Is market size or passion for hockey the best means to determine locations for NHL teams? Both? Or neither? Read on for my take.

A recent report in “The Business Journals” listed possible markets for new NHL franchises, using the following methodology:

We used team revenue data and average ticket prices to calculate the amount of TPI needed to adequately support a team in each league. Minimum income bases were estimated to be $85.4 billion for MLB, $37.6 billion for the NHL, $36.7 billion for the NFL, $34.2 billion for the NBA, and $15.4 billion for MLS.

We then calculated each area’s available personal income (API) by subtracting the TPI needed to support the market’s existing teams. Philadelphia, for example, has TPI of $281.5 billion. But its five existing franchises (one in each sport), need a base of $209.3 billion, resulting in API of $72.2 billion.

The report went on to list 58 potential markets, ranking from sufficient to insufficient, with American cities filling the top ten, including Houston, Las Vegas and Hartford. The first two have been previously mentioned as possible locations for NHL teams, while Hartford used to be home of the Whalers, until relocated to Carolina in 1997.

Canadian cities like Quebec City and Hamilton rated much lower on the list, at 31 and 33 respectively.

The study raised the ire of Calgary Sun columnist Steve MacFarlane, who slammed it as “a clear case of nerdy number-crunching gone horribly wrong”.

MacFarlane believes (and he’s not alone) Quebec City is the most logical destination for another NHL team (despite currently lacking an NHL-calibre venue), and pointed out Atlanta, which finished just outside the top ten on that list, recently lost their NHL franchise to Winnipeg.

He noted that, based on disposable income, there’s no way Winnipeg should have a franchise, yet they sold out their season tickets in only 17 minutes, and currently Jets merchandise is the league’s most popular sales items this summer.

MacFarlane suggests a passion for hockey, which Canadian cities have in abundance, trumps financial numbers in studies like these.

He also went on to make this point:

You may argue both Winnipeg and Quebec have already lost franchises of their own. But it wasn’t because of a lack of passion from the fans. The business of hockey was broken, and the salary cap era has fixed the model.”

To digress for a moment,  I remind everyone it’s not the salary cap which saved Canadian teams, and made it possible for Winnipeg to get back an NHL franchise, and raised the possibility of Quebec City perhaps getting one. The strong Canadian dollar is responsible for that.

If the “loonie” were still worth what it was ten years ago (around .65 cents US), we’d still hear cries from Edmonton, Calgary and Ottawa invoking fears of losing their respective franchises, Winnipeg wouldn’t have landed another NHL franchise, and no one would seriously consider the prospect of moving an existing franchise to Quebec City.

Furthermore, passion for hockey didn’t help the old Jets and Nordiques. Despite the myths of Canadian fans supporting their teams “no matter what”, those two clubs struggled to fill their respective buildings during their final years.

If passion for hockey alone were enough for NHL franchises to be successful in Canada, there would be a dozen of them, stretching from Victoria, BC, to St. John’s, NL.

Passion alone isn’t enough, especially if your market is too small to sustain a major league franchise over a long period of time.

As for the salary cap “fixing” the broken business of hockey, team owners in Nashville, Columbus, Phoenix St. Louis and Florida wouldn’t agree with that assessment.

MacFarlane does make a valid point about Atlanta losing their franchise, but a good argument can be made that the former Thrashers, from 2003 to this year, were poorly managed, run by an ownership group which more interested in their NBA franchise and their venue than in the hockey team which was part of the package they bought from Time-Warner.

The result was a team which only made the playoffs once during its ten seasons in Atlanta, and saw a steady exodus of stars (Dany Heatley, Marc Savard, Marian Hossa and Ilya Kovalchuk) which ultimately drove away fans, and led to their eventual sale and relocation.

As for Hartford, they lost their team when their owner, Peter Karmanos, grew frustrated with poor attendance and limited corporate support, though those factors were also the result of the Whalers icing mediocre rosters for several years.

Market size isn’t enough to sustain a franchise long term, if the support isn’t there from local sports fans and sponsors.

A more sober response to The Business Journals report comes from “Puck Daddy” Greg Wyshynski:

This study is going to be cherished by some U.S. markets that are desirous for the NHL, like Houston or Las Vegas or the “Remember The Whale!” crowd.

As a study of financial status of these markets circa 2010, it’s a nice glimpse. As a measure of a market’s viability for hockey, without factors like the current hockey culture and media outlets and corporate revenues and the potential for local ownership and facilities to support a team … well, like we said, it’s a nice study of financial status circa 2010.

Thing is, when you do measure those factors, Houston fares quite well, including an arena that seats 17,800 for hockey. We still think Quebec City is next for relocation or expansion … but Houston’s worth further, and more nuanced, study.

Agreed on both counts.

The NHL is a business, and that means making money. When selecting a market for relocation or expansion, they’re going to consider several factors, including population, wealth and media.

Houston housed the Aeros during the WHA years in the 1970s, and the Oilers were nearly moved there in 1997. It shouldn’t come as a surprise it would rank favourably in these studies.

What remains to be seen, however, is how well a franchise in Houston would be supported.

That would ultimately be determined by how committed ownership was to building and maintaining a competitive roster on a consistent basis.  That would build up and maintain a solid fan base, which would attract corporate sponsors and lucrative broadcast revenue.

The same goes for those in smaller, but more hockey-passionate, markets in Canada, such as Winnipeg.

Sure, there’s excitement this summer over the Jets, and it was a smart move by ownership to tap into that excitement by making those interested in season tickets buy into a three year package deal.

But questions remain over that market’s ability to sustain a franchise over the next decade or two.

The salary cap won’t help them if the team remains poorly managed as it was for all those years in Atlanta. Even if the next several seasons are productive, it remains to be seen if management can build upon that over the long term.

It also remains to be seen how long Winnipeg hockey fans will be willing to pay what will certainly be increasing prices to attend those games, and how effectively the team can tap into other revenue streams in the NHL’s smallest market.

Keeping pace with a rising salary cap could also prove troublesome, especially if ownership insists on remaining around the mid-point of the cap range.

The strength of the Canadian dollar will also play a significant factor. Passion and a salary cap won’t help the Jets if the “loonie” should take a significant tumble in value over the next ten to fifteen years.

With several current NHL franchises struggling, and complaints from some team owners over their struggles to keep pace with a rising cap, it’s possible we could see at least one more current NHL franchise forced to relocate to another market.

It’s also possible that, once the American economy improves over the next ten years, expansion could once again become a front-burner topic for the NHL.

“Nerdy number-crunching” will be as invaluable as determining those possible destination as fan passion for the sport. Shrewd ownership and management will be needed to make them successful.