Saturday, April 25, 2009

NHL: Kelly point man on second T.O. team

One of the most interesting aspects of this week's report (David Shoalts, The Globe and Mail) that a group of businessmen is looking to bring a second NHL team to the Toronto area (myself, Sporting Madness) was the involvement of NHL vice president Bill Daly and NHLPA executive director Paul Kelly (pictured).

These rumours have been swirling for quite some time and were at the level of informal discussions between NHL governors back in October, but now they've progressed to formal meetings with two of the most important men in the league. Only Daly theoretically has any control over where a team might wind up. Kelly's involvement may prove even more crucial.

The key to this entire discussion is the economics. There's a good reason that the Leafs are far and away the most valuable team on Forbes' list, weighing in at $448 million. They're $37 million ahead of the next closest franchise, the New York Rangers, despite most of their revenues being in depressed Canadian currency and their costs being in U.S. dollars. Southern Ontario has an incredible population of hockey obsessives and the Leafs have a near-stranglehold over the market. They can charge whatever they like for tickets, merchandise and the rest, and you can bet that people will still queue up to pay it. A good deal of fans from Hamilton and St. Catharines make the pilgrimage down to Buffalo, but that's partly due to the lack of tickets available in Toronto.

However, some things are more important to the NHL than economics in the Gary Bettman era. Consider how Jim Balsillie's huge overbid to buy the Nashville Predators was turned down in favour of a smaller local offer that involved such men of integrity as Boots del Biaggio (Allan Maki, The Globe and Mail). There's a great deal of prestige at stake here; Bettman's legacy rests on trying to sell hockey in the United States, and moving a team back to Canada will undermine that, even if it makes solid business sense.

That's where Kelly comes in. The NHL and NHLPA are said to be partners under the current collective bargaining agreement, a vast change from how things have happened in the past (The Puck Stops Here). Yes, Alan Eagleson had plenty of influence on the business side of the league, but most of that wasn't from his role as head of the players' union and that didn't really work out too well for the players. Kelly has already demonstrated a willingness to comment on decisions that heretofore would have been the exclusive province of the league, such as European expansion and television deals (Sports Business Daily).

Because the players' fortunes are now directly tied to the league's revenues, he has a duty to lobby the NHL to make sensible business decisions. He also has a considerable amount of influence to use; the NHL will assuredly need the players onside in the current economic struggles, and you can bet that the NHLPA isn't overly happy that the league is propping up Phoenix.

The key difference between this later proposal and the earlier attempts at a team in Kitchener or Hamilton is the geography, which I detail in a couple of Google Maps here. This proposal would bring a team to Vaughan, which is north of Toronto's downtown. Hamilton and Kitchener are south of Toronto and closer to Buffalo, so a team in either area would have a sizable impact on the amount of people willing to cross the border to watch the Sabres.

The Leafs are in better financial shape than the Sabres and will still prosper with a second team in Toronto; their history and legions of fans will ensure that they can still charge the highest prices in town and arrange the best corporate sponsorships and television contracts. Thus, from the point of view of either the league as a whole or the players' association, this proposal would considerably strengthen one club (whichever of the troubled franchises moves into the GTA) without appreciably weakening any of the other franchises. That makes tremendous economic sense for all parties involved, and that gives Kelly and the players considerable motivation to convince Bettman that the health of the league is more important than saving face.

There's still a long way to go before this could happen. A new arena would be needed, and that's never a simple process, especially when a team is still a far-off prospect. The question of how much the new team would have to pay in territorial rights is also one that doesn't have a clear answer yet, and that could make a big difference. We don't even know if MLSE would give up their monopoly for any amount of money, and that may be the most important question, as Stephen Brunt points out.

However, there are a lot of people interested in this idea, including former Leaf Kevin Maguire, who's heading up the Vaughan group (Shoalts). Not all the owners are happy with Bettman's recent moves, and you can bet they won't be willing to prop up money-losing teams like Phoenix indefinitely when hugely lucrative markets like the GTA await.

This is where the support of Kelly and the NHLPA could be crucial; an alliance between the players and some of the owners might be enough to force Bettman to allow this and reduce MLSE's complaints to save his own neck. We also haven't seen the full impact of the economic crisis on the NHL yet, and the lack of playoff sellouts in some crucial markets (Greg Wyshynski, Puck Daddy) may be a troubling sign. If times get bad enough, Bettman may be forced to choose to save the league instead of his reputation, and pressure from Kelly may play a role in convincing him of the eventual necessity of this move. It won't happen instantly, but this makes far too much financial sense for it to be dismissed forever.

(Kelly photo from Puck The Media.)

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