The Aftershocks of The Trade: Canadian NHL Teams Face Financial Crisis

Strategic Insights -

The departure of Wayne Gretzky from Canada in 1988 sparked a salary spiral that has created millionaires among NHL players, putting small-market Canadian teams in a precarious financial situation. With owners of teams in Edmonton, Winnipeg, and Quebec facing significant losses, there is a real threat that three or four Canadian NHL clubs may be forced to relocate to the United States in the coming years.

Key Takeaways:

  • The trade of Wayne Gretzky to the Los Angeles Kings in 1988 triggered a salary spiral that has tripled player salaries in the past five years, putting pressure on small-market Canadian teams.
  • Owners of Canadian teams in Edmonton, Winnipeg, and Quebec are facing significant financial losses, with some forecasting losses of up to $9-million next season.
  • The Calgary Flames, without a renegotiated lease at the Saddledome, may also move to a US market.
  • Canadian small-market teams rely heavily on ticket revenue, with the Edmonton Oilers earning $13.8-million in ticket sales last season.
  • US regions offer incentives that Canadian cities cannot match, including larger markets and publicly subsidized arena deals.
  • Hockey's financial difficulties in Canada are not as severe as claimed by their owners, according to sports executives familiar with NHL finances.
  • Government subsidies to build arenas in Canadian small markets are seen as investments rather than handouts by some owners, but not all public officials agree.
  • Barry Shenkarow, president of the Winnipeg Jets, argues that government subsidies should be considered investments rather than handouts, but this view is not universally accepted.

Statistics:

  • Player salaries have tripled in the past five years, from $1-million per season in 1988 to $3-million per season in 1993.
  • The Edmonton Oilers earned $6-million and $5-million from broadcast revenue and ticket sales, respectively, but lost millions of dollars overall last season.
  • The Calgary Flames picked up $17.5-million in gate receipts last season, but had net earnings of only $1.9-million.
  • The Winnipeg Jets reported a loss of $5-million last season, and forecast a loss of $5-million to $6-million this season.
  • The Nordiques in Quebec City lost $3-million last season and forecast a loss of $4.5-million this season, with losses potentially reaching $9-million next season.

Sources:

  • The Globe and Mail - "The Aftershocks of The Trade: Canadian NHL Teams Face Financial Crisis" (no date)
  • Marcel Aubut, president and part-owner of the Nordiques - as quoted in The Globe and Mail
  • Barry Shenkarow, president and part-owner of the Winnipeg Jets - as quoted in The Globe and Mail
  • Peter Pocklington, owner of the Edmonton Oilers - as quoted in The Globe and Mail
  • Andree Boucher, mayor of Ste-Foy - as quoted in The Globe and Mail