The good and bad of a National Hockey League expansion

By John Williams
September 7, 2016

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Bill Foley and his new Las Vegas expansion team will enter the National Hockey League (NHL) for the 2017-2018 season, after the league announced their arrival back in June. This means that the new Las Vegas team will become the 31st team in the league and will have an expansion draft to go through next June. An expansion draft is a special draft where each new team in the league–which, in this case, would just be Las Vegas as of now–will have to pick one player from each of the other 30 NHL teams to fill their own roster.

The National Hockey League’s Commissioner Gary Bettman said that he wants the team to be competitive right out of the gate and to challenge for a playoff spot in their first season in the league, something that has never been done by an NHL expansion team before.

“We think this is a tremendously exciting opportunity not just for Las Vegas but for the league as well,” Bettman said via the New York Times. Las Vegas’ General Manager George McPhee hopes the same thing. “Our mission here is clear: We’re going to build an organization and a team that people in Nevada and Las Vegas will be proud of and we’re going to do it quickly and we’re aiming at the Stanley Cup,” McPhee said in his inaugural press conference on Wednesday, July 13.

It will be an uphill battle for the former Washington Capitals general manager to build a team from scratch, but it should be an interesting process to watch over the next few years.

This move to Las Vegas is even more interesting from a financial perspective.

The team’s billionaire owner Foley will have to pay the $500 million expansion fee to the league.  Coupled with the brand new T-Mobile arena, which cost approximately $375 million to build according to CBS Sports, it is a gigantic financial commitment from Foley/Maloof Sports & Entertainment LLC.

It goes without saying that the number one motive for bringing in a 31st team into the league is for the money it will provide. Before the plan to build a team in “sin city” was given a green light, the 30 team owners and the NHL board of governors held a vote to see what the interest was. Every single one of them said yes and it makes a lot of sense. All of the money that Las Vegas will be paying the league to join will be going directly to the owners. So at this very moment, that’s $500 million in the owner’s’ pockets.

According to Grantland.com, this is because the buy-in fee would not fall into the category of “hockey-related revenue,” so the players would not be able to get their hands on it in the form of a raised salary cap and all that money will go straight to the owners’ pockets. If the league decides to add a 32nd team, both Quebec City and Seattle would be interested. Then, they could possibly net one billion dollars from that process alone.

It is worth asking if this is the right time for the league to make this move. In November 2015, Forbes released their 17th annual NHL evaluations and there are only 11 teams worth more than $500 million. While the $500 million insertion fee does not necessarily mean the team is worth $500 million, it is still something to consider.

Teams are losing money every season. According to the same Forbes report, the Carolina Hurricanes, Arizona Coyotes and Florida Panthers are all losing money in the form of at least $4.5 million a year. The Coyotes were in such a bad financial state that the league had to buy the franchise back in 2009, after former owner Jerry Moyes put the team into bankruptcy. The league owned the team for four years until they finally sold the team for $170 million in 2013.

 

Before the NHL announced the future move to Las Vegas, there were rumors flying around about the Carolina Hurricanes being moved to a new city. Should the league have moved them or another struggling team to a market like Las Vegas, who already has sold approximately 14,000 season tickets for the 2017-2018 season, according to multiple reports?

Even with all of that being said, the road does not get any easier for the new Las Vegas franchise from a financial standpoint.

Look at an established NHL team like the Pittsburgh Penguins. According to the Hockey News, the Penguins, a team that was worth $560 million prior to winning the Stanley Cup this past season, were making only about $25 million in profits each season. If a team that has employed three of the best players in the NHL for the past over ten seasons (Sidney Crosby, Evgeni Malkin and Kris Letang) is only profiting $20 million a year, then a team that will probably be shaky at best out of the gate like Las Vegas will have to wait quite a long time to make that $500 million back.

The fact is that while all the above information is true, so much could happen within the next year and the landscape of the league could change. Look at the Florida Panthers, for instance. The team has definitely benefitted from Foley and Friends’ money, as they have gone out and signed some players to big contracts this offseason including their former first overall pick Aaron Ekblad to an eight-year, $60 million dollar contract. They also paid fellow free agent defensemen Keith Yandle and Jason Demers a combined total of nearly $67 million over the next seven and five years respectively.

It is certain that there is plenty of change going on around the NHL, but none of that even compares to the change that will take place in Vegas. The Entertainment Capital of the World is about to get just a bit more entertaining.

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John Williams

John is a Sophomore Digitial Communications and Social Media Major at Cabrini College. He is an aspiring sports writer, who also is an editor for BlueLineStation.com. You can catch John's radio show "The Whole 10 Yards" on Fridays from 12-2 on Cavalier Radio, 89.1 WYBF-FM, or online at WYBF.com

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