Why Not Canada? (TSN/Globe & Mail)

[Phil]

http://www.theglobeandmail.com/sports/hockey/why-not-canada/article1628425/

Why Not Canada? (TSN/Globe & Mail)

David Naylor

From Monday's Globe and Mail
Published on Monday, Jul. 05, 2010 9:29AM EDT
 
Last updated on Monday, Jul. 05, 2010 9:50AM EDT
 
http://www.youtube.com/watch?v=Q1jmn8dSFMc (External Embedding Disabled)

A decade ago, with the loonie tanking and the NHL expanding to non-traditional hockey markets, Canadian fans fretted about the possible extinction of all the country’s NHL franchises, save for the Toronto Maple Leafs.

The Winnipeg Jets and Quebec Nordiques had already moved to become the Phoenix Coyotes and Colorado Avalanche, respectively, when American George Gillett Jr. was introduced as the Montreal Canadiens’ new owner in January of 2001. He felt compelled to ease the tension by saying: “These are the Montreal Canadiens, not the Oklahoma City Canadiens.”

Fast-forward nine years. Today, fans are talking about the possibility of a seventh franchise in Canada to go with the thriving six, whether by expansion or relocation. The assumption – it’s not if, but when.

“Hockey [in Canada] is at its mecca now,” says Professor Norm O’Reilly, an expert in sponsorship and franchise business models at the University of Ottawa. “The Canadian economy is probably at its best position versus the U.S. than it’s been in a long time. So right now is a great time.”

A joint Globe and Mail/TSN project studied four Canadian markets – Winnipeg, Hamilton, Quebec City and the Greater Toronto Area – with the goal of determining which would be most realistic for an NHL franchise. Each market will be reported separately in the next four instalments of a six-part series, both with a story in The Globe and a segment on TSN’s SportsCentre.

We relied upon economic data from Statistics Canada and the Conference Board of Canada, and an assessment of the four markets by Environics Analytics. IMI International further studied the impact of a second franchise in the GTA. We talked to economists, fans, potential owners, competition lawyers and market research specialists, and considered arenas, corporate presence, regional interest in hockey and demographics. O’Reilly studied the data and interview transcripts, and assigned a letter grade to each of the cities to assess franchise viability. He looked first at the market itself, then considered critical circumstantial factors.

Five years after the lockout that wiped out the 2004-05 season, the NHL has regained stability in the United States. And yet, the Coyotes’ financial saga indicates problems with isolated U.S. markets. In Phoenix, Nashville, Atlanta, Florida and Tampa Bay, teams play in far-from-filled arenas despite generally inferior ticket prices compared to those in Canada.

That spells potential trouble in a gate-driven league and leads to speculation about franchise relocation to Canada. Jim Balsillie’s attempt to bring the Coyotes to Hamilton last year, followed by the Coyotes nearly relocating to Winnipeg more recently, served only to stoke the fever.

“The future of the league is to go back to where there is a big fan base,” says Marcel Aubut, former president of the Nordiques and an adviser to the city in its attempt to land a franchise. “And where is that? It’s right in Canada. There are many elements now playing to allow the population to dream again.”

Among those elements are the league’s salary cap and revenue generation. An inability to handle rising player salaries factored heavily into the loss of the Quebec and Winnipeg franchises.

Canadian hockey fans routinely see NHL commissioner Gary Bettman as the villain in this story, the primary roadblock to northward migration. In an interview, he insisted the NHL is not expanding and remains committed to existing markets. Yet, he also acknowledged that ripe conditions exist in specific Canadian cities.

“I’d like fans to know that we are very focused on the issue and we have been,” Bettman says. “But I’d also like people to know that it’s not going to happen overnight, like throwing a light switch, and people need to be patient.”

Hamilton and Toronto have the requisite economic prowess to support a professional sports franchise. An NHL team in Quebec City would have the professional sports market to itself, while in Winnipeg a franchise would face competition only from the opposite-season CFL.

Here’s snapshot of the four markets:

Winnipeg: The city’s economy showed resiliency during the recession and the population is growing at roughly three times the rate as when the Jets left for Phoenix in 1996. Local businessman Mark Chipman and his Toronto-based partner David Thomson aim to bring a team into the downtown MTS Centre, which would be the NHL’s smallest building with 15,015 seats and 50 luxury boxes. Given that revenue generated by the building wouldn’t match that of the top buildings in the league, there’s limited upside and the franchise could conceivably have trouble attracting free agents. Is the league really interested in returning to the ’Peg? Bettman has recently indicated that the priority of the league may be to take care of markets where teams existed previously. “The market size to me hasn’t been a concern,” Bettman says. “I know there are plenty of hockey fans there.”

Quebec City: In 1995, Aubut sold the Nordiques to Denver investors after the Quebec government refused to authorize a bailout. The economy has diversified over the past 15 years and Quebec’s unemployment rate ranks among the lowest in North America. The NHL’s decision to return would hinge on the success of a campaign for a new publicly funded $400-million arena, championed by the mayor. How passionate is the business community? Suites for the nonexistent building have already sold out. Media giant Quebecor, led by CEO Pierre Karl Péladeau, wants to own the franchise.

Hamilton: The market is far bigger than the city itself; more than three million people live within an 80-kilometre drive of Copps Coliseum. But the arena needs major upgrades, and various estimates of costs range between $50-million and $200-million. Despite acknowledging in federal court in Phoenix that revenues generated by a Hamilton franchise would be among the league’s highest, the NHL claims not to have studied the feasibility of putting a franchise in the city. Says Bettman: “If you were to have a second team in Southern Ontario … maybe it belongs in London, maybe it belongs in Waterloo. Who knows? The notion that ‘well, there’s an old building that happens to be there [so] let’s go,’ I don’t think that’s the way you put your franchises on the ground.”

Toronto: Research demonstrates a massive appetite among sports fans for a second NHL team in Toronto, roughly double the interest in attracting an NFL team. The corporate support would be all but guaranteed, as Toronto is the location of more than 900 head offices. There is land available for a new arena at the Woodbine racetrack and the former Downsview Airport. But a second team would have an impact on the overall entertainment industry, in which Maple Leaf Sports and Entertainment is heavily engaged. Do the Leafs have a veto? MLSE disagrees with the NHL about its right of territorial control over a market of more than five million people. But even if a deal could be made to compensate MLSE, the cost of an expansion or relocation fee, plus a new arena, could be prohibitive. Meantime, in spite of many rumours, no company or individual has stepped forward to begin the process of establishing a franchise.

[Phil]

http://www.theglobeandmail.com/sports/hockey/why-not-winnipeg/article1629344/
Why not Winnipeg?

David Naylor

Winnipeg — Globe and Mail Update
Published on Monday, Jul. 05, 2010 8:12PM EDT
 
Last updated on Tuesday, Jul. 06, 2010 7:57AM EDT

http://www.youtube.com/watch?v=IUUnYCIg4ak (External Embedding Disabled)

When the Winnipeg Jets packed up and moved to Phoenix at the end of the 1996 NHL season, it felt like goodbye forever.

The cost of doing business in the NHL was skyrocketing and poor little Winnipeg simply couldn’t keep up.

“At that time [the NHL] didn’t fit Winnipeg,” said Mark Chipman, chairman of True North Sports and Entertainment which owns the six-year-old MTS Centre and the AHL’s Manitoba Moose in the city. “It was a remarkable effort and I don’t think it was anybody’s fault, it just wasn’t enough at the time.”

Back then Chipman was one of those local businessmen trying to find a way to save the Jets. When the effort failed, he brought an AHL franchise to Winnipeg. And several years later, he began the process of building a new downtown home for the Moose.

Toronto-based billionaire David Thomson, chairman of Thomson Reuters, became an equity partner in True North through his real estate company, Osmington, Inc. (The Thomson family holding company, Woodbridge, has a 40-per-cent interest in CTVglobemedia, whose properties include The Globe and Mail.)

Today the MTS Centre sits downtown at the corner of Portage Avenue and Donald Street, a shining success both as a hockey and entertainment facility. It books the third-highest number of shows in Canada, behind only the Air Canada Centre in Toronto and the Bell Centre in Montreal.

Winnipeggers have proved a willingness to pay top dollar for entertainment. And market research commissioned by True North indicates they would do the same for NHL hockey, giving the company the confidence to try repatriating the Coyotes recently, and to continue pursuing a franchise.

“We’ve tested it by using a price that has existed in relative Canadian markets,” said Chipman, speaking publicly about the research for the first time. “When we test those average ticket prices, and the suite prices, and the … corporate sponsorship that you need to sell, it hasn’t caused any concern or alarm with any or our existing sponsors and prospective ones.”

Last May, Winnipeg hockey fans almost had their dream come true before the NHL arranged a last-minute deal with Glendale, Ariz., to keep the Coyotes in Phoenix at least one more season. But the NHL was prepared to direct the team to Winnipeg, sources say, had Glendale not agreed to pick up as much as $25-million (U.S.) in losses next season.

“There’s never been any doubt about the passion of fans, people in Winnipeg,” NHL commissioner Gary Bettman said. “So it’s always been a good hockey market. Finally they have an arena that is up to NHL standards.”

The MTS Centre, with 15,015 seats and just 50 luxury boxes, would be the smallest building in the NHL. But Chipman believes it is ideal for Winnipeg, even though it won’t be able to match the revenue generation of the league’s other buildings. He subscribes to the theory that it is better to have too few seats than too many.

“It’s suitable for our market,” Chipman said. “I think your building has to fit your market. We’ve had this discussion with the league. They are very familiar with the size of the facility and have not expressed any concerns about the size. And I think if I have learned one thing in this business over the past 15 years it’s that if your supply outstrips your demand, it’s a slippery slope. It’s a very difficult business to be in.”

The bigger question in Winnipeg is whether there is sufficient corporate muscle – and will – to buy the high-end tickets and luxury suites.

According to Statistics Canada, 128 companies have head offices in Winnipeg, slightly less than half Calgary’s total. Research firm Environics Analytics reports there are 272 businesses generating more than $20-million in revenue and with more than 100 employees, slightly more than half of Edmonton’s total.

“The size of the community is such that you can get a real good sense of what the corporate community’s desire and appetite is for a team,” Chipman said. “It’s not something we have to guess at. I’m confident it’s there.”

With a smallish building and population of just 741,000, a Winnipeg franchise would likely have to compete at the mid-range of the NHL’s player pay scale (about $50-million U.S.). In contrast, the existing six Canadian franchises in Montreal, Ottawa, Toronto, Calgary, Edmonton and Vancouver all spend close to the maximum, or slightly less than $60-million (U.S.) this coming season.

Further, there would be the inevitable difficulty of attracting players to Winnipeg, a problem that dogged the Jets in the 1990s and plagues Edmonton today.

All of which raises the question of whether the enthusiasm for a team would wane if the team is unable to win consistently, or even sporadically. When the Jets struggled and often missed the playoffs, attendance averaged less than 14,000 a game.

“I think the biggest problem you’ve got here in Winnipeg is that if you start to put out a product that is not performing to expectations, [fans] start to stay away,” said Rob Warren, director of the Stu Clark Centre for Entrepreneurship at the University of Manitoba. “I don’t think Winnipeggers are that die-hard.”

One thing that has changed since early 1990s is the local economy. Winnipeg’s population is growing at roughly three times the rate it was in 1996, and its unemployment rate is down by more than 30 per cent.

“If there is an economy that managed to escape the latest recession, it’s the Winnipeg economy,” said Mario Lefebvre, director of the Centre for Municipal Studies at the Conference Board of Canada. “It has diversified nicely over the years. So I think we have a solid foundation of a whole sort of industries, including manufacturing. It’s not a bad story.”

http://www.theglobeandmail.com/sports/winnipeg/article1629346/
Winnipeg's Report Card

Market Attractiveness

Economy: B-

Demographics: C

Market Size: C

Corporate presence: C+

Its economy weathered the recent recession as well as any in Canada. Characterized by slow and steady growth over the past 15 years. Winnipeg’s population of about 750,000 is growing at about three times the rate it was when the Jets left town in 1996 and its unemployment rate is well below the Canadian average. Its median household income is in line with the Canadian average, while the corporate presence is small but boasts more head offices than Ottawa. It citizens have shown the ability to pay for top-flight entertainment, making the MTS Centre the third-busiest building in Canada.

Overall Market Attractiveness Grade: C+

Critical Factors

Potential Ownership: A

Arena and Location: B+

Competition and Barriers to Entry: A

The MTS Centre has a great downtown location, but with just more than 15,000 seats and 50 corporate boxes, it is small by NHL standards. There is competition of a smaller scale in the CFL’s Winnipeg Blue Bombers and independent pro baseball’s Goldeyes. Potential owners Mark Chipman and David Thomson combine a strong local presence with immense wealth.

Final Grade for viability: B

Its smallish population base and corporate presence would make Winnipeg vulnerable to an economic downturn or slump in the Canadian dollar. And unlike the six existing Canadian clubs, it couldn’t spend to the maximum on players. But the commitment of ownership, new building and resilient economy make this a viable option for the NHL.

Winnipeg

NHL history: Winnipeg Jets (1979-96) moved to become the Phoenix Coyotes.

Potential Owners: Mark Chipman, chairman of True North Sports and Entertainment, and partner David Thompson, chairman of Woodbridge Co. Ltd., whose net worth of $19-billion makes him the wealthiest person in Canada.

Demographic snapshot

Metro Population: 741,000

Median Household income: $58,128 (Canadian average $59,090)

Average Household disposable income: $52,000 (Canadian average $56,000)

Average Household net worth: $291,034 (Canadian average $351,282)

Percentage of population aged 25-39: 21 per cent (Canadian average 20 per cent)

Index for watching NHL hockey on television: 104 (Canadian average 100)

Economic snapshot

Number of head offices: 128

Unemployment rate: 5.7 per cent (Canadian average 8.1)

Number of businesses with 100-plus employees: 520

Number of businesses with $20-million-plus in sales: 619

Number of businesses with 100-plus employees and $20-million-plus in sales: 272

Population rate of growth: 1.3 per cent

GDP growth: 2.2 per cent

Retail sales: $9.7-Billion

Sports competition in market: Winnipeg Blue Bombers (CFL), Winnipeg Goldeyes (Northern League Baseball).

Arena

MTS Centre, located in downtown Winnipeg, opened in 2004. Seats 15,015 with 50 luxury suites.

Has Going For It: Slow but steady growth in an increasingly diversified economy. Population growth significantly stronger than when the Jets left 14 years ago. A building deemed suitable by both potential owners and the NHL. Potential ownership group with the wealth to sustain losses in down years.

Has Going Against It: Would be the NHL’s smallest market, making more vulnerable to a downturn in the economy or a dive by the Canadian dollar. Would likely have to compete at the mid-range between NHL’s salary floor and ceiling. Number of large companies roughly half of smallest existing Canadian markets. Market has not historically always supported losing teams.

What they’re saying: “We’ve tested using pricing that has existed in relative Canadian markets … Ottawa, Edmonton and Calgary to a lesser extent. When we test those average ticket prices, and the suite prices, and the pricing of the menu on corporate sponsorship that you need to sell, it hasn’t caused any concern or alarm with any of our existing sponsors or perspective ones.”

Mark Chipman, chairman, True North Sports and Entertainment.

What Gary Bettman says: “There’s never been any doubt about the passion of fans, people in Winnipeg for NHL hockey. … It’s always been a good hockey market. If you talk to the people who are interested in having a franchise in Winnipeg now, they’ll tell you compared to what’s going on in the rest of North America, the economy is pretty strong and they have no doubts with the economic viability.”

Professor Norm O’Reilly’s scorecard

Market Attractiveness

Economy: B-

Demographics: C

Market size: C

Corporate presence: C+

Overall score for market attractiveness: C+

Franchise viability

Arena and location: B+

Competition and barriers to entry: A

Potential owner (Mark Chipman, David Thomson): A

Final grade: B

What Norm O’Reilly says: “With the right owner, and the right management team, and the right overall philosophy, you could make it work. You’d have to accept probably not having a high-paid team on the ice. You’re going to fill 80 to 90 per cent of your building with an average team so your risks are mitigated a bit. With a few factors in play, with the current economic situation, it could work. Long term? That’s a question.”

Note: Norm O’Reilly’s evaluations are based on his own background and knowledge of the subject, transcripts of interviews done by TSN/The Globe and Mail for this series and data collected from various sources, including Statistics Canada, the Conference Board of Canada and Environics.

[Phil]

http://www.theglobeandmail.com/sports/hockey/why-not-hamilton/article1630834/
Why not Hamilton?

David Naylor

Globe and Mail Update
Published on Tuesday, Jul. 06, 2010 6:33PM EDT
 
Last updated on Friday, Jul. 09, 2010 9:48AM EDT
 

One of the most famous goals in hockey history was scored at Copps Coliseum in Hamilton when Wayne Gretzky fed Mario Lemieux for the winner in the third and deciding game of the 1987 Canada Cup against the Soviet Union.

Back then, Hamiltonians could taste the NHL coming to their town and playing games in its then state-of-the-art arena, built to bring the NHL back to Hamilton after an absence of more than 60 years. Almost a quarter century later, Copps Coliseum and Hamilton hockey fans are still waiting, perpetually teased but always denied what they believe is their destiny.

“I think some people would say that the fix is in, that the NHL is not interested in Hamilton,” said Hamilton city councillor Terry Whitehead, who initiated a subcommittee to look at attracting the NHL. “From my perspective, we have the facility, we have the location, we have the market. It would be silly for us to turn our backs at this stage of the game.”

Hamilton may not be turning its back on the NHL but the NHL has shown no interest in delivering the city a franchise, either through expansion – which Hamilton lost out on to Tampa Bay and Ottawa in 1990 – or relocation, as Research In Motion co-chief executive officer Jim Balsillie learned during his experiences trying to buy the Pittsburgh Penguins, Nashville Predators and then the Phoenix Coyotes.

“I think people tend to focus on Hamilton because there is a building there,” NHL commissioner Gary Bettman said. “I’m not sure that’s a building we have any interest in going into because it would need a substantial renovation.”

Whitehead said the arena could be brought to NHL business standards for about $100-million. Balsillie’s plan, which included a new atrium-style lobby, a ticketing area, street-level retail, expanded seating capacity to more than 18,000 and 89 luxury boxes, came in at an estimated cost of $150-million. Bettman believes the requirement would exceed $200-million.

There is little debate that hockey fans would fill the arena, renovated or not.

While Hamilton’s metro population is slightly less than 750,000 this year – smaller than Winnipeg or Quebec City – the actual market grows to about 3.2 million when the municipalities within 80 kilometres of Copps Coliseum are added in.

When Balsillie held his suite-and-ticket drive in 2007, he collected more than 14,000 down payments in less than a week. A significant portion came from addresses scattered throughout Southern Ontario, outside of Hamilton.

“The cities around Hamilton would jump onto the same bandwagon,” said Mario Lefebvre, director of the Centre for Municipal Studies at the Conference Board of Canada. “It’s a very decent market for the NHL.”

In U.S. federal bankruptcy court in Phoenix, the NHL declared that a Hamilton franchise would generate the league’s fifth highest revenue. The claim was made to protect the league’s right to a huge relocation fee, in the event Balsillie had been allowed by the court to relocate the Coyotes last year.

There are NHL governors who have told The Globe and Mail privately that the NHL should be investigating the opportunity in Hamilton. But Bettman couldn’t be less interested. He said the league’s priorities are to keep teams in their present locations, with relocation to former NHL cities as the fallback. In other words, he would favour Winnipeg or Quebec City over Hamilton for expansion or relocation.

“Despite the way it’s sometimes portrayed, we’re not sitting there sharpening our pencils and running the numbers,” Bettman said. “This is sport. This is a business that depends on an emotional connection to our teams, to our players, to our game. Is that the right place if you were to have a second team in Southern Ontario? Maybe it belongs in London, maybe it belongs in Waterloo. Who knows? That’s not anything anyone has studied. The notion that well, ‘There’s an old building there that happens to be there, let’s go,’ I don’t think that’s the way you put your franchises on the ground.”

Perhaps Bettman and the NHL really aren’t convinced Copps Coliseum could be made suitable. And perhaps, despite vouching for the market in court, they don’t see what others say is obvious about the potential of the market around Hamilton to support NHL hockey.

Or perhaps the NHL simply doesn’t want to cross swords with the Toronto Maple Leafs and Buffalo Sabres. The NHL defines territorial rights as extending 80 kilometres in all directions, meaning Hamilton sits within the defined territory of both franchises.

Another tease surfaced last week, when it was revealed that Edmonton Oilers owner Daryl Katz is negotiating for the Copps Coliseum lease. But the city’s spurned fans believe the failure to land a team has everything to do with what lies down the Queen Elizabeth Way, in opposite directions.

“The market is very strong, extremely supportive of hockey, no doubting it at all,” University of Ottawa sports business professor Norm O’Reilly said. “The challenge becomes, you have two other franchises in that market. So it becomes a political thing.”

Russ Boychuk knows the power of the Leafs firsthand. Back in the 1980s, to stage an NHL exhibition games at Copps, the Hamilton investment manager had to pay then-Leafs owner Harold Ballard between $75,000 and $100,000.

“We’ll have to walk down the aisle with Buffalo on one hand and Toronto on the other hand,” Boychuk said. “That’s the major hurdle. Until we address that, the NHL won’t get a team. As soon as Toronto says, `We want a team in Hamilton,’ all 30 members of the board will say, ‘Yeah, it’s there.’”

Maple Leaf Sports and Entertainment, owner of the Maple Leafs, declined a request to be interviewed for this series of articles.

http://www.theglobeandmail.com/sports/hockey/why-not-hamilton/article1629193/
Hamilton Report Card

NHL history

Hamilton Tigers (1919-25) moved to become the New York Americans.

Potential owners

Jim Balsillie, the RIM billionaire has tried to buy the Pittsburgh Penguins, Nashville Predators, and Phoenix Coyotes with an eye to relocation in Hamilton.

Demographic snapshot

Metro Population: 728,000. But Copps Coliseum sits a short drive from cities such as Kitchener-Waterloo, Guelph, Oakville, Burlington and St. Catharines, easily boosting potential market to over 2 million.

Median Household income: $64,377 (Canadian Average $59,090)

Average Household disposable income: $59,339 (Canadian Average $55,541)

Household net worth: $396,014 (Canadian Average $351,282)

Percentage of population aged 25-39: 19 per cent (Canadian Average 20 per cent)

Index for watching NHL Hockey on Television: 105 (Canadian average 100)

Economic snapshot

Number of Head offices: 89

Unemployment rate: 7.8 per cent (Canadian average 8.1)

Number of businesses with 100+ employees: 354

Number of businesses with $20+ million in sales: 491

Number of businesses with 100+ employees and $20+ million in sales: 215

Population rate of growth: 1 per cent

GDP Rate of Growth: 3.3 per cent

Retail Sales: 7.9 Billion

Sports Competition in market: Hamilton Tiger-Cats

Arena

Copps Coliseum, built in 1985, seats 17,300 with minimal luxury suites. Would require at least $100 million in renovations to reach NHL standards.

Has going for it

With a diversifying economy and bright economic forecast, the City of Hamilton is projecting strong growth in the years ahead. And immediate area surrounding Hamilton easily triples its potential market, giving it more than enough population and wealth to support an NHL hockey. There’s already an arena and a potential owner in waiting.
Has going against it

The NHL just isn’t interested. Speculation is that may have something to do with appeasing the wishes of the Toronto Maple Leafs and Buffalo Sabres. Regardless, the league, despite claiming in court that Hamilton would be its fifth most valuable franchsie, says it hasn’t studied the market and isn’t planning to. Copps Coliseum would require at least $100 million in renovation to host an NHL team. Potential owner Jim Balsillie has been turned down as a suitable owner by the NHL.

What they’re saying

“I believe that this would in fact be a Southern Ontario team. Not just a Hamilton team, we would draw from afar. When you take a look at who’s buying corporate boxes and who’s putting their money down to purchase season tickets, look at the geographic map, they are coming from all over Southern Ontario.” – Terry Whitehead, Hamilton City Councillor.

What Gary Bettman says

“The notion that, well there’s an old building there, that happens to be there, let’s go, I don’t think that’s the way you put your franchises on the ground.”

Professor Norm O’Reilly’s Scorecard
Market Attractiveness
Economy    B
Demographics    B
Market Size    A+
Corporate presence    B+
Overall Market Attractiveness Grade    A-

Hamilton’s metro population is less than three-quarters of a million people. But there are over three million people who live within a 50-mile drive of Copps Coliseum. An optimistic economic forecast and diversifying economy, combined with the markets proven history of being willing to lay down money for the NHL, make Hamilton a very attractive market.

Franchise Viability

Potential Ownership    A
Arena and Location    C
Competition and Barriers to Entry    D-

Jim Balsillie wants to own a Hamilton franchise but it doesn’t want him. Copps Coliseum needs a significant upgrade to be NHL-ready, anywhere from $100-$200 million depending on whom you believe. And the expressed right of the Toronto Maple Leafs to control the Southern Ontario territory, and possible NHL concerns about the Buffalo Sabres, are all negative factors.

Final Grade for Viability    D-

Hamilton and surrounding cities would warmly support an NHL team. But the fact Copps Coliseum needs work combined the NHL’s anywhere-but-Hamilton attitude make this a huge uphill climb.

[Phil]

http://www.theglobeandmail.com/sports/hockey/why-not-toronto/article1632432/
Why not Toronto?

David Naylor

From Thursday's Globe and Mail
Published on Thursday, Jul. 08, 2010 12:37AM EDT
 
Last updated on Thursday, Jul. 08, 2010 5:38PM EDT
 

The Toronto Maple Leafs charge the highest ticket prices in the NHL and generate the league’s greatest revenues. The franchise earned a $79-million (U.S.) profit during the 2008-09 season, according to Forbes magazine’s annual report on NHL finances, and that was without making the playoffs and with a lower Canadian dollar value than during the past season.

All the evidence suggests the Leafs could comfortably co-exist with another NHL franchise in the Greater Toronto Area, arguably without a dent to the bottom line. In April, research by IMI International conducted to gauge interest in a second franchise showed there are roughly 800,000 residents who consider NHL hockey “a passion” but who haven’t been able to attend a live game in at least two years.

“There is massive demand for a second NHL team in Toronto,” said Don Mayo, global managing partner for IMI in Toronto. “If there is more supply, there will [still] definitely be great demand.”

The NHL, however, seems uninterested in tapping that demand. NHL commissioner Gary Bettman categorically denied reports that he has quietly calculated an expansion fee for a Toronto franchise, one that would fetch a whopping price. He claims a second GTA team is not on the NHL’s radar screen.

“I have no idea,” he said, when asked in an interview for the Why Not Canada? series, whether the league has considered viability of a second Toronto team. “It’s not something we’ve looked at.”

The most basic reason for the Leafs success is size of market. Hockey is the most popular professional sport in Toronto, a city that is home to more than 900 corporate head offices, almost double Montreal’s total, more than three times that of Calgary and almost nine times Ottawa’s. According to the research firm Environics Analytics, more than 2,300 businesses in Toronto employ at least 100 people and generate better than $20-million in sales, representing nearly 20 per cent of the national total of companies in that category.

“Without revealing the numbers, I would estimate you’d see the Leafs probably being close to equalling all the teams across the country in total [corporate sponsorship],” said Mark Harrison, president of TrojanOne sports marketing in Toronto. “Cleary they’ve got that opportunity with the corporate head offices here and a perfect venue [the Air Canada Centre, which is connected to Union Station in the downtown core].”

Maple Leafs Sports and Entertainment, owner of the Leafs, declined a request to be interviewed for this series. MLSE’s presumed resistance to a second team could be rooted in the potential effect on its other business ventures, rather than hockey.

“The Maple Leafs would be fine,” Mayo said. “The biggest impact would be on other sports teams, such as the [MLSE-owned] Raptors or the Toronto FC, or the Blue Jays [owned by Rogers Communications] because there’s only so much money in a marketplace. It would also impact cultural and other events because people don’t have unlimited funds.”

MLSE, in a strongly worded letter to the NHL dated Nov. 29, 2006, claimed the right to a veto over another team within an 80-kilometre radius of downtown Toronto.

“The Toronto Maple Leafs do not agree that a relocation of another club into their home territory would be subject to a majority vote [of the NHL board of governors],” the letter to Bettman from a Leafs lawyer states. “They continue to believe that a unanimous vote would be required before a team could be relocated into their home territory.”

A unanimous vote would include MLSE’s own vote, and the legality of that position is murky, the outcome of a challenge difficult to predict.

Kevin Wright, specializing in competition and antitrust law at Davis LLP in Vancouver, believes the Canadian Competition Bureau would be “concerned if ... the reason a team wasn’t being relocated to Toronto was not because of legitimate interest by the league [in] promoting another city, but rather because of the interest of one team. That is, a veto being exercised to prevent the move.”

The NHL is on record disputing the Leafs’ view of territorial rights.

“We do not believe they have any rights in that regard,” Bettman said.

The Competition Bureau ruled in 2007 that the NHL’s policies regarding relocation are not anticompetitive but it never acknowledged or addressed the Leafs claim to a veto.

In theory, MLSE could be compensated but an indemnity payment would come with a heavy price tag, often speculated at well over $100-million. Combined with an expansion and relocation fee and the expense of building a new arena, and the cost of putting a second Toronto franchise together begins to look prohibitive.

“You’re talking about a pretty big number, probably pushing to $1-billion,” said University of Ottawa sports business professor Norm O’Reilly, who assigned the viability grades for the Why Not Canada? series. “Knowing the Toronto market and how supportive it is for hockey and how it’s been growing, there’s no question a team could be viable year after year. But could you ever overcome that huge investment required up front?”

http://www.theglobeandmail.com/sports/hockey/toronto-report-card/article1628544/
Toronto Report Card
NHL history 

Toronto Maple Leafs (1917-present).

Potential owners 

None identified.

Demographic snapshot 

Metro Population: 5,700,000

Median Household income: $67,948 (Canadian Average $59,090)

Average Household disposable income: $67,221 (Canadian Average $55,541)

Average Household net worth: $531,621 (Canadian Average $351,282)

Percentage of population aged 25-39: 22.8 (Canadian Average 20 per cent)

Index for watching NHL Hockey on Television: 93 (Canadian average 100)

Economic snapshot 

Number of Head offices: 919

Unemployment rate: 9.5 per cent (Canadian average 8.1)

Number of businesses with 100+ employees: 3,783

Number of businesses with $20+ million in sales: 4,921

Number of businesses with 100+ employees and $20+ million in sales: 2,322

Population rate of growth: 1.7 per cent

GDP Growth: 3.7 per cent

Retail sales: $60.8 billion

Sports Competition in market: Toronto Raptors (NBA), Toronto Blue Jays (MLB), Toronto FC (MLS), Toronto Maple Leafs (NHL), Toronto Argonauts (CFL)

Arena 

None.

Has going for it 

The Greater Toronto Area is the biggest, richest hockey market in the world and right now isn’t coming close to being adequately served by one team. No one doubts that on a yearly cash-in, cash-out basis that a second Toronto team could be financially successful.

Has going against it 

The Toronto Maple Leafs have served notice they believe they own the right to veto another team entering the GTA. Even if the Leafs were willing to make a deal to allow a second team, the costs of such a venture might be prohibitive. Add up the cost of an expansion or relocation fee, the expense of building a new arena and the fees to indemnify the Leafs and Buffalo Sabres and you’re talking about spending close to $1 billlion dollars before a puck is dropped. As well, the NHL says it has no interest in a second Toronto franchise at this time.

What they’re saying 

“There’s massive appetite for a second team in Toronto. There’s about 800,000 people in the GTA right now that have NHL hockey as a passion that haven’t been able to attend a hockey game in the past two years. So if there is more supply, there will definitely be great demand.” – Don Mayo, Global Managing Partner, IMI International.

What Gary Bettman says 

“I have no idea. It’s not anything we’ve looked at.”

Professor Norm O’Reilly’s Scorecard 

Market Attractiveness 

Economy  A- 
Demographics  B+ 
Market Size  A+ 
Corporate presence  A+ 
Overall Market Attractiveness Grade  A+ 

With a strong economy, monstrous corporate presence and growing population, not even another team in the market can take the shine off of the Greater Toronto Area. The pent-up demand from passionate hockey fans who can’t get to NHL games is immense. Which is why combined with its wealth and size the market is a winner. 

Franchise Viability 

Potential Ownership  ? 
Arena and Location  F 
Competition and Barriers to Entry  F 

The Toronto Maple Leafs have expressed their right to veto another team in their market. Though the NHL disagrees with that right, it probably doesn’t want to test it. If there was a deal to be made with the Leafs it would be costly. Add that to an expansion or relocation fee, plus building a new arena, and the numbers start to climb towards $1 billion before the puck is dropped. 

Final Grade for Viability  D- 

There’s rich and hungry market for a second NHL team in the GTA. The problem is how a team gets there. Note: Norm O’Reilly’s evaluations are based on his own background and knowledge of the subject, transcripts of interviews done by TSN/Globe and Mail for this series and data collected from various sources including Statistics Canada, the Conference Board of Canada, Environics Analytics, IMI and Harris-Decima. 

[Phil]

http://www.theglobeandmail.com/sports/hockey/why-not-quebec-city/article1633783/
Why Not Quebec City?

David Naylor

From Friday's Globe and Mail
Published on Thursday, Jul. 08, 2010 11:17PM EDT
 
Last updated on Friday, Jul. 09, 2010 9:49AM EDT
 

As the Quebec Nordiques struggled financially in the early 1990s, then-Premier Jacques Parizeau asked team president Marcel Aubut for best- and worst-case scenarios.

“I remember for the worst, we showed him something that [was so dire] we were laughing,” Aubut said. “We said that would never happen.”

But the situation in Quebec City deteriorated beyond the worst case, Aubut said, insisting still today that the sale to Denver-based ownership for $75-million (U.S.) was the only recourse.

“It was just like pulling my heart out of my body,” Aubut said. “We had to say we made the right decision. Waiting would have resolved nothing.”

At the time, Aubut asked the province and city to build a new Colisée at a cost of $50-million, and for construction of a casino to cover the team’s estimated annual losses of $25-million. The requests denied, the Nordiques became the Colorado Avalanche and Aubut made a reported $15-million personally on the sale, along with a guaranteed job as consultant for the team. T-shirts with his picture and the caption “Wanted: Dead Or Alive” sold briskly.

Fifteen years later, Aubut and others in Quebec City are trying to bring the NHL back to the city, with Quebecor Inc. said to be interested in ownership. They point to the NHL’s salary cap and the consistent strength of the Canadian dollar as positive differences between now and then. And the province’s capital offers comparative political stability, the country’s lowest unemployment rate, a growing private-business sector, and a ferocious appetite for hockey.

“The only thing I care about is getting a team back here and seeing Quebec back in the professional hockey league,” Quebec City Mayor Régis Lebeaume said. “Something is missing in town. It’s the spirit about our national sport.”

Lebeaume is a proponent of a publicly funded, $400-million arena that would seat 18,000 and be core to the city’s bid for the 2022 Winter Olympics. He is pledging $50-million of local taxpayer money and asking the provincial and federal governments to pick up the rest.

“I am a fan. I love the game,” Lebeaume said. “I think our Premier [Jean Charest] loves the game as well. You have to see the big picture. … The big challenge for me is to get the building decision as soon as possible. I don’t want to miss the opportunity to get a team.”

The arena would be North America’s largest wooden structure – built to reflect the city’s culture, with sailing flags and a moat that would serve as an outdoor skating platform rink in winter.

“We want it to be one of the most important buildings in the city of Quebec, a symbol for the city,” said François Moreau, chief executive officer of ABCP Architecture, designers of the building and a partner in the non-profit organization backing it. “The population is really behind this project.”

And so apparently is the NHL.

“I’ve spoken to the Mayor, I’ve spoken to the Premier,” commissioner Gary Bettman said. “They seem to be hopeful to confident that there will be a new arena. … There are a lot of hockey fans there. With the right ownership group, with a new arena … I believe a team can be well-supported in that market.”

Media giant Quebecor was among the final bidders for the Montreal Canadiens last spring. President and CEO Pierre Karl Péladeau reportedly met with Bettman recently to proclaim the merits of Quebec City, and Bettman has spoken public about the league’s desire to return to previous markets.

“Pierre will be the dream owner,” Aubut said. “He’s young, a good operator and the synergy with everything he’s got – television, newspapers, cable – would be a perfect fit. We could [also] find an owner who would want to move [to Quebec City]. We have to be open to all options.”

Winnipeg is the other abandoned market. Quebec City also has a relatively small metropolitan population, 754,000, with fewer corporate head offices and large businesses than Winnipeg. But with a bigger building than Winnipeg’s MTS Centre (15,015), a franchise in Quebec City could conceivably charge lower prices for tickets.

In March of 2009, the non-profit organization behind the project starting accepting down payments on suites and seats in the proposed new building. The 70 suites are already sold out, with a waiting list behind, and there have been 2,300 deposits on season tickets. As of this week, the company has taken in $10.8-million.

“It’s fantastic – without a team, only the expectation of having a team some day,” Moreau said.

However, the NHL has no plans of expanding any time soon, which raises the delicate issue of the city proclaiming its interest even as the league resolutely avoids relocating franchises.

“We just want to be a solution for the NHL,” Lebeaume said. “I’ve been straightforward with commissioner Bettman. He knows exactly where I’m going.”

http://www.theglobeandmail.com/sports/hockey/quebec-city-report-card/article1629209/
Quebec City Report Card

NHL history 

Quebec Nordiques(1979-95) moved to become the Colorado Avalanche.

Potential owners 

Quebecor Media Inc. (CEO Pierre Karl Peladeau)

Demographic snapshot 

Metro Population: 754,000

Median Household income: $54,047 (Canadian Average $59,090)

Average Household disposable income: $46,615 (Canadian Average $55,541)

Average Household net worth: $212,078 (Canadian Average $351,282)

Percentage of population aged 25-39: 21.1 per cent (Canadian Average 20 per cent)

Index for watching NHL Hockey on Television: 107 (Canadian average 100)

Economic snapshot 

Number of Head offices: 85

Unemployment rate: 5.5 per cent (Canadian average 8.1)

Number of businesses with 100+ employees: 454

Number of businesses with $20+ million in sales: 561

Number of businesses with 100+ employees and $20+ million in sales: 225

Population rate of growth: 0.8

GDP Rate of Growth: 2.2 per cent

Retail Sales: $11.3 Billion

Sports Competition in market: Quebec Les Capitals (Can-Am League baseball), Quebec Ramparts (QMJHL)

Arena 

Proposed publicly funded $400 million, 18,500-seat arena built to NHL business standards.

Has going for it 

A greater appetite for hockey than other markets and a strong economic turnaround characterized by more private business and low unemployment. Proposed arena appears to have the backing of local and provincial governments, as well as the business community. Potential owner would have the incentive to support the hockey business for synergies with media holdings.

Has going against it 

Would be the NHL’s smallest market, making vulnerable to a downturn in the economy or a dive by the Canadian dollar. Has a relatively small number of large companies and head offices. Per capita wealth and disposable income is below Canadian average.

What they’re saying 

“Something is missing in town. It’s the spirit about our national sport. It would be good for the community. More than that it makes the city more attractive. I’m trying everything I can to make this city more attractive. We’re going to have big events here so I need a hockey team to be equal to Montreal.” – Regis Lebeaume, Quebec City Mayor.

What Gary Bettman says 

“I’ve spoken to the Mayor, I’ve spoken to the Premier, and they seem to be hopeful to confident that there will be a new arena, perhaps in conjunction with an Olympic bid. But the arena is essential. I’m glad people are enthused … There are a lot of hockey fans there. With the right ownership group, with a new arena, and the economic system we have – which is different than the one we had when the team left – I believe a team can be well supported in that market.”

Professor Norm O’Reilly’s Scorecard 
Market Attractiveness 
Economy  B- 
Demographics  C 
Market Size  C 
Corporate presence  C+ 
Overall Market Attractiveness Grade  C+ 
It has one of North America’s lowest unemployment rates, an economy less reliant on government than 15 years ago, and an income per capita that has surpassed that of Montreal. But with just three-quarters of a million people its market is small by NHL standards, as is its corporate presence, although early indications are it would hungrily get behind NHL hockey. 
Franchise Viability 
Potential Ownership  A 
Arena and Location  A+ 
Competition and Barriers to Entry  A+ 
Quebec City’s NHL dreams are predicated on a new $400 million arena which has broad support from politicians, the public and the private sector. Media giant Quebecor and its CEO Pierre Karl Peladeau would love to own the team and an NHL team would face no sports competition within the market 
Final Grade for Viability  A 
With a small but enthusiastic market, Quebec City’s size would make it potentially vulnerable to a downturn in the Canadian dollar or the economy in general. It would need a shrewd and savvy management team. But assuming the new arena is built and the owner steps forward, it’s a very attractive place for the NHL. 

[Phil]

http://www.tsn.ca/nhl/feature/?id=27138
How are existing Canadian teams doing at the gate?

The NHL is a gate driven league with just less than two-thirds of team revenues on average being generated by ticket and suite sales.

During the 2008-09 season, the Canadian dollar slumped to near the 80-cent range in comparison to the U.S. dollar. But even with that factor in play, Canadian teams still had among the league's strongest gate revenues that season.

Based on conversations with hockey sources, here are approximate gate revenues for the six Canadian franchises during the 2008-09 season:

Why Not Canada? (TSN/Globe & Mail)

How are troubled U.S. teams doing?

The gate revenues of these four U.S. based teams in the Sunbelt pale in comparison to Canadian teams, both in terms of attendance and dollars fetched per ticket.

Why Not Canada? (TSN/Globe & Mail)

How do existing NHL arenas in Canada compare with potential new Canadian franchises?

Why Not Canada? (TSN/Globe & Mail)

* proposed arena
** under renovation plan proposed by Jim Balsillie

HOW DOES AN NHL TEAM'S BUDGET WORK?

The NHL Salary Cap will be $58.5 million during the 2010-11 season. So could smaller markets such as Quebec City and Winnipeg afford to compete at the cap, along side the NHL's other six franchises. Probably not.

There is between $35-$40 million of costs beyond payroll to operating an NHL team for a season. Meaning a well-run team at the mid-payroll range would have to raise about $85 million to break even. Making the playoffs would obviously make that easier with gates being worth as much as $1.5-$2 million depending on the round.

Here's what an NHL Revenue Sheet for Quebec City might look like (based on 95 cent Canadian dollar versus US.), based on sellouts to an 18,000 seat building, 70 suites, and an average ticket price in line with those in Edmonton, Calgary and Ottawa:

Category / Revenue (Million $)
Local Broadcast Revenue / $5.0
League distribution / $ 8.0
Gate Revenue  / $46.0
Suite Revenue  / $8.0 
Sponsorship  / $8.0 
Concessions  / $3.5
Parking/Publications/merch  / $1.5 
Other Hockey related Revenue / $2.0
Non-Hockey rev's (concerts etc)  / $3.0 
Playoffs /
TOTAL / $85 + playoff revenue

WHAT DO CANADIANS THINK ABOUT ADDITIONAL TEAMS IN THIS COUNTRY?

Back in May, the market research firm Environics Analytics discovered that 60 per cent of Canadians believe the NHL should add more teams in Canada, with only 14 opposed.

In June Harris/Decima asked Canadians which cities they thought could financially support a new NHL team. Here's what they had to say:

City Support:
Winnipeg 26 per cent
Quebec City 25 per cent
Hamilton 22 per cent
Toronto  11 per cent
Halifax 6 per cent
Vancouver 4 per cent
Montreal 3 per cent
Calgary 3 per cent
Edmonton  2 per cent
Ottawa  2 per cent
Saskatoon  2 per cent
Regina 1 per cent
Kitchener  1 per cent
London  1 per cent
Victoria  1 per cent
St. John's  1 per cent
Waterloo  1 per cent
Mississauga  1 per cent

[Phil]

http://www.tsn.ca/nhl/story/?id=327163
WHY NOT CANADA? FINAL SUMMARY

TSN/GLOBE AND MAIL
7/10/2010 5:29:08 PM

The 2010 Olympic Winter Games in Vancouver. 

The country was on a hockey high and Sidney Crosby's gold medal goal was proof to the world that hockey is Canada's game. Yet of the 30 teams in the National Hockey League, only a half-dozen can call Canada home.

In fact, there are two fewer Canadian teams than there were 14 years ago.

In the mid-1990s, when the Jets left Winnipeg and the Nordiques said adieu to Quebec City, the landscape was very different. There was a sinking Canadian dollar, skyrocketing salaries, and aging arenas.

And the fact that no one who wanted to own those teams did them in.

That's where the story of the NHL in Canada has changed the most.

A decade ago, when the Montreal Canadiens were up for sale, there was one bidder. Last spring, there were at least a half-dozen.

And now with Jim Balsillie for Hamilton, Mark Chipman and David Thomson for Winnipeg and Quebecor's Pierre Karl Peladeau for Quebec City, well-heeled investors are standing by with their cheque books ready.

While Balsillie is not in the NHL's good books, the league has no such qualms with potential owners in Winnipeg and Quebec.

“It's quite possible that with the right ownership and the right arena arrangement, that we could have additonal teams in Canada,” said NHL commissioner Gary Bettman. “What we are looking at now is interest from substantial people who would like to own a franchise.”

Part of what's opened up this door is the rise in the Canadian dollar, which continues with flirt with parity to the U.S. greenback. And projections are it will stay that way.

“I don't see any attack on our dollar anytime over the next five years,” explained Mario Lefebvre, Director of the Centre for Municipal Studies at the Conference Board of Canada. “I think the dollar should not be part of the equation, at last. That is something that should not stop any team in Canada from being successful.”

But if the dollar did dive, teams in smaller Canadian markets would have better protection thanks to the league's revenue sharing system.

And there's the salary cap.

“You are protected against the higher spending teams, which you would have seen previously, taking some of your best players,” explained sports business expert Norm O'Reilly. “You're able to keep a team.”

So while running an NHL team remains an expensive proposition, runaway costs are a thing of the past.

For years, Canadian hockey fans have complained that the NHL didn't care about Canada, a thought process that Chipman doesn't buy into.

“I think that is patently false,” he flatly said. “I guess I can understand to a certain extent how that conclusion's been drawn by those who opine on the subject. But I think if anybody has had the experience that we've had in working with the league like we have, they'd come with the exact opposite conclusion.”

“The future of the league is to go back to where there is a big fan base,” added former Quebec Nordiques CEO Marcel Aubut. “And where is that? It's right in Canada.”

And the league's stance?

“You could look at a market that might be three million or four million people and it might have an NFL team, an NBA team, a baseball team and a hockey team,” explained Bettman. “I'm not sure just because the market is bigger, that it would be better than a smaller market that had no professional sports teams and the hockey team would be the only team in town.”

Being buried behind other major league teams describes the situations in Pheonix and Atlanta - two franchises at the bottom of the NHL revenue scale. And neither one is tied to a lease, making them the two most likely candidates for relocation.

“You cannot blame the commissioner of the NHL - he'll try anything to keep the teams where they are,” said Aubut. “But at one point if it can't work anymore, I think they are going to make a move. For the best of the industry, for the players, and they'll look to where the fan bases are big and strong.”

So if there are teams that could be in play, where would they go?

The NHL decides where it wants to put teams and where it doesn't. It's clear that while the league is open to going back to Winnipeg and Quebec City, it seems to have no interest in Hamilton or putting a second team in Toronto.

“Could Southern Ontario support another team? Probably,”said Bettman. “It's nothing we've studied. My own focus has been to look at the places where perhaps we could go back to the fans who once supported us before going to some place new.”