[URBAN NOTE] "Quebec City’s NHL dream most viable with franchise relocation"

[rfmcdonald]

The Globe and Mail's Eric Duhatschek suggests that, to get a local hockey team, Québec City would be best advised to look for a team ready to relocat.e

Is Quebec City a viable business if the buy-in is $500-million (U.S.), which at Tuesday’s exchange rate is about $680-million (Canadian)? Consider that when the ownership in Winnipeg bought the distressed Atlanta Thrashers in 2011, it paid a quarter of the expansion amount – $170-million (U.S.). And that was at a time when the loonie was above par.

Winnipeg has been a smashing success at the box office. Every game is sold out; the love affair with the Jets is as strong today as it was when commissioner Gary Bettman originally announced the move.

But even at that, Winnipeg is a mid-market team that has to stick carefully and efficiently to a budget. The franchise remains on solid ground, though the loonie’s value has since fallen to 74 cents and player salaries are all paid in U.S. dollars.

But what if the buy-in for the Jets had been four times higher, as it would be for expansion teams? Could Winnipeg keep operating in the black if the cost of financing the Thrashers purchase was that high?

No.

And however well the Quebec City franchise does at the box office, in merchandise sales and local television revenue, the market could not spin off enough cash to make a $680-million (Canadian) buy-in work. That is the NHL’s concern, even though Quebecor, the prospective buyer, has deep pockets.

So, while Bettman always discourages the relocation of teams, it would make far more sense for Quebec City to pursue an ailing franchise whose owners are weary of mounting losses. At that point, the cost of the transaction becomes a different financial equation – simply a business deal between an eager buyer and a motivated seller, with the price to be mutually negotiated.