Once upon a time, the expansion fee was the "princely sum" of $15,000.

Discussion in 'Fugu's Business of Hockey Forum' started by LadyStanley, Oct 11, 2018.

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  1. LadyStanley

    LadyStanley RIP Fugu

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    From NHLN, NHL.com historian Dave Stubbs relates that on October 11, 1924, the Boston Bruins and Montreal Maroons were awarded franchises for $15k.

    Increase of more than 40 times the value to today's $650m expansion fee.

    A dollar in 1924 is worth $14.25 today. That means that $15k would be $213,750 today.

    A few orders of magnitude off in valuation. :D
     
  2. gstommylee

    gstommylee Registered User

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    Oh wow that 15k wouldn't seem a lot in today's time but back then 15k was a lot.
     
  3. Iceman

    Iceman Registered User Sponsor

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    $15k seems like a lot of money to get a sports team in 1924. One would think you would just create one and say "Hi, we want to join".
     
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  4. Llama19

    Llama19 Registered User

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    NHL Front Office/Sitting Members greed...plan and simple...
    Capitalism at its finest...or worst...YMMV...
     
    Last edited: Oct 11, 2018
  5. DowntownBooster

    DowntownBooster Registered User

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    The expansion fee to join the NHL in 1967 was $ 2 million which pales in comparison to the current fees. The original franchise fee to join the WHA in 1971 was a mere $ 25,000 which wasn't much more than the $ 10,000 that the Boston Bruins and Montreal Maroons paid in 1924 to join the NHL.

    :jets
     
  6. alko

    alko Registered User

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    Yeah. And Maple Leafs were worth only 2,3 millions in 1961. And now they are worth 1,4 billions. And what is great about this? Its is still owned by the same company. What an investment.
     
  7. cheswick

    cheswick Non-registered User

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    The Maple Leafs have changed hands numerous times since 1961.
     
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  8. Mightygoose

    Mightygoose Registered User

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    And back then at 15K, many would have said no one would pay 30K, 50K, 100K and so on.

    Maybe 500-650 mil will be a bargain in the not so distant future.
     
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  9. LeHab

    LeHab Registered User

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    In 1998 Google founders offered to sell the company to Yahoo for a cool million. We know the history...phew a close one . Doubt Google would have become what are today under Yahoo ownership.

    If one were to invest 15K in Dow Jones index in October of 1924 and sit back the total return (not inflation adjusted) without dividends reinvested would be around 25995.139% ($ 3 899 250) or with dividends reinvested 1076340.067% ($161 451 000). Better return for the team but also a higher risk given the single asset.
     
  10. GuelphStormer

    GuelphStormer Registered User

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    yes, but how much was beer and parking in 1924!
     
  11. Llama19

    Llama19 Registered User

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    Prohibition-era cocktail prices [1920-1933]
    "...illegal booze was expensive and most drinkers--female or male--could not afford to consume alcohol at preprohibition rates... overhead expenses were immense. The costs associated with intercepted shipments (lost either to rivals or to law enforcement agents), hired thugs, police payoffs, chemists, distillery workers, ships, trucks, and production equipment all mounted up-- so those in the traffic charged plenty. In Northern cities, cocktails that sold for 15 cents in 1918 were 75 cents by the early 1920s. Domestic lager beer, which sold for about $10.50 a barrel in 1918, cost anywhere from 15 cents to $1 or more a quart by 1930 (that is, $160 or more a barrel, depending upon the quality of the beer). Domestic spirits, which averaged $1.39 a quart in 1918, soared to an average of $4.01 a quart by 1930. Prices on imported foreign beverages also rose significantly...no doubt a large quantity of American made liquor was passed off as imported to fetch higher prices."

    ---Drinking in America: A History, Mark Edward Lender and James Kirby Martin [Free Press:New York] 1982 (p. 145)
     
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  12. AdmiralsFan24

    AdmiralsFan24 Registered User

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    It costs a nickel. Back in those days nickels had pictures of bumblebees on 'em. Gimme 5 bees for a quarter you'd say. Now where we we? Oh yeah, the important thing was I had an onion on my belt, which was the style at the time. They didn't have white onions, because of the war. The only thing you could get was those big yellow ones.
     
  13. BKIslandersFan

    BKIslandersFan Registered User

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    I always wondered, is 1.4B just for the hockey team or MLSE as a whole?
     
  14. tony d

    tony d Registered User Sponsor

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    I get buying a hockey team will cost money but have always found the 500 million dollar fee a bit absurd. Looking at the #'s from 1924 in today's dollars proves my point.
     
  15. End on a Hinote

    End on a Hinote Registered Abuser

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    According to a random inflation calculator I Googled, $15k in 1924 is $223,666.67 in 2017. Still dirt cheap, but remember the NHL was pretty much a start up league at that point.
     
  16. Wolf357

    Wolf357 Registered User

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    In 1924 there would of been no radio broadcasts of NHL games. Only media would of been local print newspapers.. People were wearing suits to games not buying Jerseys, there was no such thing as NHL merchandise... prohibition was in full effect so you couldn’t charge insaine prices for beer.... the revenue streams for teams was almost purely gate driven... so really the price is not that insaine... then again players didn’t get paid that well and all had regular jobs in the off season and PT jobs through the regular season.
     
  17. KevFu

    KevFu Registered User

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    Well, if you land on the one space, the parking is free.
     
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  18. KevFu

    KevFu Registered User

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    I think that's for the hockey team. MLSE sold for $1.32 billion in 2012, but that was just 79% of the company.
     
  19. jumptheshark

    jumptheshark Rebooting myself Sponsor

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    I think context is needed

    At the time pro sports did not make much money--no TV deals or merchandising deals

    the time and era was different
     
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  20. Xelebes

    Xelebes Registered User

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    Also factor in that the interest rate in Canada in 1924 was 5.5% as opposed to 1.5% now. $15,000 bond will cost $825/yr in interest whereas today that is $225/yr in interest. So that fee be worth roughly 300,000 in today's dollars.
     
  21. Fenway

    Fenway RIP Fugu Sponsor

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    The true barometer is the $2 million expansion fee that the NHL charged when they expanded from 6 to 12 in 1967.

    Today that would be $15,008,987.42
     
  22. Svechhammer

    Svechhammer 2 Flags 1 Cup

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    I mean if we're going there, we might as well look at the wealth disparity between the super wealthy vs the average American (using US data only for this, could be different in Canada)

    In 1960, the top 1% of wealth in the US was about on par with the remaining 99%. Ever since then, the gap has been growing to a point where its ballooned so that the top 1% now own twice as much as the slice the bottom 90% own.

    [​IMG]

    So while some of these numbers may seem quite large to us now, it might not be as much of a difference to the type of wealth who would be looking to buy a franchise. They just have more money to spend, jacking up the asking price for purchase.
     
  23. tarheelhockey

    tarheelhockey Highest Boss

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    I think maybe the context needed here is that the NHL owners had been in this business for quite a while by that time. The predecessor NHA was founded in 1909 and 3 of the NHL's 4 teams in 1924 had been around for almost all of that time (Toronto technically as a different franchise). In the interim, the NHA/L managed to take control of the arena situations in its host cities, kill off its competitor leagues, and create a near-monopoly over the labor supply. What little opposition remained was poorly organized and financially weak. The postwar economy was beginning to boom, and the handful of NHL owners had by this time figured out how to make serious money on pro hockey. Expansion fees were a big part of that profit, and by 1924 the financials of an NHL expansion team made a $200K (modern) investment make a whole lot of sense.

    Consider that of the 6 franchises that were in the league after this expansion, 3 of them will end up being century-old businesses collectively worth $3 billion. Consider that these franchises lasted so long and became so valuable by taking on a 30 year policy of non-expansion once they were entrenched as a monopoly. These guys knew what they were doing.

    Also noteworthy is that $11K of the Maroons' franchise fee was a payoff to the Canadiens for operating on their territory.

    After the 1924-26 expansions (cost $12K - $15K), the next owners to enter the league had to pony up $2M apiece. That's quite the rate of appreciation in 40 years.
     
    Last edited: Oct 17, 2018
  24. powerstuck

    powerstuck Nordiques Hopes Lies

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    Back in 2011 when Bell (BCE) and Rogers bought each 37.5% of the company, they paid 1.32B (75% of the company).

    Now the global value is above 2B. Leafs tho make a big portion of it, followed by Raptors at some 5-600M in valuation.
     

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