The new Canadian television deal announced in late November is more than just a simple business deal. It may be the final hurdle to a long-expected wave of NHL expansion.
The deal itself is massive, something the league’s official announcement made a point of underscoring:
The 12-year agreement, announced jointly by the NHL and Rogers in a Tuesday morning press conference, is for $5.232 billion (Canadian). It's the largest media rights deal in NHL history and one of the largest media rights deals in Canadian history. It is also Canada's largest sports-media rights agreement.
For reasons both obvious and slightly more subtle, this television deal is an encouraging sign for NHL expansion.
Let’s start with the most obvious one.
Under the new deal, French-language rights in Canada go to TVA, which is part of the Quebecor Media empire that also includes Sun Media. Quebecor has long been a staunch proponent of an NHL return to Quebec City, and it doesn’t take any insight at all to know that the right to broadcast French language games is much more valuable if there are two NHL clubs based in Quebec.
And it’s very much in the interests of the NHL to keep a broadcast partner willing to pony up for those rights happy.
It’s also very much apparent that this is good news for the values of NHL teams, and especially Canadian ones. When the deal was announced, TSN’s Darren Dreger reported that a portion of the money in this new deal would go directly to Canadian teams:
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
Even so, every club in the league is richer for the agreement because most of the pot is divided evenly. And with NHL teams being more valuable, the league’s owners can demand more money in exchange for awarding expansion franchises.
There’s actually even more to that latter point.
For years, there have been persistent rumours that the NHL is in favour of further expansion (because, after all, NHL owners like free money at least as much as the next guy). The league’s current 14-team Western Conference and 16-team Eastern Conference setup all but includes a flashing neon sign that says, “We plan to expand to 32 teams!”
But if the NHL had expanded before now, it would have been selling low. Consider the dates of three extremely significant deals from a franchise value perspective:
- April 19, 2011 – NHL agrees to a long-term U.S. television deal worth piles of money.
- January 6, 2013 – NHL agrees to a long-term deal with NHLPA that sees player share of revenue drop.
- November 26, 2013 – NHL agrees to a long-term Canadian television deal worth piles of money.
Gary Bettman is a very smart man.
But it doesn’t take a very smart man to know that a new NHL expansion franchise is going to be worth a lot more on November 27, 2013 than it was on April 18, 2011. And with television deals locked up long term, labour peace assured with an owner-friendly deal and the salary cap still at a relatively low point coming out of the last lockout, there are lots and lots of reasons for a prospective team owner to be willing to pay through the nose for the right to join the exclusive club that is the NHL.
Those planks weren’t in place two years ago. They are now, and consequently, it should surprise absolutely nobody if the NHL suddenly gets very bullish about adding new franchises.