Time for the NHL to Consider Contraction

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With the National Hockey League lockout now well into its second 100 days, and with chances of there being a 2012-13 season looking more and more remote, some NHL owners are apparently thinking about expanding the number of teams in the league from 30 to 32. The most frequently mentioned locations for new teams are Seattle and Quebec.

Apparently, the idea is that the labor dispute will be settled eventually, and that current owners could make up for some of their losses by dividing up sizeable expansion fees from the two new teams.

In reality, the best thing for the NHL would be to contract back to 21 teams, the number it had between 1979 and 1991, which is increasingly looking like the league’s golden age.

In 1979, the then 17-team NHL agreed to add four teams from its former competitor, the World Hockey Association. For the next twelve seasons, the league played with three 5-team and one 6-team divisions. The growing popularity of NHL hockey in the early 1990’s led the league to somewhat ambitiously add nine teams between 1991 and 2000. In retrospect, this decision to expand the league into new markets in the southern half of the United States is a major source of the league’s current financial problems.

The league simply has too many teams and too many teams in markets that will not support major league hockey.

How would one decide which nine teams to jettison and which 21 to keep? The goal could be reached by simply eliminating the nine post-1991 expansion teams, but that would overlook the fact that a few of the expansion teams—the San Jose Sharks, the Ottawa Senators, and the Minnesota Wild—are among the league’s more financially successful teams.

Fortunately, the recent Forbes Magazine franchise value evaluations provide the data that makes such a determination fairly simple.

According to Forbes, there are currently 20 NHL franchises with valuations of more than US $200 million, ranging from the Toronto Maple Leafs (worth an estimated $1b) to the Winnipeg Jets (worth $200m). Similarly, there were 20 franchises that had revenues during the 2011-12 season in excess of $95 million, ranging from Toronto ($200m) to Buffalo ($95m).

A total of 21 teams appear on these two lists. Nineteen are on both, with only Colorado (21st in terms of revenue) and Buffalo (22nd in terms of estimated value) appearing on one list but not the other. The nine franchises that appear on neither of these lists are the logical ones to eliminate.

The nine “to be folded” franchises are, in descending order of value according to the Forbes estimates: Anaheim Ducks, Tampa Bay Lightning, Florida Panthers, Nashville Predators, Carolina Hurricane, New York Islanders, Columbus Blue Jackets, Phoenix Roadrunners, and St. Louis Blues.

Six of the nine are post-1991 expansions teams, and Phoenix is a transformed beyond recognition version of the original Winnipeg Jets, since restored to Winnipeg in the form of the transferred Atlanta Thrashers. The other two teams, the New York Islanders and the St. Louis Blues, have been around for a much longer time.

The Islanders were founded in 1970, and a decade later began one of the greatest runs in North American sports history. The team won four consecutive Stanley Cups from 1980 to 1983, and almost won a fifth title, before losing in the Cup finals to Wayne Gretzky’s Edmonton Oilers in the 1984. However, for the past 20 years, the Isles have been one of the Sad Sacks of the NHL, qualifying for only 6 of the last 21 Stanley Cup play-offs and only one of the past seven.

Attendance has also tumbled as it has become clear that New York is not a good enough hockey town to support three NHL teams. The Islanders ranked dead last in the NHL in revenue last year with a total that was less than 80% of that garnered by the 29th ranked team (Phoenix).

The St. Louis Blues date back to 1967, when they were part of a decision to increase the size of the league from six teams to twelve. Thanks to a decision to put all of the expansion teams in their own division, the Blues played in the Stanley Cup finals their first three seasons in the NHL (1968 to 1970), but have not been back to the finals since. In most years, they have made the post-season, but they have usually exited early on. In the past 25 years, they have won only two division titles, and have a post-season series record of 12-19.

Losing the St. Louis franchise would be disappointing for me personally. I was a Blues season ticket holder from 1991 to 1993, and I have followed the team ever since. However, it is hard to deny the facts: the Blues are the least valuable franchise in the NHL, and their value has been declining rapidly. To flourish, the NHL needs to get rid of franchises like the Blues, and St. Louis will do fine without the team.

What would be left if these nine teams were eliminated? Simply an NHL on a much sounder financial footing with a much higher caliber of play (as only 70% of current players would still be in the league, with their less talented teammates returned to the minor leagues or to Europe).

Imagine the following divisional line-ups.

Northern Division: Montreal Canadiens, Boston Bruins, Ottawa Senators, Toronto Maple Leafs, Buffalo Sabers.

Eastern Division: New York Rangers, Pittsburgh Penguins, Philadelphia Flyers, Washington Capitals, New Jersey Devils

Midwest Division: Detroit Red Wings, Chicago Black Hawks, Dallas Stars, Minnesota Wild, Winnipeg Jets, Colorado Avalanche

Western Division: Vancouver Canucks, Los Angeles Kings, Calgary Flames, Edmonton Oilers, San Jose Sharks

With one-third of the teams in Canada and only three “warm weather” cities (LA, San Jose, and Washington), the league’s “old-time hockey” feel would be restored.

Dramatic contractions have occurred before in American sports history. In 1890, there were three major league baseball leagues with 24 teams. Multiple teams in single cities were the norm. After a negotiated settlement, the total was reduced to two leagues and 16 cities in 1891. In 1892, it was further reduced to one league and 12 teams, and in1900, to eight teams.

Similarly, between 1926 and 1927, the number of teams in the National Football League was reduced from 22 to 12. In 1950, the NFL and the competing All America Football Conference combined, and in doing so reduced the total number of teams from 18 in 1948 to 13 in 1950, and 12, in 1951. The National Basketball Association began play with 17 teams in 1949, but reduced the number of teams to 11 the following year and to eight in 1953-54.

In each case, teams were eliminated to insure the economic profitability of the remaining clubs.

Obviously, it would not be an easy task to buy out the nine NHL franchises identified for contraction. According to the Forbes estimates the combined value of the nine franchises is $1.43 billion. On the other hand, it is telling that the combined value of the nine weakest franchises is significantly less than the value of the Maple Leafs and Rangers ($1.75 billion), the two most valuable franchises.

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5 Responses to “Time for the NHL to Consider Contraction”

  1. Good post. The value of an NHL team is nothing if they are not playing hockey. This year the owners have decided they really don’t want a season. Every time hockey makes it back the owners decide to do something crazy like they are doing this year. The owners are killing the golden goose. Contraction is a way to salvage the league by having fewer, but stronger, teams.

    The problem with Phoenix is not the fan base but where the stadium is located. It is in a hard to get to location away from the fan base. I think there is a place for southern teams but it has to be thought through.

  2. Gordon Hylton Says:

    [This comment was sent directly to the author by Mitchell Scott of Lethbridge, Alberta, and is published here with his consent.]

    I read the “Time for the NHL to Consider Contraction” Blog Entry on the Marquette University Law School Faculty Blog and just wanted to throw in my two cents in defense of the St Louis Blues.

    If you check the attendance of the St Louis Blues over the past four seasons you will find they have been in the top ten for each of those four years. I grant that the trend goes in the opposite direction from year five and back. But they have momentum both with their local support and play on the ice. They have a good coach, some good young players and with ongoing NHL labour disputes perhaps a environment in which “smaller” NHL markets may have a greater chance of success.

    If you look at the 2006 – 2007 attendance you will find two teams at the bottom: the St Louis Blues and the Chicago Blackhawks–through various moves and circumstances the Hawks have turned that franchise around. Let’s hope the Blues are given the time and space for the positive momentum to continue.

    By the way, I like the blog and found this NHL entry to be thought provoking, especially the consideration of repositioning itself back to a more “cold weather” league.

    Go Blues

    Mitchell Scott
    Lethbridge, AB, Canada

  3. Gordon Hylton Says:

    Thanks to Mr. Scott and Mr. Zales for these comments.

    As I tried to indicate, I would be personally quite disappointed if the Blues were contracted out of existence. I also am aware that the situation is looking up in St. Louis, and I was initially puzzled as to why Forbes estimates the value of the Blues franchise to be so low.

    However, the value of the Blues franchise actually declined by 17% between 2011 and 2012, before the lockout. Only two other franchises declined in value (Columbus and Carolina), and none by nearly so much. Even with increased attendance and the second best record in the league, the Blues continue to lose money and rank at the bottom of the revenue list.

    The team’s previous owner had a very difficult time finding a buyer, and the group of local business leaders who ended up buying the team appear to have been engaged in an act of civic bailout rather than a legitimate money-making operation.

    In the early 1990′s, the Blues had the advantage of being the only game in town during the baseball off-season. Pro basketball departed when the Spirits folded in the 1970′s, and the NFL left when the football Cardinals moved to Arizona. The early 90′s were even a low point for St. Louis University basketball, the only one Division I basketball or football program in the city.

    The team’s fortunes in that era were bolstered by an ownership group, which like its present counterpart, was more committed to keeping the team in town rather than making money. That ownership probably did more harm than good by driving up the NHL salary scale by agreeing to oversize contracts with Scott Stevens, Bret Hull, and Brendan Shanahan.

    My real point is that to thrive the NHL has to figure out a way of getting rid of its weaker franchises, and simply moving them around won’t do it. The number of U.S. markets that can support an NHL team at current ticket prices is actually quite limited. If I were looking for new cities for NHL teams, I would look to Hamilton and Quebec City.

  4. Steven Cochran Says:

    Phoenix Roadrunners? They already folded, and they weren’t an NHL team, they played in the ECHL.

    I presume you meant Phoenix Coyotes.

  5. Joseph Hylton Says:

    Steven Cochran is correct. I meant to say Phoenix Coyotes.

    Roadrunners was the traditional name for the professional ice hockey club in Phoenix. The original Roadrunners were the relocated Vancouver Maple Leafs of the old Western Hockey League. This Phoenix team played in the WHL from 1967-1984, and was one of the first professional ice hockey clubs in the American Southwest.

    In 1974, the Roadrunners team moved more or less intact to the newly organized World Hockey Association, a competitor league to the NHL. This team folded after the end of the 1977 season.

    Other Phoenix-based team bearing the name Roadrunners played in the Central Hockey League (1977-78), the International Hockey League (1989-1997), and the East Coast Hockey League (2005-09).

    Most of these teams operated under the fiction that they were a continuation of earlier Roadrunners teams. For example, the last version of the team honored player numbers that had been retired by earlier versions of the Roadrunners.

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