Tuesday, June 14, 2011
What's Different About Winnipeg?
Winnpeggers (Winnipeglets?) welcomed the NHL back to the plains of Manitoba as the True North Sports and Entertainment purchased the Atlanta Thrashers, a franchise that had been totaled by the inept ownership that was the Atlanta Spirit Group. It was not just any welcome, as the owners were able to secure commitments to purchase 13,000 season tickets faster than you could say "relocation"; and the citizens rejoiced in the streets with a fervor normally reserved for Stanley Cup celebrations.
Winnipeg's first dance with the NHL lasted from 1979 to 1996, and the on-ice product had more highs than lows, as the then Jets made the playoffs 11 of their 15 years in the League and the team had quality players on their roster.
All indications were that this was a franchise that would last in the strong Canadian market. Instead, the team was relocated to Phoenix and reincarnated as the Coyotes after the 1996 season.
So what went wrong?
Even more importantly, what is different about Winnipeg today that would allow an NHL team to survive?
To answer that question, we need to look back at Winnipeg at the time the Jets left and compare it to the city that is receiving the Thrashers as well as the business and political conditions that are existent today. This comparison will use census data from 1996 and 2006, the last year for which there is a census. Numbers for 2011 will be extrapolated or will come from other sources.
According to the census data for Winnipeg in 1996, the total population was 618,477; in 2011 it is estimated to be 764,200 in the census metropolitan area (CMA), which includes the city of Winnipeg along with its suburban areas. The city itself is estimated to have 693,200 residents. The province of Manitoba had 1,243,700 residents as of the end of 2010 according to Statistics Canada. Both the City of Winnipeg and the CMA have averaged just over 2% population growth from 1996 to 2011.
The average total before tax income in Winnipeg in 1996 was $24,012; in 2006 was $49,794. This is an average annual increase of 5.1% Projecting the 2011 average income at the same rate of growth, average income would be approximately $63,852.
The work force in Winnipeg in 1996 was a total of 315,950, with 258,135 (81.6%) employed in the service sector. The 2006 census shows a workforce of 385,870, with the service industry again the largest sector of the work force (82.9%). The growth in the work force has mirrored the growth in the general population, averaging 2.2% annually.
Winnipeg's largest employers are the Government of Manitoba, the University of Manitoba, Manitoba Hydro, the Manitoba Health Sciences Centre, and the City of Winnipeg . Great West Life Assurance, Motor Coach Industries, Boeing Canada Technology, and Shaw Cable Systems are some of the city's largest private employers. The Royal Canadian Mint is also located in Winnipeg.
Examining the city, Winnipeg appears to be a growing, economically healthy city. Growth has been steady but not astounding. The population has grown by approximately 150,000 from the time that the Jets left for warmer climes, and average household incomes have grown just over 5% annually.
Good numbers, but not eye-popping.
So what is really different about Winnipeg?
Other than the growth in population and average income that was just mentioned, not much.
So what makes Winnipeg a city that can support an NHL team now?
There are three critical factors that have changed since the NHL last called Winnipeg home, and I would contend that without these external factors in play, the NHL would be hard pressed to justify placing a team in Winnipeg.
The first is the value of the Canadian dollar relative to the U.S. dollar. When the Jets left Winnipeg in 1996, the Canadian dollar was worth about .60 to the U. S. dollar. This crippled not only the Jets but every team in Canada, as revenues were received in Canadian dollars and salaries were being paid in U.S. dollars. One doesn't have to be a rocket surgeon to realize that a protracted period of undervaluation of the Canadian dollar was economically crushing to all Canadian hockey clubs. Today, the Canadian dollar is priced at $1.02 versus the U.S. dollar. The Canadian dollar at or near parity with the U.S. dollar closely matches revenue streams with expenses and is advantageous for all Canadian teams and will certainly be beneficial for the team in Winnipeg
The second condition that works in favor of a team in Winnipeg today is the presence of a salary cap. Like it or not, the cap provides True North with some degree of cost certainty that was missing the last time the NHL was in Winnipeg. This allows a smaller market team like Winnipeg- which is now the smallest NHL city- to stay competitive with teams in larger metropolitan markets, but the most important aspect of the cap is a degree of cost certainty for the owners.
The third condition that was not existent in the time of the former incarnation of the Jets is revenue sharing.
Decried by many of the Canadian hockey "pundits" as welfare for smaller market teams, revenue sharing will be of a benefit to a team in Winnipeg. Not that they will have trouble selling tickets- they won't. They will be operating out of the smallest arena in the NHL for the foreseeable future, and even though Winnipeggers (Winnipeglets?) will pay the second highest average ticket prices in the NHL, physical limitations of the MTS Centre will in turn limit the gate receipts for the the team. Revenue sharing will benefit this small market Canadian team just like it benefits small market U.S. teams, and this will mitigate some of the operating costs of True North.
(As an aside, there is not doubt in my mind that if the MTS Centre is expanded to NHL standards that the team in Winnipeg could potentially be a net positive earning team that would contribute to the revenue sharing pool instead of drawing from it.)
There are other obvious factors at play such as the financial soundness of David Thomson and Mark Chipman, owners of True North. The quality and financial horsepower of the owners cannot be discounted. They have the ability to carry this franchise through any lean times. The MTS Centre, although the smallest in the NHL, is only five years old and is a better facility than what the Jets played in during their time in Winnipeg.
This is not to say that there will not be challenges to the NHL being successful in Winnipeg. Should the aforementioned parity in the loonie and the dollar revert back to the conditions of the mid 1990's, the economic strain on all Canadian teams, not just Winnipeg, will be significantly negative.
Winnipeg itself faces some particular challenges. According to the Conference Board of Canada, an economic think tank, the minimum population to support an NHL team is 800,000. Winnipeg falls just under that threshold. With a CFL team in the same city, the Conference Board estimates that there should be a population of at least 1,000,000 to support both. The lack of a large corporate base in Winnipeg also could be challenging, as corporate sponsorship dollars will be spread between two professional teams. And while the average income in Winnipeg has risen significantly since the NHL was last there, the locals will be paying the second highest average ticket price in the League. Should the local economy take a hit, this will inevitably put a strain on ticket sales.
It is negative speculation to say that the NHL will not succeed in Winnipeg. I think it will. There will be challenges, however.
So while Winnipeg as a city has changed over time, the key factors that will determine success are primarily external to the city itself. Without the parity of the loonie to the dollar; the salary cap; and revenue sharing, the NHL in Winnipeg might have continued to be an unfulfilled wish.