Canadian markets ripe for new professional sports franchises

www.conferenceboard.ca

OTTAWA, Aug. 23, 2012 /CNW/ - Economic conditions are right for Canada's existing professional sports clubs to prosper and for new Canadian-based franchises to succeed over the next 25 years, according to The Conference Board of Canada's concluding publication of its Playing in the Big Leagues series.

The publication, What Will the Canadian Pro Sports Scene Look Like in 2035?, assesses the business economics of pro sports using the Conference Board's long-term national and provincial economic forecasts, as well as the analytical framework developed throughout this series. Based on these criteria, the Canadian professional sports scene in 2035 could include:

• Up to three more National Hockey League (NHL) teams, raising the number to 10;
• A revived Major League Baseball (MLB) team in Montreal;
• A second chance for a National Basketball Association (NBA) franchise in Vancouver;
• Three more Major League Soccer (MLS) clubs in Canada, making six in all; and
• Up to seven viable new markets for franchises in the Canadian Football League (CFL).

"The future is bright for professional team sports in Canada. The Canadian population is expected to continue to grow, and the dollar should remain strong for years to come. Thus, there is no reason to expect that existing Canadian franchises will move south of the border over the next 25 years. And there is reason to believe that the number of Canadian-based franchises will increase in the future," said Mario Lefebvre, Director, Centre for Municipal Studies, and co-author of the series.

The analysis in this series made extensive use of the four market pillars for professional sports franchise success. First introduced in the second briefing of the series, Defining the Market Conditions for Success, the four pillars are:

• Market size;
• Income levels;
• Corporate presence; and
• A level playing field

This briefing looks at how each of the four pillars is likely to evolve in potential Canadian markets over the next quarter-century.

By 2035, Canada's current seven NHL teams could be joined by Hamilton, Québec City and a second team in the Greater Toronto Area (GTA). Both Hamilton and Quebec City will have populations of more than 900,000, and the population in the Toronto Census Metropolitan Area (CMA) alone will grow to 9 million people. The Conference Board considers incomes in all three markets to be adequate to support teams. Quebec City and Hamilton have relatively few corporate head offices, but Quebec City could obtain support from companies elsewhere in the province of Québec, and Hamilton is next door to Toronto-based corporations.

However, franchises in each market would face significant financial outlays. Start-up costs include the construction of a new arena in Québec City and major arena renovations in Hamilton. A new building would likely be needed elsewhere in the GTA for the region to play host to a second franchise. Furthermore, a Hamilton team and a second Toronto-area franchise could expect to pay territorial fees to existing teams in the region.

Neither Montréal nor Vancouver can expect second NHL teams in the next 25 years, but other North American leagues - namely baseball and basketball - could take a second look at these markets.

Montréal already possesses the market conditions required to support a Major League Baseball franchise. Of course, a return of baseball in Montréal would require both deep-pocketed ownership and a new stadium. But the decisive factor in the outlook for Montreal is baseball's financial system. For a revived Montréal franchise to succeed, Major League Baseball needs to level the financial playing field so that teams in smaller-sized markets have a realistic chance to compete for championships by acquiring and retaining top players.

With a population forecast to rise to 3.5 million in 2035, the Vancouver market will have the size, wealth and corporate presence to sustain existing franchises in the NHL, CFL, and MLS. Moreover, Vancouver would have in place the market conditions for a professional basketball team to return to the city. When the previous NBA franchise left in 2001, the Vancouver CMA had a population of barely 2 million at the time and the Canadian dollar was sinking. Both those factors have changed. Assuming fan support can be cultivated, Vancouver could get a second chance at pro basketball.

An earlier briefing in this series identified six potential new markets for the CFL: Ottawa-Gatineau (where the league is already scheduled to return), London, Kitchener-Waterloo-Cambridge, Moncton, Halifax, and Québec City. By 2035, Saskatoon joins the list. Saskatchewan will post the fastest growth rate among Canada's provinces over the next 25 years and Saskatoon's population will grow from 265,000 (2010) to 430,000 in 2035. As a result, Saskatchewan will eventually have the market conditions in place to support two CFL franchises in the province.

One additional scenario would shake up Canada's pro sports market - a full-time National Football League franchise in Toronto. As North America's most popular league, an NFL team calling Toronto home would obviously affect the CFL; it would also reshape the pro sports atmosphere for the leagues and franchises currently in the market. Previous efforts to attract a permanent NFL team to Toronto have been unsuccessful; but, over a 25 year window, the possibility of a future NFL franchise cannot be discounted.

Turning to one other growing sport, Canada is now home to three Major League Soccer teams: Toronto FC, Vancouver Whitecaps, and Montréal Impact. A factor in the rise of soccer's popularity is population diversity, as immigrants to Canada are coming from countries where soccer is the traditional favourite sport. Calgary is expected to exceed 2 million people in 2035, while Edmonton and Ottawa are forecast to boast populations of 1.7 million apiece. Furthermore, all three cities can expect their populations to become more diverse. As result, these three markets should be able to support NHL, CFL, and MLS franchises.

This is the final publication in the Playing in the Big Leagues series. Since 2011, the series, has examined what it takes for a professional sports team to be successful in Canada, focusing on market economic conditions, league-wide competitive conditions, franchise-level factors, and the role of public funds in pro sports facilities.

SOURCE: CONFERENCE BOARD OF CANADA