nice cozy city in Canada. The teams will go from money-losing to money-making. Simple, right?

What these arguments always fail to account for is the American TV contracts, the idea of “loss leaders” and some other managerial accounting-type arguments that help the league eat up some of its costs and generate revenues. Mainly, think about how much NBC would pay if half of the USA was not represented with a hockey market? How much would ESPN or other sports stations cover (it is already minimal, anyway) hockey if the sport was relegated the northern states, east coast, and west coast? It is a marketing strategy and “necessary evil” to try to solidify new markets. Even though I don’t necessarily agree with the locations or number of teams, I understand why. Lastly, you can’t operate a league where teams are constantly shuffling around. Those leagues die fast deaths. There has to be stability in team locations.

The Canadian arguments always tend to oversimplify and fail to account for the bigger, longer-term picture. I don’t know if they are right, but it is impossible for these people to make statements that moving Carolina to Saskatoon, even if the team goes from money-losing to profitable, that the league will positively benefit in the long-run because of that. There isn’t enough information being analyzed.

Posted by VitoLambruski on 11/27/13 at 10:20 AM ET

DrD's avatar

What it does show is high intense and concentrated the Canadian fan base is. What other country’s fan base can pump that kind of revenue into the league? You want to know when the NHL’s fortunes improved? When the Canadian dollar rose against the US dollar. With both dollars closer to par, you can see where the real strength of fan support really lies in the NHL. In most US markets, there is a massive fall-off in support when the team is tanking. You get that in Canada too - but not to the same degree. Canada lost its teams when there was a big divide between the US and Canadian dollars.

There is no way a broadcaster from The USA, Sweden or Russia would put this kind of of cash behind the league because none of those countries have the high concentration of reliable fan support that Canada has. It’s like the American obsession with The NFL - except hockey is by far a better sport.

As for those saying that having a team in South Florida where the NHL ranks somewhere between Sport Fishing and The Pro Bowling Tour in popularity better for the league than another team in Canada…I have to ask, what part about making more money do you think is hurtful to the NHL?

Posted by DrD on 11/27/13 at 11:23 AM ET

henrymalredo's avatar

Canadian fans may be more passionate about hockey then most US fans, but at the end of the day, the US has much bigger markets when it comes to advertising, marketing, television and corporate sponsorships.  There are 57 metro areas in the United States and Canada that have a population of over a million.  6 of those areas are in Canada and all have an NHL team.  Winnipeg is the only area not on that list that has an NHL team.  While you could probably get a lot more fans out of the average Canadian city, many of Canada’s metro areas are just so small compared to many American ones.  When you’re talking about a market the size of Quebec City, you’re talking about a metropolitan area that’s smaller then the greater Grand Rapids area.  Now, the Quebec City area is bigger then Winnipeg, so it probably could support a team, but when you start talking about other Canadian metro areas like Halifax, which is comparable to Salem, Oregon, and Saskatoon, which is only slightly bigger then the Holland-Grand Haven area, things start to get really crazy.

Posted by henrymalredo from Lansing on 11/27/13 at 12:00 PM ET

DrD's avatar

Hey Henry,

Okay, so if there is all this ad revenue waiting to be dumped in NHL hockey south of the border, how come ESPN didn’t do this deal? It might be a tough pill to swallow, but the Toronto market alone could support a lot of the weaker-market US teams with the ad revenue available in that market…you know how I know? Because as of yesterday, that’s basically what is happening.

In fairness to Yanks, their interests are spread across four major sports (and college sports), while Canada’s focus is primarily on hockey and the NHL, but that doesn’t change the fact that the Canadian fan base is the primary driver behind league revenues and again, I attribute that to the rise of the Canadian dollar against the US dollar - because the fan support has always been here.

Hey - we gave you hockey and you give us HBO, AMC and FX - I call that an even trade. Oh yeah and you can have the NBA back…

Posted by DrD on 11/27/13 at 12:13 PM ET

henrymalredo's avatar

I never denied that, in general, Canada has more fan support for hockey the the United States and I do believe the Toronto area could support another team, but the fact of the matter is that fan support isn’t everything.  When you get beyond the Canadian cities that already have teams, you’re starting to talk about cities that are in fairly small media markets.  Fan support only goes so far in the modern era of sports, if it didn’t, cities like Winnipeg and Quebec wouldn’t have lost their teams in the first place.

Posted by henrymalredo from Lansing on 11/27/13 at 12:21 PM ET

DrD's avatar

So what is the Rogers deal based on if not ad dollars? Last I checked, they are a Canadian broadcaster and last I checked, their revenues came primarily from ad dollars…? Again, why didn’t ESPN do this deal if this was based primarily on ad revenue from US markets?

Posted by DrD on 11/27/13 at 12:30 PM ET

Avatar

I think that’s the point, that the Rogers deal is based on ad dollars. The point being: the markets Saskatoon vs. Miami; Quebec vs. Phoenix, etc. are much different in terms of size. The NHL believes that it needs to be in big markets in the US, even if fan support isn’t gigantic. The continued cost structuring/management and “evening of the playing field” is in the hopes of in the long run, that after a Cup or two and 25 years in Phoenix, that the fanbase will be established. The NHL considers these markets both an investment to create new fans and to ideally keep the ad dollars up, since they are trying to be in big markets anywhere they can be.

In terms of Hamilton, it is obviously a big market - but you are slicing a pie that is already significantly contributing to Toronto or Buffalo - you aren’t getting a bigger pie by adding a team to Hamilton - there aren’t going to be new fans by adding a team to Hamilton; existing fans just have a new team to cheer for.

Posted by VitoLambruski on 11/27/13 at 02:51 PM ET

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Paul Kukla founded Kukla’s Korner in 2005 and the site has since become the must-read site on the ‘net for all the latest happenings around the NHL.

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