The NHL’s $42.5MM cap is more reasonable -- here's why:
Here’s a sensitivity analysis – it compares the relationship between the cap and the player share % of revenues for 4 different scenarios (reduction in league revenues of 10%, 15%, 20% and 25%). For the most likely scenario (15-20% reduction in league revenues), the $42.5MM cap produces a player share range of 55.6% to 59.0%, which is about right, while the $49MM cap produces a range of 64.3% to 68.3%, which is too high.
If league revenues are down 25% (to 1.524 billion):
cap = $49MM, avg payroll = $37MM, player costs = 72.8% of revenues.
cap = $42.5MM, avg payroll = $32MM, player costs = 63.0% of revenues.
If league revenues are down 20% (to 1.626 billion):
cap = $49MM, avg payroll = $37MM, player costs = 68.3% of revenues.
cap = $42.5MM, avg payroll = $32MM, player costs = 59.0% of revenues.
If league revenues are down 15% (to 1.727 billion):
cap = $49MM, avg payroll = $37MM, player costs = 64.3% of revenues.
cap = $42.5MM, avg payroll = $32MM, player costs = 55.6% of revenues.
If league revenues are down 10% (to 1.829 billion):
cap = $49MM, avg payroll = $37MM, player costs = 60.7% of revenues.
cap = $42.5MM, avg payroll = $32MM, player costs = 52.5% of revenues.
Here’s a sensitivity analysis – it compares the relationship between the cap and the player share % of revenues for 4 different scenarios (reduction in league revenues of 10%, 15%, 20% and 25%). For the most likely scenario (15-20% reduction in league revenues), the $42.5MM cap produces a player share range of 55.6% to 59.0%, which is about right, while the $49MM cap produces a range of 64.3% to 68.3%, which is too high.
If league revenues are down 25% (to 1.524 billion):
cap = $49MM, avg payroll = $37MM, player costs = 72.8% of revenues.
cap = $42.5MM, avg payroll = $32MM, player costs = 63.0% of revenues.
If league revenues are down 20% (to 1.626 billion):
cap = $49MM, avg payroll = $37MM, player costs = 68.3% of revenues.
cap = $42.5MM, avg payroll = $32MM, player costs = 59.0% of revenues.
If league revenues are down 15% (to 1.727 billion):
cap = $49MM, avg payroll = $37MM, player costs = 64.3% of revenues.
cap = $42.5MM, avg payroll = $32MM, player costs = 55.6% of revenues.
If league revenues are down 10% (to 1.829 billion):
cap = $49MM, avg payroll = $37MM, player costs = 60.7% of revenues.
cap = $42.5MM, avg payroll = $32MM, player costs = 52.5% of revenues.