Spector and the Canadian Dollar

[william_adams]

Lyle Richardson brings up a fantastic point in his Soapbox: http://www.spectorshockey.net/

The Canadian small market teams that have done so well in the past couple of years; Edmonton, Ottawa and Calgary; are reaping the benefits of the Canadian dollar being almost 50% stronger than it was in 2002. And the rabid fans of these franchises are part of why the NHL had a larger than expected boost in both attendance and revenue.

With Canada and the US both expecting to have finished raising interest rates, M&A flows nearing an end, and the price of oil falling, one can only hope that these teams can still succeed if the dollar dips a bit.

Click to read more...

 

[Northern Dancer]

Lyle Richardson brings up a fantastic point in his Soapbox: http://www.spectorshockey.net/

The Canadian small market teams that have done so well in the past couple of years; Edmonton, Ottawa and Calgary; are reaping the benefits of the Canadian dollar being almost 50% stronger than it was in 2002. And the rabid fans of these franchises are part of why the NHL had a larger than expected boost in both attendance and revenue.

With Canada and the US both expecting to have finished raising interest rates, M&A flows nearing an end, and the price of oil falling, one can only hope that these teams can still succeed if the dollar dips a bit.

There is absolutely no doubt that high municpal taxes and the weak Cdn $ were the biggest cause of the financial plight of the Cdn teams. (shows you the financial strength of the Leafs though despite the $ and despite 1 miilion per month in muni taxes they still rank # 1 in the NHL for profitability).
Always thought that owing a Cdn NHL team was a good hedge for exporters (like pulp and paper industries).

 

[william_adams]

Always thought that owing a Cdn NHL team was a good hedge for exporters (like pulp and paper industries).

Maybe Domtar or Cascades can bring the Nordiques back to Quebec!

 

[Wetcoaster]

For the Canucks, each rise in the dollar by one cent meant about a $300,000 rise in profitability

The Canucks were very successful financially because of COO Dave Cobb who was handling all the financial matters for the organization, not Brian Burke who was always quick to take the credit for the financial turnaround. Cobb made a pile of money for Orca Bay playing the currency market and used the rising Canadian dollar as hedge.

Rising dollar a boon to sports teams:; [Final Edition]
Shi Davidi. The Vancouver Sun. Vancouver, B.C.: May 16, 2003. pg. G.1.Fro

"We're looking at it right now, it's (the Canadian dollar) strengthened so much lately," says David Cobb, chief operating officer of the Vancouver Canucks. "We're getting a lot of advice from economic and currency experts and we're probably going to make a purchase for next year.

"We're going to make a decision in the next couple of weeks."

Cobb says the Canucks tend to buy American greenbacks on a month- by-month basis and that allowed them to save some money late last season when the dollar began its climb. He adds the Canucks prefer buying currency outright over entering into forward contracts, thereby avoiding the two-cent fee per dollar charged by the derivative's vendor.

"Depending on where you feel the dollar's going to go, you may want to save the two cents," he says.

When Cobb left to join the Vancouver 2010 Olympic Committee as CFO the Canucks lost the brains behind the team's financial turnaround and the next President of the team. He was a huge loss.

 

[vbet*]

If the canadian dollar drops (which I think it will) it just means that the overall revenue drops. The vast TV contract cbc/ctv has also drops in value.

This would mean the salary cap goes down and it shouldn't have a full effect on the canadian teams.

 

[Northern Dancer]

If the canadian dollar drops (which I think it will) it just means that the overall revenue drops. The vast TV contract cbc/ctv has also drops in value.

This would mean the salary cap goes down and it shouldn't have a full effect on the canadian teams.

You are forgetting one thing, most NHL teams lost money pre the new CBA when the 'average NHL team budget was 42 million' . Now the cap is 44 million and a majority of teams are playing near the cap. I think any drop in revenue for the NHL is very dangerous no matter where it comes from.

 

[vbet*]

You are forgetting one thing, most NHL teams lost money pre the new CBA when the 'average NHL team budget was 42 million' . Now the cap is 44 million and a majority of teams are playing near the cap. I think any drop in revenue for the NHL is very dangerous no matter where it comes from.

Very true but if teams average 41 million is salary you can almost guarentee a escrow of 12 or so percent. That would bring salaries back in line to around 36 million. It's capped at 54% no matter what.

 

[puckhead103*]

For the Canucks, each rise in the dollar by one cent meant about a $300,000 rise in profitability

The Canucks were very successful financially because of COO Dave Cobb who was handling all the financial matters for the organization, not Brian Burke who was always quick to take the credit for the financial turnaround. Cobb made a pile of money for Orca Bay playing the currency market and used the rising Canadian dollar as hedge.



When Cobb left to join the Vancouver 2010 Olympic Committee as CFO the Canucks lost the brains behind the team's financial turnaround and the next President of the team. He was a huge loss.

another huge loss for vancouver is the big price you guys have to pay after '10 olympics....

can u say the big owe revisited?

 

[syc]

When Cobb left to join the Vancouver 2010 Olympic Committee as CFO the Canucks lost the brains behind the team's financial turnaround and the next President of the team. He was a huge loss.

As good as he is with money he couldn't get an olympic games to run on budget. But I don't think that has ever happened in the history of the olympics.

 

[willie]

The notion that Canadian cities are 'small markets' is one that - irrespective of the strength of the dollar - is quickly fading.

Toronto is the NHL's biggest market. Montreal and Vancouver are firmly entrenched in the top-half of the league. Calgary is easily one of the fastest growing cities in North America and Edmonton isn't that far behind. Within fifteen years, Calgary will be a top-10 hockey market and Edmonton will rise also. Ottawa's growth is a bit more tepid but it's a government town and vested interests will ensure it's viability. Plus, it's the league's second french canadian market.

And the Canadian economy's fundamentals are very strong. All 6 teams are rock solid.

 

[Willis]

The notion that Canadian cities are 'small markets' is one that - irrespective of the strength of the dollar - is quickly fading.

Toronto is the NHL's biggest market. Montreal and Vancouver are firmly entrenched in the top-half of the league. Calgary is easily one of the fastest growing cities in North America and Edmonton isn't that far behind. Within fifteen years, Calgary will be a top-10 hockey market and Edmonton will rise also. Ottawa's growth is a bit more tepid but it's a government town and vested interests will ensure it's viability. Plus, it's the league's second french canadian market.

And the Canadian economy's fundamentals are very strong. All 6 teams are rock solid.

There is the fan support, however the 3 smallest markets in Canada would take a hit if the dollar drops. Remember the 85 cent dollar vs a 60 cent dollar means huge dollars. If the Oilers had a 30 million US budget with a 60 cent dollar then they would spend 50 million CDN in salaries. Now with an 85 cent dollar this same 50 million Canadian means a 42.5 million US budget. Now granted all 3 cities are growing with huge growth in $ and population in Alberta but do not underestimate the effect of teh dollar.

 

[vbet*]

There is the fan support, however the 3 smallest markets in Canada would take a hit if the dollar drops. Remember the 85 cent dollar vs a 60 cent dollar means huge dollars. If the Oilers had a 30 million US budget with a 60 cent dollar then they would spend 50 million CDN in salaries. Now with an 85 cent dollar this same 50 million Canadian means a 42.5 million US budget. Now granted all 3 cities are growing with huge growth in $ and population in Alberta but do not underestimate the effect of teh dollar.

I guess you didn't read my post. Even though the dollar may drop the majority of the TV revenues to the league is the canadian contract. If the Canadian teams revenues drop the whole leagues revenue drops. This means that the salary cap drops, and thus equalises the drop of the CDN dollar. It will not be a 1 for 1 drop of course but it won't affect the cdn teams as much as people think.

The weak cdn dollar crushed teams like edm, cal, ott in the past when teams like Detroit spent 70 million, but that is not the case anymore. If you take into effect the revenues generated by the CDN teams, the league does NOT want a lower cdn dollar.

 

[Hawker14]

a low canadian dollar would just mean revenue sharing for them, instead of for the underperforming US markets, from the leafs.

would be justice.

 

[Wetcoaster]

As good as he is with money he couldn't get an olympic games to run on budget. But I don't think that has ever happened in the history of the olympics.

Unfortunately Cobb was not on scene when the budget was first set. He is coming late to the party and trying to clean up.

 

[kdb209]

I guess you didn't read my post. Even though the dollar may drop the majority of the TV revenues to the league is the canadian contract. If the Canadian teams revenues drop the whole leagues revenue drops. This means that the salary cap drops, and thus equalises the drop of the CDN dollar. It will not be a 1 for 1 drop of course but it won't affect the cdn teams as much as people think.

The weak cdn dollar crushed teams like edm, cal, ott in the past when teams like Detroit spent 70 million, but that is not the case anymore. If you take into effect the revenues generated by the CDN teams, the league does NOT want a lower cdn dollar.

But, the revenues generated by the canadian teams are far from the majority of NHL revenues - TV or otherwise. The gate (and other game related) revenues from the 24 US based teams is significantly greater that those of the 6 Canadian clubs - and the NHL is a gate driven league. The US National TV deals (NBC & OLN) may not be large, but the aggregate of those and the US regional cable deals (MSG, Fox Sports Whatever, etc) verly likely come close to or exceed the revenues from CBC, TSN, etc.

A 15% drop in the $CDN will reduce HRR and possibly lower the cap, but by far less than 15%. If the loonie drops 15+%, but the cap drops only 5%, the Canadian teams will be hurting.

 

[vbet*]

But, the revenues generated by the canadian teams are far from the majority of NHL revenues - TV or otherwise. The gate (and other game related) revenues from the 24 US based teams is significantly greater that those of the 6 Canadian clubs - and the NHL is a gate driven league. The US National TV deals (NBC & OLN) may not be large, but the aggregate of those and the US regional cable deals (MSG, Fox Sports Whatever, etc) verly likely come close to or exceed the revenues from CBC, TSN, etc.

A 15% drop in the $CDN will reduce HRR and possibly lower the cap, but by far less than 15%. If the loonie drops 15+%, but the cap drops only 5%, the Canadian teams will be hurting.

Perhaps I am overstating the cdn tv revenues. Actually yes I am overstating the revenues. I had a few brewskies last night.

 

[Northern Dancer]

Perhaps I am overstating the cdn tv revenues. Actually yes I am overstating the revenues. I had a few brewskies last night.

Been there done that !!!

 

[Gnashville]

Been there done that !!!

Me too except I set sail with Captain Morgan

 

[Montrealer]

Every forecast I've seen in the last two years has the Canadian dollar eventually reaching par with the US dollar before the end of 2008.

Should be interesting to see the effects of that; maybe a team in Winnipeg isn't so far fetched.

 

[william_adams]

Every forecast I've seen in the last two years has the Canadian dollar eventually reaching par with the US dollar before the end of 2008.

Should be interesting to see the effects of that; maybe a team in Winnipeg isn't so far fetched.

Sorry, which forecasts are you reading?? None of the major banks in Canada are calling for a stronger dollar going forward let alone a dollar at par... Have you seen the price of oil recently??

 

[The Fuhr*]

Sorry, which forecasts are you reading?? None of the major banks in Canada are calling for a stronger dollar going forward let alone a dollar at par... Have you seen the price of oil recently??

Hes right I'll see if I can dig some articles up.

 

[Montrealer]

Sorry, which forecasts are you reading?? None of the major banks in Canada are calling for a stronger dollar going forward let alone a dollar at par... Have you seen the price of oil recently??

I just did a quick search and you're right, the predictions are slowing down.

National Bank is saying 2009 now instead of 2007 for dollar parity.

http://www.theglobeandmail.com/servlet/story/RTGAM.20060920.wnbfdollar0920/BNStory/Business/home

The Bank of New York, on the other hand, is saying end-of-2007 even now.. though RBC seems more gloomy in the same article. http://www.bloomberg.com/apps/news?pid=20601082&sid=aXWXwVIkQ_p0&refer=canada

Of course, now we're seeing some saying the dollar will decline.. Merrill Lynch Canada sees the dollar falling to C$1.16 per US$ in 2007 here: http://www.bloomberg.com/apps/news?pid=20601082&sid=a9srG6wYVems&refer=canada


So, you're right that some people are calling for a slowdown or even a reversal of C$ gains, but it's not unanimous yet.



Edit: Oh, and I'm enjoying 89 cent/litre gas, so yeah I've seen how the price of oil has fallen.

 

[william_adams]

I just did a quick search and you're right, the predictions are slowing down.

National Bank is saying 2009 now instead of 2007 for dollar parity.

QUOTE]

Absolutely no offence, but National Bank isn't exactly a major bank...

None of the four major banks (RBC, TD, Scotia or BMO) are calling for a material change in the value of the C$ by 2008. TD is calling for a whopping increase of a half a cent to 90 cents (http://www.td.com/economics/qef/qefsep06.pdf - page 14), Scotia is calling for for a 2.5 cent increase (http://www.scotiacapital.com/English/bns_econ/forecast.pdf), and BMO for a 1 cent increase from the present. (RBC Economics seems to be only accessible by RBC clients...) These forecasts are all a long way from dollar parity.

Economists can (will always be??) most certainly be wrong, but the further oil falls, the more pressure on the Canadian dollar. The higher the interest rates in the US verses that in Canada, the more pressure on the Canadian dollar. The fewer foreign companies buying Canadian ones, the less upward pressure on the Canadian dollar.

I don't think it's a very good idea for Canadian teams to get used to this kind of CAD/USD level, but who knows??