Addition by subtraction, contraction, and then NHL expansion

Forbes Magazine released their annual NHL franchise valuation looking inside the numbers; good and bad news for the National Hockey League and an eye opening number that will result in the NHL expanding in the not too distant future. The Toronto Maple Leafs became the first NHL franchise to be valued at $1 billion. Forbes believes the Montreal Canadiens are worth $575 million. The NHL has to be looking at the Greater Toronto Area (GTA) and Quebec City lovingly with expansion fees dancing in their eyes, but before the NHL considers expanding, the league has to look at its troubled teams and contracting several franchises.

Forbes believes the average NHL franchise is currently worth $282 million an increase of 18% in one year. In a gate driven league the NHL managed to raise ticket prices by 5 percent. Overall NHL teams played to 95.6 percent capacity during the 2011-12 NHL season. The 2012-13 NHL season has yet to start, the NHL remains embroiled in a lockout, the NHL’s second lockout in eight years. The NHL lost the entire 2004-05 season, the first major sports league to lose an entire season to a labor dispute.

The teams at the bottom of the Forbes list are many of the NHL that are among the NHL’s more troubled teams – franchises with an uncertain future. The ten teams at the bottom of the Forbes list (one-third of the NHL) lost $124 million collectively last year.

The St. Louis Blues are ranked 30th at $130 million, terribly managed by John Davidson, the Blues who arrived in St. Louis in 1968 played to near sellout crowds 98.2 percent play in the 19,150-seat Scottrade Center in downtown St. Louis, the Blues will survive.

The NHL owns the Phoenix Coyotes; the NHL hopes to sell the Coyotes to Greg Jamison in the coming weeks. The Coyotes have been dead last in NHL attendance for close to a decade; Forbes believes the Coyotes are worth $134 million – the league should fold the Coyotes; the NHL has and will never work in Phoenix. Glendale taxpayers are subsidizing the Coyotes (agreeing to pay Jamison $320 million over 20 years to manage the Coyotes arena). Jamison has yet to finalize his $170 million of the beleaguered Coyotes, if Jamison the former CEO of the San Jose Sharks decides to not buy the Coyotes, the NHL should contract the Coyotes.

The 2013 NHL’s All-Star weekend was scheduled for Columbus, home of the Blue Jackets and the Ohio State Buckeyes, Columbus is a college sports town, not a city that should have ever been home to an NHL franchise. The NHL decided to cancel the 2013 All-Star weekend last week, not good for building the NHL’s brand in Columbus. Forbes was kind to the Blue Jackets suggesting their franchise is worth $145 million, well below the NHL average. John Davidson, who did a terrible job managing the hockey side of the St. Louis Blues, is now managing the day to day hockey affairs for the Blue Jackets, not good based on his track record for Columbus. Columbus plays to 80.8 percent capacity, has a terrible television agreement – its time the NHL contracted their Columbus team.

The New York Islanders believe they have found the key to universe, a move to Brooklyn into an arena built to accommodate the NBA’s Brooklyn Nets. The Barclays Center will seat 14,500 for hockey, making the new home of the Islanders the smallest NHL arena. The Islanders do have a good local television contract. The Islanders signed a 30 year local television agreement with Cablevision that began at $14 million annually. When it ends in 2030-31 season Cablevision will pay the Islanders $36 million.

There are more than 29 million people living in the Greater New York Area. The Greater New York area is home to two additional NHL teams, the New York Rangers worth an estimated $750 million, and the New Jersey Devils projected by Forbes to be worth $205 million. The Islanders Forbes suggests are worth $155 million. The Islanders may have been prime candidates for contraction, but with their local television contract and their move to Brooklyn, Islanders owner Charles Wang will keep his team alive.

Forbes estimates the Carolina Hurricanes are worth $162 million, losing a projected $9.2 million last year. The Hurricanes are playing to 85.9 percent capacity, well below the NHL average. Other than the year the Hurricanes won the Stanley Cup, Peter Karmanos Jr. has never made money owning the Hurricanes. The team lowered many of their season ticket prices after the 2011-12 NHL season; six sections were added for the $9.99 per game upper level Fan Zone, and the two northernmost sections of Sideline Premier in the lower level were cut from $72 per game to $57. In addition, the top eight rows of Lower Level South were cut 33%, to $45 per game. The Hurricanes left a traditional hockey market (Hartford and New England) for North Carolina; it’s time to contract the Carolina Hurricanes. In a gate driven sport, the Carolina Hurricanes are a business heading backwards.

“You’ve got to get rid of some of these teams with so little public support that can’t exist without subsidies from the rest of the league,” said University of North Texas economist Todd Jewell in a Globe and Mail report. “I just don’t think the National Hockey League can survive with as many teams as it has in the southern states.

“But contraction’s tough for the league to do, because it’s admitting failure. It’s admitting they’re not a big enough sport to survive in Phoenix.”

Both the Tampa Bay Lightning and Florida Panthers should be on the NHL contraction list. The Lightning according to Forbes are worth $174 million and lost a projected $13.1 million last year. Sports teams have a tough time making their teams economically viable in Tampa, the NFL Buccaneers and MLB Rays have serious ticket selling issues. Tampa’s NHL franchise plays to a respectable 96 percent capacity, but have one of the lowest average ticket prices in the NHL. Jeffrey Vinik purchased the franchise in 2010 for $93 million. The team’s attendance has increased from an average of 15,500 to 18,500. The Lightning has the third lowest average ticket price at $38, not enough to make the franchise economically viable.

The Florida Panthers Forbes believes are worth $170 million and lost a projected $12 million last year. The Panthers play to 86 percent capacity at BB&T Center in Sunrise; however that is based on attendance and not paid tickets. If you have a Florida Driver’s License and want to attend a Panthers game, all you need is that license, your ticket is free. Despite ranking last in the NHL with an average TV audience of just 13,400 viewers per game during the 2011-12 season, the team scored a far more lucrative cable deal with Fox Sports Florida that begins this season. The Panthers are one of the NHL franchises to pay close attention to once the NHL lockout ends. The Panthers made the playoffs for the first time since 2000 last year, losing to the New Jersey Devils in seven games. The Panthers need to play hockey to continue the excitement generated by making the playoffs – the longer the lockout lasts, the harder it will be for the Panthers to move forward.

The Nashville Predators Forbes believes are worth an estimated $167 million and lost a projected $3.4 million last year. Nashville plays to an average capacity of 97.4 percent, at the Gaylord Center. According to Forbes: the team’s investors have been forced to put $60 million of their own money into the Predators over the past five years, largely to cover loses, while the city has given the Predators $38.6 million over the same period. In addition, the city gives the team financial incentives to book non-hockey events and covers most of any losses associated with running the building. The state kicks in some tax dollars too. There were several “interesting” contracts NHL teams signed players to during the off-season prior to the NHL lockout. The Philadelphia Flyers offered the Predators Shea Weber a restricted free agent a 14 year $110 million contract. Weber’s contract will be impacted by the new collective bargaining agreement whenever the NHL and the NHLPA agree to a new CBA. Regardless Weber’s contract is one Nashville couldn’t afford, the Predators believed the nonsensical signing was a key to their future. In the CBA the NHL is trying to force the NHLPA to sign one key clause includes player contracts not exceeding five years, too bad Weber has a 14-year contract. Weber’s contract is one of the biggest reasons the NHL is in the financial mess they are in, Nashville should have never matched the Flyers offer, and the contract will haunt the team and could lead to the demise of the franchise.

The Phoenix Coyotes, Columbus Blue Jackets, Carolina Hurricanes, Tampa Bay Lightning, Florida Panthers and Nashville Predators – six NHL franchises with very uncertain futures, each very much on the endangered lists of NHL teams, each very much ripe for contraction in the next two to five years. The pieces of the NHL contraction puzzle are falling into place, soon enough at least two and as many as all six teams could be gone in the not too distant future as NHL franchises.

For Sports Business News this is Howard Bloom