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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Early ouster by NHL Devils shows again that late-season hired guns rarely pay off

Lou Lamoriello is a smart hockey man whose career track record of Stanley Cup championships in 1995, 2000 and 2003 speaks for itself.

Yet on the night Lamoriello's New Jersey Devils suffered a disappointing 4-1 eastern conference quarter-final loss at the hands of the underdog Philadelphia Flyers, it has to be said his penchant for late-season shake-ups has failed to pay off once again.

This time, landing prized unrestricted free agent Ilya Kovalchuk from the Atlanta Thrashers did not give the Devils the extra bump Lamoriello was looking for in the NHL's 2010 Stanley Cup tournament, where New Jersey was among the favourites going in.

It's true the Devils' CEO, president and general manager has been more predisposed to coaching changes than big trade deadline deals. Three years ago, Lamoriello fired his head coach Claude Julien with just three games left in the 2006-'07 regular season, despite having the Devils in second place in the eastern conference. Lamoriello was hoping to repeat the magic of 2000, when he dismissed Robbie Ftorek with eight games left, took over behind the bench and led New Jersey to its second Stanley Cup.

The difference between late-season coaching changes and late-season player rentals, however, is the cost. Firings cost what's remaining on the employment contract (and some goodwill). Incoming player rentals, on the other hand, don't come without tangible player assets and/or draft picks going the other way.

In this case, Lamoriello pulled the trigger just before the NHL's 2010 trade deadline, acquiring Kovalchuk in exchange for Johnny Oduya, Niclas Bergfors, prospect Patrice Cormier and -- here's the biggie -- New Jersey's 2010 first-round draft pick. That is potentially a very big price to pay for 20 games in the Meadowlands.

It's not that Kovalchuk failed to produce offence for the second-seeded Devils against the seventh-seeded Flyers; he did, with six points in five games. The question is did he make the Devils a better team than they already were? After years of being conditioned to do so in Atlanta, did Kovalchuk try to do too much himself? Most important, what did he do to the chemistry of New Jersey in a heavily-structured, team-oriented culture?

Those are the smaller questions now. The bigger question for the balance of the post-season will be where Kovalchuk plays next season. Will Lamoriello and the Devils have anything to show for the high first-rounder they gave up to get the Russian star? Or will he choose to sign with the Los Angeles Kings or another more offensive-oriented, free-wheeling team?

The big sport business question is, however, whether such late-season deals make sense in the salary cap era of the NHL, where building through the draft and player development seems to be the right formula.

Sure, you get the odd year like 2008 where a hired gun like Marian Hossa will get the Pittsburgh Penguins to the Stanley Cup final (and then leave) or a Brad Richards will drive the Dallas Stars to the western conference finals (and stay for the longer term).

The odds are that Kovalchuk will be like most late-season player rentals in the NHL (or any sport for that matter). Just ask his trading partner on the Kovalchuk deal, Atlanta GM Don Waddell, who in 2007 sent four draft picks to St. Louis to get Keith Tkachuk (for a few weeks) and Braydon Coburn to Philadelphia for Alexei Zhitnik. Or Calgary Flames' general manager Daryl Sutter, who sent two players and his first round draft pick last year to get Olli Jokinen.

Late-season shake-ups of coaches and players are high risk. The Kovalchuk case is yet another example of one that is also low reward.

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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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