The NHL and Quebec City – A Return?

Quebec City officially unveiled the plans for their state-of-the-art arena that is slated to open in 2015. It, of course, will be equipped to handle professional hockey. But is professional hockey ready for a return to Quebec City? Read on to find out.

Here is the video for the new arena for Quebec City.

It has been almost 20 years (1995) since Quebec City lost its beloved Nordiques to Colorado. The fans in Quebec City then had to go on to see their hockey club capture the Stanley Cup only one year later. Since that time, politicians and businessmen in Quebec City have been working hard to get the NHL back. That dream appears closer to a reality today than at any point in the previous 17 years.

The Arena

The arena borrowed design ideas from the CONSOL Energy Center in Pittsburgh – one of the nicest facilities in all of pro sports.

The Nordiques played their hockey in the Colisee, which was outdated almost 20 years ago. A new arena was required for any hope of getting the NHL back, and now that hurdle has been overcome.

Quebecor has already purchased the naming rights for the arena, but how much they pay depends on whether or not there is an NHL team playing there in the near future or not. The company will also help pay for operating costs of the arena.

The provincial government contributed $200 million to the project.

The new arena will be a public and private-funded venture shared by municipal and provincial governments as well as Quebecor Media Inc. Quebecor Media Inc. reportedly will pay $33-million for the new arena’s naming rights and that agreement would increase to $63.5-million if Quebec City lures an NHL franchise to the province’s capital city.

Other financing details:

The amount they will pay will depend whether an NHL team moves in, and is expected to be between $33 million and $63 million up front, plus between $3.15 million and $5 million in annual rent. The government of Quebec is going to invest $200 million, and Quebec City will invest $187 million. The last $13 million are to be raised by a private sector group J’ai Ma Place.

The Return of the NHL?

On Tuesday morning, Jason Kay from The Hockey News tweeted the following:

“There’s strong speculation the NHL could announce two expansion teams for Canada once CBA deal struck: Quebec & Toronto. More in Oct. 29 THN”

Pretty significant news, no? The NHL would likely favor expansion in these cities as it would bring in additional revenues for the entire league (in the way of expansion fees), and could recoup some of the money lost during the lockout. How much do these expansion fees run?

Upwards of $500 million per team – so one or two teams would generate significant revenues for the current 30 NHL owners to share. Back when Columbus and  Minnesota joined the league (2000), their expansion fee was $80 million, which worked out to approximately $3.1 million for each of the current teams in the league at the time.

Adam Proteau, also of The Hockey News, tweeted a similar message a few weeks ago:

An NHL agent predicts that whenever a new CBA is signed, Gary Bettman will try salvaging his rep by announcing 2 expansion teams for Canada.

Bettman’s rep is beyond salvaging at this point, and two more franchises in Canada make a lot of sense financially – the current six teams generate a significant portion of the revenues for the rest of the league.

Could Canada even support two more NHL franchises? Glen Hodgson and Mario Lefebvre list four pillars for successful pro sports franchises.

Population Size

Any Canadian market with a population under 750,000 would find it very difficult to sustain an NHL franchise over the longer term and thus should be excluded from the list of potential NHL markets.

Both Quebec City and the GTA (Greater Toronto Area) meet the above criteria.

Market Wealth

This pillar has grown in importance, given the rapid rise in ticket prices for professional sport events over the past 20 years. Personal disposable income per capita in Winnipeg in 2010 was $29,500. This put Winnipeg in 14th place among Canada’s 27 largest census metropolitan areas—but still ahead of Vancouver and Montréal, both of which are home to NHL franchises. What about Québec City and Hamilton? Québec City was ranked 10th in 2010.

Again, Quebec City has this covered.

Corporate Presence 

Of Canada’s 800 largest corporations in 2009, only 30 had head offices located in Winnipeg. Even fewer—17—were located in Québec City.

That being said, neither Ottawa (19) nor Edmonton (26) have corporate presences stronger than Quebec City.

Level Playing Field

The Canadian dollar has been at or around parity with the U.S. greenback since 2007, and The Conference Board of Canada expects that it will remain there for the foreseeable future. This is in sharp contrast to 2002, when the Canadian dollar bottomed out at just under US$0.62. A chronically strong loonie is a tremendous help for Canadian franchises that play in the major North American leagues, where teams’ largest expense—players’ salaries—are denominated in U.S. dollars. Also, taxes on individuals and corporations have been reduced by the federal government and several provincial governments over the past decade, reducing or eliminating the tax spread with U.S. jurisdictions—welcome news for Canadian franchises.

The relatively strong dollar combined with tax reductions make a new NHL franchise in Quebec City much more viable than it has been in the past.

In Conclusion…

As Hodgson and Lefebvre conclude, now is the time for expansion for the NHL in Canada.

“The conditions for growth are right — the Canadian dollar will likely remain strong and the taxation gap with the U.S. is expected to continue to narrow. This will allow existing franchises to prosper and offer a better chance for new franchises to succeed.”

Quebec City makes a lot of sense for expansion. But what does this mean for Seattle? The Seattle market is probably the top contender for any potential relocation (Phoenix, Long Island, and so on).

The NHL in Seattle (A 4-Part Series)