In the week since it was announced that the NHL franchise known as the Atlanta Thrashers was to be sold and moved to Winnipeg, discussion about this move has raised some interesting questions about the viability of markets past, present and future, to support the NHL. We’re talking about it a lot here at Raw Charge because this move directly impacts the division the Lightning play in, and we realize how narrowly we dodged this particular bullet (thanks again, Mr. Vinik). One two-part question posted in the comments of this article asks:
1) What is their (the NHL’s) shared revenue system, if they have one? If there is one, can it be enough to finance a team in a relatively small market?2) What other markets are large enough in terms of media that could handle hockey? Hampton Roads (Norfolk/Virginia Beach)? Cincinnati (or is Columbus too close)? Birmingham? Is hockey popular in Iowa? Is relocation to Connecticut an option or perhaps Providence RI? Quebec lacks a team at the moment, oui?
Here are some (definitely not presented as definitive) answers…
1) The NHL does have a shared revenue system, implemented as part of the new collective bargaining agreement reached following the lockout that resulted in cancellation of the 2004-05 season. Unlike the NFL and NBA and MLB, which feature even shares of broadcast revenue, pre-determined splits of gate receipts (which vary by league) and baseball’s so-called “luxury tax”, the NHL’s system is much more complex. Teams must pre-qualify for a stake of redistributed funds, which the league has set at 4.5% of total revenues. There are three requirements that must be met to qualify:
- Must be among the 15 lowest (bottom half) in terms of gross regular season revenues.
- Have an available player compensation that is below the pre-established payroll midpoint (which varies annually).
- Be located in a designated metropolitan area with less than 2.5 million tv households.
Teams that meet all three of those criteria are eligible for a share of the revenue to be shared which comes from four sources: centrally generated league revenue (tv, sponsors, merchandise, etc.), escrow funding (taken from the escrow accounts of the top ten revenue generating teams), playoff ticket revenue (all teams in the playoffs are taxed a a varying percentage of each playoff ticket sold) and supplemental funding (in which the top ten teams are hit up again).
So in answer to the question asked: no, not by itself. While small market teams are the obvious beneficiary of this plan (certain teams have no chance of ever even qualifying for these funds, based solely on the markets in which they play), a share of that 4.5% (think $10-$15 million) is a nice chunk of change to bolster your payroll but not nearly enough to operate a franchise.
2) To me, this is the big question that sports leagues have to figure out going forward, with the NBA and NFL leading the way by exploring the feasability of markets that lie beyond North America. Just about any place in the US and Canada that would seem to be able to support a team has already been tapped or is otherwise unsuitable. For example, the ones mentioned in this question…
- Hampton Roads (Norfolk/Virginia Beach) Less than 200 miles from Raleigh, North Carolina (Hurricanes) and less than 200 miles from Washington DC (Capitals)
- Cincinnati – Just over 100 miles from Columbus (Blue Jackets). Cleveland would be far enough away, but the Barons didn’t do well there.
- Birmingham & Iowa – These are actually intriguing possibilities. They’re smaller markets but isolated enough to not have to worry about competing with nearby big cities. Plus, they’ve certainly demonstrated the ability to support major college and minor league sports. Ideally, are these the kinds of places the major sports leagues are looking for? Probably not, but they might not have much of a choice any more. After all, the NBA moved into Oklahoma City and the NFL’s current world champion plays in Green Bay…
- Connecticut – Hartford, presumably? The Whalers were probably their one and only shot. It would be tough to try to carve out a niche…again…being located less than three hours from both Boston and New York.
- Providence R.I. – Less than an hour’s drive to Boston
- Quebec – I’m going to assume this is a shot at the Montreal Canadiens, non?
- Metropolitan areas not listed – Seattle, Indianapolis, Las Vegas, Houston, San Francisco/Oakland, Salt Lake City, San Diego, Kansas City, Louisville. Suitable or not? More suitable than Atlanta? Hard to say. A factor to consider for ALL of these areas is their arena situations. Do they have one ready to go that’s up to current league standards? If not, you’re just setting up for another move. Are these places that will be able to book, and sell tickets for, concerts, circuses and all the other events that would allow a 15-20,000 seat arena to turn a profit? When you’re expanding a sports league, you’re also expanding the demands on a region’s entertainment dollar beyond the needs of your franchise. Cities simply can’t afford to build facilities that are going to sit dark 250 nights a year and I’m not sure there are enough people in and around Des Moines, Iowa, to shell out for Lady Gaga, The Wiggles and four NHL home games over a two-week span.
So actually, these aren’t answers at all. They’re just more questions, questions that owners and commisioners in ALL the major leagues are going to have to answer in the near future.
