Questions about Expansion Fees

[Pure West]

So, those figures that some of you are tossing around, somewhere between $150m and $200m, would it be about the same for both Canadian markets, Winnipeg and Quebec City? And second question, would markets in the US fetch more or less than that, for instance: Houston, Kansas City... or Seattle or Portland if those cities came available?

The last round of expansion all 4 were sold for the same price IIRC. Seemed strange to me that Atlanta and Minnesota which are significantly bigger than Columbus would be worth the same, but oh well. I would assume they would want to set a benchmark this next time around as well. I think the value of teams in Winnipeg and QC would be around the same as the other potential US sites so it would seem fair.

I would assume the NHL would want to set the price high to both prevent outsiders from gaining a valuable franchise on at a discount and to inflate their own franchise values.

 

[Killion]

So, those figures that some of you are tossing around, somewhere between $150m and $200m, would it be about the same for both Canadian markets, Winnipeg and Quebec City? And second question, would markets in the US fetch more or less than that, for instance: Houston, Kansas City... or Seattle or Portland if those cities came available?

Same amount MoreOrr. Its a fair market price IMO. On the one hand you have climatological, historical & traditonal/cultural advantages in Canada though smallish' markets in QC/Wpg; on the other, Portland, Seattle, KC, Hartford & a few others dont offer quite the same depth but are much much larger in terms of population & potential media import & revenues. Id also draw a straight-line between Dallas and Houston with respect to the on-going nonsense with Hicks & his creditors. $175M same as everywhere else with the exception of Southern Ontario. Why do you ask; this some kinda trick question #4?.

Here's a thought: on Monday, the league could announce it's expanding to Winnipeg and Quebec. The expansion fee per team....

That'd go over like a Lead Balloon with the NHL & the BOG's Mike. Yes its sensible & "nice", but this aint no Rowing Party with Monet placidly painting the goings on of a summers afternoon on the River Seine. :

 

[MoreOrr]

Same amount MoreOrr. Its a fair market price IMO. On the one hand you have climatological, historical & traditonal/cultural advantages in Canada though smallish' markets in QC/Wpg; on the other, Portland, Seattle, KC, Hartford & a few others dont offer quite the same depth but are much much larger in terms of population & potential media import & revenues. Id also draw a straight-line between Dallas and Houston with respect to the on-going nonsense with Hicks & his creditors. $175M same as everywhere else with the exception of Southern Ontario. Why do you ask; this some kinda trick question #4?.

Haha... You're a smart guy, Killion, or you know me too well.

 

[Killion]

Haha... You're a smart guy, Killion, or you know me too well.

Ive lived in Mexico. I know how the game works. The Military Cops ask you, smiling politely, what sounds like a perfectly innocent question, such as "do you know what the Speed Limit is around here Gringo?". Next thing you know, your out of pocket 10,000 peso's because they spring all kinds of "criteria" on yer wagon before they'll let you move on down the coast for a little Mahi-Mahi fishin. So ya, Im waiting for the trap to spring Mr.Orr.

 

[LadyStanley]

FTR, relocation/expansion fees have been negotiated with the league and interested parties. There is no "set" fee, per se.

SO/Hamilton would not only have a R/E fee, but also territory indemnification payments to Toronto and Buffalo. (The former, probably larger than the latter as there will also be TV rights involved.)

 

[Killion]

FTR, relocation/expansion fees have been negotiated with the league and interested parties. There is no "set" fee, per se.

Perhaps not now as expansion is seemingly not even on the radar, but they sure did have fixed fee's in the past with every single wave of expansion. Minnesota & Columbus at $80M each but one example of a pretty much standardized fee going back to 1967, much like the NBA's structure ($125M ea. for Tor/Vcr in 95). Indemnification for territorial & broadcasts incursions have indeed been a moving target with the NHL in New York, Jersey & PA, and it would be really quite interesting to know just what the Sabres & Leafs would require in order to share their rights with another team in S.O..... As you know, relo's are a separate issue altogether.

 

[MountainHawk]

Perhaps not now as expansion is seemingly not even on the radar, but they sure did have fixed fee's in the past with every single wave of expansion. Minnesota & Columbus at $80M each but one example of a pretty much standardized fee going back to 1967, much like the NBA's structure ($125M ea. for Tor/Vcr in 95). Indemnification for territorial & broadcasts incursions have indeed been a moving target with the NHL in New York, Jersey & PA, and it would be really quite interesting to know just what the Sabres & Leafs would require in order to share their rights with another team in S.O..... As you know, relo's are a separate issue altogether.

I was under the impression that the relocation fee was 'suggested', but the ownership groups bidding for expansion could include any amount in their bid.

 

[Killion]

I was under the impression that the relocation fee was 'suggested', but the ownership groups bidding for expansion could include any amount in their bid.

Since 67, Expansion Fee's in every wave were fixed. The NHL has never charged anyone a "Relocation Fee", however, when the Rockies moved to NJ, they were required to pay indemnification fees for broadcasting rights to Philly, the NYR & the Islanders.

 

[MountainHawk]

Since 67, Expansion Fee's in every wave were fixed. The NHL has never charged anyone a "Relocation Fee", however, when the Rockies moved to NJ, they were required to pay indemnification fees for broadcasting rights to Philly, the NYR & the Islanders.

I meant expansion fee.


Hmm, the NHL is different from the other leagues then. Maybe because the NHL has been more targeted in their expansions, where as the other league just had a open bidding process, and the best bid got the team.

 

[Killion]

I meant expansion fee.


Hmm, the NHL is different from the other leagues then. Maybe because the NHL has been more targeted in their expansions, where as the other league just had a open bidding process, and the best bid got the team.

Ya. Interestingly, Ron Joyce, co-founder of the Tim Hortons' Donut Chain who was applying for an Expansion Franchise for Hamilton in the 80's lost out to Tampa Bay because he was only willing to pay roughly 60% of the then (I think) $50M Fee. The NHL never bargained with bidders (at least, that we know about). The price is fixed. Now, when you get into things like Relo's & insiders (Leipold etc) doing things, different rules, different game...

 

[edog37]

To think the NHL is going to abandon a market that is clearly a key part of their strategy and injure a city that has fought so hard for them is just naivety. If the Coyotes leave, Glendale will have a team within 24 months.

If the NHL abandons them, it puts a serious chilling effect on the 'cities building arenas for teams' thing the NHL has going on, and they aren't going to risk that.

I acknowledge that the WPG and QCY might be high. However, those markets are assets of the 30 NHL owners, and pretty valuable ones that you can only cash in once. They aren't going to underprice them. Now, the fact that their might be only one viable ownership group in WPG could make it worth less, we'd have to see.

I'm not following how you think the NHL would simply turn around & award Phoenix another expansion team after losing the Coyotes. I get the concept of cities building arenas for teams & how the league doesn't want to lose that, but a big part of Phoenix's problems centers around arena location. You might eliminate the up front debt with an expansion team, but you don't address another core issue in arena location. In other words, you would be back in the same boat within 5-10 years....

 

[MountainHawk]

I'm not following how you think the NHL would simply turn around & award Phoenix another expansion team after losing the Coyotes. I get the concept of cities building arenas for teams & how the league doesn't want to lose that, but a big part of Phoenix's problems centers around arena location. You might eliminate the up front debt with an expansion team, but you don't address another core issue in arena location. In other words, you would be back in the same boat within 5-10 years....

I'm operating under the assumption that the NHL considers Phoenix to be critical to their long term growth plan, and that the NHL and Hulsizer consider it a viable long term market.

I suppose it's possible those aren't true, but then I'm baffled why we have a 47,000 post string of threads about the NHL's fight to keep the Coyotes in Phoenix.

 

[IceAce]

Since 67, Expansion Fee's in every wave were fixed. The NHL has never charged anyone a "Relocation Fee", however, when the Rockies moved to NJ, they were required to pay indemnification fees for broadcasting rights to Philly, the NYR & the Islanders.

In '72 the Islanders also paid an additional "territory fee" to the Rangers of some sum. It's also the reason we'd now be able to move into NYC (Brooklyn or Queens) and not have to pay them anything if the arena deal on Long Island doesn't happen.

 

[y2kcanucks]

I would expect something on the order of $300-400M for QCY, $400-500M for WPG, and $750M-$1B for HAM.

I would also expect that if PHX leaves, they'll get an expansion team pretty quickly (like the Browns in the NFL), probably on the order of $150-200M.

That's just bass ackwards. Why charge almost $1B for a team to be moved to a city that's going to generate enormous revenues for the league and likely pay into revenue sharing, while only charging a fraction of that for a team to be placed in a market that will likely be drawing from revenue sharing? I would think it should be the opposite, because the league knows it will get above the $200M they charged as an expansion fee for Hamilton when they're paying a lot into revenue sharing year after year.

 

[MoreOrr]

I'm operating under the assumption that the NHL considers Phoenix to be critical to their long term growth plan, and that the NHL and Hulsizer consider it a viable long term market.

I suppose it's possible those aren't true, but then I'm baffled why we have a 47,000 post string of threads about the NHL's fight to keep the Coyotes in Phoenix.

I agree it could happen, MountainHawk, very much unlike if Atlanta lost another team, but I definitely don't think it would be anything real soon. And besides, it's not as if the NBA or some other major league will rush in an take over the NHL spot.

In Atlanta's case, it was 19 years before the NHL went there again. In Denver's case, 13 years, and even in Minnesota's case, 7 years... and certainly Minnesota had every right to get a team almost immediately.

It would probably be at least between 10 - 15 years before we'd see another team in Phoenix, and I'd lean towards the higher number or even more. But yes, eventually the NHL would likely try to return there.

 

[rabi]

NHL Expansion fees in the '90s
Year Team Fee $ per team
1991 San Jose $50 million $2.4 million
1992 Ottawa $50 million $2.4 million
1992 Tampa Bay $50 million $2.4 million
1993 Florida $50 million $2.4 million
1993 Anaheim $50 million $1.2 million*
1998 Nashville $80 million $3.1 million
1999 Atlanta $80 million $3.1 million
2000 Minnesota $80 million $3.1 million
2000 Columbus $80 million $3.1 million
* = $25 million went to the Kings for territorial indemnity.

 

[Franck]

Only gave the other posts in the thread a quick glance so this might have been said before, but one thing that should be taken into consideration is that it would probably be better to give expansion teams to supposedly strong hockey markets like Winnipeg and Quebec City and relocate the teams that are financially unstable to potential US markets like Houston, Kansas City or Portland than doing it the other way around when you consider how it is likely to take anything between 5 to 10 years before an expansion team becomes competitive, something that will probably be much easier for a Canadian market to handle than it would for an unproven US market.

This is of course if the NHL considers expansion to be a viable option in the near future.

 

[cheswick]

That's just bass ackwards. Why charge almost $1B for a team to be moved to a city that's going to generate enormous revenues for the league and likely pay into revenue sharing, while only charging a fraction of that for a team to be placed in a market that will likely be drawing from revenue sharing? I would think it should be the opposite, because the league knows it will get above the $200M they charged as an expansion fee for Hamilton when they're paying a lot into revenue sharing year after year.

How is charging more for an asset that's worth more a$$ backwards? As you point out you think a franchise in Hamilton is a license to print money. Obviously ou're going to have to pay more for that. Why? Cause expansion money is split amongst all its members. Revenue sharing is capped and split among only certain members. Detroit doesn't benefit cause Hamilton is making a tonne of money. Detroit does benefit if they pay $500 million to get into the league.

 

[y2kcanucks]

How is charging more for an asset that's worth more a$$ backwards? As you point out you think a franchise in Hamilton is a license to print money. Obviously ou're going to have to pay more for that. Why? Cause expansion money is split amongst all its members. Revenue sharing is capped and split among only certain members. Detroit doesn't benefit cause Hamilton is making a tonne of money. Detroit does benefit if they pay $500 million to get into the league.

In a way they do, if that Hamilton team is a team that was relocated from a team that was taking money out of revenue sharing. The less teams that need revenue sharing, the better. I'm assuming teams that are profitable wouldn't need to dip into revenue sharing. Detroit, being a team that pays into revenue sharing, would thus feel less of a strain.

If a city requires such a huge expansion fee because that team would be extremely valuable in that market, then why is there currently no team there? Wouldn't any prudent business person want to increase the total value of his entity? In this case, Bettman and the NHL?

 

[kdb209]

In a way they do, if that Hamilton team is a team that was relocated from a team that was taking money out of revenue sharing. The less teams that need revenue sharing, the better. I'm assuming teams that are profitable wouldn't need to dip into revenue sharing. Detroit, being a team that pays into revenue sharing, would thus feel less of a strain.

Nope. The way Revenue Sharing is currently defined, there is a minimum pool of 4.5% of HRR. If <insert undeserved team here> moved to Hamilton, all it would mean is that some other team would qualify for Revenue Sharing and some other teams would see an increase in their allotments. If fact, Detroit's Revenue Sharing payments would actually likely increase - due to the resulting increase in League HRR.

If a city requires such a huge expansion fee because that team would be extremely valuable in that market, then why is there currently no team there?

Ask the Leafs.

Wouldn't any prudent business person want to increase the total value of his entity? In this case, Bettman and the NHL?

A second team on SO would have significant value to whoever owned that team, but it would add little to the value of the NHL or the other 29 teams.

The NHL currently owns the rights to Hamilton and any other location in SO - rights that it perceives (correctly) as being very valuable. If and when there is another team in SO the League will extract ample payment for those rights - as well as requiring satisfactory territorial indemnification fees (to the Leafs & Sabres) where appropriate.

 

[IceAce]

Charging differing expansion fees at the same time based on the market would be unprecedented and quite unfair.

Technically the NHL wouldn't or at least shouldn't approve expansion to an un-viable market, so any group granted an expansion franchise should really have the same cost up front, unless they're infringing on another team's territory and has to pay some kind of additional indemnification fee on top of the expansion fee.

Anyway this is all moot since the league would be certifiably INSANE if they announced expansion at this point given the global economic situation and the fact there are various issues with 5 or 6 franchises related to arenas, ownership, market, etc.at the present time that need resolution.

 

[MountainHawk]

Charging differing expansion fees at the same time based on the market would be unprecedented and quite unfair.

Technically the NHL wouldn't or at least shouldn't approve expansion to an un-viable market, so any group granted an expansion franchise should really have the same cost up front, unless they're infringing on another team's territory and has to pay some kind of additional indemnification fee on top of the expansion fee.

Anyway this is all moot since the league would be certifiably INSANE if they announced expansion at this point given the global economic situation and the fact there are various issues with 5 or 6 franchises related to arenas, ownership, market, etc.

Apparently unprecedented for the NHL, but quite common in other leagues, I believe, where it was an 'auction' of sorts for expansion teams.

And it's pretty much the opposite of unfair.

Let's say I have two plots of land. One has a gold mine that is so filled with gold you can just scoop it out as well as a massive oil field underneath.

The other piece of land is just a empty plot, with no notable natural resources, but it is zoned for commercial and has a lot of foot traffic, so it could be developed into something profitable.

Are you willing to pay the same for those two pieces of land?

 

[Killion]

In '72 the Islanders also paid an additional "territory fee" to the Rangers of some sum. It's also the reason we'd now be able to move into NYC (Brooklyn or Queens) and not have to pay them anything if the arena deal on Long Island doesn't happen.

Grandfathered In?. I wondered about that when Queens/Brooklyn was initially brought up. I still "wonder" about it based on the mildly litigious nature & cantankerous relationship the Rangers had/have with the NHL.

Charging differing expansion fees at the same time based on the market would be unprecedented and quite unfair..

Yes, I do agree, however, what of Southern Ontario?. I guess you could charge the same say as a Hartford, Houston or Portland, however, the indemnification fee's going to Toronto & Buffalo youve' just got to figure would be onerous to say the least. Human nature being what it is, do you think the other 28 teams would be happy splitting a $150M-$200M Expansion Fee amongst themselves while Toronto & Buffalo receive their share of that plus some very substantial Indemnification Payments or would some sort of equalization system be developed with equal/partial shares distributed league wide?.

 

[MountainHawk]

Killion -- that would be the interesting part to me. Does the NHL own the rights to Hamilton, and therefore charge a huge expansion fee and get some smallish indemnification payment for TOR/BUF in comparsion, or do the teams own the market, and the expansion fee might be smaller, but the indemnification payment could be massive. My $700M is intended to include both.

 

[IceAce]

Apparently unprecedented for the NHL, but quite common in other leagues, I believe, where it was an 'auction' of sorts for expansion teams.

Couldnt find any examples of that in either NFL:
http://www.profootballhof.com/history/release.aspx?release_id=1286

or MLB:
http://www.baseball-reference.com/bullpen/Expansion_of_1993
http://en.wikipedia.org/wiki/1998_Major_League_Baseball_expansion

Seems all teams that came in at same time, paid the same fee.

And it's pretty much the opposite of unfair.

Let's say I have two plots of land. One has a gold mine that is so filled with gold you can just scoop it out as well as a massive oil field underneath.

The other piece of land is just a empty plot, with no notable natural resources, but it is zoned for commercial and has a lot of foot traffic, so it could be developed into something profitable.

Are you willing to pay the same for those two pieces of land?

Problem with your scenario, which I realize was extreme to prove the point, is exactly that. Rarely is their that huge of a disparity between buying the gold mine or the barren land. Most of the areas usually lie somewhere in the middle, and whether you find a goldmine or waste away has almost as much to do with the organization itself (how it's run, etc.) as opposed to where it's actually located.

I don't think Hamilton is the proverbial "gold mine" either. You've got fierce competition from two long-standing franchises in Toronto and Buffalo on either side of you. Not to mention your costs of doing business are going to be a lot higher in an area like that then you'd have in say Winnipeg, where you have the added bonus of not having to build a new arena and you're the only game in town.