CBA questions regarding revenue and salary cap impact

Discussion in 'The Business of Hockey' started by broadwayblue, Aug 7, 2005.

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  1. broadwayblue

    broadwayblue Registered User

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    so if i'm correct this years salary cap was based on expected league revenue of about 1.8 billion, with the players guaranteed to make 54% "hockey-related" revenues.

    my first question is what is the relationship between this 54% guarantee and the salary cap? i mean teams are under no obligation to spend more than the floor of 21.5 million. so if a team only spends the minimum what happens to the rest of the money? i read something about an escrow account where some money would go to possibly be divided up among the players...but it didn't get specific.

    my second question relates to the annual adjustment of the cap based on actual revenue numbers for the previous year. let's say they overestimate actual revenues by some number, assume 10% for argument sake. next years cap would be lowered by some amount (anyone know?) what happens if a team is over the cap because the cap is lowered on them? i was under the impression that a team is not allowed to renegotiate contracts to make them more cap friendly...so what is a team to do?

    seems like teams would be wise to keep as much cap space as possible free right now considering nobody really knows how successful the new NHL is going to be. especially the first couple of seasons under the new CBA. should be interesting to see where the league picks up financially speaking.
     
  2. kdb209

    kdb209 Global Moderator

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    The salary cap and floor are only loosely linked to the 54% of estimated revenue number. Untill the league releases the full CBA we won't know the exact formula that is used to set the salary range. However, there has been speculation that the size of the salary range ($17.5M - $21.5M to $39M) is reduced to only $16M next season. This would likely lead to a $750K drop in the cap and a $750K increase in the floor, all thinks being equal on the revenue front.

    The floor an cap aren't the important numbers, the 54% league revenues is. If every team pays close to the cap, the players will get an across the board pay cut through the escrow accounts. If every team pays near the floor, the league has to make up the difference and write a big check to the PA. Hoc the league assesses teams for the shortfall and how the PA distributes the money is one of the many CBA unknowns - but it would almost certainly be on a percentage of payroll and percentage of salary basis.

    If the cap goes down next year, due to lower revenues or smaller salary range, every team will have to be under the new lower cap. If a team is over, they will have to trade or buy out players to get under the new number, and unlike this year, buyouts will count against the cap (albiet with a lower annual cap hit than the original contract - 2/3 the $'s over 2x the time).
     
  3. projexns

    projexns Matchups Matter

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    That's very interesting. I was thinking that there was a possibility of a team with
    say an intended $30 million payroll and $1 million of UFA money left to spend to acquire a $4million player like say Roman Hamrlik.

    The players are supposed to get:

    54% of $1.7 billion = $918 million

    That equals $30.6 million per team.

    I'm projecting of course, but it looks to me like the AVERAGE payroll of each NHL
    team is going to be closer to $34 million.

    It would take a 10% cut to bring the $34 million back down to $30.6 million.

    So........my hypothetical team with a $30 million payroll target with $1 million left
    to spend on a UFA could actually offer $4 million, taking it's payroll to $33 million
    instead of $30 million, but then have it come back down to $29.7 million with the
    10% downward adjustment.

    Roman Hamrlik for $1 million anyone?
     
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