While expansion would likely benefit the NHL's bottom line more, contraction would help the game itself more.
There's already been a lot of chatter for a couple years now about how there are too many guys in the game who really aren't "NHL quality" players because teams need to round out their rosters.
That said, we all know that The Brass in the NHL care more about the bottom line than they do the quality of the game, which is probably why we'll see a two team expansion long before we see them undergo a contraction.
: Gil Perreault, Tyler Myers, Jonas Enroth, Drew Stafford
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It seems to me that the NHL must already have plans for expansion in the west (presumably Seattle and Las Vegas) and plans to keep the Coyotes in Phoenix, otherwise the would leave Columbus in the west giving them balanced conferences and allowing for the possibility of a team in Quebec City or Markham or Hamilton, etc. I find this notion of expansion in the U.S. instead of Canada disappointing.
Just get rid of Florida (they of the $7 season tix) and Columbus (they of the...well, they're Columbus) and do 4 7-team divisions.