Quebec City trying to keep the flame alive

[blueandgoldguy]

Canadians have the right to be proud of how, PROPORTIONALLY, they are great supporters of their hockey teams.

I don't think they realize that investors look at that and see limited growth potential. The Canadian markets are about as tapped as they ever will be. meaenwhile there's room to make money that isn't being made in several US cities, including ones that already have NHL teams.

Sure, to use an example upthread, the Oilers gross higher than the Blues right now. But string some good years together, and the peak potential of the St. Louis market is way higher, especially if the team manages to hit the right notes promotionally.

Nashville and Carolina are way healthier than they were 20 years ago because their leadership has done good work getting their roots in the ground. They'll make more money in 10years than they do today. Can the same be said for Edmondton?

Yes, quite easily.

 

[tucker3434]

I can't speak for everyone but we know that what investors look at is growth potential. But what people are failing to realize is that hockey is a niche sport and doesn't follow along the traditional business trajectories. There are teams who have had successful years, including winning the Stanley Cup, that simply haven't crossed that line from niche into mainstream within their city. So while you can talk about potential, evidence has shown that growth potential, market size, and population are not the only metrics that will determine success. Problem is, most people are too conditioned to believe that.

With regards to the NHL specifically, they seem to care more about what they can charge new owners via expansion as that money goes directly to the owners rather than the 50/50 split as HRR. So using those types of metrics are simply part of the illusionary sell job,

With regards to Canada, you're mostly right but not completely. People have talked about GTA 2 given the population size. Yes it would cannibalize a small percentage of the TML base but not entirely and certainly not the corporate elements.

Yes, they will be making more in all of those cities in 10 years compared to a lot of cities like St. Louis, Carolina, Tampa, Florida, Nashville, LA, Anaheim, San Jose, Columbus, and a few others.

With regards to Quebec, it 100% would tap in to an underserviced market as people are far underestimating the reach the Habs have in that city and around the region. What a Quebec City team offers is one that is going to be middle of the pack revenue wise and have some good years and some average years.

But, it doesn't fit with American expansionism and their unicorn like dream of getting that National TV deal that perverts the NHL's entire mindset.

There’s absolutely no data that would support that QC would automatically be middle of the pack in revenue. Canada’s revenue distribution is roughly the same as the NHL’s as a whole, a few towards the top, a couple in the middle, a couple towards the bottom. QC would be the second smallest market in the NHL, barely. They would not have the corporate support that most of the others do. It would very much be an uphill battle for them to be in the middle 1/3 of revenue after the newness wore off.

I’m all for QC getting another team but it’ll need to be a billionaire’s passion project. On numbers alone, it doesn’t make great sense and owners have said that.

 

[Yukon Joe]

There’s absolutely no data that would support that QC would automatically be middle of the pack in revenue. Canada’s revenue distribution is roughly the same as the NHL’s as a whole, a few towards the top, a couple in the middle, a couple towards the bottom. QC would be the second smallest market in the NHL, barely. They would not have the corporate support that most of the others do. It would very much be an uphill battle for them to be in the middle 1/3 of revenue after the newness wore off.

I’m all for QC getting another team but it’ll need to be a billionaire’s passion project. On numbers alone, it doesn’t make great sense and owners have said that.

QC doesn't quite need to be a "billionaire's passion project".

It would be like Winnipeg - definitely at the lower end of revenue, maybe receives revenue sharing - but consistently profitable. It would be a franchise the league wouldn't have to worry about - but not one driving HRR even higher.

 

[aqib]

QC doesn't quite need to be a "billionaire's passion project".

It would be like Winnipeg - definitely at the lower end of revenue, maybe receives revenue sharing - but consistently profitable. It would be a franchise the league wouldn't have to worry about - but not one driving HRR even higher.

You mean like Hamilton would have been?

 

[No Fun Shogun]

We're at the point where any franchise has to be a billionaire's passion project, or more accurately their vanity project. We are almost assuredly near the end of franchise valuations skyrocketing, so it's not like we'll see a team get bought for tens of millions to be sold decades later for billions anymore. As a result, there are way, way more efficient ways for rich people to get even richer.

But sports teams give a major boost of social clout that money alone can't buy. And that's especially the case for owning a hockey team in a Canadian city.

 

[tucker3434]

QC doesn't quite need to be a "billionaire's passion project".

It would be like Winnipeg - definitely at the lower end of revenue, maybe receives revenue sharing - but consistently profitable. It would be a franchise the league wouldn't have to worry about - but not one driving HRR even higher.

The Jets kinda perfect storm'ed their way to a team as it is. A team needed a new home and it only cost $170m. Under those exact circumstances, yeah, I could see QC getting a team. But now, with the next round of expansion fees being ~$1.3b and the following probably being closer to $2b, it'd a much tougher sell for a team that will just be profitable. T-bills are paying 5%.

It's an insane amount of money to tie up if you're modeling your cash flows after the Jets. But all it takes is the right billionaire.

 

[Yukon Joe]

We're at the point where any franchise has to be a billionaire's passion project, or more accurately their vanity project. We are almost assuredly near the end of franchise valuations skyrocketing, so it's not like we'll see a team get bought for tens of millions to be sold decades later for billions anymore. As a result, there are way, way more efficient ways for rich people to get even richer.

But sports teams give a major boost of social clout that money alone can't buy. And that's especially the case for owning a hockey team in a Canadian city.

We're sort-of on the same wavelength.

When I said it doesn't need to be a "passion project" I mean we don't expect an owner to just accept losing money every year (well, maybe in the CFL we do but that's a whole other story). And I don't know that I agree we're at the end of franchise valuations skyrocketing - but yes at some point that has to come to an end.

Where I think we agree though is - if you have $1.2 bil to invest, buying an NHL franchise is probably not the way to maximize your ROI. But owning a team does bring all the "social clout" you mention that few other investments would bring with it.

 

[ForumNamePending]

There are only so many folks out there who have both the money and interest to spend a billion+ $ on a hockey team, or $10 billion (or whatever the hell the going rate is) for a NFL team. I wonder if we start seeing a few franchises sell at barely above what they were bought for if it will lead to some panic selling (panic is probably too strong of a word, but...), especially by those who own teams that aren't "licenses to print money", where the owner is working on the assumption that sports franchises will always increase in value.

I'm certainly no economist, but it feels like sports has been riding a bit of a bubble for a while now... Could some type of correction be coming?

 

[tucker3434]

There are only so many folks out there who have both the money and interest to spend a billion+ $ on a hockey team, or $10 billion (or whatever the hell the going rate is) for a NFL team. I wonder if we start seeing a few franchises sell at barely above what they were bought for if it will lead to some panic selling (panic is probably too strong of a word, but...), especially by those who own teams that aren't "licenses to print money", where the owner is working on the assumption that sports franchises will always increase in value.

I'm certainly no economist, but it feels like sports has been riding a bit of a bubble for a while now... Could some type of correction be coming?

Franchises have gone up like 5x over the last 10-15 years while revenues have only doubled. They're going to price themselves out of even filthy rich individuals' ranges, but they're also not going to make sense for the institutional investors who only care about how the numbers look on a spreadsheet.

The value in the investment will have to tie to cash flows at some point. If the basis for these prices continues to be "sports franchises only go up in value" that's kinda what we said about housing.

 

[Yukon Joe]

There are only so many folks out there who have both the money and interest to spend a billion+ $ on a hockey team, or $10 billion (or whatever the hell the going rate is) for a NFL team. I wonder if we start seeing a few franchises sell at barely above what they were bought for if it will lead to some panic selling (panic is probably too strong of a word, but...), especially by those who own teams that aren't "licenses to print money", where the owner is working on the assumption that sports franchises will always increase in value.

I'm certainly no economist, but it feels like sports has been riding a bit of a bubble for a while now... Could some type of correction be coming?

So a correction isn't necessarily coming.

Think back to some of the bubbles bursting in our lifetimes: the 2008 real estate bubble, or the 2000 dotcom bubble. What happens when a bubble "bursts" is the people holding the investment are highly leveraged - that is they had to borrow to buy the asset (either their house, or the tech stock), and when prices come down they have to sell in order to pay the loan, which in turn forces the price even lower. This turns into a huge downward spiral driving forces much much lower.

People who own sports franchises are not highly leveraged - indeed they are billionaires. If prices start to flatline, or even dip - they aren't forced to sell. They have the option of just holding tight. There's also a relatively small number of big-league pro-sorts franchises. If one franchise owner does run into trouble and might be forced to sell for a loss, fellow owners will probably step in to loan money to prevent it (in order to maintain franchise value).

So, in my opinion, sport franchise values may well stagnate for years, but are extremely unlikely to have a major correction.

 

[BKIslandersFan]

There is a baked in structural dislike of Canadians with many of Americans. Far less than a majority, but enough for it to matter. I think this thread is a good piece of evidence, that a lot of Americans simply view Canadians as "lesser".

This is doubly so for Francophones.

Based on what?

The reality is there isn’t too many Canadian billionaires willing to pony up money for expansion team. I am sorry but pointing that out isn’t anything close to saying Canadians are lesser people.

The victim mentality of Canadian nationalists. SMH.

I'm just asking Americans to not be assholes.

It's a thread about Canadians wanting a team in Canada and is filled with Americans taking potshots at Canada.

It’s actually the other way around pal.

 

[Yukon Joe]

Based on what?

The reality is there isn’t too many Canadian billionaires willing to pony up money for expansion team. I am sorry but pointing that out isn’t anything close to saying Canadians are lesser people.

There kind-of are though.

The Senators had four bidders when they went up for sale. I'd bet you anything that if other franchises came on the market they'd be fiercely bid on.

Problem with Quebec City is the arena is controlled by one person - PKP. No other group could put a team there (without paying rent to PKP, which isn't going to be financially feasible). And realistically, to want to own a team in QC you'd better speak french, which limits your candidate pool quite a bit.

 

[Tawnos]

QC doesn't quite need to be a "billionaire's passion project".

It would be like Winnipeg - definitely at the lower end of revenue, maybe receives revenue sharing - but consistently profitable. It would be a franchise the league wouldn't have to worry about - but not one driving HRR even higher.

Winnipeg is absolutely a billionaire’s passion project though. It’s the reason none of their attendance problems are a real concern.

 

[KevFu]

Generally speaking...
Canadian fans feel disrespected by the relocation/expansion choices preferring larger US markets.
Southern American fans feel disrespected by the RESPONSE to that and having to "justify" their existence.
Northern American fans basically bounce back and forth on a case-by-case basis depending on topic.
- The fans in huge markets (NY, DET, BOS, PHI, etc) are more likely to side with Canadian "your attendance sucks, you don't deserve hockey" kind of topics.
- The fans in the smaller markets are more likely to side with Canadians on the "Quebec and Winnipeg should have teams" but also with the southern markets on "hockey can work anywhere, it's not a market it's a circumstance" thing.

Everyone on the same page now? Great.


Have there been any kind of developments on the topic of "PKP's ability to cut a cheque?"

 

[BMN]

Generally speaking...
Canadian fans feel disrespected by the relocation/expansion choices preferring larger US markets.
Southern American fans feel disrespected by the RESPONSE to that and having to "justify" their existence.
Northern American fans basically bounce back and forth on a case-by-case basis depending on topic.
- The fans in huge markets (NY, DET, BOS, PHI, etc) are more likely to side with Canadian "your attendance sucks, you don't deserve hockey" kind of topics.
- The fans in the smaller markets are more likely to side with Canadians on the "Quebec and Winnipeg should have teams" but also with the southern markets on "hockey can work anywhere, it's not a market it's a circumstance" thing.

Everyone on the same page now? Great.

Get outta here with that rationality, this is a HFBoards thread!

 

[KevFu]

Get outta here with that rationality, this is a HFBoards thread!

My bad. Death to all markets!

 

[Takuto Maruki]

Get outta here with that rationality, this is a HFBoards thread!

Kind of puts things in perspective that the business board is just a different form of reactionary compared to the main board.

 

[Headshot77]

So a correction isn't necessarily coming.

Think back to some of the bubbles bursting in our lifetimes: the 2008 real estate bubble, or the 2000 dotcom bubble. What happens when a bubble "bursts" is the people holding the investment are highly leveraged - that is they had to borrow to buy the asset (either their house, or the tech stock), and when prices come down they have to sell in order to pay the loan, which in turn forces the price even lower. This turns into a huge downward spiral driving forces much much lower.

People who own sports franchises are not highly leveraged - indeed they are billionaires. If prices start to flatline, or even dip - they aren't forced to sell. They have the option of just holding tight. There's also a relatively small number of big-league pro-sorts franchises. If one franchise owner does run into trouble and might be forced to sell for a loss, fellow owners will probably step in to loan money to prevent it (in order to maintain franchise value).

So, in my opinion, sport franchise values may well stagnate for years, but are extremely unlikely to have a major correction.

I don't think you can say that for certain. I think Alex Meurelo was pretty highly leveraged IMO. Lots of corporate takeovers are over leveraged. Just because people on paper are billionaires doesn't mean they have billions on liquid assets just chilling in a bank account. Take the owner of the Oakland A's for example. On paper he's a billionaire but almost all of his money is tied up in Gap/Old Navy and the A's themselves. And he's a notorious cheapass. Many NFL owners are family heirloom owners, like the Rooney's with the Steelers.

A sports bubble bursting would f*** a lot of owners over. ESPECIALLY if they used the value of their team to leverage other acquisitions.

 

[joelef]

I don't think you can say that for certain. I think Alex Meurelo was pretty highly leveraged IMO. Lots of corporate takeovers are over leveraged. Just because people on paper are billionaires doesn't mean they have billions on liquid assets just chilling in a bank account. Take the owner of the Oakland A's for example. On paper he's a billionaire but almost all of his money is tied up in Gap/Old Navy and the A's themselves. And he's a notorious cheapass. Many NFL owners are family heirloom owners, like the Rooney's with the Steelers.

A sports bubble bursting would f*** a lot of owners over. ESPECIALLY if they used the value of their team to leverage other acquisitions.

Most of these predictions of “ bubbles bursting “ have been high exaggerated

 

[Yukon Joe]

I don't think you can say that for certain. I think Alex Meurelo was pretty highly leveraged IMO. Lots of corporate takeovers are over leveraged. Just because people on paper are billionaires doesn't mean they have billions on liquid assets just chilling in a bank account. Take the owner of the Oakland A's for example. On paper he's a billionaire but almost all of his money is tied up in Gap/Old Navy and the A's themselves. And he's a notorious cheapass. Many NFL owners are family heirloom owners, like the Rooney's with the Steelers.

A sports bubble bursting would f*** a lot of owners over. ESPECIALLY if they used the value of their team to leverage other acquisitions.

A sports bubble bursting would f*** a lot of owners over. Which is why sports owners will take steps to make sure it doesn't happen.

There are owners in all sports, but in particular the NFL, that have the teams "in the family" for many decades, and are even on to the second generation. Those owners bought when teams were only worth a fraction of what they are now, so to the extent they are billionaires it is only because of that one asset they own.

So the big question is this: are there multiple owners that have outstanding debts equal to nearly the entire value of the sports franchise itself?

So lets take the NHL. As of now the going rate for a franchise is $1.2 bil. But let's say there's a recession. Now nobody's willing to pay $1.2 bil (maybe $1 bil at most). Let's say an owner is in trouble, needs money fast. Rather than sell the team for $1 bil, which lowers the value of everyone's franchises, I think the other owners are going to lend that person the $200 mil to prevent them from selling, and wait until the economy improves such that someone will pay $1.2 bil again.

So, in order for the "bubble to burst" there'd have to be multiple owners in trouble and needing to sell such that the league itself can no longer bail them all out. Remember that the league itself is quite profitable, so they have the money to be able to lend.

What I think is far more likely is that at some point franchise values just stagnate - they stop increasing, they become harder to sell, and perhaps through inflation over time they become less valuable.

Now if something happens that fundamentally changes the profitability of the league all bets are off - if people just stop coming to games and attendance falls league-wide, or broadcasters just stop wanting to buy tv rights. That doesn't seem to be happening in the short to medium term however.

 

[tucker3434]

A sports bubble bursting would f*** a lot of owners over. Which is why sports owners will take steps to make sure it doesn't happen.

There are owners in all sports, but in particular the NFL, that have the teams "in the family" for many decades, and are even on to the second generation. Those owners bought when teams were only worth a fraction of what they are now, so to the extent they are billionaires it is only because of that one asset they own.

So the big question is this: are there multiple owners that have outstanding debts equal to nearly the entire value of the sports franchise itself?

So lets take the NHL. As of now the going rate for a franchise is $1.2 bil. But let's say there's a recession. Now nobody's willing to pay $1.2 bil (maybe $1 bil at most). Let's say an owner is in trouble, needs money fast. Rather than sell the team for $1 bil, which lowers the value of everyone's franchises, I think the other owners are going to lend that person the $200 mil to prevent them from selling, and wait until the economy improves such that someone will pay $1.2 bil again.

So, in order for the "bubble to burst" there'd have to be multiple owners in trouble and needing to sell such that the league itself can no longer bail them all out. Remember that the league itself is quite profitable, so they have the money to be able to lend.

What I think is far more likely is that at some point franchise values just stagnate - they stop increasing, they become harder to sell, and perhaps through inflation over time they become less valuable.

Now if something happens that fundamentally changes the profitability of the league all bets are off - if people just stop coming to games and attendance falls league-wide, or broadcasters just stop wanting to buy tv rights. That doesn't seem to be happening in the short to medium term however.

I don’t think it has to be a bubble for the investment not to make sense in a place like QC. The insane rate of increase on franchise valuations in the past has made even a money-loser like Arizona a brilliant investment. If you do stagnate, the cash flow neutral teams turn into bad investments.

And with NHL franchises now costing a material amount of money to even the absurdly rich, it becomes much less likely some random wealthy dude can buy it as a plaything. I think you have to have big market upside for it to make financial sense these days unless a bubble actually does burst (but I agree with you that it won’t).