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NHL's run for the border
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October 12, 2001: 12:18 p.m. ET
More Canadian teams could head south due to Canadian dollar weakness.
A twice-weekly column by Staff Writer Chris Isidore
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NEW YORK (CNNmoney) - As the National Hockey League season takes to the ice this month, the value of the Canadian dollar continues to body check the teams playing north of the border, and may knock more of the teams right out of the country.
The Canadian dollar, worth only about 64 U.S. cents, reduces the value of the ticket, concession, local television and most other revenue the six Canadian teams receive, compared with their U.S. counterparts.
Since the National Hockey League shares none of the local revenue and has relatively little league-wide revenue because of the modest television packages, it has put the Canadian teams in a hole before the first puck of the season is dropped.
The defending Stanley Cup champion Colorado Avalanche were the Quebec Nordiques until 1995. The Winnipeg Jets moved to Phoenix the following year. During the latest round of expansion there were no bids to create a new Canadian team from any potential owners, although the city of Hamilton, Ontario, made a bid without an owner lined up.
While Toronto is one of the league's most successful franchises, smaller market Canadian teams in Calgary and Ottawa could be the next to head south. Calgary could leave as soon as next season without turning the difficult hat trick of increasing season ticket sales, getting about C$4.5 million in financial support from the league and another C$5 million from the province of Alberta, said Ken King, its CEO.
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Calgary hockey fans filled 97 percent of the team's seats last season, but they could still lose the team to a U.S. market due to the weak Canadian dollar. | |
There are also reports that Vancouver, B.C., which just lost its NBA team, could lose its NHL team as well, and there has even been concern expressed about the recent purchase of the storied Montreal Canadiens by U.S. ski resort mogul George Gillett, although few see the league's most successful franchise leaving.
Foreign exchange costs the Calgary Flames about C$14 million-to-C$16 million, or about $9 million to $10.3 million a season, according to King, whose team has the league's cheapest average ticket and concession prices. That hit equals about a third of the team's overall payroll. King said the team wants to stay in Calgary but it won't be able to do so if it can't get help.
"Our margin for error is very small," said King. "We do need ticket sales. We do need (assistance.) We do need a competitive team to maintain our brand loyalty and keep the wind at our back. We have very sophisticated fans who get very cranky when we don't play well."
Is hockey burned out in the Sunbelt?
Some NHL executives are confident Canada won't lose any more teams before the current collective bargaining unit expires in 2004, when ownership hopes to win a hard salary cap and some revenue sharing that can help the position of some of the Canadian teams.
One factor that could keep some Canadian teams at home is expansion and franchise relocation the last 10 years has already brought a flood of new teams to U.S. Sunbelt markets like Tampa and Fort Lauderdale, Fla., Phoenix, and Raleigh, N.C. But each of those teams is in the bottom third of attendance for the league, and all of them other than the Phoenix had more than 20 percent of their available seats go unsold last year.
"From what I can tell, hockey is not selling in the U.S. Sunbelt anymore," said Patrick LaForge, president of the Edmonton Oilers. "All the Canadian franchises are doing well at the gate, although only Toronto is doing well financially. But would you rather sell hockey in the desert to the few people who know about it, or sell it where people love it and worry about the value of the currency."
NHL Executive Vice President Bill Daly says the health of the remaining Canadian teams is a linchpin of the league, but that the Canadian teams were helped by the expansion to the U.S. Sunbelt because of increased sponsorship revenue for the league. The league is now in 22 U.S. markets, up from 12 in 1990.
"We now have a national product we can sell in United States," said Daly. "When you're perceived as a regional sport, you can't sell national sponsorship agreements."
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Daly said he's confident there can be several years of franchise stability, but he also said that he's confident there are several U.S. markets that can support a team if relocation is necessary. And King said while Calgary wants to stay put, that's an option the Flames will have to weigh at the end of the season if they can't stem losses.
"We're a business, and we can not sustain excessive losses in the belief that the world will right itself in 2004," he said. 
Click here to send mail to Chris Isidore
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