NHLPA Offer Calls for Extra Picks, Cap Movement, More

[Fred Bear]

Well, I wouldn't say that the way it raises is 'false'. The players were given 57% of hockey related revenues, so the cap needs to increase year-over-year if revenues also increase. If the event that they drop, the cap would also drop.

Revenues have been going up big each year, so the player's take has jumped with it.

Remove (or at least drop) the floor. It would mean owners need to kick into a pool of money, similar to the players & the escrow payments they may (a mechinisim to pay out bonuses at the end of the year - to top player salaries up to the correct share of revenues).

I'd also suggest letting teams go over, but with a luxury tax penalty (and a stiff one). $2 in tax for every $1 they go over. If the cap is $60 million, and the Rangers want to spen $80 million.... let them. That would just mean they'd have to kick in $40 million to the tax pool. You can pull money from that pool first, to top up player salaries, if the floor was removed and that sort of thing was needed (then teams would be able to get some, most, or all of their 'escrow' back) and if there's anything left, add it to the revenue sharing pot.

There's a lot of ways that the NHL can spread the money around. The NHL brought in $3.3 billion in revenue last year. Even with the players taking 57% of that (and I will assume that in the next deal, their share will go down - closer to a 50-50 split, which would be in line with other leagues) there is a ton of money to go around. I don't think the Leafs, Habs, Flyers, etc should be forced to accept the same cashflow as the Panthers, Coyotes, or Blue Jackets..... but if the whole point of the Cap was "cost certainty" and/or "parity" then this agreement has failed. The big market teams are more profitable than ever (the Leafs are protected from spending outrageous amounts of money on players, by the Salary Cap) and the small market teams are losing more money than they ever were.

If the owners can't figure out a more equitable way to split their pot amoungst themselves, I have a really hard time showing them much sympathy when negotiating with the players.

I don't have any sympathy for anyone involved, really. Arguing millionaires sounds more like a VH1 reality show than something that should really ever happen in the NHL, but I digress...

The issue on the owners' side is that while overall revenue has gone up, it is NOT going up evenly across the teams. The current CBA assumes parity between the teams when calculating the cap and floor, but it's a poor assumption. That's why it needs to be fixed. The issue is - who pays for it?

If you look at the numbers published by Forbes magazine last year, the cumulative 'value' of the NHL franchises went up (2011 over 2010) by about 6% with a cumulative revenue of just over $3 billion and a positive operating income of just over $126.5 million (by cumulative, I mean summing over ALL 30 franchises). These are the numbers which work to set the cap structure under the current CBA - that was actually how the owners set it up! The 'League' as a whole is happy and healthy. The situation that is created, though, is that on-ice parity comes at a cost.

Every time CBA discussion come up, fans are led to believe that these are 'businesses'. They aren't. NHL franchises are basically the ultimate fantasy toy for rich NHL fans. That's not to say, you can't make a living as an NHL owner, but you, for sure, have to pick your spots! The CBA basically outlines the 'rules' the owners need to follow to ensure 'parity' for the fans.

I think of it this way, there are really 3 groups at the table. There are players, of course, but there are really two sets of 'owners', large-market / solvent teams (teams which make money each year) and small-market / dying (teams which lose money). This is why I think the NHLPA's proposal was smart compared to the NHL's original offer. The NHL's opening offer changes the rules to make the small-market teams 'competitive' on paper. Remember, the stars already locked up on long-term contracts would be 24% cheaper and they would stay right where they are! The top teams would make MORE money (less costs) while giving the financially struggling teams a chance to balance their books (not necessarily turn a profit). And for small-market teams to even come close to 'making money', they won't be able to compete with the profitable teams in the free agent market. So, under the NHL's offer, large market franchises continue to thrive while 'moving forward', smaller-markets have a chance, if they draft and develop talent to compete with the existing talent... Ultimately, the players pay for the parity in lower salaries, a lowered money pool, and longer team control (10 years until unrestricted free agency). By contrast, the NHLPA's proposal, makes teams work and distinguish themselves in order to maintain competitiveness. Ultimately, in the NHLPA's proposal, rich markets and profitable franchises 'pay' for the parity along with the NHLPA agreeing to take a smaller percentage of the pie.

From the NHLPA's perspective, let's go back to Forbes' numbers for 2011. For every $1 spent in Toronto, the Leafs took in $1.74. That was tops in the league. Worst was Phoenix, who got only $0.74 for every $1 spent. That's why Phoenix is in trouble (no surprise). If we look at another team, though, like St. Louis ($0.97 for every $1 spent), we can see why the NHLPA proposal makes sense - St. Louis can sell $4M in cap space and, if it's at a $1-for-$1 rate, turn themselves into a profitable franchise for the season! The NHLPA's proposal, though, goes further and addresses teams like Phoenix who need more help and provides that they can get assistance in the form of additional draft picks. I'll dip back into the Forbes numbers, but from 2010-2011, one of the biggest movers in value was Edmonton, a team loaded with young talent from several solid drafts... They were also one of the 'least' valuable franchises to turn in a significant operating income ($1.22 for every $1 spent). Believe it or not, the NHLPA's offer is actually founded closer to reality than the owners'.

I'm sure the truth lies somewhere in the middle, but until the small market teams 'force' the large markets to actually compete with them, the supposed parity is a farce. The current system surely creates winners and losers and the owners are upset that more of the winners are players rather than owners. It's only natural for them to try to create a system which allows a couple more owners to become winners at the expense of the players. I just don't think it's what's right for the league long term. I think there are some tough decisions which need to be made on whether or not teams should be held to a business standard (looking at you Phoenix) or if we'd be better off expanding the League and splitting it into a Premier League and B League with relegation.

[xelloss1012]

But remember that the owners want a 24% rollback of salaries which would then lower the players cap hits as well. They wouldn't handicap their teams with a reduction of $70 mil to $51 mil with the current salaries and cap hits.

The minimum should be $30 million with a max of $70 million and have it frozen like that for the next 5 years in a new CBA. However they should also increase revenue sharing and add in a luxury tax that would allow teams to go to $80 million but have to pay dollar for dollar the extra amount they spend and that money would go to struggling teams who keep their payroll under $45 million.

If the 24% does include the rollback on the cap hits, it might be survivable. The cap at the very least needs to be frozen and not increase for a number of years as it's spiraling up too fast. The other thing is that they need to at the very least restrict contract lengths down to single digits.

I have doubts that a luxury tax would work that effectively in the NHL. It's probably more feasible to penalize the overbudget team by the forfeiture of draft picks or a waiver draft protection.

My analogy of MLB to NHL to show how fragile baseball is in Canada compared to hockey in the sunbelt. If someone is not fixed, I estimate at least a couple teams will still fold even with the revenue-sharing.

[MatsSundin13Rocks]

If the 24% does include the rollback on the cap hits, it might be survivable. The cap at the very least needs to be frozen and not increase for a number of years as it's spiraling up too fast. The other thing is that they need to at the very least restrict contract lengths down to single digits.

I have doubts that a luxury tax would work that effectively in the NHL. It's probably more feasible to penalize the overbudget team by the forfeiture of draft picks or a waiver draft protection.

My analogy of MLB to NHL to show how fragile baseball is in Canada compared to hockey in the sunbelt. If someone is not fixed, I estimate at least a couple teams will still fold even with the revenue-sharing.

I strongly disagree about the cap going up too fast. The problem is the cap floor. The teams with money can easily spend $70 million and still make money. The teams losing money can't spend $54 million and survive doing so. Sure we have parity but that means we get the Leafs making tonnes of money and continually missing the playoffs while teams like Phoenix which the league is paying for are having to make the cap floor and end up making the playoffs. Florida's spending binge to reach the cap floor actually helped them make the playoffs but not a profit. I like the idea of selling cap space as proposed by the NHLPA as Toronto can pay Phoenix $5 million to acquire $5 million in cap space.

[xelloss1012]

I strongly disagree about the cap going up too fast. The problem is the cap floor. The teams with money can easily spend $70 million and still make money. The teams losing money can't spend $54 million and survive doing so. Sure we have parity but that means we get the Leafs making tonnes of money and continually missing the playoffs while teams like Phoenix which the league is paying for are having to make the cap floor and end up making the playoffs. Florida's spending binge to reach the cap floor actually helped them make the playoffs but not a profit. I like the idea of selling cap space as proposed by the NHLPA as Toronto can pay Phoenix $5 million to acquire $5 million in cap space.

I agree that the cap floor has to go and it's killing the smaller market teams in the U.S. However the cap ceiling is going up too fast as it's increasing at almost 9% compounded per season. In 2005-06, the cap was only 39M, while the 2012-13 is going to be 70.2M. As a result, crazier contracts have been signed as the cap rises. The max length of a contract should not be more than 9-10 years. Also, changing the buyout scheme for UFAs if they fail to perform at a certain level by allowing a readjustment to contracts.

Interesting idea of buying cap space, but of course certain limitations would need to be laid down to prevent abuse of such a system, if implemented.