Simple mathematics should be enough to prove the league is overcharging The Creator for his entrance into the NHL. The average value of an NHL franchise approximately $505 million. All six of the original NHL franchises rank in the top eight. The other five teams coming in above the $500 price tag are in massive cities and have gigantic hockey followings (Pittsburgh, Vancouver, Washington, Philadelphia, and Los Angeles.)
Every other team in the league, which accounts for 19 of the 30 teams are valued short of the reported entry fee the league is set to charge The Creator.
We’ve bitched and moaned about this before, but now a well respected business website is questioning the price as well.
Still, sources say the real hiccup in the Pens’ sale is the $500 million asking price for a potential expansion team in Las Vegas, an untested market for professional sports teams. Once the league is able to sell that expansion franchise, it will have a sort of baseline to go on for future team sales, the investment banker said. But is the NHL really justified in asking for $500 million for an expansion franchise? – Michael Brown, TheStreet.com
I highly recommend you give that entire article a read as they relate the expansion fee to the stalled sale of the Pittsburgh Penguins, but for our sake we are going to stay on the Vegas portion of the story.
The question is fair, is the NHL truly justified in asking for such a high price? The answer however is yes, and the fact The Creator is willing to pay it is fantastic for everyone.
The NHL is doing what’s best for them in trying to get the largest amount of money possible from a buyer who is more concerned about receiving the “product” than he is about price.
But here’s why it’s not only excellent for the league, but also for the Penguins, the Hurricanes, and even The Creator himself. Think of it in terms of real estate. The purchase of an expansion team is essentially a “comp” just like what is used on the housing market. As prices rise in he neighborhood, the price of your house goes up. The same goes for the NHL, if a brand new unproven team has a buyer for $500 million, it’s perfectly fair to ask a much higher price for a proven franchise like Pittsburgh, and it’ll even raise the asking price on a team like Carolina who may be struggling, but still could be argued to have more value than expansion Las Vegas.
The article goes on to wonder if the expansion process is holding up the sale of the Penguins, to which the answer is once again yes. But it’s probably not because the Penguins can’t find a buyer, it’s more likely they are simply sitting back and waiting for The Creator to sign his check and make their franchise much more valuable.
It’s yet another reason why the league is going to expand to Las Vegas soon. The only person at risk of that $500 million price tag is The Creator himself, and quite frankly, I don’t think he cares. Expansion continues to prove it’s worth to every part involved in and around the league. We’ve been saying it since Day 1. Slowly the local media caught on. Then came national sports media, and now even financial media can see the value behind expanding a league that may not appear to need to expand.
This is yet another example of how the picture is starting to clear up for everybody. It’s just a matter of time before Gary Bettman stands behind a mic and makes our dreams come true.
**All team valuations mentioned in this post are from Forbes’ “Business of Hockey List”**