New Financial Report Proves Relocation Best Option for Struggling NHL Teams

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New Financial Report Proves Relocation Best Option for Struggling NHL Teams
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NHL commissioner Gary Bettman

If you are tired of boring NHL lockout news, take some time to examine the wonderful financial report compiled by Mike Ozanian of Forbes.com on the NHL's 2011-12 season.

Even though less teams are losing money in comparison to the 2010-11 season (18 down to 13), relocation is still the right move for franchises that are having difficulties making a profit.

If the salary cap were lowered to, say, 50% of revenue and the subsidies given from high-revenue teams to their low-revenue rivals was increased to $200 million from the current $150 million, which is essentially what where the two sides seem to be headed, small-market team values would get a big boost (as was the case in the NBA when the New Orleans Hornets and Memphis Grizzles sold for $338 million and $330 million, respectively, after the league worked out a new labor pact last year), and the league’s overall profitability would increase. But  teams like the Carolina Hurricanes, Phoenix Coyotes, Tampa Bay Lightning, Anaheim Ducks and Columbus Blue Jackets would still have trouble making money unless they went at least two rounds in the playoffs.

Ozanian also writes:

Drew Dorweiler, managing partner of Dartmouth Partners in Montreal, thinks the league needs to move some teams. “The Sunbelt has had plenty of time to prove that the viability doesn’t work.” Dorweiler thinks Quebec, where ground has already been broken for a new arena, will eventually get an NHL team, and he also thinks Portland, where minor league hockey is popular, and Seattle, where the city has approved a new arena, would be better cities to house teams than Arizona, North Carolina and Florida, where NHL teams are losing money.

Should the NHL consider relocating teams who are struggling to make a profit?

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If teams have to make it to a certain round in the Stanley Cup playoffs just to make money, then they shouldn't be in that market. It's that simple. Playoff success, in any sport, is far from guaranteed, regardless of how much talent a roster has.

For teams in these markets that are going through a rebuilding phase, it's going to be incredibly difficult to make a profit. Teams cannot be expected to make a profit only if they perform at a certain level during postseason play. That's not a smart business strategy for anyone.

Of the five teams Ozanian lists that require playoff success to make money, only the Lightning had an attendance percentage over 90 percent during the 2011-12 season, according to ESPN.

To ensure financial success, NHL teams should be in traditional hockey markets where fans will continue to support teams despite their on-ice performance.

For a gate-driven sports league such as the NHL, the fans' continued support of a team, even during rebuilding periods, is crucial to financial success.

You cannot expect sports fans in nontraditional hockey markets to support NHL teams when they are not playing well and there are other teams in and around the city that are more successful and/or exciting to watch.

Phillip MacCallum/Getty Images

Even though league commissioner Gary Bettman is not responsible for all the Southern expansion the NHL has seen in the last 25 years, it's unlikely that he will give up on many more teams in these markets during his tenure as commissioner.

Just look at his determination to keep the Phoenix Coyotes in Glendale. After putting so much effort and money into keeping the Coyotes in Arizona, it's hard to imagine Bettman letting teams like the Carolina Hurricanes and Tampa Bay Lightning leave their current markets after both franchises have enjoyed a decent amount of success since arriving in those cities.

After reading Ozanian's report, it's clear that relocation is the best course of action for certain franchises to avoid losing money on an annual basis. Why continue to lose money when there are several markets (many of which are listed in the report) capable of hosting a successful NHL franchise?

It's not impossible for these teams to make money, but it's still going to be very hard. Relying on playoff success to build financial strength is a poor plan for any NHL team.

If this situation does not change for the teams that Ozanian listed, Bettman and the NHL have to strongly consider relocation as the most effective way to improve the financial health of these clubs.

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