The Business Of Hockey
In the two seasons since team owners canceled the 2004-05 campaign to force a salary cap on the players, the 30 NHL franchises have increased an average of 23 percent in value, and the league has gone from an operating loss of $96 million to a profit of $96 million.
The average hockey team is now worth $200 million and last season posted a profit (in the sense of earnings before interest, taxes, depreciation and amortization) of $3.2 million on revenue of $81 million. Even small-market hockey teams are hot properties: Tampa Bay Lightning owner William Davidson, who bought the team, the operating lease to the arena, and 5.6 acres of surrounding real estate for $115 million in 1999, is on the verge of selling that package for $206 million.
No, television ratings have not improved. Last season's Stanley Cup finals between the Anaheim Ducks and the Ottawa Senators were the lowest in history, and NBC pulled in a horrid 1.1 regular-season rating. And to win back the love from fans and sponsors spurned by the lockout, team owners have kept ticket and advertising prices essentially where they were three years ago.
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The surge in team values and profits is due to the salary cap that was included in the new collective bargaining agreement (which has lowered player costs from 66 percent of revenue to 54 percent since the 2003-04 season, according to our data) and a stronger Canadian dollar (the six hockey teams north of the border pay players in U.S. dollars).
Revenues for the Montreal Canadiens were $109 million last season, 21 percent higher than two seasons ago, while profits were $25 million, a 236 percent gain. In 2001 George Gillett paid $181 million for the team and the Bell Centre arena. We now value his investment at $283 million.
The Vancouver Canucks are now worth $211 million, 43 percent more than before the lockout. Last season the team posted a profit of $12.8 million, after barely breaking even in the few seasons before the lockout. In addition, greater revenue sharing from the new collective bargaining agreement (CBA) helped teams like the Pittsburgh Penguins and Edmonton Oilers turn a profit.
But the CBA has hurt the bottom line of some small-market franchises by establishing a minimum team payroll in addition to a salary cap. The minimum team payroll was $28 million last season and jumped to $34 million for the current campaign. The Minnesota Wild and Nashville Predators had payrolls of $24 million in the season before the lockout, and both turned a profit. Yet both teams finished the 2006-07 season in the red because of their increased payrolls.
With only $6 million per team in national television revenue ($8 million for most Canadian franchises), real estate economics and local television deals still determine the league's pecking order. The Toronto Maple Leafs are the most valuable ($413 million) and profitable ($53 million) team in the NHL. The Leafs' parent, Maple Leaf Sports & Entertainment, owns the Air Canada Centre, the Toronto Raptors basketball team, Leafs TV and Raptors NBA TV.
The Air Canada Centre is one of the busiest arenas in North America, with about 300 events a year. The ability to cross-market premium seating and advertising with two teams helped generate a league-high $138 million in revenue for the Maple Leafs. The team also had the highest local TV revenue, raking in $23 million last year.
It is no coincidence that the New York Rangers, who have a business model similar to that of the Maple Leafs and are tied with the Canadiens with the second-richest local television deal, are the next most valuable team in the league, worth $365 million. The Philadelphia Flyers ($244 million), Colorado Avalanche ($214 million) and Los Angeles Kings ($209 million) are also among the league's top 10 in value, in part because their owners control their buildings and can add the appeal of an NBA franchise.
The downside: Owners of sports conglomerates rarely win championships. While multi-team owners with media properties accumulate the most wealth, poorer, single teams, which rely on the playoffs to make money, win Stanley Cups. None of the last three Cup winners – Anaheim, Carolina and Tampa Bay – are worth more than the league average $200 million. Toronto has not won the Cup since 1967, and the Rangers have won one championship in the last 67 years. There is nothing like necessity when it comes to winning.
The top five:
1. Toronto Maple Leafs: Slideshow
2. New York Rangers: Slideshow
3. Detroit Red Wings: Slideshow
4. Montreal Canadiens: Slideshow
5. Dallas Stars: Slideshow
• See more of the most valuable hockey teams
