Yes we can
Revenue-sharing system, cap mean Winnipeg can afford its own NHL team
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Hey there, time traveller!
This article was published 01/06/2011 (4209 days ago), so information in it may no longer be current.
Ever since Winnipeg began pining for the return of the National Hockey League shortly after the Jets left in 1996, one question has worried even the most optimistic of fans: Can we afford it?
There’s no reason to pass the hat for the ownership group of David Thomson and the Chipman family, as they have among the deepest pockets — if not the deepest — in the entire league.
But a rich owner is no guarantee of success. (Hello, New York Islanders.) And rich owners can very quickly become poor ones if the team doesn’t put enough butts in the seats. That can be particularly challenging in smaller cities or non-traditional markets. (Hello, Phoenix Coyotes and nearly $37 million of losses last year.)
But thanks to the lockout in 2004-05, neither the owners nor the fans have to do it alone. The NHL has a revenue-sharing system in place to give teams such as Winnipeg, Edmonton and Nashville a helping hand from their wealthy brethren in Toronto, Philadelphia and Chicago. Here’s how it works:
The top 15 teams in the league pay into a central pool based on their own financial performance. Only the bottom half of the teams in terms of revenue can qualify for revenue sharing. Of those 15 squads, a couple are typically ineligible because of their market size.
(Teams in a large market, as measured by their television territory and how many people they could reach, are automatically excluded. That includes team such as the New York Islanders and the Anaheim Ducks.)
To be eligible, teams must average 14,000 fans per game and post annual revenue growth greater than the league average.
The incentive to meet these league-imposed targets is huge. According to deputy commissioner Bill Daly, revenue sharing could add anywhere from $500,000 to $18 million to a team’s top line. For teams at the high end of the scale, revenue sharing could represent up to 30 per cent of their total intake.
Failure to meet these criteria, however, triggers penalties of 25 per cent for the first year, then 40 per cent and 50 per cent. That’s as far as they go, Daly said.
“You’ll never fall off the table. Revenue sharing will never be eliminated.”
The system was designed to help low-revenue clubs that need help covering a payroll in the mandated range, he said. While it’s often assumed the beneficiaries of revenue sharing are small-market clubs, it’s typically not contingent on the population of their cities.
“It’s really focused on revenue generation within the market,” he said.
Ian Hudson, an associate professor in the department of economics at the University of Manitoba, said the NHL’s revenue-sharing model isn’t sufficient to let small-market teams truly compete for star players. He said it’s very different than the National Football League version, where the home and away teams split the gate from each game 60-40.
“In the NFL, it’s pretty even. With Kansas City and New York, there’s not much difference in revenue-generating ability. The spread (between cities) is much more narrow (than in the NHL),” he said. “That doesn’t mean Winnipeg isn’t more viable because of revenue sharing; it is. But it doesn’t mean it won’t have some real financial constraints.”
Hudson said Winnipeg will be in much the same boat as Edmonton in terms of attracting stars and holding onto their best players.
Daly said it’s not fair to compare the revenue-sharing models of different leagues because each sport is unique in terms of financial history and how owners bought in.
Brother, can you
spare a dime?
If you think Winnipeg can compete more effectively in the National Hockey League because of the salary cap that was imposed after the lockout six years ago, imagine if the city had a team back in the Great Depression.
During the 1930s, the league was under financial pressure to lower its salary cap to $62,500 per team and to $7,000 per player. The restriction forced some teams to trade away well-paid stars in order to fit under the cap.
To lower costs even further, team rosters were reduced to just 13 players. The league even cut its officiating expenses in half by eliminating one of the two on-ice referees.
The salary cap in the NHL last year was $59.4 million, or roughly $2.83 million per player on a 21-man roster.