Mike Babcock's salary about more than winning the Leafs a Stanley Cup
Business analyst says if the Leafs want to be an international brand, they have to start winning
Toronto Maple Leafs coach Mike Babcock's unprecedented salary is a sign the Leafs are playing a bigger game than just trying to win a Stanley Cup, one sports business expert says.
Babcock signed an eight-year deal this week estimated at $50 million US, making him the highest-paid coach in hockey and putting him in elite North American company.
Vijay Setlur, a sports marketing instructor at York University's Shulich School of Business, said the contract is a sign that owner Maple Leafs Sports & Entertainment believes the team can be more popular outside Toronto (where the fan base remains strong no matter how awful the team is) and even outside the country.
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For instance, Setlur notes that the Leafs have attempted to make inroads in China, where the massive population means even a small dent in the country's marketplace can have a huge payoff. The team has run on-ice schools in China and appears frequently on the Chinese national broadcaster.
But it will be difficult to become an international brand with a team that rarely makes the playoffs, let alone threaten to win a championship.
"In this market [Toronto], they don't have to win," Setlur told CBC News. "But if they want to build the brand outside of this market, and want to be on the par of the Yankees or the Lakers or Manchester United, then they can't be a losing brand. They have to be a winning brand."
'As the Maple Leafs go, so goes MLSE'
Babcock's salary — more than double that of the next highest-paid hockey coach's — will affect all of MLSE's holdings, including its other teams and arenas, Setlur said. (MLSE owns the Toronto Raptors, Toronto Marlies and Toronto FC.)
"This decision, this development, permeates the entire business of the company," he said. "As the Maples Leafs go, so goes MLSE."
Setlur and Richard Powers, a professor at the University of Toronto's Rotman School of Management, agree that the salary is a sign the league is doing well.
The average NHL team value is at a historical high of $490 million, which Forbes credits to the multibillion-dollar media deal with Rogers Communications that came into effect this season.
"The league's swimming in profits," Powers said. "They've done very well over the past year, or the last several years. The [salary] cap's expected to rise every year, why not coaches' salaries?"
Both analysts expect other coaches' salaries to jump.
Setlur compared the change to when baseball player Alex Rodriguez signed an unprecedented 10-year, $252-million free-agent contract with the Texas Rangers in 2000. "It drove the market higher and it allowed some players to be paid more without seeming ridiculous."
Powers said the salary is a matter of supply and demand, and few teams should be harmed by a new price ceiling for coaches.
"If I was another coach in the league I'd be very pleased with him," he said.