A story in today's Toronto Star:
A secret National Hockey League report detailing the ticket revenues of its 30 teams provides additional ammunition for those suggesting more struggling U.S.-based teams should be relocated to Canada.
The confidential document shows that the six Canadian NHL clubs last season accounted for about 33 per cent of the $1.2 billion (U.S.) in league ticket revenue. In 2007-08, Canada's six teams represented 31 per cent.
The report, which was obtained by the Star from several league sources, suggests operating a club north of the border is much more lucrative for the NHL. Five of the top six-revenue generating clubs are based in Canada, with the New York Rangers being the lone team from the U.S. in that group.
“There will be a lot of people using these numbers to argue that the league would be better off with teams in Quebec City and Hamilton, Ont., rather than Columbus, Ohio, and a number of other locations where the NHL is not setting the world on fire,” said Marc Ganis, president of a Chicago sports advisory firm that has advised the buyers of several NHL franchises.
I wanted to test exactly that - how would new teams in Canada fare in terms of gate revenue. More importantly, how susceptible would they be to exchange rate fluctuations?
All the ticket revenue per game (in millions) figures are in U.S. dollars but no exchange rate was given. However, it is very straight forward to figure out. According to Tyler, the NHL CBA uses an average of every day of the league season - July 1 to June 30. From the Pacific Exchange Rate service, we see the average value of the Canadian dollar during this period was 0.99546 USD. In other words, parity. (For those interested, other seasons: '07-'08 0.990746, '08-'09 0.862505, '09-'10 0.948394)
Let's add two teams to the mix. We want a worst case scenario, so we will assume the new Canadian teams will not be particularly successful. I'll add a team "AAA" that earns 80% of the revenue of the Ottawa Senators and a team "ZZZ" that earns 60% of the revenue of the Sens. Our new league looks as follows:
At current exchange rates, the AAA team is right around league average and earns more in gate revenue than 15 of 24 US teams. The ZZZ team is naturally less successful, but is in the same revenue class as Carolina, Dallas and St. Louis.
But what if the exchange rate goes south? First 90 cents:
We're assuming here that the exchange rate doesn't alter ticket sales in any way, which is probably unrealistic. A drop in the Canadian dollar likely means that oil prices are lower, which means less disposable income in Calgary and Edmonton. But it may also mean more disposable income in Ontario, so we won't worry about it too much.
Even at a 90 cent Canadian dollar, 5 of the top 6 teams in the NHL are Canadian (again, assuming nothing else changes). Our AAA team falls only behind Buffalo in terms of revenue. Our ZZZ team still outperforms six U.S. teams in terms of gate revenue.
Next 80 cents:
A big fall for Edmonton, which is no longer a top-10 revenue team and now Ottawa is only league average. Our ZZZ team still outperforms five US teams, while our AAA team outperforms 10 while tying the New Jersey Devils in gate revenue.
Let's do one more. Absolute worst case scenario - 65 cents:
We have Edmonton and Calgary still above average, which is highly unrealistic, given a 65 cent dollar means that oil prices are in the $20-30/barrel range. Our ZZZ team is now in trouble, as it has a revenue right around the level of two relocation candidates. Our AAA team, however, has gate revenues equal to that of Nashville, a team which does not appear to be going anywhere anytime soon.
While there are other revenue streams other than gate revenue, it would appear that a new team in Canada could survive all but the most extreme of exchange rate fluctuations.
Just for fun, here is what our figures look like when the Canadian dollar appreciates to $1.20 US.