Unlike other businesses, we know very little about the value of professional sports teams. As privately held concerns, no professional sports team in North America releases audited financial information. To fill this gap, Forbes magazine releases annual estimates of franchise values. The estimates are based on ratios applied to observable revenue drivers like attendance, publicly available information on broadcast rights fees, details about arena lease deals that trickle out into the mainstream media, and cost information on payroll that are widely reported.
The 2009 NHL franchise value estimates were released a couple of days ago. Given the current economic environment, and the obvious financial problems currently plaguing the NHL, these estimates are worth a look. The most valuable franchise is the Toronto Maple Leafs, worth an estimated $470 million (in US dollars). Estimated profits in the last year were $79 million. Residing at the bottom of the list, our familiar friends the Phoenix Coyotes, worth an estimated $138 million. Forbes estimates that the Coyotes lost $18 million in the last year.
League wide, the estimates suggest that 14 of the 30 NHL franchises lost money last year. 14 franchises also saw their estimated value decline over the past year, although six of the franchises that lost value had a positive estimate of operating income last year. All in all, these estimates do not paint a pretty picture of the financial health of the NHL. The Leafs made a lot of money last year, and a few other franchises (Habs, Rangers, Red Wings, Black Hawks and Canucks) earned respectable profits. But a lot of franchises appear to be in deep financial trouble. Many of these franchises are part of Gary Bettman’s “southern expansion” strategy. The Thrashers, Lightning, Hurricanes, Predators, Blue Jackets, Panthers and Coyotes all lost money last year based on these estimates.
However, all is not lost. Mike Mondello and I pointed out in the IJSF a couple of years ago that these estimates don’t jibe with actual franchise sale prices, which don’t have to be estimated. As an example, consider the Coyotes. Jim Balsillie was willing to pay in he neighborhood of $250 million for the team a couple of months ago, yet Forbes values the team at $138 (granted Balsillie wanted to move the team). And the bad economy clearly has an effect on estimated profits and franchise values. The economy will eventually turn around, benefiting all professional sports teams.