Expansion Teams

[Ted Hoffman]

I'll be happy about 2 western expansion teams if the Columbus Blue Jackets can become an Eastern team. Heck they are a western team in the eastern time zone!

So is Detroit - and you better believe the Red Wings will be fighting tooth and nail to get out of the West should expansion or a franchise move put a team in the West.

 

[GSC2k2*]

Just doing some quick math - 50 million / 0.54 * 30 teams .... that's just under 2.8 billion

Yep, that's what he did too.

Problem is that it demonstrates no knowledge of the actual way it works.

The cap is determined off the midpoint. The midpoint is the number on which revenues determine (not the cap) by applying the applicable percentage, and then add 5%. You get the cap by adding $8 million to the midpoint. The floor is $8 million below.

Revenues were approximately $2.3 billion.

I don't mind you saying it, Hank, since you do not have a nationally syndicated radio show. You do not need to know better. This is McCown's job.

 

[Ted Hoffman]

To accurately know how much league revenues were in '06-07, one would have to know the amount in preliminary benefits paid to the players ... but it's safe to say that for the prior year, NHL revenues were between $2.33 billion and $2.36 billion [with $2.357 billion the number I'm selecting].

They certainly weren't as high as $2.4 billion, and they were nowhere near $2.7 billion.

 

[toshiro]

I agree. Talent has never been better.

As for expansion cities.

I would pick the two best Canadian candidates from the list.

Whether it is Winnipeg or Hamilton, or another Canadian city, I would prefer that they go to Canada.

Winnipeg doesnt have the population base. For some time edmonton had trouble competing with a much larger population and a booming economy.

 

[SOLR]

I was in Winnipeg recently for work and I talked to a number of locals about the
possibiulity of a franchise someday returning to Winnipeg. I was told, but have
no confirmation, that when the MTS Center was built it was part of the
design consideration to allow for a relatively inexpensive expansion to NHL standards.
Can anyone confirm this or was this more wishful thinking.

I was also lucky enough to spend about two weeks in Quebec City very recently.
I say lucky because it is a beautiful place to visit. If you have not been there
you should go. This said and as much as I loved the old Nordiques, I am not at
all convinced that the city would support an NHL franchise at todays prices.
Correct me if I am wrong but the local economy still seems to be dominated
by tourism and civil service jobs. Many of these jobs are not particularly high paying
nor would the employers be the type you would usually think of as being natural sponsors for an NHl franchise. But perhaps the bottom line for me is the sense
that for a rather small population base the city offers way to many interesting
and very affordable things to do as competition for the entertainment dollars.
As I said, I used to love watching the Nordiques. Outside of the Oilers, they were
generally my favourite team to watch during there tenure in the NHL. This comes from someone who as a kid was a die hard Habs fan so I am very uneasy about admitting this in public. As such I would be more than happy to be proven wrong.

And how do you see this in 2 weeks as a tourist? Come on now. The reality is that Quebec City is quickly becoming the silicon valley of the north and his growing very fast atm.(With many growth vectors) I'm a member of both commercial chambers(Montreal, Ottawa, Toronto, Hamilton as well...) and I can say with great confidence that the mood in Quebec city is much better than Winnipeg these days. Particularly in the little to medium enterprise segment where the close presence of Montreal helps a lot. If I had to choose 2 cities in Canada as a business man, it would be Hamilton and Quebec, simply because of market sizes. Winnipeg is very strong in the corporation segment, I think that in the current economy they could have a franchise, however I'm a bit puzzled at what they would do if the dollar goes down again. The Nords left basically on a political dispute.

 

[SOLR]

Why hasn't QC started building an arena?

In today's sports landscape, the arena needs to be there --- and then the team comes to fill it. That's how Nashville got an expansion team (over Houston, who had no arena at the time) in the first place.

That's how KC has a chance.

Houston now has one, and they've got a shot.

You need the arena in place. If QC really is "viable" --- they need to put their money where their mouth is and build the arena.

Oh we know that, trust me. Hopefully its coming, with the renewed interest on Aubut's side I think it will happen.

 

[SOLR]

The Nordiques couldn't last in Quebec because we had no arena and there was no plan a build a new one. Marcel Aubut even said he would have NEVER sold the team if we had a new arena.

Plus, the Citadelles had good attendances in the AHL. But the managment of the team was angry with the habs since they were always losing there best players when they were called up. The habs decided to end that and moved their ahl team. Also, don't forget the habs were the worst ennemies of the nordiques.

It makes no sense to say we couldn't support an ahl team. The nordiques had better attendances than the nhl's league average. But, a few years after the nords moved, you believe we couldn't support an ahl team ? You know dude, ahl tickets are much less expansive than nhl's one. It just shows people were not interested in the AHL.

Also, I've never been to a citadelles game and many people are like me in quebec city. I was simply not interested into a lower calibre after having tasted the nhl. The remparts is another story. The attendances were not that great before Patrick Roy started to coach the team. When he will leave the remparts, the attendances are going to be lower. When it will happen, will you also say quebec city couldn't support an qhjml team?

Plus, even the co-owner of the Remparts is interested into investing for a nhl team in quebec city. He said it himself. You think he would have said that if he knew we couldn't support it ? That would be just stupid.

Remember when the avs went to quebec city to play a pre-season game vs the habs ? All 15000 tickets were sold after only 10 minutes. I know it was only one game, but it shows that Quebec is a city of hocey and will always be.

You know, quebec has advantages on many cities for an expension :
-marcel aubut is very close to bettman and he even works for the nhl
-when aubut wants something, he gets it
-we have a a great fans base and quebec is a proven hockey market
-coorporate support wouldn't be a problem
-tv conctracts too

we can also add the plan to build an arena (from what I've heard, an arena of more than 200 millions).

that's many things we couldn't say about other possible markets.

275 million is what I'm hearing on the streets. Its not simply an arena, its a multi-utility center.

 

[njdevsfn95]

there have been a few measureable increases in NHL numbers since the lockout

1) the Salary Cap has risen, which means revenues have increased the past 2 seasons

2) attendance has increased on the average.

3) FRANCHISE VALUES HAVE INCREASED

add em all together and you can charge ridiculous "expansion fees" because the owner has a great chance of making money off of hockey.

ridiculous expansion fees which are MONEY IN THE POCKET OF OWNERS, not players, and will not make the cap rise.

$500M/30 = $16,666,667/team.

we all said Leipold was nuts for throwing away 20-30M from Balsillie, so why would anyone just throw away that much money?

 

[Circulartheory]

Can any1 explain to me about the love for KC? I've never been there but it just doesn't ring 'Hockey' to me.

 

[avesandyanksfan]

WINNIPEG PEOPLE CMON i am from wpg and if they got a team i would beg to get season tickets, so Bring Back The JETS!!!!

 

[Jeffler]

Can any1 explain to me about the love for KC? I've never been there but it just doesn't ring 'Hockey' to me.

Because they're the bully at school that has no power whatsoever but all the kids are scared of them anyway.

 

[Bear of Bad News]

Because they're the bully at school that has no power whatsoever but all the kids are scared of them anyway.

Thanks for clearing that up.

 

[Fugu]

there have been a few measureable increases in NHL numbers since the lockout

1) the Salary Cap has risen, which means revenues have increased the past 2 seasons

Revenues have increased for one season. Immediately following the lockout, the base revenue of $1.8 billion was used to set the cap. This was a conservative projection agreed to by the NHL and NHLPA. Actual revenues turned out to be ~$2.175 billion. How this compares to the last year of actual revenues (prior to the lockout) is a bit debatable since what is reported as aggregate NHL revenues under the new CBA does not correspond fully with what was previously estimated. Since the NHL did not have an agreement with the NHLPA on what constituted hockey-related revenues, a similar reporting structure was not available nor disclosed.

2) attendance has increased on the average.

Reported and paid attendance are two different entities. Are you referring to the former or latter? The generally available numbers on sites like ESPN are reported attendance. I personally only know of the leaked Globe & Mail gate receipts detail, which only provide October - January [inclusive] gate data, nevertheless showing a 5% increase over the prior year.

3) FRANCHISE VALUES HAVE INCREASED

Estimated franchise values - per Forbes - have increased. A lot of people believe the Forbes data is irrelevant in this regard. Only one franchise has sold since the lockout ended. Prior to the lockout, Forbes had St. Louis at ~$140 MM; they were sold for $150 MM however someone like IB can enter all the qualifiers, in interested (Laurie's debt, Savvis Center lease, etc.).

Since the sale of the Blues, two bids have been made for two teams, the Penguins and the Predators. Many people believed the value of both bids were very high due to the desire of the bidders to move the teams (KC, Hamilton). Several of us here have argued that these values are unique to these situations and should not be used to make a claim that all NHL teams' values will then rise by a commensurate amount. As a predominantly gate-driven league, the local issues are thus more pertinent than say a league like the NFL with a greater chunk of centrally derived revenues.

add em all together and you can charge ridiculous "expansion fees" because the owner has a great chance of making money off of hockey.

ridiculous expansion fees which are MONEY IN THE POCKET OF OWNERS, not players, and will not make the cap rise.

$500M/30 = $16,666,667/team.

we all said Leipold was nuts for throwing away 20-30M from Balsillie, so why would anyone just throw away that much money?

Assuming the league can get $500 MM in expansion fees, Leipold's share would be $16.7 MM, as you pointed out. Balsillies bid was for $220 MM, but up to $238 MM. In various reports, Del Biaggio bid as high as $180-195(?) MM, while the local bid has not been released, as far as I know but is believed to be less than Del Biaggio. The latter, apparently, has also remained silent and there is no binding agreement with any of the parties to-date. You do the math.

 

[Fugu]

Can any1 explain to me about the love for KC? I've never been there but it just doesn't ring 'Hockey' to me.

Kansas City has a new arena that currently lacks an anchor tenant. Del Biaggio, a Silcon Valley-based venture capitalist, has an agreement with Anschutz Entertainment Group (AEG) to buy an NHL team for the facility. AEG owns the KC arena, in addition to the Los Angeles Kings (and several other arenas and sports franchises).

 

[MoreOrr]

Is it reasonable to compare teams' positions on attendance lists when some of those have been in the NHL 0-5 yrs; 6-10 yrs; 11-20...or 80+?

You make a very valid, and should be obvious, point. I would think that any team, especially one established in a relative non-hockey market, with less than 10 years of existance, should only be judged on how attendance has been growing during that time, and not in comparison to teams which have a long-standing history.

On the flipside, once a team has existed for 20+ years then it should have established itself as a hockey market, or not. However, another criterium should be the winning record of the team. If a team has been in the League 10+ years with 10+ years of losing records then that also might cause attendance numbers to be low, don't you think.
Of course, none of that explains the attendance numbers of a team like New Jersey, which has been in the League plenty long enough, with winning records, Stanley Cups, but frequent poor attendance.
I think it's not that the New York / Newark area isn't a hockey market, because surely it is, and certainly population size isn't the issue, but I'm just not sure that even the New York area should really have 3 'hockey' teams.

 

[Fugu]

Merged Brooks Expansion thread ongoing discussion of Expansion teams. Essentially the same topic.

 

[Skyblaze]

I'm not entirely against expansion if the teams are going to draw fans to games. A team in Kansas City is still a little bit less silly than a team in Phoenix and the Yotes apparently posted an average attendance of close to 15000 last season?

The only two problems I can see with expansion is odd scheduling (the current one is crap anyways) and "dilution of talent".

As far as that last one goes, we've seen major improvements in the quality of players coming from the States in recent years and a few players from non-traditional hockey countries have made the jump to the NHL. This is just bound to increase with time. This makes me somewhat less concerned with "dilution".

In a perfect world, every major city would have their hockey team. It's just a matter of drawing in more fans; that we can only blame on inadequate advertisement by the league and the fact that the sport can't be picked up quite as easily as baseball or soccer.

 

[coolguy21415]

In a perfect world, every major city would have their hockey team. It's just a matter of drawing in more fans; that we can only blame on inadequate advertisement by the league and the fact that the sport can't be picked up quite as easily as baseball or soccer.

Eventually I'd love to see a league style similar to that of European soccer, where there are two leagues and the bottom 4 or so teams get relegated. I don't expect it to ever happen, though.

 

[MayDay]

Eventually I'd love to see a league style similar to that of European soccer, where there are two leagues and the bottom 4 or so teams get relegated. I don't expect it to ever happen, though.

I often hear this, but I don't see how a European-style relegation system could ever be adapted to American sports.

The main reason being that in North America the top level clubs own the rights to most of the players in the minors. I believe that NHL clubs own the rights to many of most of the players on their AHL farm team. What happens when that AHL farm team gets promoted to the NHL? Does the original parent club retain the rights to all of their players and recall them to whatever their new farm team is? It wouldn't make sense for them to have to compete against their own prospects, who are suddenly their own NHL team.

No, no matter how much I think about it, I see no way for a relegation system to work here.

 

[kdb209]

I often hear this, but I don't see how a European-style relegation system could ever be adapted to American sports.

The main reason being that in North America the top level clubs own the rights to most of the players in the minors. I believe that NHL clubs own the rights to many of most of the players on their AHL farm team. What happens when that AHL farm team gets promoted to the NHL? Does the original parent club retain the rights to all of their players and recall them to whatever their new farm team is? It wouldn't make sense for them to have to compete against their own prospects, who are suddenly their own NHL team.

No, no matter how much I think about it, I see no way for a relegation system to work here.

A much more important reason why you will NEVER see a relegation type league in the US (well at least not any existing professional sports league changing) - money.

Owners have hundreds of millions of dollars invested in an asset. Any team that gets relegated would immediately have its revenues and franchise value plummet. Why would an existing owner or league ever agree to it - little upside and a huge potential downside.

 

[steepler]

A much more important reason why you will NEVER see a relegation type league in the US (well at least not any existing professional sports league changing) - money.

Owners have hundreds of millions of dollars invested in an asset. Any team that gets relegated would immediately have its revenues and franchise value plummet. Why would an existing owner or league ever agree to it - little upside and a huge potential downside.

I agree promotion/relegation is never going to happen in America, but this exact scenario plays out every year in the English Premier League. Teams that go down see their revenues plummet. I'm not so sure about franchise value since it's possible to get up fast. This kind of system is in place in English soccer even if certain owners take major losses because of it and there have been major investments lately in the Premier League by Americans who own sports franchises in American leagues, Glazier, Lerner, Hicks etc. Those owners at least have agreed to invest money in a league that operates that type of system. So it's possible to get people to invest money into that type of league.

Regardless it's not going to happen in America. I think mainly because it is an inefficient way to operate a sports league. It does not maximize the potential of the market as a whole, since some well supported teams in large markets might be down because of different reasons and a big market is missing from the league. Also once those teams are down they might have a difficult time getting up even if the market is potentially strong.

 

[Resolute]

Not only that, but I doubt there is much support for such a structure in North America by any group, including the fans. Not even the top level of soccer associates itself with the pyramid format.

 

[coolguy21415]

I agree promotion/relegation is never going to happen in America, but this exact scenario plays out every year in the English Premier League. Teams that go down see their revenues plummet. I'm not so sure about franchise value since it's possible to get up fast. This kind of system is in place in English soccer even if certain owners take major losses because of it and there have been major investments lately in the Premier League by Americans who own sports franchises in American leagues, Glazier, Lerner, Hicks etc. Those owners at least have agreed to invest money in a league that operates that type of system. So it's possible to get people to invest money into that type of league.

Regardless it's not going to happen in America. I think mainly because it is an inefficient way to operate a sports league. It does not maximize the potential of the market as a whole, since some well supported teams in large markets might be down because of different reasons and a big market is missing from the league. Also once those teams are down they might have a difficult time getting up even if the market is potentially strong.

Not discounting what you've said, and I agree with most of it, but it forces teams to compete. Even currently we see teams with ownership groups who can't put together winning teams, either due to poor management or financial constraints. If you suck, you get relegated.
I can think of a few ways to make the relegation process more feasible ("two-way" contracts for one, where your relegation salary is 1/2 your NHL salary, or something to that effect), but it probably wouldn't work. That's for certain. The only reason it would be appealing for ownership is expansion fees because presumably whichever extra teams make up the relegation league to start would have to pay in.

It would be terribly complicated and even then it's a problem because the development of hockey players takes longer than in soccer. The infrastructure to support this would be complicated. In terms of prospects, I figure that prospects would only be able to compete in the relegation league (as though they were on loan). So at season's end, the prospects are returned to their original club to be loaned out again (or not). That's pretty much how the system currently works, really.

Anyway this entire thing would cause a SERIOUS talent thinning. But the idea is kinda fun to think about.

 

[Fourier]

And how do you see this in 2 weeks as a tourist? Come on now. The reality is that Quebec City is quickly becoming the silicon valley of the north and his growing very fast atm.(With many growth vectors) I'm a member of both commercial chambers(Montreal, Ottawa, Toronto, Hamilton as well...) and I can say with great confidence that the mood in Quebec city is much better than Winnipeg these days. Particularly in the little to medium enterprise segment where the close presence of Montreal helps a lot. If I had to choose 2 cities in Canada as a business man, it would be Hamilton and Quebec, simply because of market sizes. Winnipeg is very strong in the corporation segment, I think that in the current economy they could have a franchise, however I'm a bit puzzled at what they would do if the dollar goes down again. The Nords left basically on a political dispute.

I was not there as a tourist but rather for work. My contacts were from Laval University so I had a sense that they had some feel for the place. Still I am glad
that you called me on this. I was actually going to post a more positive
follow-up but unfortunately never got around to it. After my post I did a little more digging and was pleasantly surprised about the diversification in the economy. I also notice that Canadian Business named QC the best city in Canada to do business.
The median family income was also higher than I expected.

Can you back up the claim of Silicon Valley of the north. I found quite a number of
high tech firms with offices in Quebec City. However, most all of these were
either very small or they had branches offices in Quebec with their
corporate offices in Montreal, Toronto or Ottawa. I would be rather surprise
for example if the high tech sector in Quebec employed anywhere near the
numbers of a town like Waterloo or if the number of companies in that sector
with sufficient revenues to have a substantial corporate impact on an NHL team
rivals that of the KW region. You are obviously much closer to
the Quebec corporate scene than I am so if you have information to the contrary
I would love to see it. (There are a few very good high tech research centers in QC but collectively they only employ a few hundred people).

I still stand by my conclusion that an NHL franchise could be a
hard to sell in Quebec particularly given the cost of a new arena, and the
relatively small population. However, I would be happy to be proven wrong.

PS.
The best summary breakdown I could find in one place on the employment by sector
was here.
http://www.innovationstrategy.gc.ca/gol/innovation/site.nsf/en/in02002.html
However it is five years old so I am sure things have changed. Do you have
a more up to date picture of the employment demographics.

 

[Fourier]

You make a very valid, and should be obvious, point. I would think that any team, especially one established in a relative non-hockey market, with less than 10 years of existance, should only be judged on how attendance has been growing during that time, and not in comparison to teams which have a long-standing history.

On the flipside, once a team has existed for 20+ years then it should have established itself as a hockey market, or not. However, another criterium should be the winning record of the team. If a team has been in the League 10+ years with 10+ years of losing records then that also might cause attendance numbers to be low, don't you think.
Of course, none of that explains the attendance numbers of a team like New Jersey, which has been in the League plenty long enough, with winning records, Stanley Cups, but frequent poor attendance.
I think it's not that the New York / Newark area isn't a hockey market, because surely it is, and certainly population size isn't the issue, but I'm just not sure that even the New York area should really have 3 'hockey' teams.

One other factor that differs quite a bit between teams is the level to which the
financial health of a team is sensitive to the absolute level of paid attendence. I would expect that new franchises and many small market teams would experience a
much higher level of sensitivity to attendence issues than would teams like
Toronto, Boston, Chicago, Detroit and Philly. (I would also expect to see
Dallas in the less sensitive group but I am not so familiar with their revenue
streams.) I would like to know which other teams are basically immune
to even rather significant drops in attendence from the point of view of their
long term hockey operations.