Taken-for-granted and passionate Toronto Hockey Fans might get a second NHL Team

by Richard Powers

The hockey gods have finally come to their senses. Toronto, the home of the venerable Maple Leafs, may see some competition for the Holy Grail of hockey – the Stanley Cup. "Seriously?" you may ask. Well, yes, and quite conceivably sooner than the Buds are likely to hoist the Cup. Wouldn't that be a kick in the pants if a new Toronto franchise won Lord Stanley's mug before the Leafs?

It was 41 years ago that the Toronto Maple Leafs last won the Stanley Cup. As the most financially successful team in the league – last year Forbes magazine estimated the Toronto franchise to be worth in excess of $330 million – it is an understatement to say that its success at the bank has not been matched by success on the ice. And why should it? The Ontario Teachers' Pension Plan, the majority owner, has a mandate that involves maximizing its return on investment. Why would it pump money into an asset that is already producing excellent returns for its shareholders?

But if the rumours are true and the NHL governors are indeed considering allowing another team to set up shop in Toronto, that all may change. Fans want to back a winner and another franchise in the Greater Toronto Area may be the impetus that triggers a change in strategy for the Leafs – one that involves building a championship contender rather than an investment vehicle.

Let's look at the numbers. The GTA is home to more than 350 recreational hockey leagues comprised of more than 300,000 players. The population is growing not only in Toronto but throughout the Golden Horseshoe with a projected figure of more than 10 million people by 2012. Leaf games are sold out and there is a waiting list for season's tickets. And this is for a team that has not won the Stanley Cup in more than 40 years.

Hockey is Canada's Number 1 sport. Many of the most successful NHL franchises are located in Canada. If the league is considering expansion, it would be foolish to look anywhere else but Canada. And if it is not expansion, how about relocating one of the money-losing U.S. teams to a fan-friendly environment? Throw in the fact that we have a person willing and able to cough up the $500 million to $700 million that it would probably take to land an NHL franchise, and the answer is obvious. Please welcome Jim Balsillie to the microphone.

In the past, the NHL has trotted out its radius clause that protects both Toronto and Buffalo from competition within their catchment areas. In effect, it sets up a non-compete zone and would curtail any notion of another team in the area.

The legality of that provision has been questioned, but it may be a moot point if the NHL governors agree to change the rule or accept compensation in lieu of enforcing it. Balsillie and company have indicated that they would be open to such an arrangement and recent musings of the NHL governors suggest that they too may be considering waiving the limitation. And how about this – the new franchise could play out of the Air Canada Centre, which should satisfy its owners, Maple Leaf Sports and Entertainment.

Balsillie's most recent attempt to purchase the Nashville Predators and move them to Hamilton was stopped in its tracks by the NHL and its head honcho, Gary Bettman. Perhaps Balsillie jumped the gun that time, but this time his patience is paying off.

Note that Balsillie has not commented at all about the rumours and the fact that the NHL governors interviewed were happy to mention his name indicates a tidal change in opinion. Bettman may be the commissioner, but it is the governors who call the shots and they appear to be ready to welcome a new face to their club. Considering Bettman's recent problems with Nashville Predators owner William Del Biaggio, who is currently facing bankruptcy, Balsillie, co-CEO of Research in Motion Ltd., would be a viable (and solvent) partner.

Many may be sceptical, but this appears to be the real deal. The NHL governors meet today and let's hope that an announcement indicating their preference for another team in the GTA is on the agenda. Not only would it be a welcome addition to an already hockey mad city, it just might shake the Leafs out of their doldrums and make them a contender once again. After 41 years, it's high time!

About the writer:

Richard Powers is Associate Dean at the Rotman School of Management.

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