The Canadian dollar closed on Friday at 78 cents against its American counterpart, and in a league where one third of all revenue is generated in Canadian funds, that has to make Gary Bettman happy.
Most people in Canada who are on variable mortgages are likely scrambling to lock in their interest rate before the Bank of Canada meets on Wednesday. (Which reminds me…) But what might not be great news for anyone wanting to borrow money in Canada these days is actually pretty good news for the NHL.
You might not have noticed that the Canadian dollar closed on Friday at 78 cents against its American counterpart. That’s by no means where it was five years ago when it was trading at par or above par against the U.S. dollar, nor is it as dire as January, 2002, when it dipped to 62 cents. But that close of 78 cents on Friday represents the highest value it has had in the calendar year of 2017.
And if it can nudge its way up to 80 cents, something that could very well happen, particularly if the Bank of Canada increases interest rates this week, that would be a very, very good thing for the NHL.
“It will make a significant difference,” said one NHL executive. “It wouldn’t have any effect on this season, but it could make a difference next year.”
With the salary cap already set at $75 million, teams will have no more cap room this season despite what the Canadian dollar does. But with one third of the league’s revenues coming in Canadian dollars, the difference between a 73-cent dollar (which is where it was trading at its 2017 nadir in May) and an 80-cent dollar is huge for the league. Not only do Canadian NHL teams take in revenues in Canadian dollars and pay their players in U.S. dollars, they also provide roughly 33 percent of the league’s overall revenues.
To break it down further, consider that NHL revenues, which have flattened over the past couple of seasons, are about $4 billion (U.S.). One third of that is approximately $1.3 billion. If the Canadian dollar were to gain seven cents, that would bump that revenue figure up by more than $90 million U.S. dollars. Those revenues are split 50-50 between the players and the league, which would put $45 million more into the players’ share, which would account for an increase of about $1.45 million per team.
Let’s take a look at the Canadian television deal Rogers has with the NHL, for example. Each year, Rogers pays the NHL $300 million in Canadian funds. With a 73-cent dollar, that amount is reduced to $219 million, but at an 80-cent dollar it’s more like $240 million. The Edmonton Oilers, who were once a drag on overall league revenues, are now near the top, right there with the Toronto Maple Leafs according to a league executive, and the more they take in, the more the effect the Canadian dollar has on its share of overall league revenues.
To realize the impact of the Canadian dollar one only has to look at times in the past when it hasn’t been doing well. Back when the dollar was trading in the mid- to low 60s, there was very real concern over the future of the Oilers, Flames and Senators, prompting the league to enact the Canadian Assistance Plan and, in a moment of folly, the federal government to consider giving financial help to Canada’s NHL teams. The times that the cap has risen the most - from $50.3 million in 2007-08 to $56.7 million in ’08-09, from $59.4 million in 2010-11 to $64.3 million in ’11-12 and from $64.3 million in 2013-14 to $69 million in ’14-15 – have all coincided with a robust Canadian dollar.
In December of 2014, NHL commissioner Gary Bettman projected the cap would be somewhere in the $73 million range for 2015-16, but was forced to adjust those projections as the Canadian dollar lost value, and it finally settled at $71.4 million but, like this summer, would have stayed stagnant had the NHL Players’ Association not triggered its escalator clause.
Much of this also has to do with how the league and teams hedge against the Canadian dollars fluctuation, but there’s absolutely no doubt that a stronger Canadian dollar is very good news for the entire NHL.