Addressing the Small Market Problem for Canadian NHL Franchises: On-site Gaming as a New Revenue Stream

This paper identifies the unique problems faced by Canadian small market (CSM) franchises in the National Hockey League (NHL). While featuring characteristics similar to other major leagues in North America, CSM franchises are also burdened by currency and taxation issues that favor US-based teams, as well as a reliance on gate revenues, which have exacerbated the problem for NHL teams. Three general alternatives devised to address the small market problem are introduced in this paper: (1) allow other stakeholders, such as levels of government, to subsidize weaker teams; (2) create revenue sharing agreements among teams to distribute money to weaker franchises; and (3) create artificial restraints on player salaries in order to reduce the ability of large market teams to stockpile talent (Cocco & Jones, 1997). These are reviewed in the context of the NHL and include the Mills Report and Manley proposals, the Alberta Players Tax, lotteries, revenue sharing, and salary caps. A proposal is put forward to explore the use of on-site gaming in arenas in order to provide additional revenues for Canadian-based NHL teams. The benefits of such a proposal are then reviewed, which include: (1) acting as a less regressive tax than other government subsidies by targeting game attendees; (2) having fans who already support the team provide the subsidization, eliminating those who are not followers of hockey from bearing the financial burden; and (3) enhancing the viewing experience of fans. In doing so, it is hoped that an alternative way of assisting small market Canadian teams can be achieved that does not require substantial legal or labor negotiations, while not altering the structural characteristics of the league as a whole.