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Is the NHL's bet on Las Vegas a wise one?

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The AP posted that the NHL is preparing to announce expansion to Las Vegas. It's a page out of the NBA's playbook, but there's no guarantee it's a great fit.

That's not Las Vegas's fault. They wanted it more, and they earned it. But there are a few realities that the NHL and NHL fans need to observe.

Ethan Miller/Getty Images

Firstly, congratulations to Las Vegas and the citizens of Las Vegas who both showed they were serious about getting an NHL team. This is in no way a shot at them, their efforts, or their city. Las Vegas is a jewel of a city, and it's growing. Let's not lose sight of that. And the NHL believed in Bill Foley, the T Mobile Arena, and the market. And even more importantly, Las Vegas showed they wanted it. Arena? Built, and it's gorgeous. Support? Plenty of initial support from the area. So both congrats and thanks to them for buying in to the sport of hockey.

So the NHL is the first major professional sporting league to set up shop in Las Vegas. Let's embrace the realities of what this means and what to expect for the immediate future of this market, and try to understand why the NHL chose Vegas.

The NFL

When the expansion chatter first started, the NHL was poised to beat the other leagues to Las Vegas. And in all likelihood, they still will. It takes a lot of time to build a stadium, and the NBA isn't planning expansion just yet.

But as early as last summer, the Oakland Raiders began checking around for a new landing spot. They're likely the number two team in the Bay Area for the foreseeable future, and their stadium is a giant leaky concrete form with bad plumbing. Mark Davis and the Raiders' brass were talking to cities like San Antonio for a reasonable stadium solution. And with the national television contract that the NFL reaps, they could play games on an aircraft carrier and still make money.

The Raiders and Chargers both explored moving to Los Angeles and sharing a stadium, but the Rams had the land and had the most to gain by moving. The Rams moved back to California, claiming the second-largest TV market for their own. Another potential city for the Raiders just became claimed. A move to LA could still happen, but it's not as lucrative as before.

Enter: Las Vegas.

ESPN and other outlets reported that the Raiders are exploring stadium talks with Las Vegas, and willing to spend a pretty penny for their share. Let's not forget this: Las Vegas has the hotels, the convention space, and the temperature to host a Super Bowl. There is NO single event that stands up to the Super Bowl. The NFL is the easiest sport in this country to support, follow, and observe. Thankfully, their schedules don't frequently clash directly. But there is another sport that hockey fans should be concerned about.

The real danger of the NBA

If the NFL moves in, the NBA would be more open to coming in to Vegas. And folks, there are two clear and present dangers to the NHL in this country (aside from concussions and related lawsuits): the NBA and the MLS. Vegas has hosted the NBA All-Star Weekend before, and they don't even have a team yet. And thanks to UNLV having a solvent program for a while, they're strong basketball market.

The NBA has historically been the bold league that moves into new markets. The NBA was bold enough to venture into Orlando, Portland, Oklahoma City, Salt Lake City, and Charlotte. The ABA teams that survived the merger were also in virgin markets (Indianapolis, San Antonio), and the NBA wasn't afraid to go back to a market that once held an ABA team (Memphis). The NHL adopted this strategy and began moving into new markets with their expansion beginning in the 1990s. And while San Jose was an immediate hit, there has been eventual success after initial instability in Nashville and Columbus. But neither are considered a financial powerhouse.

Compared to the NHL, the NBA prints money. According to Forbes, the Knicks are worth north of $3 billion and the Lakers aren't far behind at $2.7 billion. The average NBA team is worth $1.25 billion. By comparison the NHL's most valuable team (Rangers) is worth $1.2 billion. It's safe to say James Dolan is doing just fine these days. Here's more from Forbes:

Rounding out the top five are the Chicago Bulls ($2.3 billion), Boston Celtics ($2.1 billion) and Los Angeles Clippers ($2 billion). Thirteen teams are worth at least $1 billion, up from just three two years ago.

The league’s 30 teams generated $5.2 billion in revenue last season and $900 million in operating profit (earnings before interest, taxes, depreciation and amortization). Both are records. The NBA’s 2011 collective bargaining agreement, which enhanced revenue sharing for poorer small market teams and cut player costs, means that every team except one—billionaire Mikhail Prokhorov’s Brooklyn Nets—turned an operating profit last season.

In case you were interested, the average NHL team is worth $505 million.

The point of talking about all these numbers: investment and interest. Once the light turns green for the leagues to start looking at Las Vegas, the NBA is a much smarter and stronger play than the NHL. It's a rough situation for the NHL, because their TV revenues will never improve without a strong national audience.

The Tampa Bay Lightning are a success story for new hockey markets. The following was taken from the 2015-16 Forbes NHL evaluations. Picture this as a long-term base case scenario:

Notice that some teams lost money last season yet increased in value. The Tampa Bay Lightning’s trip to the finals did not quite enable the team to turn a profit last season but did give them a much better shot this year. The Lightning, up 15%, to $260 million, sold 3,000 new season tickets since the playoff push, putting them up to 13,500 total for the 2015-16 season. Owner Jeff Vinik’s strategy is to strengthen the Lightning’s brand as part of a his broader game plan to develop Tampa real estate.

Many NHL owners in cities like Nashville, Tampa, Columbus and others own other ventures and use their franchise to buoy their other investments. Las Vegas is a completely different animal, since it already has a few thousand people roaming around the strip with or without professional sports. Those other cities wouldn't have that type of economic activity on weekdays.

An NBA franchise in Las Vegas would crush the NHL team in terms of coverage, interest, support, etc. That's not a shot at Las Vegas, it's a reality for much of the nation. And given how much money NBA teams have been generating, why would the NBA not look at expansion before much longer?

In case you're wondering why is the the NBA worth so much more than the NHL...

TV revenue is king, and the NHL knows it

The NBA has a national TV deal on multiple networks; ESPN/ABC and TNT. The NHL has NBC & NBCSN. One contract has two legacy cable channels available on most every package, even in grimy hotel rooms. The other used to be the Outdoor Life Network.

Vegas showed they were committed more than Seattle, and represented a market gain that QC didn't give them. But the NHL currently depends on live gate revenue more than other leagues. And the fact that the NHL chose an experimental market over two cities that would be more likely to fill the building as the years go on is a bit concerning. If you need an illustration on this, here it is:

The Winnipeg Jets are worth more than the St. Louis Blues. That's largely thanks to the Canadian TV revenues, but the building is full at a high price every night. The Jets are valued at $350 million, compared to the Blues ($270 million) and the Predators ($255 million). Winnipeg's TV market size is less than 1,000,000 people.

A Las Vegas-based NHL team may not move the needle to raise the TV revenue immediately... but it's worth a shot over time. And I'm not sure how the NHL can get their TV revenue up otherwise. But interest remains a problem. People want storylines, want stars to follow, and the NHL players that qualify as stars don't often play 40% of the game. The NBA: the best players play 75% of the game, and soccer players often play the entire game. That's the fundamental difference that the NHL cannot overcome. That will eventually force the league to be more creative. And since the folks at NBC only like showing 5-6 teams, creating casual interest on other teams is a job left completely alone to the teams and local networks.

So here's what we're left with: the NHL is banking on Vegas and their reach in a new market lifting up the TV revenue over time vs. a bigger market (Seattle) or an established market (QC) both with existing hockey. It's, no pun intended, a gamble. And when it comes time for another round of expansion, will the league wait for Seattle to get their house in order? That's advisable.

We're pulling for Las Vegas to work, and for more cities like them. That's the NHL's plan to grow the game. And if it works, the sport can start gaining back some relevancy.