What is the Cost of NHL Playoff Failure?

As the NHL entry draft and free agency period approaches, we thought we would reflect on the most recent playoff elimination of the Toronto Maple Leafs in the second round of the NHL playoffs.

Despite the improved performance over prior first-round losses, the Leafs once again ended their season in disappointment. As the weather gets warmer, and their offseason plans heat-up, we thought it might be a fun experiment to consider what the cost is of a “less than successful” playoff run for Toronto’s most popular sports team.

To get started, we need to establish some ground-rules for our lighthearted look that is purely for entertainment purposes:

1. From the 2018-19 NHL season and onwards, the Leafs should have been capable of achieving similar playoff success as the top-8 playoff teams, based on total postseason games played. Those teams played an average of 64 games or about 32 homes games (i.e. 50%) over the course of 5 playoff years. This assumes about 6 or 7 home playoff games per season, which we consider a reasonable target of baseline performance for the “Buds”.
2. The Leafs sell-out every regular season and playoff game every year, such that, any potential losses relate only to playoff games not played.
3. Per game ticket revenue, concession revenue, and operating expenses, are as indicated herein. Since this data is not readily available, these estimates and approximations are based on publicly available information.
4. Player, management and front office compensation represent fixed costs that would not change as a result of the length of a playoff run (i.e. there were no gains or losses calculated). This is similar for television revenue, and other elements that do not depend specifically on playoff performance.
5. The impact of Covid-19 (i.e. no fans in buildings) is ignored, such that lost profits from fan attendance are included during the 2020 and 2021 playoffs.
6. The series against the Columbus Blue Jackets (i.e. the play-in) counts as the regular season (i.e. the Leafs did not make the playoffs in 2020).
7. The weighted average of ticket revenue by round is as indicated herein. This represents the probability that playoff runs can range from one playoff round to as many as four in one season.
8. Amounts are expressed in Canadian dollars, unless otherwise noted.

With our assumptions stated, we summarize our calculations and observations, as follows:

• The reduction in pre-tax profit over the course of the 5-year period from 2019 to 2023 was approximately $103.5 million, with an annual average of about $20.7 million.
• Over that period, each missed playoff game would have added an average of about $8.09 million to pre-tax profits.
• In 2023, the Leafs played 7 home playoff games, so there is a $5.81 million reduction in losses (i.e. they exceeded the annual target).
• The losses are the most in 2020 ($50.5 million), when the Leafs lost to the Blue Jackets in the “play-in” round, and thus, did not play in any traditional playoff rounds.
• The losses are reduced to $33.14 million if the Covid-19 years (2020 and 2021) are not included. This is a difference of $70.36 million.

Our calculations are provided below. Here’s hoping that the Leafs can recoup the losses some day soon, to the benefit of their fans. Maybe then we’ll calculate the cost of a parade!