If Gary Bettman cannot see the opportunity for the NHL, someone else will

One of the principal jobs of the commissioner of the National Hockey League – or any professional sports league for that matter – is to create value for his member franchises and their owners. Commissioners do that by creating league-wide conditions that grow the business of their member clubs.

The more revenues franchises generate, the greater their business valuation. When more franchises make more money, the average value increases throughout the league and that is good news for NHL club owners in the same way rising home prices and growing ownership equity is a boon for home owners.

So when it comes to franchise values, we give NHL commissioner Gary Bettman credit where it’s due. Values have grown under Bettman’s 17-year tenure several fold.

The question for any seasoned business valuator -- or any fan who cares about the game for that mattter -- is, however, what could be?

When one considers where the league could be without the stresses -- both public and private -- surrounding a group of under-performing hockey businesses in the southern U.S., Bettman's record raises red flags and deserves further scrutiny.

That’s because every single one of the NHL’s major business indicators – attendance, ticket prices, box office, merchandise sales, sponsorship sales, television audiences and revenues – would be even higher if the league had less U.S. sunbelt franchises and more Canadian or northern U.S. franchises.

Why Bettman has not pro-actively addressed the issue is one of the big blind spots in his leadership of the NHL. Why the NHL’s governors – the owners of the league’s 30 clubs – have not pushed more aggressively for solutions that would strengthen the league and improve their own lots considerably is an even bigger mystery.

If it’s true that you’re only as strong as your weakest link, the Phoenix Coyotes are a problem for the NHL. So are the Atlanta Thrashers. Throw in the case of the Florida Panthers – where less people are watching on FSN Florida (an average of 13,400 viewers per game) than are attending games in person (15,000 on a good night) – and you have at least three teams mired in red ink in questionable hockey markets.

Why not play to your strength? Why not license your product in markets where it is being gobbled up in record numbers? Why not replace your weak links with solid performers?

“The Case for Canada” report outlines just how bullish the Canadian market is for the NHL brand of hockey, especially in the period since the lockout in 2004-'05.

http://www.vancouversun.com/sports/could+cash+return+roots/3060451/story.html

It suggests that if the NHL relocated three of its weakest southern U.S. franchises to Canada, their individual franchise values would increase by more than 50 per cent and the league’s average team valuation would jump by $11 million US. It also submits that the combined revenues of the three relocated franchises would rise by $100 million per year, average attendance would grow by 6,000 more fans per game per franchise (or 738,000 more per season) and regional television audiences would increase twenty-fold. Yes, twenty-fold.

Yet more than anything, the report by TheSportMarket.biz and The Vancouver Sun makes a compelling case for the landing of at least one more NHL team in Canada. Plain and simple, the numbers clearly show how the NHL, its member franchises, broadcast partners and other corporate stakeholders – not to mention fans of the game in Canada – would be well-served if the NHL shifted its centre of gravity northward.

The proof is in the pudding of the hockey markets themselves. Considering market size, demographics and other attributes including affinity for sports in general and hockey in particular (as Forbes Magazine does in its annual list of NHL franchise values), the average NHL market contributes $84 million to its franchise valuation (out of about $210 million in average overall value).

Sun belt markets are considerably weaker; the market attributes of Phoenix, Atlanta and Florida for hockey average out at only $48.3 million according to Forbes.com. That's about half the average U.S. hockey market value and about 40 per cent that of the average Canadian market.

Those numbers exemplify how the sunbelt teams are dragging down the average value of NHL franchises the way shabby houses devalue entire neighbourhoods.

The Case for Canada is clear. It’s your move commissioner Bettman.

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Salary cap helps raise the roof on NHL attendance

Attendance in the National Hockey League has grown each year since the lockout of 2004-'05, reaching an all-time high of a league-wide per game average of 16,458 in the 2009-'10 regular season which ended last Sunday.

Many would point to raucous big buildings such as the United Center in Chicago (21,356) and the Bell Centre in Montreal (21,273) as driving the league-wide average and they'd be at least partially right. Some would suggest new rules and an emerging crop of young superstars a la Sidney Crosby and Alex Ovechkin have peaked fan interest and they'd also be right. Still others would point to shootouts and three-point games and how they pump up team point totals and compress the point differentials between contenders and pretenders.

Yet if the numbers have grown consistently since the lockout, isn't it also true that parity -- pure and simple --has gone a long way to keeping the turnstiles moving? What better way to sell tickets and drive attendance than on the promise of hope: with no clear Stanley Cup favourite, more fans from more markets can dream longer about their own team's prospects of making the grade.

The numbers would suggest the bull market for NHL tickets is the result of the perfect storm of all of these factors, but none more important than team balance.

Check this out: almost half of the 30 teams in the NHL (13) are drawing more than 18,000 fans per game...more than a third (11) of the league's teams are selling out every game...five of Canada’s six franchises are at 100 per cent capacity and the sixth is not far off at 98.8 per cent...six northern U.S. markets are playing to full houses.

Most impressive is that four-fifths of the NHL is north of the magic number most people in the business covet as a sign of franchise strength; with 24 of 30 teams at or above 80% arena capacity.

Despite the bull market for NHL tickets north of the border and in northern U.S. markets, the league clearly still has its work cut out for it in the southern U.S, where seven of its eight lowest-drawing teams are currently located...five of them in sun belt markets.

That includes Phoenix. Despite a fourth-place finish in the NHL's overall standings last week, the Coyotes closed the regular season dead last in attendance, averaging a reported 11,989 at Jobing.com Arena.

Yet Phoenix and the NHL's other weak links would be even weaker were it not for the elephant in the room; a salary cap implemented in 2005 and one which has to be given at least some props for helping drive these record levels of game attendance and fan interest.

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NHL's own Coyotes spin Slap Shot-like tale

Whether it's called Flight of the Phoenix, From the Ashes of Bankruptcy or simply Believe It or Not, the Phoenix Coyotes are the closest thing the National Hockey League has to a Hollywood script in its 2009-'10 season.

In fact, despite not featuring the Hanson brothers or anything close, the Coyotes invoke the cult movie storyline of the Charleston Chiefs of Slap Shot fame.

Barry Riz of TSN.ca channeled the 1977 flick, the most popular hockey movie of all time, in a blog Monday night as the Coyotes occupied -- albeit temporarily -- a share of first place in the western conference of the NHL.

Instead of the Federal League, it's the NHL...it's not Reggie Dunlap (Paul Newman), it's Shane Doan...Jobing.com Arena in place of War Memorial Arena...stories of relocating to southern Ontario (last summer) and now Winnipeg or Kansas City instead of Florida...instead of a new, aggressive team fronted by the Hanson brothers, it's a new, stubborn team fronted by head coach Dave Tippett.

What would be more unlikely: The Chiefs' league title in Slap Shot the movie in 1977 or the Coyotes winning the Stanley Cup in real life in 2010?

Two things for sure: 1. The Phoenix Coyotes are the NHL’s story of the year for their surprising on-ice performance and position near the top of the western conference. 2. They continue to be its off-ice dog in terms of ticket sales and sponsorship revenues and hence, its most troubling sport business story for the third or fourth year in a row.

With a franchise record 98 points, the Coyotes are fourth overall among the 30 teams in the NHL and tied for second in the western conference – just one point behind the Chicago Blackhawks and knotted with the San Jose Sharks.

They are making the most of a season which they began in bankruptcy protection before being bought and taken over by the NHL itself in the Bettman-Balsillie-Moyes love triangle and sport business soap opera of last summer.

Yet despite being a lock to make the playoffs for the first time in seven years, the Coyotes are playing dead at the box office, despite impressive walk-up sales this month by spring break visitors from Vancouver and transplanted Chicagoans.

Phoenix is dead last among NHL teams in terms of ticket revenues earned per game. It is almost certainly also last in sponsorship revenues and tied for last in local television audiences. It is in the bottom five in the league in merchandising.

Going into this weekend, the Coyotes are averaging just north of $425,000 US per game at the box office. That's $125 K less per game than the next weakest NHL ticket machine, the Tampa Bay Lightning. Even perennial losers such as the New York Islanders -- in danger of moving out of an outdated arena and perhaps out of New York altogether -- and the Atlanta Thrashers -- out of the playoffs and in and out of court in a lawsuit among its owners -- make at least $225 K more every night out than the Coyotes. That's $9 million a year and change.

The Coyotes need an entire season to make as much box office revenue as the Vancouver Canucks do in a quarter-season Ice Pak of 11 games. Conversely, the Toronto Maple Leafs need only eight dates at the Air Canada Centre to outperform a 41-game regular season of Phoenix home games.

The Maple Leafs are the opposite of the Coyotes. Poor on the ice. Solid at the box office and in every category of off-ice hockey business: sponsorships, television revenues and merchandising.

Unless they reach the third round of the playoffs, the Coyotes will still lose at least $20 million US this year. That's a third of the losses they suffered last year but it's still nowhere near long-term sustainable.

Considering that the Coyotes have more points than any Canadian team, even the Northwest Division-leading Canucks, the only question NHL commissioner Bettman should be asking and imagining is what the Coyotes' sport business performance -- ticket sales, sponsorship sales, television and merchandising -- would be in a Canadian market such as Winnipeg or Southern Ontario or in even any northern U.S. market.

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Leadership vacuum a problem for the business of professional hockey in North America

Is there anything more deafening than the silence of the lambs behind the National Hockey League Players Association?

Sure, we're the first to challenge the NHL's failure to understand how much a more balanced schedule -- in which each team hosts at least one visit from each of the other 29 clubs -- would add value for season ticket holders, the heart of the league's gate-driven business. We question the league's unclear global marketing strategy and its reluctance to commit to Sochi 2014.

We're always haranguing the NHL commissioner's office for its handling of the Phoenix Coyotes situation in general and its treatment of former owner Jerry Moyes -- not to mention former managing partner Wayne Gretzky. We are convinced the league's spin on its troubled franchises in the southern U.S. does little to create value for either the game of hockey and the owners in the NHL.

We believe the NHL could do much to strengthen its television platform, particularly in the U.S. where Versus is still as difficult to access as a question-and-answers media conference by Tiger Woods.

Yet the inability of the NHL's commissioner's office to inspire hockey fans on either side of the border is less worrisome than the tumbleweeds posing as leadership, advocacy and communications at the NHLPA during this 2010 regular season.

Still seeking to install its fourth executive director in five years, the NHLPA has been as invisible as Casper since the unfathomable firing of Paul Kelly in September. Interim executive director Ian Penny represented the union at the Kraft Hockeyville pre-season game in Terrace, B.C. but resigned himself only weeks later.

Since then, pretty much nada. Yes, former Major League Baseball Players Association kingpin Donald Fehr appears to have at least stabilized the operations of the dysfunctional NHLPA acting as an adviser for the past few months. That didn't give the NHLPA a public voice during the Alex Burrows-Stephane Auger incident earlier this season. It didn't lend the union any discernable profile at the Vancouver 2010 Olympic Winter Games. And it certainly hasn't offered any meaningful representation of NHL players during these weeks of consternation over blind side head shots.

All of this as the NHLPA is supposed to be ramping up to revamp escrow and push for other changes to the NHL's salary cap in the coming round of collective bargaining negotiations.

Firing the polished and media savvy Kelly was a mistake for a union desperately seeking stability and long-term vision and leadership. Going dark for much of the 2010 NHL season has been simply embarrassing.

The sooner the NHLPA confirms Fehr or Doug Allen of the NFLPA or NBAPA outside counsel David Feher or another candidate as its new executive director, the better. The lack of a full-time union boss is not only a liability for the NHLPA, it has only exacerbated the leadership vacuum at the top levels of professional hockey in North America.

It's not good for the association. Ironically, it's worse for the business of hockey.

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