Calgary Flames

Even if the Calgary Flames lose Matthew Tkachuk, don’t expect them to rebuild

This truly is the darkest timeline. After losing Johnny Gaudreau to the Columbus Blue Jackets, the Calgary Flames look to be losing their other 100-point scorer in Matthew Tkachuk. The team has elected for arbitration, which removes the possibility of them losing him to an offer sheet, but puts a clock on the negotiation. This forces Tkachuk to either take a long-term deal with the team or a one-year arbitrated decision in the next two weeks. At an objective level, taking Tkachuk to arbitration is not a good sign for the Flames.

The more this gets discussed, the more likely it seems that Tkachuk will be traded this summer. Without any certainty that he will remain with the team when he hits unrestricted free agency and with the lingering pain caused by Gaudreau’s departure, it feels almost certain that the Flames will move him to another team in exchange for assets as opposed to letting him walk for free.

This is obviously awful for the Flames who go from having two 100-point scorers to losing two of their top players in the same year. However don’t expect the Flames to try and tank. Here’s why.

The gloomy financial picture

As the Wu-Tang Clan wrote in their 1994 song C.R.E.A.M, “Cash rules everything around me,” the Flames simply cannot afford a rebuild right now. The pandemic caused an enormous financial burden on the league, forcing teams to play in empty arenas while continuing to pay operating costs such as salaries, travel, and more. NHL teams make over 35% of their revenue from ticket sales each year. This is the highest proportion of all the major sports leagues in North America, and is a huge factor for teams.

This discussion has mostly been had around hockey escrow, the revenue sharing between teams and players, but has not been talked about enough around how this impacts teams’ bottom lines. Hockey teams in Canada faced this even more than their counterparts down south, facing longer lockdowns and games without fans even this past season.

For the Flames specifically, gate revenue is estimated at 48 million dollars a season, or just over a million dollars per home game. This doesn’t account for parking revenue on the Stampede grounds, concessions, jersey sales, as well as advertising revenue brought in by businesses like Telus, Scotiabank, and others. These businesses pay a premium for the captive audience of between 15,000 and 19,289 fans on any given night to promote their products and services.

Now the Flames definitely made a good chunk of the money they lost this past year back from the two playoff series they had. Playoff game revenue is substantially higher than regular season games, with Saddledome tickets much more expensive and the barn full each game, not to mention a more engaged fanbase is more likely to buy merch than a fanbase that casually pays attention. This all factors into the budgeting for next season.

However, it seems unlikely that this season made up for the losses the team has had to cover since the 2019–20 season when this all began. Between the early part of the pandemic when teams played in the bubble in Edmonton to playing in the North Division with no fans for 56 games, this obviously had a huge impact financially on the team.

This season, the Flames finished 25th in the league in attendance, with an average of 14,284 tickets sold per game over the 41 regular season home games according to ESPN. This is obviously lower because of the games without any fans in the stands, but the average is very telling to the team’s ability to be financially viable.

Tanking is expensive

The Flames are a mid-revenue team—sitting 18th in franchise value according to Forbes with a value of $680 million. However in terms of actual operating revenue, the Flames barely broke even, reporting a very modest $400,000 gain in the 2019–20 season according to Christina Gough at Statista.

While the 2019–20 season was a weird one because of the pandemic, it’s pretty clear that the Flames are a very steady mid-revenue team across the board. They are not the Toronto Maple Leafs or Montreal Canadiens by any stretch of the imagination, but are also well far away from being the Arizona Coyotes or Ottawa Senators.

The issue is that if the Flames go into tank-mode, their revenue is guaranteed to drop. They will be shedding some salary, but even if they don’t take on any bad contracts for additional picks and barely hit the cap floor, the team will be spending $61 million in salaries at least as compared to the ceiling of $82 million. This is substantial in terms of actual dollars, as 21 million dollars is an enormous amount of money, but only a savings of about 25%.

Then factor that a tanking team will be a harder draw for fans, meaning the attendance numbers will be down substantially. This includes average fans, but also corporate sponsorships for the very nice seats and the boxes at the Saddledome as corporations may not be as willing to sign on for a team that is struggling, likely leading to the organization charging less for boxes than in the past. Another major revenue loss.

Fewer fans in the stands means lower ancillary revenue from parking, concessions, and other sources. Without stars to get fans excited about, jersey and other merchandise sales will drop as well, as the sales on Jacob Markstrom jerseys are naturally higher than those for Trevor Lewis or Brett Ritchie, with due respect to both players.

This also isn’t a one year play. If the Flames are planning to rebuild, the team is likely committing to this for three to four seasons at least. The Flames went through a five year period between 2009–10 and 2013–14 in which they missed the playoffs each and every season. They then missed the playoffs in two of the next four seasons, and lost to the Anaheim Ducks in both of the years they made the playoffs.

Given their track record of not making the playoffs very much over the better part of the past decade coupled with the enormous losses the team has sustained not to mention any other capital costs the team may have to incur, including any portion of paying for a new arena, it seems highly unlikely that the Flames’ ownership group would be inclined to go for a rebuild.

The future of the Flames remains uncertain

There will definitely be those around the team who point to the number of high picks on both teams in the Stanley Cup Finals this year and how successful teams go through rebuilds, and those people would absolutely be correct in those statements, but at the end of the day, hockey is a business first and if ownership is looking at the annual statements for the past few seasons and couples that with the winning record of this team through the most recent rebuild, it seems unlikely they will go for it.

Photo by Brett Holmes/Icon Sportswire

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