Pro sports market in Winnipeg is in good shape, but margins for success are tight; franchise management counts more than in other cities
WINNIPEG, May 29, 2014 /CNW/ - The conditions for financial and competitive success of the two major professional sports franchises in the Winnipeg market are more favourable than they have been in at least two decades. However, the Winnipeg sports market remains smaller than many other Canadian cities—reducing the margin for success among the franchises. Skilled management is therefore more crucial than in other markets to the long-term success of both the Winnipeg Jets of the National Hockey League (NHL) and the Winnipeg Blue Bombers of the Canadian Football League (CFL).
The Conference Board of Canada's newly published book, Power Play: The Business Economics of Pro Sports, assesses how the Winnipeg market for professional sports has improved markedly since the original Jets moved to Phoenix in the mid-1990s, and what challenges may lay ahead for the long-term future of the two franchises.
"Since the 1990s, Winnipeg has grown in population and wealth. The Canadian dollar is much stronger today, the operating environment in the two leagues have improved substantially, and both the Blue Bombers and the Jets have impressive new playing facilities," said Glen Hodgson, Senior Vice-President and Chief Economist.
"However, Winnipeg remains a comparatively small pro sports market and the margin for success is going to be slimmer than in larger cities. That makes player evaluation and business management even more crucial to the franchises than they would be elsewhere."
The Conference Board's analysis assesses conditions for successful franchises on three levels:
- market pillars: market size, income, corporate presence, and economic conditions (notably the exchange rate)
- league competitive conditions: including caps on player salaries, revenue sharing, and access to player talent
- franchise specific factors: ownership and management strength, playing facilities, and fan support
The market conditions in Winnipeg are, by and large, sufficient for the Jets and Blue Bombers. Winnipeg's population had risen to 780,000 in 2011-12 when the NHL returned, from 650,000 in 1996 when the original Jets franchise left.
Winnipeg's disposable income per capita is eighth in Canada among major pro sports markets, higher than Montreal. In 2012, Winnipeg was home to 26 of Canada's 800 largest corporations, more than Edmonton, Ottawa or Quebec City. While the loonie has slipped into the low 90-cent-range in recent months, it is much stronger than it was a decade ago, and it is still high enough to avoid weighing down Canadian franchises that pay players in U.S. dollars.
Nevertheless, market size remains a potential longer-term issue for both franchises. Winnipeg is substantially smaller than comparable Canadian cities with both CFL and NHL teams—Calgary, Edmonton, and Ottawa. The Conference Board's analysis suggests that a Canadian NHL market should have at least 800,000 residents, and the minimum for a CFL franchise is about 250,000. Thus the desired population level for the market could be as high as one million, and it may take many decades for Winnipeg to attain that population level.
Of course, financial success in a small market is made more likely by winning on the field and on the ice. Winnipeg fans have shown exceptional passion for both NHL and CFL franchises—the Jets sold out almost instantly for their first three seasons, and the Blue Bombers have a devoted supporter base. To maintain that enthusiasm, both franchises will have to manage their player talent and business operations well to make competitive success more likely.
The competitive conditions within the respective leagues are favourable to the Jets and the Blue Bombers. In particular, both the NHL and the CFL have player salary caps, although both have been the subject of tough bargaining between the leagues and their players. The NHL went through a work stoppage in 2012-13 and the CFL is currently in the midst of negotiations with its players—which could affect the start of the 2014 season.
Released in March, Power Play: The Business Economics of Pro Sports is authored by economists (and passionate sports fans) Glen Hodgson and Mario Lefebvre. It examines the economic conditions of the communities that host professional sports franchises, looks at the operating conditions for pro sports leagues, discusses franchise ownership and management, and addresses the politically hot topic of who should pay for new pro sports facilities. It is available in printed and e-book formats.
Join a live webinar by Glen Hodgson and Mario Lefebvre June 18, 2014 at 12:30 p.m. EDT.
For more information, visit http://www.conferenceboard.ca/powerplay.
SOURCE: Conference Board of Canada
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