Would the Maple Leafs be even more valuable if they were actually good?

Ken Campbell
Leaf fan

When Forbes magazine came out with its 50 most valuable sports franchises Wednesday, it had just one NHL team on it. You know the one. It plays in The Center of the Hockey Universe™.

Yes, once again the Toronto Maple Leafs are ranked as the most valuable franchise in the NHL at $1.15 billion. That put the Leafs No. 26 on the list with a worth less than half of the No. 1 team, Real Madrid, but ahead of such iconic sports franchises as the Pittsburgh Steelers, Boston Celtics and Chelsea.

It’s important to note that the franchise value was based on solely on the value of the hockey team and its share of non-hockey revenue generated at the Air Canada Centre. Two years ago, 80 percent of the entire Maple Leaf Sports and Entertainment empire – which includes the Toronto Raptors, Toronto FC and Marlies – was sold for $1.32 billion, which would have pegged its overall value at about $1.65 billion at the time.

The worth of the Leafs will undoubtedly add fuel to the critics who believe the franchise has been so dismal for the past decades because there is no financial incentive for them to win. The Leafs, those critics contend, have made and will continue to make gobs of money simply by throwing the doors of the ACC open a couple of times a week during hockey season and placing an inferior product on the ice.

This, they contend, keeps the Maple Leafs from spending the money they need to be competitive in the NHL and that’s why they underperform. If the building is full of people wearing $200 replica sweaters and buying $15 beers, what incentive could there possibly be to get better?

It’s not a point that is without merit. A good friend of mine has two pairs of season tickets for the Maple Leafs and recently expressed his frustration over the fact that one pair increased in price by seven percent and the other was hiked by 16 percent. This for a team that has made it to the playoffs once in the past nine seasons.

But it also ignores the fact that these are not Harold Ballard’s Maple Leafs and have not been for a long, long time. The Leafs have not been averse to throwing money at players for the past two decades. They were among the league’s biggest spenders before the salary cap and have been near or at the cap ever since. (According to capgeek.com, the Leafs are about $11 million below the cap right now with pending arbitration hearings/settlements with Cody Franson and James Reimer and contract to work out with defenseman Jake Gardiner.) It also ignores that the Leafs have never skimped on the management side. They actually have more layers of highly paid managers than most teams in the NHL and have never spared expense to meet every need their players have.

It’s actually a matter of spending the money properly. From this vantage point, your trusty correspondent does not buy the notion that the Leafs don’t win because there is so little for them to gain financially from putting a winning team on the ice. The Leafs and their owners actually want to win in the worst way and price is no object in trying to achieve that objective. It’s a matter of spending the money in the right places.

Which brings us back to our original question. Would the Leafs be more valuable if they were winners? Well, yes, but it would probably be marginal. Here’s why. Franchise values are based on something business people call EBITDA, which is an abbreviation for “earnings before interest, taxes, depreciation and amortization.”

The Leafs EBITDA is about $100 million per year and their value is worth roughly 10 times that. The one area where the Leafs would be able to improve their bottom line would be in having more playoff dates, but even then, while it would improve their revenues and profits, it might not bump their value up considerably.

The Leafs typically make about $1 million in profits per regular season game, so let’s say with the higher ticket prices that come in the post season, that profit goes up to $1.5 million. The Chicago Blackhawks have been the most successful team in the post season over the past five years, averaging eight home dates per season in that time. If the Leafs had been as successful as the most successful team in the league, based on that they would have an average of $12 million more in profits per year. Multiply that by 10 and you get $120 million, which would hike the value from $1.15 billion to $1.27 billion.

So even if the Maple Leafs were true perennial Stanley Cup contenders, they’ve already pretty much maxed out on ticket sales, sponsorship and merchandising, so really the Leafs have no real financial incentive to be chasing the Stanley Cup. But that’s not why they’ve been so bad. They’ve gone as long as they have being as bad as they have because they’ve been incompetent, not cheap.