Fans Will Determine Viability of NHL Expansion

Fans Will Determine Viability of NHL Expansion

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Fans Will Determine Viability of NHL Expansion

(Charles LeClaire/USA TODAY Sports)

(Charles LeClaire/USA TODAY Sports)

As the playoffs continue, the National Hockey League is completing a year of exceptional growth and energy on the ice and at the cash register. Despite another disappointing year missing the playoffs, the Toronto Maple Leafs again topped the Forbes annual team valuation list at $1.1 billion. The Leafs last won the Stanley Cup 47 years ago, so clearly their fortunes off the ice are driven by the strength of the game and breadth of the local passion for the game.

Many will look back on the 2013-14 season as one of the most ambitious and successful in league history, as evidenced by the $3.6 billion in revenue generated by the league; some of which was generated through the extension of the NHL’s Big Event strategy.

With more than 100,000 fans attending the 4th Winter Classic at the University of Michigan’s Big House and successful Stadium Series games stretching from Yankee Stadium to Dodger Stadium, as well as the Heritage Classic played at BC Place in Vancouver, this season proved to be quite a spectacle.

(Rick Osentoski/USA TODAY Sports)

(Rick Osentoski/USA TODAY Sports)

Add the Sochi Olympics to these special events and there was barely a day in the last six months where the league was not showcasing the world’s best players. Top this off with the signing of the new Canadian broadcast rights worth over $5 billion, and the outlook for the NHL has never been brighter.

All of which begs the question: How does the league continue to drive growth in the hyper-competitive professional sports marketplace?

Much of the attention turns to the question of expansion. Last season’s realignment of the conferences created a new imbalance with 16 teams in the East and 14 in the West. The natural conclusion of fans and sports radio pundits is that the league is primed for the addition of two franchises.

The contenders have been debated for quite some time. North of the border, a return to Quebec City and a second Toronto area team (Markham) are the clear favorites. The leading U.S. candidates appear to be Seattle, Las Vegas and Kansas City.

For many, the debate is not only where, but should expansion even be on the table while existing franchises still fight to secure their long-term financial foundation? New ownership in Phoenix, New Jersey and Florida in the last year may have satisfied some of the most concerned opposition . . . . but this issue is unlikely to fade any time soon.

(Matt Kartozian/USA TODAY Sports)

(Matt Kartozian/USA TODAY Sports)

Assuming that expansion is not a question of if as much as when, what will determine the ultimate success of a new franchise?

The first and most notable need for a new market. . . . fans, fans, fans. This is especially the case in the NHL because not all markets are created equal. Fan development is everything for NHL franchises.

A recent study of Google searches for existing clubs revealed a powerful connection between operating income and market-based avid fans. Greater fan avidity creates value and, by extension, an audience that can be monetized. In Toronto, with a population of 9.6 million, 52 percent of the market is identified as avid NHL fans, resulting in a NHL fan population of just over 5 million fans. In the U.S., Pittsburgh has the highest percentage (27 percent) of avid NHL fans and has, in turn, the eighth-highest valuation by Forbes at $480 million.

The key for many of the less traditional U.S. hockey franchises is committing to creating new hockey fans. When the Dallas Stars moved from Minnesota in 1997, they made this a priority. Their efforts included building new ice rinks and starting a high school hockey league that now has 42 teams. Implementing a similar program, the Anaheim Ducks have invested $12 million over the last six years and established a high school hockey league now including 28 teams. Creating new hockey fans is the foundation of building incremental revenue and long-term value.

(Gary A. Vasquez/US PRESSWIRE)

(Gary A. Vasquez/US PRESSWIRE)

Importantly, teams building and extending large and deeply passionate fan bases can drive the most meaningful media values. Whether it be traditional broadcast or new digital platforms, the value for the teams and the league will be all about eyeballs and the ability to monetize this viewership, whatever the platform. Some may have the power to consider their own networks (similar to Boston/NESN) or simply garner larger rights fees as regional networks vie to control live sports.

The league continues to believe frontiers exist to satisfy the passion for the game in North America. And, in turn, grow the value of the game for the owners and players. For the prospective teams, one idea will lay the foundation for long-term success . . . . it’s all about fans . . . . live this mantra and the path to building a viable financial base will be established. From there, a few good calls in the draft, a 6-foot-4 athletic goalie and a tough two-way, 25 goal-scoring center and you’re on the way to the Stanley Cup.

***

Chris Zimmerman is a serial Brand Architect, leading business and cultural transformation in both under performing and emerging business units. In successive GM/President/CEO roles (Nike Golf, Bauer Hockey, Vancouver Canucks, Easton Sports) Chris has driven strategic repositioning in each to establish a clear and distinctive north star that galvanized the team and fueled growth.

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