April 11, 2011
New Mowat research demonstrates that Canada can support 12 NHL teams – double the current number of franchises.
New Mowat Study Shows Canada Can Likely Support 12 NHL Teams, More than Double the Current Number of Canadian Franchises
Toronto – The Mowat Centre at the University of Toronto has released a new research report concluding that Canada can likely support 12 NHL teams – double the current number of Canadian franchises.
The paper, The New Economics of the NHL: Why Canada Can Support 12 Teams by Tony Keller and Neville McGuire, finds that Canada has so few NHL teams because of the monopoly structure of the league, not due a lack of local demand or economic viability.
* Southern Ontario can support two more teams – one new team in the Greater Toronto Area and another in Hamilton, London or Kitchener-Waterloo.
* Vancouver and Montreal can each support a second team.
* Winnipeg and Quebec City could also be successful homes to NHL franchises.
The paper estimates that a team located in Canada can expect to take in roughly $23 million per year in extra gate revenue, relative to an American market of the same size.
“A major increase in the supply of NHL hockey to Americans has not led to a commensurate jump in demand,” says Keller.
“Hockey is still not a closely followed sport in much of the US. Many US teams are struggling financially, despite being heavily subsidized by local taxpayers and Canadian fans,” he adds.
“This is a relevant public policy issue for Canadians,” says Matthew Mendelsohn, the Mowat Centre’s Director.
“There are competition and anti-trust questions to consider. There are also questions about whether Canadian tax dollars are being used to subsidize unprofitable American teams through the NHL’s television contracts.”
According to Keller, “the league clearly has no interest in having supply meet demand, but rather benefits from ensuring that supply always remains somewhat below demand.”
“The market did not decide that Canada should only have six teams, or that Southern Ontario should only have one—the NHL did,” notes Keller.
“It is up to Canadians to fix it,” he says.
Interesting facts:
• Canada has only one-fifth of NHL teams, but generates nearly one-third of the league’s revenues.
• During the first rounds of last year’s NHL playoffs, Canadians were 40 times as likely as Americans to have watched hockey. Quebecers were as much as 90 times as likely.
• Most of the approximately $100 million a year that the CBC pays for Canadian TV broadcast rights ends up in the pockets of US teams. The same goes for the rights fees paid by TSN and RDS.
• The Edmonton Oilers, despite playing in the smallest market in the NHL, and the second-smallest arena, generate more ticket revenue than 21 out of 24 American teams.
• The Phoenix Coyotes appear to be earning more money in transfers from Canada than from local ticket sales.
