Last week, Forbes released their 2018 NHL franchise valuations. The Tampa Bay Lightning currently sit 21st in that list, but had the fourth-highest year-over-year increase from 2017 to 2018. That’s an indication that the organization is financially healthy under the leadership of owner Jeff Vinik, and it’s an encouraging sign for the future — especially in the context of what it took to get to this point.
Historical context
The Tampa Bay Lightning have only existed as an NHL franchise for 26 years, but in that time, they’ve experienced more than their share of change. At times, they’ve been a model for other organizations to follow. And at other times, they’ve been a disaster of chaos and questionable legality.
The early years of the franchise prior to 1999 seem like something from a different era. And maybe at this point, they are (although I don’t like how old that makes me feel). The team during those years was often a sideshow. They had some success in the mid-90s, including the franchise’s first playoff berth, but by the late 90s, they had become A Problem.
The team was sold in 1998 and again in 1999. The second sale brought the first period of stability in the team’s history. Following years of incompetent ownership, William Davidson of Palace Sports and Entertainment, which also owned the NBA’s Detroit Pistons, purchased the team.
He acquired an organization hemorrhaging money at nearly twenty million dollars per year. That would be a lot now; it was even worse in 1999 terms. Adjusting for inflation brings it to around thirty million in today’s dollars.
Since Davidson purchased the team, the Lightning have been through three ownership groups. Davidson’s, the OK Hockey Group, and current owner Jeff Vinik. Each of those groups has brought differing levels of success.
Petbugs (of Twitter, Canucks Army, and Hockey Graphs) has compiled the Forbes data going back to 1999. So with the data being fresh, this is a good time to look at how the Lightning are currently positioned and how that position has changed over the last almost 20 years.
Team value over time
We’ll start by looking only at the team value during that time. The chart is broken into three sections representing each lockout. I split it this way because with each lockout, the rules of the game changed a bit and seeing each period in context is helpful.
Each line on this graph is an NHL team. The teams in orange are “sunbelt” teams. The blue line is the Lightning. Comparing the Lightning to a Canadian team doesn’t make much sense because their financial positions are different so using the other sunbelt teams as a guide can also provide meaningful context.
While interesting, the values don’t tell us much about how the team is doing. The franchise has always been near the bottom of the league in terms of value and that’s to be expected given the location and the size of the market. Tampa is a viable city for professional sports in North America. That’s not a question. But no one would mistake it for one of the major cities like New York, Los Angeles, or Dallas. All it takes is a quick look at the populations to know that.
After Davidson purchased the team in 1999, he immediately sent it on a climb in value. That continued until the late 2000s when it leveled off and started to head back the other direction.
The sale to OK Hockey shows an initial drop in value and than quite a cliff from 2009 to 2010. Vinik’s purchase of the team immediately sent the value back in the right direction. And the team has been one of the fastest appreciating over the last few years.
Operating income over time
The more interesting and more important part of the Forbes data is the operating income, which tells us more about the viability and health of the franchise. From a fans’ perspective, this is more meaningful than the valuation. Frankly, I don’t really care whether Vinik stands to make $300M or $500M dollars when he decides to sell the team. I do care if the team has enough cash to operate because if they don’t, I won’t have a team to root for anymore.
As discussed above, the team was in a nightmare position in 1999. Davidson’s purchase of the team was the first example of an owner stepping in to acquire a depressed asset and turn a profit by bringing it back to respectability. The team won its first Stanley Cup during his tenure and seemed ready to become a premiere franchise in the league.
Unfortunately, the 2005 lockout came at the worst time for the Lightning. They lost all of their momentum as a franchise. They didn’t have a chance to defend their Stanley Cup. And from there, things went bad quickly. The Palace Group sold the team to OK Hockey in 2008 ushering in a new era of incompetence and mismanagement that saw the city almost lose the team.
In just two years, OK Hockey managed to do so much damage that it would require years to recover. Having been at least close to break even or better since 2001, the team lost money every season from 2009 to 2014. That includes both years of OK Hockey and the first four years of Vinik’s ownership.
Under Vinik, the team has climbed back to supporting itself and removing any questions about relocation. Sports teams don’t have to make a lot of money to be worth owning. They grow in value so much that just breaking even every year is more than enough for their owners. Even a small loss isn’t a problem. But losing lots of money year after year like the Panthers or Coyotes are doing can put teams in trouble. And not so long ago, that’s where the Lightning were.
The bigger picture
Less than ten years removed from those dark times, the Lightning leaving Tampa seems unthinkable. The team feels more a part of this area than any of the other professional franchises. They’ve connected locally in a way that the Bucs, and certainly the Rays, have not.
The investments the team has made in the community through the Lightning Community Hero program and Vinik’s other charitable endeavors have been a big part of that. Being among the best teams in the league hasn’t hurt either. That combined with one of the best game day experiences in the NHL has led to selling out every night.
But this won’t last forever. Inevitably, the team will not be able to sustain this level of on-ice success. It might be two years from now. Or four years from now. Or six years from now. And with those on-ice struggles will come drops in attendance, drops in revenues, and challenges to stay profitable.
But every time the team sustains a period of success like this, it makes the next downturn less likely to be as bad as the previous ones. As the ceiling rises on fan interest, so does the floor. Every season with a deep playoff run creates more fans and some of those will stick around even through the next low point.
The Lightning, much like Nashville, are showing that building a model franchise in a midsize city in the southern United States is possible. It isn’t easy. But it’s possible. Other franchises like the Hurricanes and Coyotes haven’t been able to find the same level of success yet. But the turn around with the Lightning suggests that with the right owners, those markets could get back on track too.
The Lightning and Vinik had some advantages. The arena was in decent condition and in a great location. Vinik smartly spent money renovating it, first at his own expense and later in partnership with local government. He’s also used the arena as the centerpiece for his larger development plans in Channelside.
His vision combined with hiring the right people to manage the on and off ice decisions has led to the Lightning thriving in a market that not too long ago seemed like it might not be viable.
