Forbes says Canadian teams are healthy; American teams not so much

Forbes annual look at the business of hockey was released on Wednesday, and if their estimates are accurate Canadian NHL teams are far and away the healthiest group of franchises in the game.

Before getting into the details, it’s important to talk about the weight put on these numbers. While Forbes is the only outlet (to my knowledge) publishing industry-wide financial estimates for the NHL, all of their figures are just that: estimates. NHL teams do not release financial data. These are educated guesses based on publicly available data.

Advertisement - Continue Reading Below

With that caveat noted, let’s get into the results.


The Toronto Maple Leafs are the first NHL team valued at $1 billion. Nothing shows the danger of relying on Forbes numbers more than the huge spike in value for the Toronto Maple Leafs. In 2011, the magazine estimated the club was worth $521 million, but the sale of Maple Leafs Sports & Entertainment over the summer revealed that as a gross underestimate. Today, the figure nearly doubled to an even billion dollars.

Canadian NHL teams all seen as profitable. All seven Canadian teams are estimated to have an operating income (earnings before interest, taxes, depreciation and amortization) well in the black. Toronto is seen as the league’s most profitable team, with an operating income of $81.9 million, but Montreal ($51.6 million), Vancouver ($30.4 million), Edmonton ($16.2 million), Ottawa ($14.5 million) and Winnipeg ($13.3 million) all cracked the top-10, and Calgary ($11 million) was pegged as the 11th best-earning team in the NHL. All seven teams are at least eight figures in the black, according to Forbes.

Canadian team valuations remain low. While all seven teams are seen as profitable, only three – Toronto, Montreal and Vancouver – have an estimate franchise value in the league’s top-10. Teams narrowly in the red like Washington and San Jose are highly comparable to Edmonton and Calgary; despite an estimated eight-figure profit, Winnipeg’s franchise value narrowly edges out the Anaheim Ducks, with an estimated eight-figure deficit.

Advertisement - Continue Reading Below

Franchise values up nearly across the board. We’ve considered how fickle Forbes’ estimates of franchise values can be, but they see good things for the NHL: 27 teams saw their franchise value stay the same or go up; only three clubs saw dips and only the St. Louis Blues –sold in May at a valuation of around $130 million – saw a major decrease.

The haves and have-nots. According to Forbes, there’s a wide gap between which teams are profitable and which ones are not. They list 13 teams at eight figure or near-eight figure profits, eight teams that are hovered around the break-even mark, and nine clubs losing nearly $10 million annually.

We will have team-specific posts to follow on many of the Nation Network’s sites, please stay tuned.

Recently by Jonathan Willis

This site uses Akismet to reduce spam. Learn how your comment data is processed.

  • Cheap Shot Charlie

    I don’t think its a surprise that Canada’s three most significant cities boast NHL franchises with both high value and high profits.

    No offense intended to Alberta.

    This wasn’t always the case for Vancouver, who’s undergone a dramatic evolution in the last 20 years as a city (in general).

  • jandrewyang

    Note that MLSE is comprised of:
    Toronto Maple Leafs
    Toronto Raptors
    Toronto Marlies
    Toronto FC
    Air Canada Centre
    BMO Field
    Ricoh Coliseum
    Maple Leaf Square
    Gol/Leafs/Raptors TV

    Sloppy Forbes article. Reported final terms of sale to Bell/Rogers of MLSE was $1.07B for 75%, which puts the entire enterprise value at $1.42B. This is consistent with previous valuations (by Forbes) of the Leafs of mid-$500M. Forbes lists the value of the deal at $2.05B based upon a press release from the Teachers Pension plan on the announcement, not culmination of the deal.

  • DSF

    I always take Forbes numbers with a block of salt but we need to look more carefully at the Oilers numbers.

    According to Forbes, the Oilers had an operating income of $16.2 million BEFORE taxes, amortization, depreciation and, most importantly, interest.

    We need to remember that Katz borrowed, reportedly, $100 million of the purchase price of the franchise.

    Now, none of us know that the interest rate being charged on that money but, assuming it’s 7 percent, you can quickly see that the $16.2 million operating income shrinks pretty quickly.

    One also should assume Katz is also making principal payments on that money which, over an 20 year amortization, would be $5 million annually.

    Things in the rear view mirror are closer than they appear.

      • DSF

        Also important to note that the Oilers were $4 million under the cap last season.

        When you combine that with the other elements I mentioned, it’s a pretty dodgy situation if they spend to the cap.

    • For one thing: I’m not convinced that Katz’s loan is at seven percent.

      For another – and I know you didn’t say this, I’m extraploating: I’m also not convinced that a profitable business should be subsidized because the guy who bought it went heavily into debt to do so.

      • I bet the plan was to go heavily into debt for the short term. There’s a HUGE upside if he can get RX2 built due to all the surrounding development possible on land he now owns. That’ll more than offset the up-front expenditure.

      • DSF

        Well, we just don’t know about that interest rate but I think 7% might be close.

        As for your second point, the real issue is the NHL business model you are suggesting shouldn’t be followed in Edmonton, is there whether we like or not.

        If the Oilers become an exception, they will become a second tier team.

        Please note the Canucks have DOUBLE the operating revenue of the Oilers and I would guess, based on when Acqullini purchased the team AND the arena, that his carrying costs are much, much lower.

        Given that the Canucks television market and access to a larger pool of fans, there is no way the Oilers could effectively compete over time.

  • Are the players on the 9 losing teams entitled to any revenue? How do you share something that doesn’t exist.?

    If players want the revenue shared it should only be shared with the players on the teams making the money. That way you’d have to come to Edmonton and Toronto and play under the microscope to earn your money. It too easy for these manginas to sign a 50-60 million deal and go and play in the city where no one cares about hockey, yet alone about that manginas performance.

  • DSF

    Also note that Edmonton profited $16.2M with zero playoff revenue, and boasting the 2nd worst record in the league.

    Katz is definitely not borrowing at 7%. For the ultra wealthy who typically pledge collateral against loans of this nature such as stock in public companies, or his company itself, they are bascially borrowing at prime.

    • Katz would NOT have leveraged his other assets if at all possible. He would have put up the team as collateral. Rexall Sports is the entity running the Oilers, not Katz or Rexall Inc. Big diff. Rule #1 of rich guys is to stay rich by leveraging stuff you didn’t pay for, not stuff you did.

      As mentioned above, he overpaid for the team on the basis that he could more than offset upfront costs by making a killing on the development around RX2.

      His ability to pay back the loan would be based on projected revenue the team generates, which is somewhat uncertain given the state of flux of the economy and worth of the $CAD. That loan wouldn’t be anywhere near prime.

  • With your numbers even if they spend the extra 4M they still break even. That doesn’t include increased revenue from having theoretically a better team by doing so.

    Playoff revenue would go straight to the bottom line minus costs of hosting games etc.

    I also can’t believe Katz would take a very large loan at 7%. If he did he deserves to not make money. He must have some pretty good banking connections by now, and a billionaire buying the profitable Oilers isn’t a risky venture, like perhaps buying the ‘Yotes.

    Has anyone ever heard what an acceptable pretax profit % is for a major hockey/sports team?

    To me this is the important piece of info needed to evaluate a “successful” operation. Berkshire Hathaway wants 10% ROI yearly, and old Buffet is pretty good at business (or for the Oilers 10% of Katz’ purchase price). Is that too high or too low for pro sports?

    Perhaps 3-4% pre tax profit is a good year for most NHL teams. There will likely never be more than a handful of teams making huge profits, there likely isn’t in any sports league.

    • DSF

      Here ya go:

      Last season the Cowboys generated $500 million in total revenue, a record for an American sports team, and posted operating income (earnings before interest, taxes, depreciation and amortization) of $227 million, $108 million more than any other football team and more than either the entire National Basketball Association or National Hockey League.

      A prime example of what separates Dallas from the league’s other 31 teams is the more than $80 million in sponsorship revenue Cowboys Stadium rakes in from companies such as Ford Motor, Bank of America, PepsiCo, Dr. Pepper and Miller Brewing, almost $20 million more than any other football team.

      Sponsorship revenue, unlike the NFL’s national television fees with NBC, Fox, ESPN and CBS, are not shared equally with the other teams.

      Any idea of how many major corporations are based in Seattle?

      Holy cow.

      • The whole point of getting a new arena in Edmonton for Katz is to a) get non-game day revenue and b) maximize his hockey revenue.

        Seattle’s a non-starter because he won’t get (a) and the market for (b) is a heck of a lot lower.

        There’s simply no rational argument that supports Seattle relocation. None.

        • DSF

          There is no way of knowing what kind of a deal Katz would strike with the Seattle group.

          For example, Katz could become a partner in the organization that owns the arena and the NBA team and share in non-hockey revenue streams that way.

          The ownership group led by Hansen has a tremendous incentive to bring an NHL team there since the city and county will provide an additional $80 million if they can deliver an NHL team.

          Having said that, I wouldn’t be surprised if Katz has already put the team up for sale to see if anyone in Edmonton will step up to the plate.

        • Cheap Shot Charlie

          Thank you for writing an article where our friend DSF can post on something and feel important. His therapist says its very helpful for his treatment.

          -the B.C. Mental Heath Society

  • Cheap Shot Charlie

    There’s 2 ways to look at this investment. Annual profit returns and overall team value. Even if an owner, beyond Katz, bought a franchise and lost money annually but sold it at a profit it COULD be a good investment.

    On the flip side, if the Oilers were amalgamated into the Rexall name and operating costs were a deficit, then they can off set the taxes Rexall will pay in the pharmacy industry. I’m sure many teams do this, such as the Florida Panthers. Owning a sports team is not a business venture for making money. It’s an asset that is for enjoyment and tax write off.

    Don’t fool yourself the guys who own sports teams aren’t going hungry because their franchise is losing millions. They do tend to switch hands more often when the market is in flux though.

    DSF, where did you pull 7% from? Maybe you need better banking friends! Have a *HUG* and evaluate your financial advisor more closely!

  • Cheap Shot Charlie

    Regarding the Forbes numbers, players shouldn’t think that they have much of a right to look at these numbers to negotiate a CBA and owners should keep the players out of that business. I’m sure Google makes a boat load of money but I’ll guarantee you that the programmers don’t get 57% of the annual income.

      • and the 700 NHL players are not the best in the world. They are not product, the game of hockey is the product-players are just simple ingredients. But, since theyre human they are employees. They get paid for the work they do and that makes them an employee. Some of them dont even do the work they should and are still paid for it. None of the players are independent businesses, they are part of a union. Unions work with companies, companies pay them and that makes them employees.

        The referees work for the NHL: are they product or employees? Go.

          • You tell me, Mr. Knowitall. What would happen? Please tell me, since I dont’ own the NHL and can’t replace those spoiled whinners with 700 other people. Tap into your wealth of knowledge, stats and ignorance and tell me what would happen.

            If you want me to believe that there is no people on this planet better at hockey than; Parros, Cogliano, Sturm, Bishop, Winchester(just to name a few, *I could go on), you are out to lunch at this late hour.

      • DSF

        Really? Google is scarily ahead of almost any curve you want to find. Advanced search algorithms, predictive computing, and the terrifying and as-yet distant “singularity”. If they don’t have the best 700 programmers, they have the best 699!

        I digress. Good point about the players being the product.

        Also, 7% on financing would probably be a good estimate. We’re all speculating here, but I’m in corp fin and know I do deals that have preferable financing rates when there’s corporate guarantors that lend assurance with their cashflows. Rex may or may not be on the deal. Way too many variables to come up with anything but complete and utter hypotheticals, guys. That’s not even considering other anicilliary revenues that are split off from hockey ops.

        • DSF

          Well, I’d argue Apple likely has about 400 of those programmers.

          Otherwise, while we’re all speculating, I think it’s pretty obvious Katz is likely close to breaking even.

          Not too many smart businessmen would look at that as a smart investment and might explore other options.

          • DSF

            Apple sets trends based on aesthetics and some cool technology. Google runs laps around them on raw programming…but I think this is two non-tech guys arguing about something that a proper nerd would know more about!

            DSF, you refer often to Seattle, but consider the lowest-valued team, by Forbes’ estimate: St. Louis. It’s an historic franchise with track record. Large TV market. Dunno about corp hq’s. Still, assuming a market will be quick on the uptake, particularly one with a sub-par record of supporting anything except football, is tenuous.

          • I know. Thanks for ruining my comment. He likes to find random stats that have nothing to do with nothing and then put his own spin on them to make it go along with whatever asinine point he is trying to make.

            Few days ago, he used Vancouver goalies stats to show why Dubnyk is not and will not be a good goalie in the future.

  • In the context of the lockout, one of the proposed solutions for solvency for the clubs losing money is revenue sharing by all teams. I know that the Rangers and the Leafs are dead set against it for obvious reasons. But I never thought of Edmonton, Calgary and Winnipeg being teams opposed to revenue sharing as well. Maybe they are, maybe not, but the profit numbers would suggest that they would be against it.

  • Cheap Shot Charlie

    The reason that canadian teams are profitable and most US teams are not is due to the classification of sports teams as S-corporations and their use of the “Veeck Loophole”. This is just a clever accounting method to account for depreciation of players for every game played and injury incurred. Once an owner buys a team they are given a 5 year period to straight line depreciate 100% of their Player Contracts working as a loss towards the company. So for instance if the total player contracts when the team is bought = $100M USD the team would post a loss of $20M each year for 5 years, now its possible for a team to make a $20M profit before adding this loophole and posting that they broke even for the year when the financial information is posted. This is merely a tax evasion tool since most of these teams revenues are recorded under the Owners personal income it gives him in our example 20 Million dollars untaxed and he saves roughly 7 million dollars. After 5 years though the owners must either classify the team as a corporation and face corporate taxes or sell the team so that the next owner can use the loophole. I dont believe the canadian government has such a loophole offered so it is only seen in US teams which is why most of them post low or negative profits. Also the Loophole itself holds value when the team sells. As in our example the owner saved $35M USD by using this loophole so that would be accounted for in the final sale of the team as well. Plus the canadian teams do not have as much competition for TV market amongst each other and hockey is a relatively inelastic market much like football in the US. Once more teams start popping up in canada you better believe the other team values will start to drop.