Hockey deal augurs poorly for rebirth of Nordiques

With a new collective bargaining agreement in place, National Hockey League play resumed on the weekend. The enthusiastic fan reaction suggests that the four-month lockout will not result in any significant fan blowback in the short term.

Over the longer term, though, fans of teams operating in the weakest markets have reason to worry, for the new agreement doesn’t do much in terms of offering them improved revenue sharing. Contraction and/or franchise relocation is inevitable.

The question of revenue sharing is an important one for hockey fans in Quebec, given that the new agreement increases the odds of a struggling U.S. franchise eventually relocating to Quebec City. On the other hand, it doesn’t do much to help ensure that a revived Quebec City franchise would be financially stable.

Saturday night’s season opener at the Bell Centre between the Toronto Maple Leafs and Montreal Canadiens showcased Canada’s two most-storied franchises, and among the league’s most profitable ones. According to Forbes magazine, the Habs, Leafs and New York Rangers accounted in 2010-11 for 83 per cent of all profits in the 30-team league. Thirteen clubs lost money, said Forbes, while the balance either had small profits or were around the break-even point.

The NHL suffers from a dearth of rich franchises, at least in comparison with other sports. Although the new labour agreement increases annual revenue sharing from $150 million to $200 million, or about six per cent of last year’s $3.3-billion revenue pot, the increase is offset by the fact that more teams have become eligible for revenue sharing.

Under the old agreement, teams struggling to make ends meet in large population centres, all of them in the United States, were not eligible. The new agreement is blind to market size, so revenue sharing will now include such teams as the New York Islanders and Anaheim Ducks.

The wider distribution of revenue sharing to accommodate larger U.S. markets will satisfy NBC, which, in 2011, signed a deal with the NHL agreeing to pay $1.9 billion over 10 years for U.S. national TV rights.

And, while it will help middle-of-the-pack franchises become more profitable and capable of spending up to the limit of the league’s new $64-million salary cap for next year, hockey writer Albert Ladouceur, of the Journal de Québec, says any new Nordiques franchise would have trouble affording such a high payroll.

The new agreement, then, will probably help facilitate franchise relocation to Quebec City, but not be very useful in terms of helping a team operate profitably there. Inevitably, some sort of public operating subsidy in Quebec City might be necessary, as is currently the case in Glendale, Ariz., home of the Phoenix Coyotes. In Glendale, the city owns the arena where the Coyotes play, and effectively absorbs the cost of operating it. Plus, it pays the Coyotes a fee to do that.

Whereas private money built Montreal’s Bell Centre, the new $400-million rink soon to be built in Quebec City is to be financed 50 per cent by provincial taxpayers and 50 per cent by Quebec City municipal taxpayers. Since half of provincial tax revenue is generated in the Montreal metropolitan region, it means Montrealers are effectively underwriting $100 million of the new arena. If ever there is provincial participation in arena management as well, à la Glendale, there will be an added indirect layer of Montreal subsidization.

All in all, the new labour agreement will improve the profitability and stability of the average U.S. franchise, and enhance the national television value of hockey in the U.S. It won’t be quite as helpful to the Ottawa Senators, Edmonton Oilers, Calgary Flames or Winnipeg Jets, though, let alone a reborn Nordiques. And that’s too bad.