Protecting Canadian NHL Teams: A Matter of Government Support and Market Strategy

Strategic Insights -

The Canadian government is poised to make significant decisions that will impact the financial stability of the National Hockey League's (NHL) small-market teams based in Canada. As the federal budget is set to be unveiled next month, two key measures are being considered to help these teams remain competitive: the reinstatement of the income-averaging provision and the preservation of tax-deductible status for luxury boxes. Meanwhile, a separate issue will be decided on February 26 by the Canadian Radio-television and Telecommunications Commission (CRTC), which will determine the fate of The Hockey Channel (THC), a pay-television channel that could generate significant revenue for Canadian NHL teams.

Key Takeaways:

  • Reinstating the income-averaging provision would help Canadian teams become more competitive by reducing the year-by-year tax bite on their players.
  • The provision, if reinstated, would allow all players with fluctuating earnings to average their income over 10 years, making Canadian teams more attractive to players.
  • Leaving intact the tax-deductible status of luxury boxes would help many teams maintain their financial stability and build new arenas.
  • If The Hockey Channel is approved, it could generate significant revenue for Canadian teams, with gross income projected at $540-million annually.
  • THC revenues would be distributed as follows: the eight Canadian teams would share one-third of the proceeds off the top, while the remaining two-thirds would be shared equally by all teams.
  • If THC becomes a reality, the Canadian teams could receive approximately $15-million annually in the first cut, and another $9.2-million in the second cut.

Statistics:

  • $540-million: Projected annual gross income from The Hockey Channel (THC).
  • $360-million: Estimated annual profit from THC.
  • $15-million: Estimated annual revenue from THC that would go to the eight Canadian teams in the first cut.
  • $9.2-million: Estimated annual revenue from THC that would go to the eight Canadian teams in the second cut.
  • 48: Number of applicants for the six licenses available for The Hockey Channel.
  • 26: Share of THC revenue that would go to each team after the Canadian teams take their share.
  • 8: Number of Canadian NHL teams backing The Hockey Channel.

Sources:

  • "Government Can Help Hockey Teams" by Al Strachan, The Calgary Herald, undated.
  • An Angus Reid poll commissioned by The Hockey Channel.