Winnipeg Free Press - PRINT EDITION
Posted: 02/6/2014 1:00 AM | Comments: 0
Last Modified: 02/6/2014 7:06 AM | Updates
When the NHL returned to Winnipeg in spring 2011, much was made about the changes in the city and league's economic landscapes since the original Jets left for Phoenix in 1996.
There was a new building, deep-pocketed owners, the loonie was trading above parity with the U.S. greenback and the league had adopted a revenue-sharing model in its collective bargaining agreement with the players.
Three of those four factors are still in place today, but one faltering leg of the chair is not enough to throw the business plan of True North Sports & Entertainment out the window.
Although the loonie has fallen four cents this month alone and nearly a dime in the last 12 months, there are checks and balances in place to prevent small-market hockey teams north of the border from being adversely affected.
Canadian teams take in the vast majority of their revenue in local currency, and when the loonie trades lower than the U.S. dollar, their "hockey-related revenue" is proportionately lower.
-- Mike Ozanian, senior editor at Forbes magazine
Owners and players throughout the NHL split the hockey-related revenue, and if a Canadian team's income statement is hurt by the falling dollar, it is compensated by an increase in revenue-sharing.
Scott Brown, True North's director of corporate communications, said the loonie's fluctuations are a non-factor.
"The falling dollar has no impact on us at all due to currency mitigation laid out in the revenue-sharing part of the (collective bargaining agreement). It simplistically means that mechanisms in revenue-sharing will compensate teams for the equal amounts of revenue lost due to a decreasing Canadian dollar," he said.
Brown was backed up by NHL deputy commissioner Bill Daly.
"I do not believe at this point it is a major concern for our clubs. Most of our Canadian clubs protect themselves against currency fluctuation. Obviously, a steeper and lasting decline in the value of the Canadian dollar might prove more problematic over time, but is not a situation that we are facing right now," Daly said.
-- Bill Daly, NHL deputy commissioner
Mike Ozanian, senior editor at Forbes magazine, who regularly crunches numbers on the NHL, said the decline of the loonie is only a "small concern," nothing like it was back in the 1990s. To have a strong NHL, there must be strong Canadian franchises, he said.
"There wasn't a salary cap in the NHL then and there is one today. Now, the Canadian dollar can do less harm vis--vis the types of players you can have and the ability of a team to compete," he said.
The NHL has become better at hedging against currency fluctuations in recent years, too, Ozanian said.
The recent signing of a $5.2-billion television contract that gives Rogers Sportsnet access to most of Canada's hockey properties, including Hockey Night In Canada -- it dwarfs the deal the league has in the U.S. -- will benefit all NHL teams, including those in the U.S., so they're unlikely to put up much of a fuss.
"You don't have to be an avid NHL follower to understand that Winnipeg, Calgary and Edmonton are much hotter hockey markets than Florida and Phoenix," Ozanian said.
It only makes sense the NHL would have some provisions built in to protect the financially highly successful Canadian teams, said John McCallum, a finance professor at the I.H. Asper School of Business at the University of Manitoba. Hedging the Canadian dollar is one way to take out some of the risk, he said.
"In the short run, you hedge it. In the long run, you hope you have business partners who appreciate you don't want to have seven members on the ropes because of a crazy world they have no control over," he said.
McCallum said the value of a currency depends on so many factors -- the comparative strength of the two economies, inflation, commodity prices, interest rates, deficits and debt, trade accounts and wage rates -- that anybody who says they've correctly forecasted the loonie's trajectory is probably lying.
"In economics, there is nothing harder to predict than the value of one currency against another out in the future," he said.
Republished from the Winnipeg Free Press print edition February 6, 2014 B7
Updated on Thursday, February 6, 2014 at 7:06 AM CST: Replaces photos
Have you found an error, or know of something we’ve missed in one of our stories? Please use the form below and let us know.
Having problems with the form?Contact Us Directly
NYC's Met opera still negotiating with 10 unions
Macy's to pay $650,000 in shopper-profiling probe
US safety agency offers online recall check
Free the booze, drink in the profits: study
Japan trade deficit widens, exports up slightly
Singer Ray J denies crimes at Beverly Hills hotel
Eatery that served toxic tea had labeling citation
Lucrative Grand Canyon contract up for bid again
Anna Nicole Smith's estate loses bid for millions
Funds earmarked for startups
PetSmart to consider selling itself
FDA approves new drug for rare genetic disease
Uber hires former Obama adviser Plouffe
US wants to make cars talk to each other
Attorney blasts fatal police shooting at Wal-Mart
Prison company pays $8 million in back wages
Peanut, almond butter recalled for salmonella risk
How the Dow Jones industrial average fared Tuesday
Uber hires former Obama adviser
Fork lift load falls on man, fatally injuring him
Most actively traded companies on the TSX
List of Penn West class action lawsuits grows
Audit: 'Obamacare' tax not meeting revenue target
The top 10 books on Apple's iBooks
Spotify's Top 10 most viral tracks
US stocks move higher; Home Depot rises
Committee approves higher pension calculations
Trudeau blasts Harper's pipeline policy
Grain mixed and livestock higher
WWII bomb found near Frankfurt airport
Defence grills plant manager in salmonella trial
AP Exclusive: US changing no-fly list rules
WhiteWave to remove ingredient from Horizon, Silk
NY regulators sanction Standard Chartered Bank
Ballmer steps down from Microsoft board
Islanders announce sale of minority stake of club
CEO of bankrupt oil company sentenced in scheme
Farmers given more time to repay cash advances
AstraZeneca says DOJ closes probe into drug trial