Corporate Valuation, Technology, Media, & Telecommunications

February 19, 2016

Are There Really 2 NHLs?

When it comes to the four major league sports (NFL, MLB, NBA, NHL), the NBA and MLB have had less success in Canada vs. the USA, primarily due to demographics. With the exception of Toronto, most of the cities tend to be smaller and have fewer corporate headquarters relative to U.S. cities. Currently there is only one NBA and one MLB team in Canada, both in Toronto.

There is one major league sport, however, that is thriving in Canada, the National Hockey League (“NHL”). The NHL teams in Vancouver, Calgary, Edmonton, Winnipeg, Ottawa, Toronto and Montreal are doing very well. In fact, they’re doing much better on average than their U.S. counterpart cities that have much larger populations (i.e. Dallas and Atlanta which is now a former NHL city). So much so that one may say there are really two NHLs, the Canadian NHL and the U.S. NHL.

How can that be?

Let’s look at the estimated 2013 franchise values of the teams as published by Forbes magazine. Three of the seven Canadien teams are in the top four of league franchise values. The Toronto Maple Leafs are first at $1.2 billion, the Montreal Canadiens third at $775 million and the Vancouver Canucks fourth at $700 million. The NHL league average is $413 million. The remaining Canadian teams are valued as follows:

  • (#11) Calgary Flames $420 million
  • (#14) Edmonton Oilers $400 million
  • (#15) Ottawa Senators $380 million
  • (#16) Winnipeg Jets $340 million
Our home team, the Dallas Stars, comes in at $333 million and the Columbus Blue Jackets rank last at $175 million. Now some interesting numbers: the seven Canadian teams feature values averaging $595 million, while the 23 American NHL teams average $358 million. That’s a little over half of the Canadian teams. How can the New York Islanders, with a metropolitan statistical area (“MSA”) population of 19.9 million, be worth $195 million, while the Winnipeg Jets, with an MSA population of 0.7 million, are valued at $340 million? Additionally how can Vancouver, with a MSA population of 2.3 million, be valued at $700 million? The franchise value relationship with MSA population does not directly correlate. How can this be? The answer is the popularity of hockey in Canada has no comparison to most U.S. cities. Hockey is the national sport of Canada. Kids grow up playing it, watching it and living it. That culture creates much greater revenue and profits for their teams. This can be demonstrated by analyzing the national television revenues and the local revenues of NHL teams.

NHL: National Television Revenues

The U.S. has a population of 319 million people vs. 35 million for Canada, yet the national TV rights for the NHL in Canada was recently won by Rogers Communications for $5.2 billion over 12 years, or an average of $433 million a year. This compares to the $2 billion, 10-year NBC U.S. deal which averages $200 million per year. In addition, 65% of the Canadian national TV rights will be shared with the 23 U.S. teams. It is interesting that a country with one-tenth the population gets about 2.2 times the national TV revenues compared to the U.S. and then has to share with the U.S. teams.

NHL: Local Revenues

Local TV rights are retained by the teams, as are other local revenues from suites, sponsorship and ticket revenues. Here again, the Canadian teams far outshine the U.S. teams. Forbes estimates the average NHL ticket prices in Canada for six out of the seven teams was $70 for non-premium tickets. Forbes estimated that small markets, Edmonton and Calgary, each had $1.6 million in annual ticket revenues. Compare that figure with the New York Rangers ticket revenue of $1.8 million, and that comparison is shocking (if that is not shocking to you, please compare populations of the three cities). Additionally, local television viewing shows the same type of comparisons as national TV viewing. Therefore, smaller Canadian markets like Vancouver will have multiples of local TV revenue when compared to a larger U.S. market, like Dallas.

Conclusion

In conclusion, after considering the numbers, it is hard to make a case for franchise value comparison between Canadian and U.S. NHL teams. Clearly, the economics indicate there are two different NHLs.

This article was originally published inValuation Viewpoint, October 2014.

Author
Donald Erickson
Managing Director
Learn More

Continue Reading

Specialty Finance Acquisitions
Specialty Finance Acquisitions
In 2021, there were 21 deals announced with a U.S. bank or thrift buyer and a specialty lender target. This represents a significant uptick from the prior two years and the highest level since 2017. Deals in 2021 were largely driven by a desire to deploy excess liquidity and grow loans. Other drivers of deal activity include efforts to find a niche in the face of competition or diversify revenue and earnings. Through May 19, six deals had been announced in 2022.
Medical Device Industry Outlook – Five Long-Term Trends to Watch
Medical Device Industry Outlook – Five Long-Term Trends to Watch
Demographic shifts underlie the long-term market opportunity for medical device manufacturers. While efforts to control costs on the part of the government insurer in the U.S. (and elsewhere) may limit future pricing growth for incumbent products, a growing global market provides domestic device manufacturers with an opportunity to broaden and diversify their geographic revenue base. Developing new products and procedures is risky and usually more resource intensive compared to some other growth sectors of the economy. However, barriers to entry in the form of existing regulations provide a measure of relief from competition, especially for newly developed products.
A Decade in Motion: How COVID Reshaped Valuations in the Transportation Industry
A Decade in Motion: How COVID Reshaped Valuations in the Transportation Industry
The last several years have been nothing short of transformative for the transportation and logistics industry. Shifts in global trade patterns, consumer behavior, capital markets, and cost structures have left an indelible mark on both the operating performance and valuation metrics of transportation companies. A review of enterprise value to EBITDA (EV/ EBITDA) multiples across key subsectors, truckload, less-than-truckload (LTL), air, marine, rail, and logistics, reveals three distinct eras: the calm before the storm (pre-COVID), the whiplash of the pandemic years, and the normalization that followed.

Cart

Your cart is empty