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Canada could support double the number of NHL teams: report

Hey there, time traveller!
This article was published 13/4/2011 (2321 days ago), so information in it may no longer be current.

Canada and its hockey fans can support double the number of existing NHL teams, according to a study that says despite their relatively small populations, both Winnipeg and Quebec City would be viable franchises.

The University of Toronto report, titled "New Economy of the NHL: Why Canada Can Support 12 Teams", also takes NHL owners to task for being "collaborators in a cartel" that is a barrier to having more teams in Canada.

In its 43 pages, authors Tony Keller and Neville McGuire, argue the NHL’s four-decade-old southern strategy of growing the game in the United States, and particularly in the Sun Belt, "has been largely unsuccessful" because of low fan interest and resulting low revenue.

"As a result, there is increased pressure to relocate some of these teams to Canada where demand for hockey is stronger."

The study, from the U of T’s Mowat Centre for Policy Innovation, goes on to estimate how much stronger this demand is, by analyzing demographics and economics in 10 Canadian markets and assessing their ability to support an NHL team.

"We conclude that Canada can likely support 12 NHL teams, or double the current number of Canadian franchises."

Toronto, Montreal and Vancouver could all support second teams, say the authors who rank Winnipeg ahead of Quebec, but behind Hamilton, Kitchener, and London, Ont. on its top-10 list of prospective Canadian NHL markets.

For analysis purposes the authors used Edmonton as an existing benchmark Canadian franchise.

"Edmonton is the NHL’s smallest market and has the league’s second smallest arena, yet thanks to the higher level of interest in hockey in Canada, the Oilers consistently generate higher arena revenues than most American NHL teams."

The study goes on to break down the economics city-by-city, from the size of rink, to the number of high-income homes — 12,255 in Winnipeg’s case — and corporate head offices: there are 33 here by the author’s count.

"Winnipeg’s MTS Centre is NHL-ready," the study states. "It is a modern building, newer than Edmonton’s Rexall Place but slightly smaller, and probably the right size for a smaller market. At 15,000 seats, it would be the smallest building in the league — but if the New Jets could sell it out, and do so at ticket prices comparable to Edmonton or Ottawa, the team would enjoy greater ticket revenues than most American NHL teams."

The report notes that last season, seven of 24 American NHL teams had average attendance less than the MTS Centre’s capacity and this season a third of U.S.-based teams are attracting crowds that wouldn’t fill Winnipeg’s rink.

And, the study adds, those teams are selling tickets at prices well below the Canadian average.

The study estimates that teams located in Canada can expect to take in about US$23 million a year in extra gate revenue, compared with an American market of the same size.

The reason is Canada’s higher level of fan interest, which means "small Canadian cities are bigger hockey markets than most large American cities."

The study says Ontario’s Greater Golden Horseshoe, and its nine million people, can support three NHL teams. And that a new team would also be successful in one of three cities west of Toronto: Hamilton, Kitchener-Waterloo or London.

Relocating teams to Canada from the United States — or rather the reluctance to do that — is also addressed in the report. As is the reluctance to establish new Canadian teams.

"Why has the league not moved more of the supply of hockey to where the demand is?" the authors ask. "Why has the NHL not allowed investors to establish new teams in those six underserviced Canadian markets?

The answer, it concludes, is the monopoly structure of the league.

"Professional hockey in North America is not a free market. NHL owners are not competitors but instead collaborators in a cartel. The NHL, just like the MLB, NFL and NBA, artificially restricts the supply of top-tier professional sport for the benefit of its members, by limiting the number of franchises and controlling where they play.

This artificial scarcity in turn causes cities to compete for the right to host a big league pro team, with most American state and local governments using taxpayer funds to lure or keep a franchise. Those taxpayer subsidies — omnipresent in the US, uncommon in Canada — significantly distort the market."

Without those subsidies, — "which are often large enough to offset a lack of ticket sales and local fan interest" — the study argues teams would leave for cities where there is actual demand for hockey.

A case in point, the authors say, is the Phoenix Coyotes.

The study concludes the structure of the NHL, which undermines free-market principles, is what is to blame for more Canadian cities not having teams.

"The barrier to more NHL teams in Canada is not economic," the study concludes. "The problem is political and legal, as are the solutions."

Free Press sports columnist Gary Lawless says he agrees with the premise of the report; that the NHL works better in Canada than in sun belt in the U.S.

"We play hockey. We watch hockey. We spend money on hockey. It’s not an oddity to us. It’s part of the fabric of life."

In particular, he agrees with their conclusion that small-market cities such as Winnipeg can work because the logic is based on something people in the city have been saying for years.

"It doesn’t matter how many seats you have. It’s how much revenue you generate."

Florida can have a 20,000 seat arena, Lawless points out, but if most of them are empty there goes the revenue.

"Winnipeg’s 15,000 seats would be full all the time," Lawless predicts. "And spin off more revenue than two-thirds of the existing NHL franchise."

Where Lawless and the study part ways, though, is the top-10 list, and its rating Ontario cities such as Hamilton, Kitchener and London ahead of Winnipeg.

They’re all great markets, he acknowledges.

"And yes, we wish them the best of luck."

But the academic-top 10 list didn’t bother to factor in a reality.

"The reality is the NHL has selected Winnipeg as the next-best market to support a team."

Read more by Gordon Sinclair Jr..


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Updated on Wednesday, April 13, 2011 at 12:06 PM CDT: Adds comments from Free Press sports columnist Gary Lawless

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