Top 5 NHL Expansion Cities (hint: #1 is not Seattle)

[Mike F]

Pretty much every city on the list would support a winning team, I don't doubt, but an expansion team is going to struggle, and there's only so long that the novelty of a new pro sports franchise alone will sell tickets. You generally need a true hockey fanbase to support a struggling team.

Quebec would have that. The rest of the cities, I'm not so sure.

[vanisleflamesfan]

Ugh. I'm so sick of expansion talk. As a hockey fan, every other week the news is filled with reports of 'so and so southern team is losing money', 'so and so US team is in trouble', 'so and so American team is giving away tickets with the purchase of a car wash'. How can people realistically think that the NHL needs to expand just because Gary and Co. screwed up the realignment? Crazy talk. Contraction, should be the conversation.

[TurnedTheCorner]

Contraction will never be the conversation. But yeah, expansion talk is premature.

[MisterJoji]

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.

Not trying to say you're wrong as you seem to be very knowledgable on this front. Just wondering where you got the 250 million for an expansion fee from? During the last round of expansion the Wild and Bluejackets paid 80 million 13 years ago. Has that price really more than tripled since then? If you look at what San Jose paid 9 years prior to that, they paid 45 million. Why did the price not even double from 1991-2000, but it costs more than triple the amount from 2000-2013? Seems ridiculously high. Also who sets the territory fee? Again, 1/4 million dollars seems insanely high as I can't see the Leafs losing any money with a 2nd team in the GTA. With a 20 year wait list to get Leafs season tickets, it wouldn't even dent their cheque book.

[Jay Random]

Originally Posted by MisterJoji

Not trying to say you're wrong as you seem to be very knowledgable on this front. Just wondering where you got the 250 million for an expansion fee from? During the last round of expansion the Wild and Bluejackets paid 80 million 13 years ago. Has that price really more than tripled since then?

I don't have any NHL source, of course, since the NHL is not officially saying anything about expansion. However, the usual journalists and rumour sites are tossing out numbers $200 million and up, based (I suppose) on the fact that proven money-losing franchises in bad locations are selling for not much less than that.

Why did the price not even double from 1991-2000, but it costs more than triple the amount from 2000-2013? Seems ridiculously high.

It is ridiculously high. On the other hand, it's also ridiculous that the Phoenix Coyotes were valued at $170 million — without the option to relocate.

However, what you get for that money has changed dramatically. In the 1990s, the league was selling franchises that were almost certain to lose money, thanks to cutthroat competition for players among an increasing number of teams. Expenses were rising faster than income, with no end in sight. Today, the NHL would be selling franchises with predictable expenses, thanks to the cap. If your team has average revenues, you're almost certain to make a profit. That makes it a much better investment even at $250 million than Columbus was at $80 million. (Not that that's saying much.)

Also who sets the territory fee? Again, 1/4 million dollars seems insanely high as I can't see the Leafs losing any money with a 2nd team in the GTA. With a 20 year wait list to get Leafs season tickets, it wouldn't even dent their cheque book.

It would dent their chequebook, all right. It would make them have to spend money putting a good product on the ice, instead of just taking their enormous customer base for granted. The Toronto Maple Leafs are almost the only franchise in the NHL that is driven entirely by pursuit of profit and cares nothing for winning. If they had local competition, they would have to start caring. Every owner since Stafford Smythe has been fighting tooth and nail against that.

The real point, however, is that the Leafs are going to set an asking price of infinity, and they are only going to lower it to the point at which it is cheaper for the league to pay the fee than fight it in court. In the past, territorial fees have tended to be roughly the same as the cost of an expansion team. The Islanders, I believe, paid $6 million for their franchise in 1972, plus a $5m indemnity to the Rangers. The Anaheim Ducks got their franchise by paying $25m to the league and $25m to the L.A. Kings. If the league can get $250m for an expansion franchise, as many people are suggesting, then the Leafs can probably hold out for an indemnity in the same range.

[gilligans_off]

Originally Posted by kunkstyle

Considering that the NHL has said on numerous occasions that they have no desire to put a team there...

They have!?!

[getbak]

Originally Posted by MisterJoji

Not trying to say you're wrong as you seem to be very knowledgable on this front. Just wondering where you got the 250 million for an expansion fee from? During the last round of expansion the Wild and Bluejackets paid 80 million 13 years ago. Has that price really more than tripled since then? If you look at what San Jose paid 9 years prior to that, they paid 45 million. Why did the price not even double from 1991-2000, but it costs more than triple the amount from 2000-2013? Seems ridiculously high. Also who sets the territory fee? Again, 1/4 million dollars seems insanely high as I can't see the Leafs losing any money with a 2nd team in the GTA. With a 20 year wait list to get Leafs season tickets, it wouldn't even dent their cheque book.

Historically, expansion fees have been set to whatever the league thought they could get at the time. Between 1967 and 1970, they tripled from $2 million to $6 million. Then, they stayed at $6 million for the rest of the 70s (the Islanders paid an additional $5M to the Rangers, and the Oilers, Nordiques, Jets, and Whalers each paid an extra $1.5M that went to the WHA, but the NHL received $6M from each).

The WHA teams paid $7.5M total each in 1979. 12 years later, the Sharks paid 6 times that much.

Even though Columbus and Minnesota didn't start play until 2000, the last four expansion teams were all awarded in 1997 (conditional upon completion of their new arenas), so it was only 6 years between the Sharks paying a $45M expansion fee and the Preds, Thrashers, Wild, and Jackets paying $80M.

Now it has been 16 years since the last expansion franchises were awarded, which is the longest period since 1967 without an expansion. There have also been two lockouts, designed to level the financial playing field and make it possible for every team to compete both on and off the ice. Given all that, I don't think a $200M+ expansion fee is out of the question.

[valo403]

Originally Posted by MisterJoji

Color me surprised that Houston's AHL attendance was 7th in the league last year. Never really thought Houston would be a viable NHL destination given their location in the deep south of football country, but it's definitely an interesting option. But in terms of who "deserves" a team more, it would probably be Quebec or Seattle. Relocation might be a good option for Houston. Move Florida to Houston, give Seattle and Quebec expansion teams and boom ... 16 teams in each Conference and the divisional playoff format will make a lot more sense.

Just curious, what has Seattle done to "deserve" a team?

[troutman]

Originally Posted by valo403

Just curious, what has Seattle done to "deserve" a team?

They gave grunge to arenas everywhere.

[MisterJoji]

Originally Posted by valo403

Just curious, what has Seattle done to "deserve" a team?

Thye had the Sonics stolen out from under them. Thought they had a deal to acquire and move the Kings, which was recently squashed. Haven't had an NHL team for 43 years despite being in a decent hockey market. The city has had some ###### luck lately with regards to pro sports and I think they've waited a long time for a 2nd shot at having an NHL team. KC hasn't had a NHL team for almost the same amount of time but has a considerably smaller population and isn't really as big as a hockey market that Seattle is. Seattle's WHL team also draws over 4000/game. Portland is top 4 in the league for attendance totals but Seattle out draws them relative to arena size (67% vs. 64%). Finally, they are just itching to break ground on a new arena but would like to have a confirmed tenant first.

[Jay Random]

Originally Posted by troutman

They gave grunge to arenas everywhere.

Ah, grunge. The musical skill of punk rock combined with the energy of Lawrence Welk. Thanks for reminding me.

I was hoping Seattle would get a team. Now I've gone back to hoping it sinks into the ocean.

[Flamescat]

So with all this talk about MLSE putting up hurdles for a 2nd Toronto Team, and if a Markham team is a licence to print money, why hasn't MLSE just put up a 2nd team themselves? I mean, they're spending all this money acquiring every Toronto Franchise in Major Sports (TFC, Raptors, Marlies, Leafs, your daughter's peewee hockey team) why not them? Would the NHL even let them?

[AltaGuy]

Originally Posted by Jay Random

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.

I think there are likely plenty of corporate boxholders to sell to in Toronto who are currently priced out of the ACC, or on some kind of waiting list (more likely the latter).

Yes, prices would not be anything near what they are for the ACC for a second team, but that does not mean that it is not feasible. Compared to boxes for most NHL cities, I would guess (just a guess) demand and prices would be pretty comparable for a second team in a massive hockey market. Less, in this case, is still large.

As I mentioned earlier in the thread, any viable team second team near Toronto will have to get MLSE on board - and that means promising them more dough. While MLSE cannot expressly own the team, they can manage the arena and concessions, collect parking, and who knows what else.

You are right that paying both an expansion fee and a territorial fee would be crippling. Therefore a creative solution that promises MLSE more money in the longrun is the only way forward.

Originally Posted by Flamescat

So with all this talk about MLSE putting up hurdles for a 2nd Toronto Team, and if a Markham team is a licence to print money, why hasn't MLSE just put up a 2nd team themselves? I mean, they're spending all this money acquiring every Toronto Franchise in Major Sports (TFC, Raptors, Marlies, Leafs, your daughter's peewee hockey team) why not them? Would the NHL even let them?

You can't own two teams at once.

[valo403]

Originally Posted by MisterJoji

Thye had the Sonics stolen out from under them. Thought they had a deal to acquire and move the Kings, which was recently squashed. Haven't had an NHL team for 43 years despite being in a decent hockey market. The city has had some ###### luck lately with regards to pro sports and I think they've waited a long time for a 2nd shot at having an NHL team. KC hasn't had a NHL team for almost the same amount of time but has a considerably smaller population and isn't really as big as a hockey market that Seattle is. Seattle's WHL team also draws over 4000/game. Portland is top 4 in the league for attendance totals but Seattle out draws them relative to arena size (67% vs. 64%). Finally, they are just itching to break ground on a new arena but would like to have a confirmed tenant first.

So they once had a basketball team is enough to deserve an NHL team? I don't get that. It might be a decent hockey market, but it's far from proven, just like the rest of the cities on that list, with the exception of Quebec.

[WilderPegasus]

Originally Posted by MisterJoji

Thye had the Sonics stolen out from under them. Thought they had a deal to acquire and move the Kings, which was recently squashed. Haven't had an NHL team for 43 years despite being in a decent hockey market.

Huh? It's been a lot longer than that!

[WilderPegasus]

Originally Posted by Jay Random

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.

Have you been to Markham and the other cities in the York Region? It's not exactly McKenzie Towne when it comes to corporate presence.

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.

I think they'd go in the other direction these days. They'd broadcast games of a Markham team on Sportsnet Ontario and (a new) TSN Toronto station. Then they'd move all the Leafs games to Leafs TV so that Leaf fans have to pony up big money to pay for it each month.

Not broadcasting an NHL team is the one thing that would give another company a chance to break into the sports tv duopoly in this country.

[DoubleK]

Originally Posted by Nehkara

3. Seattle - Large city, natural rivalry, very close proximity to Canada.

Is it expected that Seattle will be BC's Buffalo? Lots of cross border hockey travel?

[Vulcan]

Here's an article from 09 with comments by Daly about having another team in S. Ont.

And if the Toronto Maple Leafs don't like it, Daly said in so many words, they can lump it. But, he said, it's possible the Leafs could approve a competing franchise.


"I don't think it's a point of contention even with the Leafs," Daly said. "I can see a situation where by adding a franchise to a market, you can raise the tide for all boats. I don't think that because you put a franchise here, it necessarily makes the Leafs any less successful. And, in fact, it could create new revenue opportunities."

If the Leafs were opposed, Daly said, the NHL could put a team in Southern Ontario anyway.
"They don't have to agree," Daly said of the Leafs. "They can be dead set against it, but that doesn't mean they can stop the league from putting a franchise here if the league thinks a franchise here makes sense."

Hamilton is out.

Daly said no new franchise is possible without a new arena and he made it clear Hamilton's Copps Coliseum is not the answer.
"The demographics are friendly for the NHL and NHL teams and that makes [Southern Ontario]a good candidate for a franchise," Daly said. "Having said that, what I will say is that even the proposal to move the team to Hamilton. … Copps Coliseum doesn't provide modern-day NHL economics."

A second franchise would most likely be located in Toronto or close to it, since many NHL governors believe putting a team in Hamilton would divert ticket sales away from the Buffalo Sabres. Burke said yesterday the Leafs are worried about the harm to the Sabres if there is a second franchise even in Toronto.

As for the Leafs having a veto, they don't.

Balsillie's lawyers made much of the letter, saying it bolstered their interpretation of the NHL's constitution. The lawyers argued that franchise relocation required a unanimous vote of the governors, which effectively gives each team a veto. The league says only a majority vote is required.
Daly said the Leafs' letter "says they have a different interpretation of the constitution than we have. So?" He repeated the NHL's contention, which was argued in the Coyotes' case, that "the whole concept that someone has a veto is just plain wrong. It's made up. There's a falsification of the facts."

http://www.theglobeandmail.com/sport...rticle1364111/

I think league power has shifted from the owners to league management, so the Leafs are no longer able to dictate to the rest of the league.

[Vulcan]

Originally Posted by WilderPegasus

Huh? It's been a lot longer than that!

Seattle has never had an NHL team. Their last pro team was in the old pro WHL and that's probably about 40 years ago. When they won the Stanley Cup, I think the league was the Pacific Coast Hockey League. They were granted a NHL expansion franchise in the 70s but that fell through.

[Jay Random]

Originally Posted by AltaGuy

As I mentioned earlier in the thread, any viable team second team near Toronto will have to get MLSE on board - and that means promising them more dough. While MLSE cannot expressly own the team, they can manage the arena and concessions, collect parking, and who knows what else.

You are right that paying both an expansion fee and a territorial fee would be crippling. Therefore a creative solution that promises MLSE more money in the longrun is the only way forward.

The trouble is, the expansion fee and the territorial fee will have to be paid anyway. If you're giving MLSE parking and concession revenue (and why would you? The team would not be playing at ACC), you're putting a third huge burden on the expansion team. Not even the Toronto Toros had to cope with that much, and the Leafs ran them out of town after just three years.