In April 2011, the NHL announced that it had agreed with NBC on a 10-year deal to broadcast hockey in the United States. The deal saw the league land roughly $200 million annually and was heralded as an end to the days of hockey being a second-class sport on American television. It was a big deal for U.S. teams.
But a new Canadian television deal, announced by the league on Tuesday morning, is even bigger news for clubs south of the border.
Why is it such a big deal?
For starters, because the new 12-year deal with Rogers Communications that the NHL revealed this morning is for huge money: $5.232 billion, more than double the total dollar commitment from NBC.
And thanks to the NHL’s policy of distributing centrally generated revenue (such as national television deals), every team in the United States gets a cut of that money.
Of course, American hockey teams have always been given a share of Canadian national television revenues, but never has that share been so rich. Sports Business Journal's excellent Chris Botta reported that the national TV rights under the old deal were worth approximately $190 million, split between TSN, CBC and RDS.
As it turns out, the actual average yearly value of the new Canadian deal is more than $400 million. Rogers Sportsnet revealed that the deal between their network and the NHL gradually ramps up, “starting at just over $300 million next year then increasing gradually to more than $500 million in the final year.”
How much money does that mean for every NHL team? While all clubs get a share, that money isn’t divided evenly. TSN’s Darren Dreger reports that Canadian clubs will get a portion of those dollars off the top.
NHL rights: average of $15 million per club per year. But, a portion is taken off top and paid to 7 CDN teams in the form of invasion fees.— Darren Dreger (@DarrenDreger) November 26, 2013
That means that what would have worked out to roughly $14.5 million per team will be disproportionately handed over to teams north of the border.
Still, the money is significant. Doug MacLean, the former general manager of the Columbus Blue Jackets and now a hockey analyst for Sportsnet, suggested on that channel’s Hockey Central that the money involved boils down to between $7 and $10 million per year for a team like Columbus.
If he’s right, that means American teams could earn more money off the Canadian deal than they do off the NHL’s U.S. national television agreement.
Naturally, the salary cap will be going up as a result of the deal, though the biggest increase likely won’t come for two years. The cap each season is based on revenues from the year before it, and as this deal doesn’t kick in until next year, that means the big spike (absent other factors) should land in the 2015-16 season.
But even with the salary cap going up, it won’t go up the same amount that revenue does. The players and owners split dollars 50/50 after certain expenses are removed from the equation, so something like a $10 million per team increase in revenue will correspond with a cap increase south of $5 million.
That’s good news for all NHL owners, but especially so for small-market teams with narrow profit margins. For teams like the Phoenix Coyotes that are just barely hanging on, this new money is a godsend.