Analysis of the NHL’s Money-Losing Teams (Part Three).

The third part of an overview of the NHL’s money-losing franchises in hopes of better understanding the factors behind eighteen NHL teams losing money in 2010-11.

In the second part of this series, I examined the NHL teams which lost money each season from 2005-06 to 2010-11. In this part, I’ll look at the teams which lost money in all but one season over that period.

The Near-Perennials.

The Carolina Hurricanes, St. Louis Blues and Buffalo Sabres lost money in five of six NHL season between ’05-’06 to ’10-’11.

Following the Hurricanes Stanley Cup championship season of ’05-’06, attendance jumped from 21st overall to 15th the following season, but an ominous sign was they played to 92.8 percent capacity in ’06-’07.

As the Hurricanes on-ice performance declined (they only made the playoffs once after their championship season), so did their attendance numbers, to where in the ‘Canes never finished higher than 20th in attendance from ’07-’08 to ’10-’11.

Their Fan Cost Index (FCI) was regularly among the lowest in the league during this period. In ’06-’07, it was 25th. In ’07-’08, it was 27th. In ’08-’09, 29th; in ’09-’10, it rose slightly to 26th; and in ’10-’11, to 24th.

During the early years of this CBA, the Hurricanes were 16th overall in payroll in ’05-’06,  and climbed as high as 7th overall in ’07-’08, but fell into the bottom third of the league over the following three seasons.

Like the perennially money-losing Nashville Predators, the Hurricanes also carry a lot of debt, prompting owner Peter Karmanos to seek new investors to bring in additional revenue. As per Forbes.com in 2009, the recession and a crumbling house market hit their fan base hard, which was probably still taking  its toll over the following two seasons.

The Blues frequent appearances among the money-losers was the result of a change of ownership in 2005 (which reportedly took on $120 million in debt purchasing the team and its arena), and an lengthy roster rebuild with cheaper, younger players.

As a result, the Blues – which had a 25-year playoff streak prior to the lockout – missed the postseason for the first three post-lockout years, resulting in their attendance (once regularly among the league’s best) plummeting to among the league’s worst in ’05-’06 and ’06-’07.

From ’08-’09 onward, however, attendance steadily improved to where the Blues were regularly in the top ten.

Their FCI was slashed significantly following the ’06-’07 season, dropping to the league’s lowest for ’07-’08 following their plunge to the bottom of the league’s attendance. It would slowly-but-steadily increase after that, rising to be sixth-lowest by ’10-11.

The Blues’ payroll remained among the lowest in the league throughout that period, and was fourth-lowest in ’10-’11.

The rise in attendance and FCI, coupled with keeping payroll low, likely accounts for their losses in ’10-’11 being less than the previous season.

The Sabres frequent appearances among the money-losers came in spite of their strong attendance numbers. In 2005-06, the Sabres were 14th overall in attendance, but never sank below 11th overall in the following years, frequently sitting in the top ten.

Despite a loyal fan base, theirs is the smallest American market in the NHL, one which has also suffered through a bad economy. As a result, their fan cost index is among the lowest in the league. For 2010-11, it was fourth lowest ($228.72).

Throughout that period, their payroll never went higher than 13th overall (’07-’08).

Billionaire Terry Pegula, who took over ownership of the Sabres mid-way through the ’10-’11 season, has pumped money into their roster and arena, bumping their payroll from 15th overall in ’10-11 to fourth-highest (over $65 million) in ’11-’12. They played to capacity (99.9), but their FCI, however, still remained among the lowest in the league.

It’ll be interesting to see the effect upon their operating income for ’11-’12.

4 Comments

  1. Great analysis as always. Its interesting to see how some teams have poor attendance even when the team is doing well (Phoenix), while others at least get a short lived bump when doing well (Carolina). But I think the low ticket prices are really the death of some of these teams. People don’t want to go to the game when the team is doing well and you are practically giving away tickets, how do you raise the prices to a profit level?

    I’m not a big fan of the FCI. Not everyone brings a family of 4, drives the car and buys caps to every game, but I get what its trying to analyze, and I have no other suggestion.

  2. i really like that Terry Pegula is such a passionate hockey fan and is putting his money where his mouth is, however i don’t think his GM is getting the most bang for his buck. Buffalo is not a preferred destination and end up paying more than they should for mid level players.

    • gameon63, I’m convinced the best approach for small market teams is to pretty much forget the free agent market and develop from within. Make sure your key players are so well treated so they want to stay then lock them in and pay them accordingly. I firmly believe what Minnesota did this summer was a mistake and they’re going to regret it down the road.

  3. It should be obvious to everybody that the economy, over the last few years, has been a major concern. It’s affected the discretionary spending for many, non-wealthy, hockey fans. Some have had to cut back on, or eliminate, hockey tickets. This fact is much more likely to affect the smaller market teams, regardless of success on the ice. The subject that has yet to be mentioned, concerning attendance, is projected increases/ decreases in the near/ far future. I’m sure that there’s data available which shows population shifts (past and expected), ie. Florida, North Carolina have been (and will continue) growing at a significant rate as people move to the sunbelt
    (usually from the north and “hockey-country”). The combination of immigration and the development of the hockey culture in the south (huge number of youth hockey leagues including elite, potentially future NHL players) will continue to increase the markets and attendance at games. The future is rosy, if the owners/ PA don’t let their collective greed get in the way.