The Financial State of the NHL
December 5, 2011 1 Comment
With Forbes’ recently released 2011 NHL Valuations, it is now possible to take a look inside the NHL and perhaps get a better idea of what state the league is in financially.
The Toronto Maple Leafs, yet again, rank atop the league’s elite, with a value of $521 million – directly ahead of the New York Rangers, who come in at $507 million. The Montreal Canadiens, Detroit Red Wings, Boston Bruins, and Chicago Blackhawks round up the top six (ironically, all Original Six teams) with values of $445 million, $336 million, $325 million, and $306 million, respectively. All six of these teams saw an increase in their value from last year, with the Rangers increasing by 10 percent.
Altogether, the average value of NHL teams increased by about five percent (5.07, to be exact) to $240 million. The average NHL team is also worth about 47 percent more than it was worth before the lockout in 2004-05. The five teams that saw the largest increase were the Tampa Bay Lightning (20 percent), Vancouver Canucks (15 percent), Edmonton Oilers (16 percent), Washington Capitals (14 percent), and Winnipeg Jets (21 percent, although the majority of the increase is due to the relocation from Atlanta). Twenty-one of the league’s 30 teams saw an increase in value, while two teams remained about the same.
The Maple Leafs led the league in operating income, with $81.8 million. The Canadiens and Rangers were next in line, with operating income of $47.7 million and $41.4 million, respectively. The Vancouver Canucks also saw a large amount of operating income, with $23.5 million – most likely due to the high number of home playoff games last season.
Now to the negatives of the business release: the Phoenix Coyotes rank last in the league, yet again, at a value of $134 million. The team also reportedly had an operating income of -$24.4 million, easily the lowest in the league. Right behind the Coyotes are the New York Islanders and Columbus Blue Jackets, with values of $149 million and $152 million, respectively. Each of the two teams ended the season with a loss, losing $8.1 million and $13.7 million, respectively.
One of the darkest parts of this annual report was the NHL’s operating income, which dropped 21 percent to $126 million – something that will most likely need to be addressed when the league and the NHL Players’ Association begins negotiating a new Collective Bargaining Agreement in the upcoming months. This number led to a profit margin of just 4.2 percent.
Two teams that, although have average values, but are struggling to pay the bills, are the New Jersey Devils and Dallas Stars. Having just been sold to a bright new owner who looks to be setting the team in the right direction, the Stars should hopefully be able to overcome their debt-to-equity ratio of 126 percent. The Devils, on the other hand, have an abnormally high ratio of 144 percent, which suggests they are struggling to be profitable (the Devils had an operating income of -$6.1 million last year, while the Stars’ was -$1.1 million). Debt-to-equity ratio is the relative proportion of debt and shareholders’ equity that is being used to cover a company’s assets. A number over 100 percent is unreasonably high and can suggest trouble for any company, specifically that of a professional sports team. In comparison, the Rangers, Red Wings, and Blackhawks have debt-to-equity ratios of zero.
Altogether, the league should be happy with the health of the majority of their franchises. However, they need to ensure that expenses manage to stay down in the next few years – something that will be addressed with the salary cap negotiations and potential salary cutbacks in the next CBA. The salary cap is currently set to 57 percent of revenue, but with the league’s struggling operating income, expect that to drop closer to a number between 48 and 52 percent.
Local Team – The Philadelphia Flyers saw a decrease in value for the first time in many years, dropping four percent to a value of $290 million. They managed to stay in the black, ending with an operating income of $3.2 million, the second least of any team in the top eight of the league. They rank eighth in the league, and the second of any non-Original Six franchise. The Flyers were the only team in the top-18 to drop in value from last year.
Alan Bass, a former writer for The Hockey News and THN.com, is the author of The Great Expansion: The Ultimate Risk That Changed The NHL Forever. He has worked for the Philadelphia Flyers’ Fan Development department, going to schools throughout the tri-state area to teach about fitness and the importance of teamwork. He is the General Manager of the Muhlenberg College Division II hockey team as well. You can contact him at Alanbasswriting@aol.com.