Originally Posted by Jay Random
Markham is a licence to print money if and only if the city is dumb enough to build the proposed arena at public expense — and it's starting to look like that won't happen.
Anyway, while I am quite sure that an NHL team in Markham could sell out every night, it would have a mighty rough time in other respects. First off, the corporate presence in Toronto is just that — it's in Toronto. There is great prestige and PR value for a company in owning a suite at the Air Canada Centre; a suite at a barn in the suburbs would be distinctly second-best. It would therefore sell for its actual value as entertainment, not much more — certainly nothing like the price of ACC suites, which have enormous amounts of snob value built into the price.
Secondly, the Leafs would move heaven and earth to keep the Markham team off the air and out of the local media; and since Rogers and Bell jointly own the Leafs, that means no Markham team on TSN or Sportsnet. Remember when Molson was the primary sponsor of Hockey Night In Canada, and Carling O'Keefe owned the Nordiques? You never saw Nordiques games on HNIC (though it's true, La Soirée du Hockey was another matter). Multiply that feud by 100 gazillion (because this is the Leafs, and the one thing they know how to manufacture is soap opera) and you get some idea how hard they would try to make a Markham team fail.
Thirdly, a Markham team would begin life with several hundred million dollars of debt to service, thanks to the enormous territorial fee that the Leafs would be able to extort. MLSE has huge clout in the NHL, and even if the league wanted to thwart the Leafs' wishes, MLSE has something like $80 million a year in free cash flow from the Leafs alone. I'm sure they would pour every dollar of that into a legal battle against the league rather than give up one inch of their territory. This is, after all, the same franchise that opposed a team in Hamilton, opposed a team in Ottawa, opposed the WHA merger (because that put three more teams in Canada) — even fought tooth and nail to keep Vancouver from getting an NHL team. They eventually lost all those battles except, significantly, the Hamilton one, because Hamilton was actually within their 50-mile exclusive radius. I can't see them allowing another team into that territory without massive compensation.
If the City of Markham doesn't pay for the arena, then an owner would have to spend, say, $400 million for a building, $250m or so for an expansion franchise, and probably another $250m in indemnities to the Leafs. That doesn't leave much change out of a billion dollars. There are several billionaires who would like to own NHL teams but don't yet. But their capital is largely tied up in the businesses that made them billionaires, and if they tried to sell out and convert their assets to cash, most of them wouldn't be billionaires for very much longer. That means they would have to borrow to raise that kind of money, and the debt-servicing costs would weigh heavily on an expansion team that was already second fiddle in its own market.
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