Toronto Maple Leafs forward Kasperi Kapanen and forward Jason Spezza react after a loss to the Columbus Blue Jackets during the Eastern Conference qualifications at Scotiabank Arena, in Toronto, on Aug 9, 2020.John E. Sokolowski/USA TODAY Sports via Reuters
During a show at Scotiabank Arena last month, American comedian Shane Gillis pointed to the rafters and noted how many of the 13 Stanley Cup banners hanging there – the most recent of which dates to 1967 – were in “black and white.”
All jokes aside though, when it comes to the Toronto Maple Leafs and their efforts to end a Stanley Cup drought which now stands at 57 years and counting, it’s not been for a lack of trying. Things have gotten in the way – Kerry Fraser’s non-call on Wayne Gretzky or Harold Ballard’s reign of error both still haunt Leaf fans – but current team owner Maple Leaf Sports and Entertainment routinely spends to the cap limit to try and ice a winner.
However, with the Maple Leafs already valued at an NHL-high US$2.8-billion by Forbes – the recent Rogers takeover should push that valuation even higher – is there any real incentive for the team’s corporate owners to add another Stanley Cup banner to the rafters?
IN GOOD COMPANY
“It’s funny, a lot of the top franchises in whatever league that they’re in, losing doesn’t necessarily affect franchise valuation,” says Michael Goldberg, senior vice-president, sports finance, at DBRS Morningstar. “The Leafs are the most valuable NHL franchise by many third parties. The Knicks are one of the most valuable NBA franchises; they haven’t won in 50-plus years as well.
“So really, those top franchises who have built brands over decades, they can lose year after year and still maintain those franchise values. But I would still say winning wouldn’t hurt.”
Maybe so, but given the company the Maple Leafs currently keep, alongside the likes of the New York Knicks (second-most valuable in NBA) and the Dallas Cowboys (NFL’s most valuable) – with their championship droughts of 51 and 28 years respectively – one could almost say there’s a solid business case for losing.
Certainly the current iteration of the Leafs – the team has a solitary playoff series win to its name in two decades – has done little to hurt the team’s box-office appeal, with the team generating a league-high US$127-million in operating income for the 2022-23 season, according to Forbes.
However, from a pure dollars-and-cents standpoint, Toronto is missing out with its early playoff exits, having been one-and-done in the postseason in seven of the past eight years. There’s clearly a lot of runway upon which to pile on the profit without the need to get bogged down in parade-route planning.
“If we talk about just profitability on its own, the best thing in a given year for a franchise is to reach the final and then lose in Game 7, or just lose the final, depending on what sport they’re in,” Goldberg says. “Because they maximize revenues from ticket sales and beer sales, concessions, merchandise, and then they don’t have to pay the bonuses for players or management, or plan parades.”
The numbers certainly help make his case, with the Florida Panthers making just US$2,758,125 more than the Edmonton Oilers from the NHL’s playoff fund following their seven-game Stanley Cup victory over the Alberta club last June, according to figures from the NHL Players Association. However, they did benefit from a 20.6-per-cent increase in ticket revenue from the previous season, according to the Miami Herald, when they also reached the final before losing in five games to the Vegas Golden Knights.
THE THREAT OF RELEGATION
Over in Europe, the business case for losing isn’t quite so black and white. Often operating without the safety blanket of a salary cap, or the mandated injection of top talent through a draft system, soccer clubs can get relegated – or even go bust – in the pursuit of winning.
But that certainly hasn’t happened in North London, where two of the country’s biggest clubs top the all-time Premier League table for profitability. While Arsenal has compromised the goal of pure profiteering by winning three league championships since the EPL started in 1992, its local rival Tottenham Hotspur has been unfettered by such naïveté and has now gone 63 years since it lifted the most cherished crown in the land. Both teams have been ever-present in the EPL – the world’s most lucrative soccer league – with Tottenham sitting top of the all-time profit league table at £212-million ($379-million), followed by Arsenal in second place at £201-million ($359-million).
Conversely, five-time EPL champion Chelsea sits dead last in that league table on negative £1.1-billion ($1.966-billion), while Manchester City, which has won six of the last seven titles, is second-last on negative £634-million ($1.13-billion).
Kieran Maguire, an English university professor who hosts The Price of Football podcast, keeps tabs on the sport’s finances and provided these figures. While the money that is mostly flowing out of club coffers is mind-boggling, he points out that winning isn’t necessarily the ultimate panacea that fans think it is. He points to the example of Leicester City, which miraculously upset the form guide to win the EPL crown eight years ago, but was relegated from the top flight seven years later amid losses of 90-million pounds the same season.
At the end of the day, being competitive is the name of the game in the EPL. The best-case scenario – from a business standpoint – may well be simply finishing in the top four, high enough to qualify for the riches of the Champions League, but without having to pay out title-winning bonuses to the players.
“I’ve spoken to quite a few chief executives, and they would say that’s the sweet spot,” Maguire says. “Second, third, that’s perfect.”
A NEW ERA
Shortly before the Maple Leafs moved into what was known as the Air Canada Centre in 1999, team owner MLSE was “the company that time forgot,” according to Richard Peddie, who was its chief executive for 13 years. Before Peddie took over in late 1998, the Maple Leafs weren’t even in the top 10 of the NHL’s most valuable franchises, sitting 11th between the New Jersey Devils and the Dallas Stars at US$119-million in the 1997 Forbes valuations.
Getting a new arena dragged the club into the 21st century, adding more than 100 extra luxury suites and an overhauled restaurant and concession experience, and presaged the franchise’s move to the top of those Forbes valuation lists. But short of two trips to the Stanley Cup final four since then, in 1999 and 2002, it hasn’t revived the team’s fortunes on the ice.
“We traded all our draft choices, we did not have a development program,” Peddie says. “But it was working because we had more money than everyone else and [general manager and head coach] Pat Quinn and [president] Ken [Dryden] had a lot of success. We were in the playoffs every year. We knocked at the door.”
But following the 2004-05 lockout season, the NHL introduced a salary cap and the Leafs then suffered through seven playoff-less seasons. Peddie, who was the CEO for much of the period when the Ontario Teachers’ Pension Plan owned MLSE, says the Teachers’ CEO, Jim Leech, was levelled with the charge that Teachers didn’t care to win because they already made so much money.
“Jim said, ‘Having a winning team is really good for business,’” Peddie says. “‘Winning the Stanley Cup is really great for business.’”
In a diverse city such as Toronto though, where the competition for eyeballs and fan dollars is perhaps greater than ever, the Leafs can’t afford to not be competitive. The Toronto Raptors’ 2019 NBA Finals win created a whole new generation of basketball fans in this country.
“You get a team that starts going deep into the playoffs and knocking on the door again, look at how they’ll all jump on board, and there’ll be all kinds of young kids that will see them win that championship, and they’re at that stage in their life, and they say, ‘I’m going to adopt the Maple Leafs,’” he says.
“So winning is important for the bottom line immediately, and I believe it creates future fans.”
Despite the plethora of other entertainment options now, Peddie doesn’t imagine interest in the Leafs would wane, even if they were to win the Stanley Cup. As he says, “hockey is still Canada’s sport,” and he doesn’t see interest falling away if Auston Matthews and Co. manage to end the drought.
“We used to have the highest [season seat] renewal rates of almost any professional team,” he says. “I think it was like 98 per cent almost every year. … after a Stanley Cup, I don’t think it’s going to drop to 70 or 80.”
STRENGTH OF THE BRAND
In recent years, baseball’s Chicago Cubs are perhaps the best example of a team ending a long championship drought, with the 2016 team winning their first World Series since 1908. Despite bumping up the average cost of season tickets 19.5 per cent for the 2017 season, the team still experienced a renewal rate of 99 per cent. However, the team’s season ticket waiting list, which was introduced in 2003, was finally caught up last year, with fans being able to purchase season seats if they so desired.
“I think people feel much better about the Cubs because it was possible for them to win in 2016 and now the expectation levels are much higher,” says Rick Horrow, visiting expert on sports business at the Harvard Law School.
Being a loser – loveable or otherwise – might be a fun thing for the fans to banter about, but it’s awfully hard to shake that tag.
“The branding doesn’t happen overnight, but certainly, if you get into that perception of a, quote, ‘losing brand,’ it’s awful hard to change it,” he says.
Much like the Cubs, one of the strengths of the Leafs is the market in which they play. If hockey is Canada’s game, then playing in the biggest city in the country, with the backing of Bay Street and the tourist dollars that come from visitors to the Hockey Hall of Fame seeking out a Leafs game, cements the franchise’s position as one of the most dominant in the sport.
And while a Stanley Cup victory would be a boon for the long-suffering fans, from a business standpoint, it might not have much effect at all.
“Both not winning and winning are great stories from a fan perspective, but I don’t see any significant long-term impact on franchise value one way or the other,” says Neil Longley, the director of business at Nevada State University and the author of A Whole New Game: Economics, Politics and the Transformation of the Business of Hockey in Canada.
Longley, a Regina native who spent many years teaching at the University of Massachusetts, points to the New England Patriots, who won six Super Bowls largely on the talents of quarterback Tom Brady and head coach Bill Belichick and moved up to second behind the Cowboys in Forbes’s franchise values at US$6.4-billion.
“That franchise got to the point where it wasn’t really dependent on the next Super Bowl win or on Tom Brady or Bill Belichick and so on,” Longley says.
And short of the Leafs embarking on a dynastical run of winning championships year after year – like the Patriots or the Golden State Warriors, which recently overhauled the Knicks at the top of the NBA valuations – he feels much the same way about a Stanley Cup in Toronto.
“I do understand the mystique argument of not winning and I think that can captivate fans, definitely, but I think also that it perhaps is overstated,” he says.
“... I’m just not fully convinced that a Stanley Cup victory would have a huge impact one way or the other. I think the brand of the Leafs is so strong.”