Time, place have made Leafs No. 1
Toronto has led Forbes list for nine years with a brand that is entrenched in market
The business magazine Forbes published a story last June explaining how the Chicago Blackhawks’ Stanley Cup win would boost the franchise’s value to near $1 billion.
The Leafs were already well beyond that threshold and didn’t need a title to get them there. In fact, when Forbes valued the Leafs at $1.3 billion last November, it marked the ninth straight year the team topped the magazine’s franchise value rankings.
Heading into this season there’s not much stopping the Leafs from stretching that streak to a full decade — not even a post-season drought that dates back to 2004.
How does that work? Mainly because on-field success is only one factor among many that make a sports franchise valuable, experts say. In the right market and with the right ownership, franchise value can survive and thrive despite lacklustre results.
“The Leafs have all the other boxes checked,” says Norm O’Reilly, chair of the sports administration at Ohio University College of Business. “They have the historical brand. They have the massive fan base. They own their own facilities. They’ve diversified as part of MLSE. If you wanted to buy a team and your goal was financial, there’s no better buy in the NHL.”
Here are five ways in which the Leafs remain successful in the longrange play for franchise value.
DEMOGRAPHICS
Toronto might not be the biggest market on the continent but it’s the most populous hockey-obsessed city on the planet, which bodes well for the lone NHL team here. It’s not like the Leafs have to compete with either the NFL or even a neighbouring NHL team for fans’ minds, hearts or pocketbooks. The same goes for sponsors, who still know they can reach the largest number of sports fans possible by aligning themselves with the Leafs.
“It’s a pretty fundamental factor in sports business valuation,” says Drew Dorweiler, managing partner at the valuation firm Dartmouth Partners. “Toronto’s a sizeable market, a wealthy market, and, most importantly, one where hockey is extremely popular, if not a religion. These factors combine to make it one of the very best places on the planet for hockey.”
OWNERSHIP, MANAGEMENT, SYNERGIES
When the Ontario Secondary Schools Pension Fund owned Maple Leaf Sports and Entertainment, fans argued that the owner had no incentive to field a winner as long as tickets sold and TV ratings remained high. True. But since Rogers and Bell bought a majority stake in MLSE, and even more since Tim Leiweke took over as president and CEO, the Leafs and other MLSE properties have been aggressive about seeking out sponsorships both here and in- ternationally. When broadcaster CCTV wanted to introduce hockey to audiences in China, they partnered with the Leafs, giving the club an entrance to a large and lucrative market.
“They were one of the first adopters in recognizing the synergies in combining the different clubs — hockey, basketball and soccer,” Dorweiler says. “Arena ownership, broadcasting rights, getting in Bell and Rogers; that’s huge.”
MEDIA RIGHTS AND REVENUE SHARING
Closely tied to the above-mentioned synergies. Ballooning media rights fees have swelled franchise values across pro sports, boosting the Leafs’ value along everyone else’s. When Rogers (which owns 37.5 per cent of MLSE) pledged $5.2 billion over 12 years for national NHL media rights in Canada, the Leafs benefitted via the NHL’s revenue sharing agreement. And when NBC signed on for 10 years and $2 billion, it helped the Leafs even more because the U.S. currency helps soften damage the falling loonie causes.
“It’s not as bad as it was when Winnipeg and Quebec left (the NHL) 20 years ago,” O’Reilly says. “Money from the owned properties like the Heritage Classic and media deals is all shared across the board. The exchange rate certainly hurts, but it’s not nearly as severe as it was.”
TRADITION AND BRAND VALUE
A distinguished history alone won’t propel a team to the top of the franchise value rankings. The Black- hawks are also an Original Six team in a big market, but still trail the Leafs even after their Stanley Cup win. Still, the Leafs’ pre-1967 track record of success helped cement their place at the centre of Toronto’s sports consciousness, creating successive generations of dedicated fans. It hasn’t mattered that many people who spend money and time engaging with the Leafs were born after the most recent championship, but O’Reilly warns it might one day.
“There are very few people alive who still have keen memories of the ’40s and ’50s and ’60s,” he says. “Anybody 65 and under really has no recollection of the Leafs being a dynasty. That heritage variable is going to start to slide off the table a little bit.”
OH YEAH . . . WINNING
Every team owner welcomes the windfall that comes with a playoff run. Player costs plummet while TV ratings skyrocket and arenas sell out at inflated ticket prices. O’Reilly says that if the Leafs had acquired superstars and won a couple of Stanley Cups in the last decade, franchise value would have risen. But Dorweiler points out that franchise value is a long-term proposition and won’t always respond to a one-time infusion of cash.
“Look at the Chicago Cubs, who haven’t won a title since 1908,” Dorweiler says. “Franchise value is really demographics-driven. It’s the popularity of the sport, and not so much titles. The Leafs are already doing a good job of maximizing value, I don’t know that another title would materially increase franchise value.”