For those of us who like to take a system view of league sports but aren’t economists, Forbes’ list of franchise valuations is a vital talking point. Sure, the math is inexact. Sure, it’s a snapshot of a situation in perpetual motion. Sure, sports is a whole lot more fun when we don’t pay as much attention to the dollars and cents. With those caveats aside, I think the list is illuminating. I can’t help but find takeaways with every annual list.
On the surface, this year’s list doesn’t hold too many surprises. The league, as advertised, continues to increase in value, buoyed by regular growth and new television deals. Last year’s list had the Toronto Maple Leafs breaking the billion dollar threshold–the first in the league. This year’s list has three teams with a big B next to their name: Toronto, the New York Rangers, and Montreal. Every team gained value, with a full 23 teams gaining in the double digits and 12 gaining in excess of 20%.
A 20% return…in one year…on any investment is bananas. And thanks for the new Collective Bargaining Agreement, the owners will have a chance to keep more of that than ever before. So, the picture of league health is a good.
Now, this isn’t exactly cheery news for the Ottawa Senators. Ottawa gained a paltry 5% growth on the year–the same year they announced a 12 year broadcasting deal with TSN. While a 5% return isn’t exactly terrible, it is comparatively unimpressive when you look across the league. Teams in both non-traditional markets, like Nashville (22% increase) and established sports markets where you’d think there wasn’t room for massive new growth, like Dallas (26%), Boston (25%) and Washington (21%) are outperforming Ottawa in terms of value growth by a factor of four to five.
Some of this might be expected. Calgary gained only 7% and Winnipeg 5%, which means smaller markets and a weak Canadian dollar might be the main contributor. But the fact remains that even with its television-deal the needle barely moved on Ottawa’s value.
This with a team that has the lowest payroll in the league, and who plays in an aging building. It you put any stock in Forbes’ valuations (and not everyone, or even most people, should) it casts a bit of a pall over the future of the team, if only because there doesn’t seem to be much incentive for Eugene Melnyk to spend on the team or on the arena.
That means, potentially, continued mediocrity on the ice and a fight with city hall over who pays for a new arena. Not tomorrow, but certainly in the next few years. There’s no new windfall in the making. The owners got the deal they wanted, Bell Media showed Ottawa the money. What’s left, other than winning?
I’m not pitying Melnyk here at all, of course. He bought the team and arena for a song, and has seen almost a four-fold increase on his investment. But if the only way Ottawa is going to see growth in value is by becoming a hot(ter) commodity than it already is, then it’s going to need to win–which means either Paul MacLean and Bryan Murray working miracles with the lowest payroll in the league, or Melnyk being willing to take a loss on player salaries now in the hopes of cashing in bigger later.
Not that spending guarantees you a winner…but not spending gets you a line of Chris Neil, David Legwand, and Milan Michalek, and we’re watching the (painful) results of that every night.