On Jan. 29, the city of Markham, Ontario voted in favor of building a $325-million arena in the hopes of attracting an NHL team either through expansion or relocation. Cities have learned that in order to bring the NHL to town, they have to have the building. The days of approving a team on the condition of an arena are long gone. That is why places like Seattle, Quebec City, Kansas City and now Markham have moved their names to the front of the line for NHL teams. While many in the Greater Toronto Area (GTA) love the idea of another team, it begs the question of how another team in the area would affect the Buffalo Sabres, the smallest U.S. market in the NHL.
After many debates and community involvement, on both sides, Markham Council decided against ending a cost-sharing agreement with GTA Sports and Entertainment and Remington Group.
The council wants to ensure that the project is not going to cost taxpayers. The plan Markham has is to borrow from Remington and pay it back over 20 years and raise half of the funds through development fees and ticket surcharges.
To give Markham even more reason to proceed with the project, former executive director of the NHLPA, Paul Kelly, stated that he believes the NHL will come to Markham if they have the facility, even hinting that he had conversations with the NHL about another team in the GTA.
If a team were to go up in Markham, it would be approximately 19 miles from the Toronto Maple Leafs and 98 miles from Buffalo. But it is not the distance between Buffalo and Markham that would be the concern for the Sabres. The real concern would be everything south of Toronto. Where people chose to go to Buffalo in the past, they may decide to stay in Canada and head north to Markham.
The Sabres get roughly 15 per cent of their business from Southern Ontario and the real question is how much of that 15 per cent would they lose to Markham?
The Sabres faced a similar scare a few years ago when former Blackberry co-CEO Jim Balsillie wanted to put a team in Hamilton. The difference in that situation was the Sabres would have been able to stop the project if they wanted, as per NHL rules about a team’s market extending 45-miles outward. This time it is only Toronto that would have a say about a team in Markham.
The only comparable concentration of teams is in New York/New Jersey, but even still that metropolitan area far exceeds the GTA and, according to Forbes’ most recent list of team values, the Islanders rank in the bottom five. There are of course other factors to that, like the state of Nassau Coliseum, but it is a bit of a grim stat and potentially foreshadows what could happen with three teams in the GTA/Western New York separated by about 100-miles.
The population in the GTA and Hamilton area is 6.5-million. With that number there is reason to believe that three teams can succeed and that it would not affect Buffalo too seriously when you compare it to some of the smaller markets in the NHL like Winnipeg (730,018), Edmonton (1,159,869), and Calgary (1,214,839) that don’t have the same expanded metropolis area. When you divide the number of people in the GTA and Hamilton area and Buffalo by the number of teams, the numbers say: yes three teams could survive with that amount of people. But again it is important to look at New York. The population in there is over 22-million and yet the Islanders struggle.
Furthermore, it is important to look at the trends in population of the City of Buffalo and surrounding area. As of 2010 the Buffalo-Niagara area’s population was 1.3-million. Yet that population has been on the decline over the past few decades meaning that more than ever, the Sabres need business from Southern Ontario.
Taking into account the location of these potential three teams and the population that will have to support them, how will the value of the Sabres be affected? There is no doubt the franchise is in a better financial state since Terry Pegula took over, but on Forbes’ 2012 list of team values, the Sabres still rank 22nd at a value of $173-million. Can they handle the competition and not take an overall hit to the value of the franchise? That is something that is hard to predict.
The fact that this potential project is going up in Markham takes that ability of Buffalo’s to voice their concern if they find evidence to say that they will take a major hit. As for Toronto, there is nothing they need to be concerned about. They top the list of most valuable franchises at nearly $1-billion.
There is reason to believe that the Sabres value will improve based on their 2011-12 numbers. The team sold, on average, 18,687 tickets per game and sold out 39 of 40 home games.
It would appear that the area could support all three with the population that is there. However, it will depend on that 15 per cent still going to Buffalo and not abandoning the Sabers for Markham. If they continue to get that support they should be able to succeed and grow based on recent ticket sales.
The other area to watch is how would another team in the GTA affect the Sabres/Leafs rivalry? Would that rivalry lose some of its glory and the amount of people from Toronto who make the trip to Buffalo? Only time could answer that, yet when asked about the prospect of another team in the GTA Maple Leaf players liked the idea.
For now, the Sabres will have to work on strengthening their relationships with existing fans and develop new ones so that if another team arrives, they don’t lose the fringe fans that decide to choose Markham over Buffalo.