More business is boosting National Hockey League team values but climbing player costs are eroding the sport's profitability.

The average hockey team is now worth $240 million, 5 per cent more than last year due to a 5 per cent increase in revenue during the 2010-11 season, to an average of $103 million per team.

The sport's popularity on television (NBC's broadcast of the Bridgestone NHL Winter Classic was the most-viewed NHL regular season game in 36 years with an average of 4.5 million watching during prime time) and online (average monthly unique visitors to NHL.com plus all 30 NHL team Web sites has increased to a record 22 million) is up, as is the revenue from those platforms.

Sponsorship and merchandise sales have also been increasing thanks to new deals, like the one with Tim Hortons that gives the quick-service donut chain title sponsorship of the 2012 NHL All-Star Game in January, and the extremely well done reality series 24/7 Penguins/Capitals: Road to the NHL on HBO that was a big hit. And the NHL recently extended its European reach with separate regional broadcast deals for U.K./Ireland, Czech Republic, Germany and Austria, among other new territories.

But margins are getting squeezed. During the 2010-11 season the league posted operating income (earnings before interest, taxes, depreciation and amortization) of $126 million, 21 per cent lower than the previous year.

Main reason: Player costs increased 11 per cent, to $59 million. Last season 18 of the league's 30 teams lost money even before they had to pay bank loans or write down assets, compared with 16 the prior year.

The league's salary cap, set at 57 per cent of revenue, is too high for some teams to be profitable . As a result, expect the National Hockey League to undergo a cantankerous labor negotiations when the owners and players union begin to hammer our a new collective bargaining agreement to replace the current six-year deal that expires in September.

The NHL must move much closer to the 48 per cent model the NFL agreed to before this season or the 50-50 revenue split National Basketball Association owners and players recently agreed to.

Three years ago NHL commissioner Gary Bettman told me not a single NHL team was worth less than $200 million. But money-losing teams are being sold for much less. In February Forbes 400 member Terrence Pegula bought the Buffalo Sabres, who lost $5.6 million last season, for $165 million.

The St. Louis Blues and Carolina Hurricanes, two other teams losing money, are being shopped at prices well below $200 million. And the New Jersey Devils, who sank 17 per cent in value to $181 million, are in such bad shape financially that there is speculation the team could be headed for bankruptcy and a court supervised sale like the Dallas Stars.

Yet a handful of teams, most of which play in big markets, are making piles of money. The league's most valuable team, the Toronto Maple Leafs, is now worth $521 million and generated $81.8 million in operating income last season.

The New York Rangers, who are enjoying the benefits of playing in a refurbished Madison Square Garden, earned $41.4 million last year and are the NHL's second-most valuable team, worth $507 million. And the Montreal Canadiens, placing third with a $445 million valuation, earned $47.7 million. Thus the top three teams posted an aggregate operating profit greater than the rest of the league combined.

Having all that cash gives teams an advantage when it comes to keeping talent despite the salary cap because teams can reduce their payroll for salary cap purposes by sending players to minors or Europe, playing games with the league's long-term injury reserve system and front-loading contracts to manipulate the yearly cap hit (team payrolls are based on the average annual values of the contracts).

This helps explain the big gap in team payrolls within the league. The New York Rangers, Vancouver Canucks and Chicago Blackhawks each had more than $70 million in player expenses, versus under $50 million for the Carolina Hurricanes, New York Islanders and St. Louis Blues.

The value of the Winnipeg Jets increased 21 per cent, the most among the 30 teams. After buying the Atlanta Thrashers in May for $110 million, plus a $60 million relocation fee, True North Sports and Entertainment moved the team to Manitoba where the previous incarnation of the Jets played as part of the NHL from 1979 to 1995 before moving to Phoenix.

In Atlanta the team sold only 73 per cent of their tickets last season but have sold out all of their games for the 2011-12 campaign in less than 30 minutes.

The average NHL team is worth 47 per cent more than it was before the lockout that cancelled the 2004-05 season. Let's hope a the NHL can get a more economically sound CBA without having another work stoppage. Business has improved too much the past seven years.