Speculating on the values of NHL clubs doesn’t make much sense, but it can provide some insight into league economics.
I haven't always put a lot of stock in Forbes Magazine ranking the value of sports franchises, especially National Hockey League franchises.
It's not that I don't believe the editors and writers there don't try their best to get the numbers right; I'm certain they do. But how do they gauge the income and value of what are mostly privately-held companies?
How much teams spend beyond payroll can be difficult if not impossible to ascertain. How much money they take in is just as difficult to determine as ticket pricing has become an art form and merely looking at announced ticket prices and reported attendance figures no longer works. Teams discount here, inflate there and have pricing schemes that rival those of car salesmen and real estate brokers. Television and radio contracts, at the local levels, vary widely as do sponsorship fees and advertising rates.
That said, the latest rankings, though perhaps not perfect, seem to confirm a few things people have been reporting or speculating on for months.
Forbes makes it very clear that increased ticket prices and the rise of the Canadian dollar had a huge role in the bottom line for the 2007-08 season, combining to increase revenue some 13 per cent. That's not out of line with what many of us have argued to be the case: the growth in revenue came not from "growing the game" but by raising ticket prices and by counting the extra cash value to Canadian teams of a strong Canadian dollar.
The magazine also contends that the once-strong loonie (it's been devalued by almost 20 per cent since this season began) was a primary factor in the increased value of Canadian teams, stating that five of the six Canadian-based teams -- Montreal, Ottawa, Calgary, Edmonton and Vancouver -- increased in value 15 per cent (a number corresponding almost exactly to the rise in value of the Canadian dollar). That growth compares with a 10 per cent increase that was the norm for the rest of the league. Of course the sixth Canadian team, the Toronto Maple Leafs, continued to outstrip all others in terms of revenue growth and value, a tribute to the size of the market and a long history of charging extraordinary prices for everything associated with a less-than-ordinary team.
The Leafs are said to be worth $448 million, by far the best ranking of any NHL team on either side of the border. Even without playoff revenue the Leafs made a reported 41 cents on every dollar it took in last season. You knew that even losing paid off huge in Toronto, now you have an idea as to how much.
Given that hockey and hockey writing in general is largely about fun and games and the occasional sex or drinking trial, you might be asking yourself why any of this matters.
I'll give you a one-word answer: competition.
Teams with greater revenue, even in a salary-capped system, have a better chance of competing at a higher level than teams that do not.
A classic example comes just from looking at the top and bottom of the Forbes list. The Leafs may not be good at what they do when it comes to the hockey operations, but they at least are not hindered by financial considerations when it comes to finding a new general manager or, should they choose, invest in scouting and development.
Compare that to the Phoenix Coyotes, a franchise the magazine estimates is worth $142 million and might be in need of new ownership or even relocation.
The Leafs were dubbed a monster of a money machine. The Coyotes, who are struggling to draw any kind of a fan base despite having a decent collection of young talent, chip away at every corner of their budget and still, according to Forbes, lost $9.7 million. That's a stunning amount of negative cash for a team thought to be on the rise last season.
And while most of the teams are doing better than before the lockout, the magazine paints a picture that is not always in line with the "all is well" stump speech often uttered by commissioner Gary Bettman during his many stops around the league.
The magazine disputes media reports that had both the Edmonton Oilers and Nashville Predators selling for around $200 million -- a figure the NHL maintains is the norm for franchise value. Forbes says the equity value (when net debt is factored in) was really $170 million for the Oilers and $174 million for the Predators.
Is anyone truly shocked by that?
The magazine also maintained that the New York Islanders (again, anyone surprised?) would be on virtual life support were it not for the value of a lucrative cable deal and that the Carolina Hurricanes have the lowest operating income in the 30-team league at minus-$11.5 million. We all knew the Hurricanes were in trouble when they lost their revenue share because they fell short of league-mandated revenue targets. What Forbes has provided is a reasonable estimation of just how far down the economic ladder they have slipped.
For the record, Phoenix is 29th with minus-$9.7 million in operating income. In total there are 10 teams -- Carolina, Phoenix, Buffalo, the New York Islanders, St. Louis, Washington, Atlanta, Boston, Philadelphia and Nashville -- in negative numbers ranging from minus-$11.5 million to minus-$1.3 million.
There are only three surprises on that list: Buffalo, Boston and Philadelphia. Buffalo at least has the excuse of having missed the playoffs last season.
The Minnesota Wild, often touted as one of the expansion success stories given years of sellouts and a relatively low payroll, is said to have operating income of just $700,000. Now you know why there are such strong rumours about Marion Gaborik being shopped around.
Some other gems from Forbes: revenue increased 13 per cent to an average of $92 million per team and operating income rose an average of $4.7 million per team; ticket revenue, on average, made up 43 per cent of the league's revenues; the average non-premium ticket in 2007-08 cost $49, eight per cent more than the season before and that attendance increased two per cent last season to 21 million as clubs played to 93 per cent capacity, numbers that are lower than NHL reports. It did say that franchise value rose 10 per cent last season to an average of $220 million.
The magazine also said that the coming economic slowdown is going to make it much more difficult for the NHL to post a gain in ticket revenue this season.
Again, nothing there that you hadn't already heard, but at the very least the magazine gives an estimated dollar figure to both the good and bad economics in the NHL today.
