The National Hockey League is often overshadowed by other sports leagues in the United States as the least valuable of the four major sports. The other sports boast national television deals and continue to draw huge numbers. In Canada, the NHL remains the prime-time sport of choice and the national pastime. Time to pay attention to NHL investing opportunities as team valuations and television ratings heat up in the United States.
Invest in Television Deals
The NHL is coming off of record television numbers. The 2013 Stanley Cup Final featured two Original Six teams, the Boston Bruins and Chicago Blackhawks, and saw over eight million viewers tune in. The game saw over 10 million viewers during its peak finals period. The 2013 Stanley Cup Finals, which went six games in a best of seven series, averaged 5.76 million viewers per game. The 2014 season is picking up where last year left off, as October's opener between the Blackhawks and Washington Capitals was the most watched season opener since the NHL began tracking.
In the United States, NBC, a subsidiary of Comcast (NASDAQ:CMCSA), owns the television rights to the NHL. During the current 2013-2014 season, NBC plans on airing 103 games and every playoff game across its multiple networks. NBC will also likely see an increase in television ratings from NHL with a record six outdoor games scheduled this season.
Through three quarters, Comcast has seen total revenue fall 3.4%. Cable revenue is up 5.5%, while broadcast revenue is down over 20% due to tough comparisons to the 2012 Summer Olympics. Back in fiscal 2012, total revenue increased 12.7%. The fourth quarter could get a slight boost from the strong NHL season.
Another strong player in the United States is Madison Square Garden (NYSE:MSG), whose MSG Network airs games of several NHL teams. The company owns the New York Rangers and has aired its games since 1969. The company pays $35 million annually for the television rights to Rangers games. Along with the Rangers, who the company will control television contracts for, Madison Square Garden also has long term deals with the New York Islanders and New Jersey Devils. The Islanders and Rangers will see their games air on MSG Network through the 2031 and 2025 seasons respectively.
MSG Media, which includes the MSG Network, has seen strong results. In the last fiscal year, the segment saw revenue increase 10% to $677.7 million. Operating income also increased 44% to $328.5 million. The business segment makes up the largest percentage of revenue and operating income for the company.
This week, the National Hockey League saw the richest media rights deal in league history. The league signed a new 12-year deal with Sportsnet, a media asset of Rogers Communications (NYSE:RCI), for the exclusive rights across all platforms in Canada. Sportsnet beat out TSN with a huge $4.9 billion offer which was also the largest sports media deal signed in the country of Canada. The new deal will pay out a range of $284 million to $474 million annually through the 2025-2026 season. This annual payment will be a huge increase over the current $180 million deal and the deal for the United States rights, which averages $190 million a season.
The Toronto Maple Leafs, who were recently named the most valuable team in the NHL, are the kings of television royalties . The team has annual television rights of $41 million, which translates to $700,000 per game. The games air on Sportsnet, TSN, and Leafs TV. With the NHL rights and the regional rights to the most popular team, Rogers clearly has a lot to benefit from strong NHL viewership.
Buy Stock in NHL Teams
Forbes magazine recently released its annual NHL team valuations. The average enterprise value of teams jumped 46% to $413 million. Four of the top ten highest valued teams are available to investors via public stock. Surprisingly enough three of them were mentioned above for their rich media assets as well.
The Toronto Maple Leafs topped the list with a valuation of $1.15 billion. The company saw annual revenue of $142 million and operating income of $48.7 million according to the financial magazine. Rogers Communications owns 37.5% of the Maple Leafs as well as stakes in other sports teams with its partial ownership stake in Maple Leaf Sports & Entertainment. Bell Canada is a unique play on the NHL as it is the only company that owns stakes in two NHL teams. In fact, the company owns stakes in two Canadian rivals. Through subsidiaries, Bell Canada owns 28% of the Maple Leafs and 18% of the Montreal Canadiens.
Coming in second place is the New York Rangers, who are owned by Madison Square Garden. The Rangers had a valuation of $775 million. The team saw annual revenue of $127 million and operating income of $29.6 million.
The Philadelphia Flyers, who are owned by Comcast, ranked seventh on the list. The team is valued at $500 million. The Flyers are 63% owned by Comcast through the Comcast Spectator subsidiary, which also owns and operates the Wells Fargo Center where the team and the NBA's Philadelphia 76ers play.
There are no pure play stocks that allow investing in just a NHL team. Each investment comes with other assets like additional sports teams, media assets, and telecommunication assets. The companies who own NHL teams saw a hit to their revenues and bottom lines as a lockout cut the 2012-2013 season to 48 games from a normal 82.
Madison Square Garden brings a NHL team, NBA team (New York Knicks), an iconic stadium, a huge NHL regional channel, and other media assets. The stock is up over 115% in the last two years, so investors should be cautious about jumping in. A strong season by the Rangers and Knicks could boost team valuations and television ratings once again.
Comcast is a small play on the NHL as the company's other assets are much larger. Comcast Spectator and the NBC Sports assets have small impacts on annual performance. Rogers Communications has the best representation with a strong NHL season and it is also the largest mobile and television media company in the country of Canada. Rogers represents a great play on the NHL and Canada.
Chris Katje has no position in any stocks mentioned. The Motley Fool recommends Rogers Communications (USA). The Motley Fool owns shares of Madison Square Garden. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.