How will it happen & what does it mean for the Toronto Maple Leafs?
In a memo released in September of this year, the Chief Operating Officer of the NHL notified all league employees of initiatives and staff changes to take effect during the 2013-2014 season. In the memo the league identified a plan to increase annual gross national revenue by $1 billion dollars by the end of three years, or in other words, in time for the 2016-2017 season. To put that type of increase in perspective, it had previously taken the league from 2005-06 to 2011-12 – or 6 years – to attain the same revenue growth. Forget linear growth, we’re talking exponential revenue growth here, folks.
First off, let me start by thanking Alec, Michael and Michael for inviting me to participate in Maple Leaf Hangout Episode #17 – if you guys and gals had nearly as much fun watching as I did filming, then you and I are off to a good start!
Secondly, I wanted to take a moment to introduce myself to anyone that didn’t catch the Hangout and wonders what the heck I’m doing here. I’ve been following Alec’s writing since he started out at that ‘other site’ and I quickly moved over to the greener pastures of MLHS when he made the move. Along with reading all of the incredible content that the writers here put together, I’ve also stealthily followed the comments sections, and although I never actually posted myself, I feel like I’ve gotten to know a number of you by reading your comments over the years. So on that note, let me say that it’s an honour to have the opportunity to write to you along with the rest of the stellar (myself excluded) MLHS team.
Briefly, I’m a lawyer working downtown in Toronto with a concentrated litigation practice. As part of my education I’ve had the opportunity to study and write extensively about sports and entertainment law, and I now work at a firm with a practice in media litigation. As a guy with dreams of working in sports, I can’t tell you how many hours I’ve spent immersed in this site getting my hockey fix. My hope is that I can provide a slightly different take on some of the news and events that concern hockey and our Toronto Maple Leafs. But make no mistake, I’m a fan of the game – and more specifically the Maple Leafs – first and foremost.
I know that the Michaels and I addressed the Rogers deal with the NHL earlier, but I thought I’d just provide a quick run-down for anyone that missed the Hangout, or who simply wants a quick reference.
The Rogers Deal: The Basics
The proposed deal is for 12 years and approximately $5.2 Billion, which averages out to more than the $400 million/ season that the Commissioner was reportedly seeking from a new Canadian broadcasting deal. The deal is one of the longest in sports broadcasting history, and is unprecedented in that it is the first time in North American sports that a major sports league has granted exclusive distribution rights to a single broadcast network. As a result of the deal Rogers gets exclusive rights to all Canadian hockey, across all media platforms (including television, digital, and mobile) until the end of the 2026 season (or roughly until Rick Dipietro’s deal with the Islanders was supposed to expire). Rogers will have the exclusive right to broadcast Canadian hockey on Wednesdays, Saturdays and Sundays.
As part of the deal, Rogers will sublicense two games a week to the CBC under the Hockey Night in Canada moniker over the next 4 years, while TVA will carry all French language broadcasts in la Belle Province. It’s not clear what will happen to the CBC’s affiliation with Hockey Night in Canada beyond four years. The CBC will also retain playoff games and Stanley Cup finals games that fall on a Saturday. Interestingly, because HNIC has now become part of the Rogers programming platform, editorial control over HNIC (including on-air content, talent and creative direction) now belongs to Rogers. In other words, if you’re tired of hearing Glenn Healy malign the Leafs call Nadir Mohamed (don’t actually) because the CBC can’t help you anymore.
Probably the single greatest impact of the deal is that is promises to mark the end of “regional games” and “blackouts.” So what does this all mean for us Leafs fans?
The Rogers Deal: Through a Blue and White Lens
Unequivocally, the end of “regional games” and “blackouts” is a good thing for Leaf fans living outside of the Leafs broadcast regionwho just want to watch hockey games featuring the Leafs. Regional games and blackouts occur as a result of agreements reached between the NHL, the national broadcaster (currently TSN and CBC), regional broadcasters (currently Sportsnet), and to some degree the hockey club. Take for example a poor Leaf fan stranded in Vancouver, far removed from his or her favourite team.
Under the current (expiring) deal, when a regional Leafs game is scheduled only those viewers residing in the Leafs broadcasting zone can see it. Making matters worse is that when a regional game is scheduled on a night when a national broadcaster is airing another game coast to coast, in order to prevent the games from competing for viewership the regional Leaf broadcast is limited to a 50 mile radius around the ACC.
Under the new deal, it would appear that even where the regional broadcaster (which will now be TSN as the station retains 10 regional Leafs games in 2014 and 26 in 2015) is broadcasting the Leafs game in Ontario, Rogers will have the right to broadcast the game outside of Ontario, so our Vancouver residing Leafs fan is now a happy camper. This is one of the major benefits of having a single media broadcaster because the concern over games competing against one another is a lot less pressing when you own the rights to all of the games anyway.
The concern for Leafs fans is that as part of the deal struck between Rogers and the CBC it may become necessary to subscribe to cable to see any Leafs games. The way the sub-license has been structured it’s not necessarily the case that the CBC will be carrying the Leafs on HNIC in Canada on a Saturday night. While Rogers owes the CBC two NHL games a week, the company retained control over on-air content and may simply decide that it would prefer to have the marquee Leafs matchup on CityTV rather than CBC. If that is in fact the case, then fans will not be able to tune in to the CBC’s free HD feed, and may need to start shelling out for games.
While the deal has not yet been ratified, the NHL Board of Governors is set to meet during the second week of December and will vote on the deal. That being said, anything less than resounding approval by the Board would be shocking at this point. In short, get ready for a whole-lot more Kypreos for the next 12 years.
The always tedious Hockey Night in Canada Hot Stove brought us a worthwhile nugget to examine this weekend, and that’s our first look at the proposed four new conferences that the NHL will be rolling out next season. Earlier in the week, both Darren Dreger and the more reliable Bob MacKenzie hinted that we are only a week or two away from this realignment being finalized, so we can assume this is pretty close to being set in stone:
The NHLPA has invited U.S federal mediators into today’s meetings. They were of little use in late November but do re enter the picture at a more progressed stage than last time around. Bettman expressed zero interest in going the mediation route when talks broke down last week, Bill Daly is setting the bar low for today already, and no owners will be present, so there’s no sense in getting your hopes up too high for today.
Forbes released their annual NHL franchise valuations today alongside an article detailing the financials of league’s 30 teams. Unsurprisingly, the Toronto Maple Leafs top the list â€” by a lot. With the recent sale to Bell/Rogers, the value of the team became more concrete and Forbes has estimated they are worth $250,000,000 more than the next team, The New York Rangers. Simply staggering numbers. The Leafs are the first team to break $1 billion dollars in value.
On the ice, the National Hockey League has never been more competitive than it has been over the course of its of its last collective bargaining agreement that began with the 2005-06 season. A different team has won the Stanley Cup each season, with the champion coming from big markets like Los Angeles and Chicago, as well as small ones such as Pittsburgh and Raleigh. A total of 12 different teams reached the finals during the seven-year CBA.
So why have the owners thus far cancelled 422 regular season games of the 2012-13 season, as well as the All Star Game, insisting on a new CBA that drastically reduces the amount of money (currently 57% of hockey-related revenue) that can be spent on player salaries?
The reason is because on the financial scoreboard, the leagueâ€™s 30 teams have never been further apart.
Consider the two most recent team sales. In May, Tom Stillman acquired the St. Louis Blues, the teamâ€™s American Hockey League affiliate, the Peoria Rivermen, the lease to Scottrade Center, and a piece of the Peabody Opera House for just $130 million. One month later, the NHL approved the Ontario Teachersâ€™ Pension Plan sale of its controlling interest in Maple Leaf Sports & Entertainment, which owns Torontoâ€™s Maple Leafs (NHL) and Raptors (NBA), and the Air Canada Centre, for an enterprise value of $2.05 billion. We estimate the transaction placed a value of $1 billion on the Maple Leafs.
Our data illustrates the leagueâ€™s conundrum. Fueled by a 9% increase in overall revenue to $3.4 billion during the 2011-12 season, the average National Hockey League team is now worth $282 million, 18% more than a year ago. The increase in revenue and value speaks to the leagues ability to raise the average ticket price an average of 5% last season, fill its arenas to 95.6% of capacity and renew or secure new sponsorships with Discover, Geico, Honda, Las Vegas Convention and Visitors Authority, McDonaldâ€™s, Paramount Pictures, Tim Hortons, Verizon and Visa.
But the spread between the rich and poor teams is dramatic. The top five teamsâ€“Maple Leafs ($1 billion), New York Rangers ($750 million), Montreal Canadiens ($575 million), Chicago Blackhawks ($350 million) and Boston Bruins ($348 million)â€“are worth $605 million, on average. The five least valuableâ€“Carolina Hurricanes ($162 million), New York Islanders ($155 million), Columbus Blue Jackets ($145 million), Phoenix Coyotes ($134 million) and St. Louis Blues ($130 million)â€“are worth just $145 million, on average.
There is also an incredible bifurcation of cash flow. Overall operating income (earnings before interest, taxes, depreciation and amortization) almost doubled during the 2011-12 season, to $250 million. But the sportâ€™s three most profitable teamsâ€“Maple Leafs ($81.9 million), Rangers ($74 million), Canadiens ($51.6 million)â€“accounted for 83% of the leagueâ€™s income, while 13 of 30 teams lost money, before non-cash expenses and interest payments.
If the salary cap were lowered to, say, 50% of revenue and the subsidies given from high-revenue teams to their low-revenue rivals was increased to $200 million from the current $150 million, which is essentially what where the two sides seem to be headed, small-market team values would get a big boost (as was the case in the NBA when the New Orleans Hornets and Memphis Grizzles sold for $338 million and $330 million, respectively, after the league worked out a new labor pact last year), and the leagueâ€™s overall profitability would increase. But teams like the Carolina Hurricanes, Phoenix Coyotes, Tampa Bay Lightning, Anaheim Ducks and Columbus Blue Jackets would still have trouble making money unless they went at least two rounds in the playoffs.
Drew Dorweiler, managing partner of Dartmouth Partners in Montreal, thinks the league needs to move some teams. â€œThe Sunbelt has had plenty of time to prove that the viability doesnâ€™t work.â€ Dorweiler thinks Quebec, where ground has already been broken for a new arena, will eventually get an NHL team, and he also thinks Portland, where minor league hockey is popular, and Seattle, where the city has approved a new arena, would be better cities to house teams than Arizona, North Carolina and Florida, where NHL teams are losing money.
The success of the Winnipeg Jets buttresses Dorweilerâ€™s case for moving a team to Quebec. Last year, True North Sports & Entertainment bought the Atlanta Thrashers for $170 million (including a $60 million relocation fee paid the the NHL). The team moved to Winnipeg and was renamed the Jets, after the original franchise that moved to Phoenix for the 1996 season. The team lost a pile of money playing in Atlanta but posted an operating income of $13.3 million last season, when they sold out every game at their new arena. We think the Jets are now worth $200 million.
The emboldened excerpt there is shocking even knowing beforehand the growth in revenue was driven by a wealth imbalance. Three teams responsible for 83% of the league’s income.
From Forbes’ Mike Ozanian:
There will always be a huge gap in team values because telecommunications companies like Rogers and Bell Canada can leverage the media rights for the Maple Leafs multiples of what Stillman can command in media fees for the Blues. But a new CBA in the NHL along the lines of what the NBA has, coupled with the relocation of some teams, would shrink the disparity in hockeyâ€™s operating income. Hopefully, NHL commissioner Gary Bettman and NHLPA director Donald Fehr stop fighting and start skating toward that goal before the entire season is lost.
The internal data of this table is corrupted!
The $1 billion valuation ties Leafs with the NFLâ€™s Carolina Panthers and MLBs Boston Red Sox at No. 23 and 24. How a losing team can make this much money is hard to wrap your head around. If that wasn’t bad enough, this was Mike Ozanian’s response to a question about their value if they were to actually become a winning team.
$1.5 Billion would put them at about the 6th most valuable sports franchise in the world behind Machester United ($2.33 billion), Real Madrid ($1.88 billion), The New York Yankees ($1.85 billion), The Dallas Cowboys ($1.85 billions), The Washington Red Skins ($1.56 billion) and just ahead of the Los Angeles Dodgers ($1.4 billion).
There might have been a little somethin’ somethin’ crowding your Twitter feed last night, forcing you to miss the updates (or lack thereof.. in this case, possibly a good thing) from the latest round of NHL/NHLPA meetings. No word about what went down, but the negotiating session lasted seven hours and ended with plans to resume talks today (Wednesday).
Considering the last meeting between the two sides took about 10 minutes and preceded two weeks of stalemate, this seems to be a good sign. They’re talking at length, and a process that’s been riddled with posturing has broken for some welcomed silence and secrecy.
It looks like the NHL and Players Association are ready to resume talks this week (most likely Tuesday), and now we can briefly have hope again.
Certainly, a marathon talk between Bill Daly and Steve Fehr is a good start, and it gives even more reason for optimism that nothing was leaked from this meeting.
Where I lose some of my optimism is in a) the fact that this deal will rely on Jeremy Jacobs’ ability to compromise, and b) we live in a world where players value the opinion of clowns like Allan Walsh.
Neither side is content to reach the compromise we all envision for them, and both sides will need to let go of this â€œtrying to winâ€ philosophy that has cost them a quarter of a seasons revenue.
Iâ€™ll cap this rant early, but root for radio silence on both sides (an understandable challenge for the PA with 700+ members).
Anyway, if youâ€™ve read me or listened to me on the radio throughout this process, you know Iâ€™ve been very pessimistic about a deal getting done. I would say Iâ€™ve switched to cautiously optimistic now. I have been given hope that the two least turbulent leaders in this negotiation are sitting down talking about things that actually matter, and without storming off in a huff and a puff.
This is a math equation now. Solve the math equation, save some face, catapult this league back onto the national landscape and make sure that a large portion of the 2012-13 season is played.
-Michael Russo updates after last night’s lengthy meeting between Bill Daly and Steve Fehr. A meeting involving more representation from both sides is expected to take place early in the week.
"Thank you, NHL. I rarely have the opportunity to seem this friendly and appealing."
…is what Michael Grange should have called his terrific Sportsnet article from yesterday (SPOILER ALERT: Cold water). If only because A) this whole thing’s about money, B) wuns are punderful, and 3) it’s probably what Bettman and his negotiating team screamed in frustration when Fehr didn’t fall into the baited mudslinging trap that was the NHL’s first CBA proposal.
Grange almost gets there. He goes as far as referring to the Trojan horse myth when describing the NHLPA’s counter proposal, insinuating that it’s far more nefariously designed and player-favourable than it may seem from the limited details we’ve received. And that despite the proposal appearing level-headed and good faith-y, it will amount to little more than a fleeting gasp of fan relief in these discussions if only because it so sharply contrasted the NHL’s laughable initial offer by being, y’know, slightly realistic.
With NHLPA representatives set to make their counter-proposal to the NHL today, a lot of talk in the last 24 hours has centered around the possibility of a luxury tax system. Apparently it’s something that is right up Donald Fehr’s alley, as it’s been said he’ll try as hard as possible to get away from the hard cap system the league currently operates under.
For those who are a little unfamiliar with it, a luxury tax system is simplyÂ where a tax threshold is implemented (instead of the hard cap), and when a team spends over that line, they start paying cents on the dollar to the league. It may be included in revenue sharing, it may not. In the MLB, only a handful of teams clear the threshold, and I suspect the NHL would likely be the same way.
Editor’s Note: We’re pleased to welcome Ian Dudgeon to the MLHS blogging team. Ian was one of the co-founders of McKeen’s Hockey.com. He’s been busy at work assembling a database of profiles on Leafs prospects for MLHS, which you’ll be able to enjoy before long. He’s also going to be chiming in with a blog here and there.
Everyone please calm down and resume taking your medication. I have some extra Valium if you need some. There is no imminent NHL lockout. You will not be forced to watch basketball in October or November, or whenever they start playing that alleged sport. I think we will have hockey when we are supposed to and the threat of a lockout or strike is being artificially inflated by sports media who love, live for and need controversy.
The NHL tabled a proposal to the NHLPA this weekend and the collective reaction was as if everyoneâ€™s favourite commish, Gary â€œThe Countâ€ Bettman took the Stanley cup and used it to prop up his car while he rotated the tires. From fans and media alike, it was one of the craziest overreactions I have heard since.. well since the Leafs last made a move. But really, I should stop being surprised at how sports media react to things and how fans take their cues from them. The little picture numbers seemed scary but stepping back and seeing the bigger landscape, the NHLâ€™s proposal was really not that concerning.
With the rumoured initial offer from the NHL owners to the NHLPA hitting the internet last night, we have seen no shortage of freak outs. I guess itâ€™s understandable as not many people are familiar with labour negotiations, and everyone wants to see hockey start on time in the fall.
The reality is much more optimistic than it appears. For one itâ€™s encouraging that two weeks into discussion one side has already put forth a proposal. Secondly, itâ€™s damn encouraging that the scheduled meetings for next week will proceed as planned, and that there are three of them. A lot can be accomplished in three days.
While part of me is being naive or optimistic itâ€™s at the very least too early to panic. Considering the long wait for these talks to start, the league and union are certainly making up for lost time. Itâ€™s also damned encouraging that the NHLPA provides regular updates on the talks from Donald Fehr on their website. When the PA is unhappy youâ€™ll notice a sharp change in his tone and these updates will cease.
Roll the cameras. According to TSN’s Bob McKenzie, we’ll find out tomorrow where Justin Schultz is “taking his talents” as the former University of Wisconsin defenceman will decide which of the Edmonton Oilers, Vancouver Canucks, Toronto Maple Leafs, Ottawa Senators or New York Rangers is the winner of the highly publicized sweepstakes.
To this writer, this yearâ€™s Stanley Cup Finals were a treat. Not as much of a treat as seeing the Leafs win it of course, but enough of a treat to keep me in (and out of) my seat for most nights.
I couldn’t help but fancy the underdog, even if it meant not getting a chance to see the Cup in a neighboring country (Slovenia). Based on their team depth and level of play this team is capable of, the Kings seemingly had it all.
On the other hand, the Devils had to fight against injuries and featured storylines about a legendary goaltender fighting to improve on his already monumental impact on hockey history and an injured scorer struggling to shoot while leading all players in playoff points (up until game six).
A very interesting story is beginning to develop out west. The Anaheim Ducks top prospect, defenseman Justin Schultz, has been the best blueliner in college for the past two seasons. We’re talking about a 6’2 well-rounded defenseman with strong skating ability, slick passing ability, a very good point shot and a boatload of upside. During his age 20 and 21 years in the NCAA, he’s scored 34 goals and 91 points in 78 games played for Wisconsin. Â There’s the potential here for a future top pairing defenseman. Remember the Gardiner-Lupul trade last season? Schultz was a big reason that trade happened because the Ducks believed (and they may be right) that Justin was the better of the two talented young blueliners. Now here’s the thing: he has not yet signed with the Ducks and is due to become a league-wide free agent this coming summer.