Thursday, June 26, 2008

Salary cap rises to $56.7-million

The numbers are in and they're not far off the projections we've heard all off-season:
The salary cap in the NHL is going up again.

Sources tell TSN that for the 2008-09 season, the salary cap will rise to a maximum of $56.7-million. That is a $6.4-million increase from this past season when the cap was set at $50.3-million.

The lower limit also rose to $40.7 million, the minimum each of the 30 teams must spend on player salaries.
A lot has been made of the league minimum being out of reach for some small-market teams, but I think it's worth pointing out that only three teams spent under $40.7-million in 2007-08: Columbus, which was $800,000 under; Phoenix, which will have to add $3.5-million; and Nashville, which spent just under $36-million.

With the revenue sharing that teams like the Predators get, no one should have trouble getting to the minimum figure. Whether or not they can turn a profit at that number, however, is going to be up to them.
.

24 Comments:

At 2:55 PM, June 26, 2008, Anonymous Karina said...

Haven't the 'Yotes already added $3.5 mill with Jokinen?

 
At 3:49 PM, June 26, 2008, Blogger Rob Robinson said...

The Preds are already being projected at $45 million for next season.

 
At 3:53 PM, June 26, 2008, Blogger Guy Lafleurs Good Son said...

I can't wait til the CDN dollar to go back down and the cap to go down. What will the players do then:)
The CDN dollar is the only reason that the cap is going up. You would have thought that the owners would have covered that off the in the agreement.

 
At 3:54 PM, June 26, 2008, Blogger FAUX RUMORS said...

1) So who won the labour war?

 
At 3:58 PM, June 26, 2008, Blogger Kel said...

So who won the labour war?

Of course the owners, because league average salary after escrow is about the same as before the lockout, but league revenue rose to over $2.4B from $2.2B. $200M of pure profit.

 
At 4:01 PM, June 26, 2008, Blogger Kel said...

If the CDN dollar falls, league revenue probably falls and the cap goes down one year after. During the fall, revenue forecast drops and players pay more in escrow. In the end, their compensation is tied to league revenue at a fixed percentage. That's the same regardless of cap level. (The percentage may change a little depending on revenue, but definitely in the 5x% range)

 
At 4:04 PM, June 26, 2008, Blogger Don said...

I'd guess the Leafs, Habs, Rangers, and maybe the Wings and Flyers would be over 100 million this upcoming season if it weren't for the cap.
Likely Crosby wouldn't have signed an extension with Pit as you would have seen Mtl or the Leafs go to 15 mil per.

 
At 4:37 PM, June 26, 2008, Anonymous Anonymous said...

jeez, kel, who do you think gets the escrow? The owners?

 
At 4:46 PM, June 26, 2008, Blogger Kel said...

jeez, kel, who do you think gets the escrow? The owners?

The owners keep the escrow until the end of the season. Then, the accountants figure out the total league revenue, and the total salaries paid, and then refund part of the escrow to players (if necessary) to ensure players receive the CBA-mandated percentage of revenue. The rest goes back to the owners, and there are rules on how escrow money is divided among teams, as part of the revenue sharing scheme.

 
At 4:48 PM, June 26, 2008, Anonymous Karina said...

Average NHL salary is now $2 million, which is more than it was pre-lockout. Who won, again?

 
At 5:10 PM, June 26, 2008, Blogger Kel said...

Average NHL salary is now $2 million, which is more than it was pre-lockout. Who won, again?

Where did you arrive at that number? From the cap number of $56.7MM and the cap formula in the CBA, we figured that the league earned just over $2.4B last season. Players received 56% of that. Using a 23-player roster for 30 team, average salary is $1.95MM. On the other side, league revenue after player salaries for 2007/08 season is $1.056B.

Before the lockout, the average salary is $1.83MM according to this link. The owners claimed they made only $2.1B in revenue, even though rumours came out that it would be closer to $2.2B using the current CBA accounting. Using the $2.2B figure, in the 2003-04 season the owners pocketed $937MM after paying salaries. Compared that against $1056MM this season, it's a 12.7% increase. Average salary increased from $1.83MM to $1.95MM, a 6.5% increase. Who won?

 
At 5:40 PM, June 26, 2008, Anonymous cynical joe said...

Thanks Kel, now can you please explain it to Tom Benjamin?

 
At 5:53 PM, June 26, 2008, Blogger Kel said...

I don't think Tom ever claimed the players won. He hates the idea of linkage and this CBA. He repeatedly wrote that contract amount is meaningless now that actual salaries are tied to revenue.

 
At 6:07 PM, June 26, 2008, Anonymous Karina said...

I got that # from the AOL Fanhouse... which was quoting Paul Kelly.

Here's the link

 
At 6:11 PM, June 26, 2008, Blogger Kel said...

Thanks for the link. I guess $1.95MM is close enough to $2MM. But if you multiply by the number of players, the difference is not small.

 
At 7:17 PM, June 26, 2008, Anonymous Anonymous said...

The Dwarf shut the league down because of the suffering fans so I quess the fans won.

Ticket prices fell, no more trap. It's all good.

And you gotta love smaller pads for goalies, puck over the boards, that triangle or something behind nets, and no change after icings...

Wow, whatta difference! Those Adam Foote vs. power forward battles in the corners and front of net that we don't have to watch anymore because now D knows fronting.

Thank you, thank you.

 
At 2:19 AM, June 27, 2008, Anonymous Gerald said...

If the CDN dollar falls, league revenue probably falls and the cap goes down one year after.

The CDN$ would have to fall quite dramatically, Kel. Per my own calcs, the CDN$ increase accounted for only 3% revenue growth for the NHL this year, notwithstanding a huge 10 cent increase in the exchange rate. NHL revenues increased 9% "organically", to quote a favoured foil. For NHL revenue to drop this year, the average exchange rate would have had to drop 30 cents in a single year.

In short, not possible, short of an economic catastrophe across North America.

On a side note, Kel, your calcs of NHL revenues are significantly off. NHL revenue this year was much closer to $2.6 billion, not $2.4 billion.

 
At 2:46 AM, June 27, 2008, Anonymous Nathan VN said...

Gerald, I don't understand how you came to your figures. I found an excellent article that discusses in detail that suggests the increased value in the Canadian dollar post-lockout has accounted for as much as half of the leagues revenue gains. http://www.thestar.com/Sports/Hockey/article/433906
If the figures in the article hold true then a 10% reduction in the Canadian$ will equate to a 3% drop in gate revenue alone. Nevermind the fact that internal team revenue would be reduced because of the higher costs of contracts (seeing as players are payed in American$), as well as external reductions because of lower value of TV and radio contracts.

 
At 12:29 PM, June 27, 2008, Blogger Kel said...

This comment has been removed by the author.

 
At 12:42 PM, June 27, 2008, Blogger Kel said...

Gerald, I think I noticed what's wrong w/ my calcs; I left out subtracting benefits from the players' share. In the CBA example, it's $66MM. If we use the figure, then yes, the revenue would be in the high $2.5B range. I apologize. My point about owners winning is still valid, however. Pre-lockout, owners received $937MM - $66MM = $871MM after players cost (players received $1329MM). The past season, players received around $1460MM. Owners received around $1216MM. The growth is clearly in owners' favour.

 
At 4:33 PM, June 27, 2008, Anonymous Gerald said...

Kel, i thought that might have been the case. I forget it myself sometimes.

I agree with you completely about the owners "winning" (although this entire structure is designed for a win/win). It is not even close.

 
At 4:41 PM, June 27, 2008, Anonymous Gerald said...

Gerald, I don't understand how you came to your figures. I found an excellent article that discusses in detail that suggests the increased value in the Canadian dollar post-lockout has accounted for as much as half of the leagues revenue gains. http://www.thestar.com/Sports/Hockey/article/433906

If the figures in the article hold true then a 10% reduction in the Canadian$ will equate to a 3% drop in gate revenue alone. Nevermind the fact that internal team revenue would be reduced because of the higher costs of contracts (seeing as players are payed in American$), as well as external reductions because of lower value of TV and radio contracts..

Nathan, unfortunately, the "excellent article" is written by a guy who I am quite confident cannot balance his own checkbook, much less comment on NHL business issues.

Here is the short form of the math (all numbers have public media sources):

revenues for 2006/07 = 2.318 bill US

cdn team share was 28%, or $649 mil US

at .8831 (Exchange rate for 2006/07, per CBA), $649 mil = $735 mil CDN

at .99 (Exch rate for 2007/08), $735 mil CDN = $727.65 US

$727.65 mil - $649 mil = $78.65 mil

$78.65 mil divided by $2.318 bil = 3.39%

Clear enough, I hope.

 
At 3:21 AM, June 29, 2008, Blogger Kel said...

Yes, $78.65MM is 3.39%, but it's 3.39% of TOTAL REVENUE. Gerald claimed that league revenue was just under $2.6B last season.In other words, the maximum amount of revenue growth from 06/07 to 07/08 was $282MM. $78.65MM is also 27.89% of the $282MM growth. (Actual percentage would be higher than that because I was generous in using the $2.6B number)

 
At 10:40 AM, June 29, 2008, Anonymous Gerald said...

Correct, Kel. The CDN dollar exchange rate escalation provided approximately a quarter of the growth (simpler math - 3.39% is slightly over a quarter of 12%).

Now you've got it.

I am doing my best to combat the perception out there (and it is a persistent perception, even if wrong) that the cap is going up almost completely due to the CDN dollar exchange rate escalation.

The failure of the mainstream media to have had the inclination to do a little eighth grade math is disappointing, to say the least.

 

Post a Comment

<< Home

Links to this post:

Create a Link


.

Free Page Rank Checker
eXTReMe Tracker