Can Canada save the NHL? Maybe

Thirteen weeks into an NHL lockout that revolves around propping up money-bleeding franchises in U.S. markets, it may already be late to salvage the current NHL season.

But would moving some of the league’s 12 money-losing franchises to Canada help avoid work stoppages in the future?

In the 1990s, a weak Canadian dollar contributed to the skyrocketing expenses that helped chase NHL franchises away from Quebec City and Winnipeg. But economists say that’s no longer a problem: rising commodity prices are set to keep the dollar strong in the long term, and various studies say Canada can support anywhere from one to six more NHL clubs.

Winnipeg has already proven it can handle a franchise, adopting the Atlanta Thrashers, rebranding them it Winnipeg Jets, and boosting its value from $135 million in 2010 to $200 million this year, according to Forbes. Would repeating that process in hockey hotbeds across Canada boost the number of profitable franchises, and improve the league’s bottom line?

Not really, experts say.

While Quebec City is an NHL-sized market with a top-flight arena under construction, economists who study the issue say luring an underperforming NHL team won’t provide a meaningful boost to finances league-wide.

“You could take the three weakest teams in the league and drop them in Canada, but you still have a third of the league that’s not breaking even,” says economist Glenn Hodgson of the Conference Board of Canada, an economic think tank that has studied Canada’s pro sports industry. “The way (NHL owners) solve that is through really tough negotiating, or more revenue sharing, or both.” That doesn’t mean the viability of its U.S. markets isn’t a pressing economic concern for the NHL. No matter how or when this lockout ends, Drew Dorweiler of the Montreal-based business valuation firm Dartmouth Partners says finances will forces several teams to seek more lucrative homes.

“Some of these teams are just not viable in Sun Belt markets,” Dorweiler says. “There are other areas waiting that are demographically much more appealing to hockey. The franchise could be significantly more valuable and more profitable in these other markets.”

Are Canadian markets viable? When releasing a stronger-than-expected earnings report last March, Quebecor specified that it hoped to in an NHL franchise. The Quebec-based telecommunications giant has already agreed to buy the naming rights to Quebec City’s new $400-million arena.

But with Seattle also angling for an NHL franchise, the chances of more than one club seeking profits north of the border in the post-lockout era are slim. “After Quebec City, it’s pretty hard to think of a Canadian city with a market that could support (NHL) hockey,” says University of Ottawa economics professor Norm O’Reilly.

The other problem, experts say, is that Canada’s various hockey hotspots aren’t as profitable as they seem. Are there enough fans in corporate dollars to support a second team in Toronto? Sure. But finding an owner willing to pay the Maple Leafs for the privilege of setting up shop in their territory is something different.

And while hockey passion in mid-sized markets runs deep, revenue sources do not. O’Reilly points out that several U.S. NHL teams with lacklustre ticket sales nonetheless benefit from having more television sets and sponsors than they’d have in a hockey-hungry but economically modest Canadian market.

“Even the smaller-market U.S. teams would get more regional TV dollars than any small market Canadian team,” he says. “(Moving teams to Canada) would be a pretty modest influence on the overall revenues of the league. If you’re the owner of the L.A. Kings and a team moves from Phoenix to Quebec City, it really doesn’t change your world.”

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