The bulk of the money paid by Canadian television stations for the right to broadcast NHL hockey games goes to subsidize weaker teams south of the border, while the structure of the league is preventing expansion of the game here, a new study found.
Canada could support 12 NHL teams, or double the current number, if artificial barriers were removed and teams were able to move to where demand is greatest, the study by the University of Toronto’s Mowat Centre for Policy Innovation found.
The study said the NHL has been following an unsuccessful strategy for the past four decades of trying to expand in the U.S. and generate interest in the sport. Many of the franchises suffer from low fan interest and weak revenue.
The study blamed the structure of the NHL for distorting the market, restricting the number of teams and controlling where they play. The lack of supply has meant that cities have been forced to compete for the right to host a team, with many U.S. cities using taxpayer funds to help secure the rights to the sport. That’s a practice that is uncommon here in Canada, it said.
If such subsidies were removed, the teams would move to where the demand was greatest and that is north of the border, it found.
A Canadian hockey team is likely to pull in about $23 million US more a year in gate revenue than a rival in a U.S. city, thanks to the Canadian passion for the sport, the study found.
The study also found that hockey mad Canadians are also helping to subsidize the sport south of the border. Canadian teams accounts for only one-fifth of the league, but generate one-third of the revenue.
“A good chunk of those dollars end up in the U.S. through revenue sharing,” it said. “The primary beneficiaries of this scheme are American hockey team owners and a smattering of American fans attending games below cost. The primary victims are Canadian hockey fans, particularly those in cities that could support a team but are deprived from having one or two by the NHL.”
For example, the CBC is paying about $100 million a year for the broadcast rights to NHL games, the study found. But those monies belong to the league and therefore only $20 million goes to support Canadian teams.
The same goes for other television stations with broadcast rights to the games, it found.
Add to that a practice of revenue sharing among the poorer teams and it’s likely that 90% of Canadian television revenue from the games goes to the U.S.
The study assessed the most economically viable potential locations for new hockey teams in Canada.
It found the best location for a new team would be in Ontario’s Greater Golden Horseshoe, a market of nine million that could support three teams, it said.
There is enough demand for a second team in both Vancouver and Montreal, as well as Winnipeg and Quebec City, it found. Any of those locations would be likely to generate higher gate revenues than existing U.S. teams, it said.
Canadians outside of Quebec were about 40 times more likely than Americans to have been watching a national broadcast of NHL hockey during the week of April 26, with the audience in Quebec likely to have been 90 times bigger, it found.