NHL is ‘eager to avoid’ expansion to Canada?

Greg Wyshynski
NHL is ‘eager to avoid’ expansion to Canada?

Quebec City was one of only two cities to submit bids for an NHL expansion franchise last week, which means it’s time for major Canadian newspapers to explain why the League’s inherent bias against the Great White North will prevent the return of the Nordiques. 

The Globe & Mail editorial page featured this piece on expansion, which we’ll attempt to translate for you here:

Quebec City recently completed a major public infrastructure project ahead of schedule, and under budget. The normal course of events would see its spanking new, $370-million arena occupied by an NHL team. That’s why so much (public) money went into the building. The timing even looks to be ideal, as the league is in the midst of receiving applications for expansion franchises; two cities could advance to the next stage. What’s more, there are only two bidders – aspiring owners in Quebec and Las Vegas – for those maximum two expansion slots. The return of hockey to hockey-mad Quebec would seem to be as easy as scoring an empty-net goal from inside the crease.

It isn’t.

Yes, the normal course of events is to build a state-of-the-art arena and then have the NHL drop a team into it like a coin in a fountain.

As Kansas City will no doubt tell you …

The fact is that Quebec built an arena well before the NHL’s formal decision to explore expansion. One assumes they were privy to that new cycle’s arrival, but by no means was there a direct line between “build an arena” and “acquire a team,” nor is that a “normal course of events.”

Anyone distracting themselves from the summer heat with daydreams of a revived Nordiques vs. Montreal Canadiens rivalry (The Battle of Quebec! The Good Friday Massacre!) had best take a deep breath. Just because Québecor principal shareholder/aspiring premier Pierre Karl Péladeau and irrepressible Quebec City Mayor Régis Labeaume built the Vidéotron Centre (with, we again note, a massive helping of taxpayer dollars) doesn’t mean the NHL will come.

But bilking a municipality out of millions of taxpayer dollars in order to build an arena that may or may not house a team is the normal course of events!

If anything, the NHL appears eager to avoid Quebec City, or any other location in hockey’s northern homeland. Here’s looking at you, Hamilton.

Hamilton had one thing going for it, and then he (a) sold season tickets for the Hamilton Predators before he even owned the Nashville Predators and (b) attempted to use bankruptcy courts as a backdoor to NHL ownership because he knew the Board of Governors would never approve him and (c) is, to this day, having to defend his pursuit of an NHL team within the context of his company’s fall from its tech throne.

So yes, here’s looking at you, Hamilton, and the smoldering carcass of your golden goose.

Los Angeles has two NHL teams but the Toronto area still has but one; artificially limiting hockey supply in the biggest hockey market on Earth predictably leads to the Leafs recording league-topping revenues, year after year, regardless of their record on the ice.

The NHL has denied for years that the Toronto Maple Leafs had veto power over another team in the market, despite the team having inferred as such when Jim Balsillie attempted to make his Hamilton move.

But the kicker here, obviously, is that the NHL can only grant a franchise to someone that wants to buy one and house one. And did Toronto submit an expansion bid for a second team this week? See: Paragraph One.  

Winnipeg only got its Jets back in 2011 because, when the Atlanta Thrashers went into financial cardiac arrest, Winnipeg was the one hospital available. It was a similar story for Calgary in 1980, after an earlier attempt at Sunbelt expansion failed: When the Atlanta Flames flamed out, they were moved north. (Recite now the Canadian Hockey Fan’s Prayer: Almighty NHL, we beseech thee, put another team in Atlanta. Please.)

It should be also said that Winnipeg played the backroom handshake game better than many other suitors have with the NHL, keeping talks private and off the record. Rather, than, you know, doing everything Quebec City has done so far.

At first glance, Quebec City’s bid ticks all of the league’s boxes: deep-pocketed corporate owner, ready-made television deal, rabid fan base and, of course, a state-of-the art arena, gifted by taxpayers. It might not matter.

Something something strength of the Canadian dollar something something geographically undesirable given the current configuration of the league something.

One of the benefits of running a cartel is that it, and not the market, sets the rules. In what other business is a prospective entrepreneur required to plead, cap in hand, with all of his North American competitors in order to set up shop? And then cut them a fat cheque for the privilege?

There is no National Restaurant League limiting the number of restaurants on the continent to 30, with expansion to 32 conditional on new members paying a fee. In any other business, this would look suspiciously like restraint of trade. The NHL has a lot in common with various taxi monopolies currently being undone by Uber. Only there’s no Uber to disrupt pro hockey.

Wow, there’s a lot to unpack here.

Let’s start with the concept of franchises. The above assumes that the 30 NHL teams aren’t different branches of one business entity, when in fact they are. In many ways, NHL owners are buying McDonald’s franchises, and the parent company determines who does or does not get to operate one (the other 30 teams, literally, are on the Board).

Granted, under this comparison, each McDonald’s battles against each other every summer to see you can land the best Happy Meal toys, and some franchises end up with “MINIONS” and other franchises end up with toys from “TOMORROWLAND” …

The Uber comparison is an odd one. Uber is taking on the taxi monopolies in order to even the playing field. NHL expansion franchises are asking for admittance into an established business, not an industry. And the parent company has every right to limit franchises. Uber, in this comparison, would be the World Hockey Association taking on the NHL. And there’s obviously a reason there isn’t a rival to the NHL, which is that everyone wants to be a part of the NHL.

(Then again, a 75-team League, as the editorial seems to envision, would be amazing to watch. Who wouldn’t want to see a 50-year-old Mike Sillinger skating on a line with your plumber?) 

But the bottom line about any real-work financial comparisons with professional sports leagues: They just don’t apply.

It’s fantasy land, where employees of a certain age are basically indentured servants and can be traded for each other and smack each other in the face with weapons with no legal ramifications. Most times.

League commissioner Gary Bettman and the team owners seem strangely preoccupied with restoring conference balance – there are currently two more teams in the East than in the West. Quite why expansion, and not simple realignment, is the preferred solution isn’t all that clear.

What’s strange about wanting an equal number of teams between the conferences? Yes, what an odd preoccupation: One conference has fewer teams competing for playoff spots, and the other one feels that’s unfair.

What’s the simple realignment? Screw the Red Wings or Blue Jackets with a move back West to make room for Quebec City?

Nothing is simple. This Reddit realignment, for example, could be effective but remakes the league.

But most importantly, the league longs to build its U.S. presence, in media markets far bigger than Quebec City. Quebeckers, like all Canadians, already consume enormous quantities of televised hockey. Americans, especially the U.S. Sunbelt? Not so much. All of which puts Las Vegas in the catbird seat.

Wait, so there are legitimate reasons – like creating new hockey fans rather than reaffirming established ones – for the NHL choosing a U.S. market over a Canadian one, rather than just “being eager” to avoid them?

True, the NHL merely needs to name its price and Québecor will stroke a cheque. A Canadian NHL franchise is that valuable. But if the point were a one-time windfall for the existing owners, surely the NHL would simply allow a second team in Southern Ontario, and even a third.

Or four! Or five! Hell, the Ontario Six, so all the good Canadian boys can play near their homes and Don Cherry can be the commissioner and …

Instead, it’s entirely possible that the receipt of only two bids for new teams will mean that the NHL will decide to hold off on expanding until an arena deal is reached in Seattle – another highly coveted market. In any case, adding to the club of owners requires the assent of 23 of the 30 current clubs.

As Geoff Baker of the Seattle Times explained on our podcast this week, the Seattle bid’s issues go beyond the arena deal. There’s a cash-flow problem with the bidders which could render the pursuit of a Seattle team pointless. This is why the NHL asked for owners to ante up, and this is (partially) why the Seattle bidders didn’t.

And keep in mind that the addition of two teams, carrying wtih (sic) them a one-time payment of as much as $500-million each (all figures in U.S. dollars), the price the NHL has hinted at, wouldn’t bolster an existing owner’s bottom line all that much once it’s chopped up 30 ways.

No, but it could be something that influences the sale price of existing teams.

Expansion would also water down each team’s share of the U.S. and Canadian national television deals. Together, those two are worth about $600-million; expansion would split that pie 32 ways rather than 30.

This ignores the additional revenue streams – including the billion black and gold Las Vegas jerseys that’ll sell – these new teams will bring to the table.

Then there’s the league’s salary floor. At $52.8-million next season, it has risen almost 150 per cent since 2005. It is rising because some teams are taking in a lot more cash – but many struggling U.S. franchises are not. The upper salary cap limit could top $90-million in the next decade. Have fun making that work, Phoenix.

AHEM, Arizona …

The beauty of the salary cap floor is that it’s a total scam as long as teams are allowed trade cap space and take on dead contracts to hit the number. It’s like a blogger who needs to hit certain traffic milestones to – oh, I don’t know – get NHL credentials, and then runs a week of Ice Girls and Paulina Gretzky galleries. There’s always a way.

And yet it may be that, no matter what it does or how attractive a market it is, Quebec City won’t get an expansion team. There’s a widely held belief that, even though a Quebec team would be an immediate success, the league would rather save the city as a fallback solution, to be used when a struggling Sunbelt club is at death’s door.

This is the truest truth in this editorial. For all the “Coyotes to Seattle” chatter, the NHL would much rather move a team to a more established hockey market.

Four summers ago, the returning Winnipeg Jets sold every one of their 13,000 season tickets – in two minutes. The same would happen in Quebec City.

Oh boy, here we go …

Meanwhile, the prospective Las Vegas owners have received deposits on about 13,000 seats – but getting there took four months.

Had Vegas opened up the season ticket drive to casinos and businesses, they would have hit that number in half the time. But that’s not even the point here.

Yes, we get it: Canadian markets are flush with hockey fans that will buy season tickets in milliseconds. The strength of Las Vegas as a current hockey market just needs to show a minimal interest and the potential for growth. Nashville didn’t sell 13,000 tickets in two minutes. Neither did Tampa. Neither did Columbus. Neither did Anaheim or San Jose. But those markets have minted new fans for the NHL. Which, we believe, was a point this editorial made several paragraphs ago regarding the League’s desire to go to the U.S. rather than Canada.  

Canada, home to seven NHL teams, should get more eventually. But it may not happen through expansion, at least not directly. Pray for a repeat of Winnipeg’s Immaculate Relocation.

Quebec City’s place as a relocation fallback is directly tied to the NHL expanding into new U.S. markets. If Seattle’s not in play, there’s every chance the NHL is going to accept $500 million (at a minimum) to bring hockey back to Quebec. Because if it’s the money they want, the application process showed there are few owners that can offer it up.

If the NHL is willing to move a team there, then wouldn’t they be willing to sell a team to Quebec for double the price?