For Toronto's Pro Sports Franchises, Winning isn't Everything

Teams are flourishing financially without competitive success

OTTAWA, March 31, 2014 /CNW/ - The Toronto market for professional sports is so good that the teams don't necessarily have to be, The Conference Board of Canada suggests in its new book on the business economics of pro sports in Canada.

"Toronto sports fans have a history of tolerating competitive mediocrity to a degree that fans in other Canadian cities will not," said Glen Hodgson, Senior Vice-President and Chief Economist, and co-author of Power Play: The Business Economics of Pro Sports.

"Why do sports fans in the Toronto region seem so willing to tolerate mediocrity? Maybe it's just a matter of simple economics. Combine a limited supply of tickets for most pro sports events with a large population, considerable individual and corporate purchasing power and strong media interest, and you get sustaining fan support."

HIGHLIGHTS

• Profitable corporate-owned franchises may simply not have the same "burning platform" to win as teams in other markets.
  
• The two Toronto pro sports franchises that have achieved the best competitive success in recent years are owned by individuals.
  
• Management capacity is the most significant factor in explaining the recent performance of Toronto-based franchises.
  
  

The market fundamentals for pro sports in the greater Toronto region - population, disposable income, corporate presence, and the economic environment in which teams play - allow franchises to be financially successful without being winners, unlike teams in many smaller Canadian markets, where winning is often a prerequisite for financial success.

The authors suggest that corporate-owned franchises, which can generate significant profits in the large Toronto market, may simply not have the same "burning platform" to win as teams in other markets where financial success depends more on the team's competitive results. The National Hockey League's Toronto Maple Leafs, the National Basketball Association's Toronto Raptors, the Toronto Blue Jays of Major League Baseball and Toronto FC of Major League Soccer are all owned by major corporations.

The two Toronto pro sports franchises that have achieved the best competitive success in recent years (albeit in smaller leagues) - the Argonauts of the Canadian Football League and the Rock of the National Lacrosse League - have been, and continue to be, owned by individuals.

The lesson that can be drawn is that management capacity is the most significant factor in explaining why most Toronto-based franchises achieve financial success without necessarily having winners on the ice, field, or court.

Toronto franchises have made changes in ownership and team management recently. Perhaps the most important change is the hiring of Tim Leiweke as the president of Maple Leaf Sports and Entertainment, owners of the Leafs, Raptors, and TFC. Leiweke has been busy placing his stamp on the future direction of the three MLSE-owned franchises, and the early competitive results for the Raptors and TFC appear to be positive.

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. The book looks at why some pro sports franchises succeed, financially and competitively, while others fail, and concludes with a "fearless forecast" of what the Canadian pro sports scene could look like in 2035.

Power Play: The Business Economics of Pro Sports is available in printed and e-book formats. For more information, visit http://www.conferenceboard.ca/powerplay.

SOURCE: Conference Board of Canada

Brent Dowdall, Media Relations, Tel.: [phone] ext. 448
E-mail: [email protected]
The Conference Board of Canada

Link to publication: http://www.conferenceboard.ca/powerplay.aspx