NHL Expansion-How To Increase Hockey Related Revenue

If you look at the players’ proposal to the owners, they want a 50% split in Hockey Related Revenue (HRR) and the NHL owners to honor all contracts that were signed prior to the lockout. This is a very reasonable request, which means it won’t be entertained by the owners. The negotiations of exactly is calculated as HRR, length of contracts, and how long until restricted and unrestricted free agency dominate the news cycle. What the players and Donald Fehr have not spoken about is the likelihood of expansion into more Canadian markets and how those dollars would be added to the revenue calculations.

When a team relocates, the NHL, and more specifically, the owners, do not reap any fiscal reward. From a revenue sharing aspect they do, but it is minute compared to the expansion fee a team would have to pay that would be directly added into the HRR. On SiriusXM Home Ice last week, host Scott Laughlin had on Mike Brophy of Sportsnet Canada. They estimated that the NHL would charge FIVE HUNDRED MILLION dollars for an expansion team. And cities like Markham that are planning on building a 20,000 seat multi-purpose arena will pay the money. The New Quebec City Ampitheatre (Quebecor Arena) will hold 18,000 when it is completed in 2015. The four hundred million dollar arena was funded equally by the provence and the city. Quebecor purchased the naming rights and the management of the arena. Why would you build an arena unless you were going to make a bid to obtain a team.

The NHL knows that Markham has plans for a 20,000 seat arena just north of Toronto. There exists the need and the desire for a second team in the greater Toronto market. It would give Leaf fans a chance to attend a playoff game in their lifetime without traveling to Buffalo to see the Sabres. Ticket prices would be driven down due to the increased supply, meaning families could afford to attend a game without sacrificing two months salary. “I thought two months salary was for an engagement ring?” “No dear, that is what it costs for glass seats to see the Leafs.”

The Marlies would not be hurt as there is a market for minor league hockey in these cities. Youth hockey would be expanded as you now have additional ice with the Markham arena and the team practice arena. You will be able to bid on and win more international events like the Four Nations tournaments, Elite Tier 1 events, and regional tournaments. All this means more money to the local economy. Do not forget the payment that go to the Buffalo Sabres and Toronto Maple Leafs for putting another team in the general vicinity.

The CBA is discussing current revenue streams for HRR of around 3.3 billion dollars. Add in the two expansion cities, and now you are at 4.3 billion dollars.