The latest round of NHL expansion appears to be done. The NHL joined the NFL as the only two North American major sports leagues with 32 teams with the addition of the Vegas Golden Knights in 2017 and the Seattle Kraken in 2021. The latest bet for expansion was Salt Lake City, but the “Cleveland Browns”-esque relocation of the Arizona Coyotes to become the Utah Hockey Club has taken care of that.
Predicting The Next Potential NHL Expansion Fee
Someday the NHL will expand again. Before we start debating on the potential candidates, and if Quebec will ever get a team, there might be a simpler question to ask. What will the next NHL expansion fee be? The Kraken paid $650 million just a few years after Vegas paid $500 million. Prior to that the last two expansion teams, the Columbus Blue Jackets and Minnesota Wild, both paid $80 million in 2000. Expansion fees have come a long way since the $2 million the six teams of the 1967 expansion paid.
Last month the NBA said it would begin preliminary steps towards expansion. The NBA is almost certain to expand before the NHL, so the NHL might wait and see on how much the NBA charges. Back in 2021 NBA commissioner Adam Silver said a rumored expansion fee price of $2.5 billion might be too low and that the league might charge more. This was prior to the league signing a new $76 billion rights deal, which in turns makes an NBA team more valuable, so that price might even go up.
To put that in perspective only two existing NHL franchises, the Toronto Maple Leafs and New York Rangers, are currently valued at more than $2.5 billion. When the Ottawa Senators were sold to new owner Michael Andlauer for $990 million we wondered when an NHL team would sell for over the $1 billion mark. We got our answer a few months later when the Coyotes were sold to the league for $1 billion, who then flipped them to current owners Smith Entertainment Group for $1.2 billion. Now not only are we seeing hockey teams sell for over $1 billion, but we might see NHL expansion fees eclipse that as well.
Speaking of Utah, they present a rather interesting case study. Remember the NHL is considering Utah an “expansion” franchise and not a relocation. Former Coyotes owner Alex Meruelo was given first opportunity to an expansion team to replace the Coyotes if he could build an arena, and that potential team would keep the records and be as if the Coyotes had never left. After his latest arena building venture failed, a major contingent on a replacement expansion franchise, Meruelo gave the rights back to the NHL.
If Utah is an “expansion franchise”, as the NHL put it, was the $1.2 billion Smith Entertainment Group paid technically an expansion fee? The NHL technically explains it as “Smith Entertainment Group bought the assets of the Coyotes including the player contracts”. Isn’t that just explaining a relocated franchise with extra legal jargon?
When owners buy an expansion franchise they are quite literally buying the team from the group up. Even if the NHL wants to call Utah an “expansion” team, it’s as “pre-assembled” as any expansion team can possibly get. The league can easily spin that as the premium that Smith Entertainment Group paid for bypassing the whole expansion draft and staffing a team process. That could be a potential argument to make a future expansion fee for future owners lower than the selling price Smith Entertainment Group paid.
Here’s another interesting little tidbit buried in that 2021 story about the NBA potentially charging $2.5 billion. After explaining the then recent sale of the Brooklyn Nets, Sam Quinn of CBS Sports told readers “expansion fees are typically pricier than typical team sales”. The reasoning is that the more teams are in the league the value of the teams gets diluted. We can expect at least a few NHL teams will be sold before expansion, as another expansion is seemingly years, perhaps a decade or more, away. If the NHL enters into a new media rights deal by then could also affect the value. When the NHL is ready to expand that fee will most likely be higher than those selling prices.