Hypothetically: is the cap *always* necessary

Discussion in 'The Business of Hockey' started by shveik, Mar 1, 2005.

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  1. shveik

    shveik Registered User

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    NHL and NHLPA do not seem to have as big an issue with the cap anymore, so hopefully we can discuss this issue in a reasonably non-partisan fashion. Here is my question. Suppose a league (hockey, basketball, whatever) teams were placed in the locations that are almost identical from the market standpoint. Would the salary cap be necessary for such league to be healthy financially?
     
  2. Drury_Sakic

    Drury_Sakic Registered User

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    Yes..

    Just because the markets are the same, don't mean you won't have an owner that scews the market system..

    See the D-Backs in baseball.. totally throwing the MLB pitching market off its rocker with the Russ Ortiz contract.... a "small" market MLB team, giving away cash like candy..
     
  3. John Flyers Fan

    John Flyers Fan Registered User

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    That would be impossible.

    A better question might be, if teams shared 100% of revenues, would a salary cap be necessary ??
     
  4. SENSible1*

    SENSible1* Guest

    And an even better question would be why would owners want to do something so foolish as to remove most of the incentive to develop their team/market.
     
  5. John Flyers Fan

    John Flyers Fan Registered User

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    It wasn't somehing I was endorsing ... just a hypothetical.
     
  6. Jaded-Fan

    Jaded-Fan Registered User

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    It depends on what you believe regarding equal opportunities to compete and health of whatever sports league you are talking about.

    100% revenue sharing would not stop a billionaire to massively outspend everyone else, losing cash hand over fist and not caring about the losses. If that is acceptable to you and you believe that the fans of other teams will maintain interest if this goes on long term, then you answer accordingly. I for one doubt that a league can remain viable longterm if the opportunity to compete is not maintained at a fairly equal level. Baseball thus far has proven me wrong as saps continue to buy tickets when the majority of the league has virtually no chance to compete (< 50% aggregate salaries median in the league has won 5 of 219 playoff games in 10 years), but that has been a relatively short term phenomenon. Give it another five years or so and if the landscape does not change I predict the sport will suffer. So I personally believe that for a sport, any sport, to thrive longterm it needs to be one people enjoy watching, and one with a Cap which gives fans in all cities a feeling that they can compete based on management, not on $$$$.
     
  7. shveik

    shveik Registered User

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    Let me clarify. I do not want to go into revenue sharing, that's a whole separate issue, and perhaps should be discussed in a separate thread.

    Clearly the cap is the "solve-all" solution against all possible disparity problems. And in fact, in the situation when the teams ar more or less equal financially, a fairly negotiated cap is almost inconsequential. But in my opinion it is similar to amputation in medical world. It *will* remove the problem, literally, but you have to ask yourself if it is necessary. Cap is an extreme regulatory measure, it disables many natural market mechanisms.

    What I want to identify, is what kind of market disturbances would be present in this hypothetical league, and if there are *other* stabilization mechanisms are available to deal with them.
     
  8. Jaded-Fan

    Jaded-Fan Registered User

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    I can think of none that operate in ways similar enough to a Cap to achieve the goal of allowing every team to think that their team has an equal opportunity to compete without $$$ being a factor, only management. Luxury taxes merely give the fig leaf of doing so, logically they can be overcome if the owner has the resources, be it through market size or deep pockets, to do so.

    The real question that I have is what is the motive here? I put forth that it is to placate those fans of small and mid-sized markets, who you need to have a league, and yet to keep a system in place to insure that the teams who benefit from being able to greatly outspend can continue to do so as you all like being in the playoffs every year and adding (or merely keeping your own) the top talent year in and year out through 'trades' with weaker sister teams.

    I see no reason NOT to support a Cap other than selfish ones. But I challenge anyone to try to put one forth. I wait patiently to hear.
     
  9. free0717

    free0717 Registered User

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    The Cap wont work without Revenue Sharing.

    The one thing that Baffles me in all this Cap talk is I dont see how a 42.5 Million dollar Cap is going to help the small Market teams. Its not going to significantly reduce there payroll. Without revenue sharing, There still will be a group of teams at the Cap level and a bunch of teams below the cap. I would like to see a cap with linkage but also see 50% revenue sharing among all teams. The players are right on that note, The owners need to learn to be partners among themselves.

    Now some may ask Why would the New York Rangers want to write a check to the Nashville Predators and my answer is When Nashville came into the league, Did the New York Rangers object and complain that the Nashville market will not give ample support to a NHL team? The Rangers were happy to get there cut of the 80 Million dollar expansion Fee. That is why I believe in revenue sharing. That is why the NFL is successful because they share 63% of the revenue. I know the NFL has large common revenues and the NHL Revenues are basically local, but if you want strong NHL, Revenue sharing is as necessary as a cap with linkage.
     
  10. Snap Wilson

    Snap Wilson Registered User

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    Answering the first question, no, of course not. A salary cap is *never* necessary to ensure financial health for a league. Nothing forces a team to spend more than they make. If the league wants cost certainty, they can attain it the way the rest of us do. Proper fiscal management.
     
  11. Jaded-Fan

    Jaded-Fan Registered User

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    Bettman addressed this. He basically said that spending by high aggregate team salaried teams acted as a 'magnet' pulling salaries of all players higher. I actually find this to be logical. If Team 'X' pays 40 goal scorer a certain amount because they have huge revenues, then Team 'Y' who does not have that revenue stream will have a player of similar caliber want the same $'s. Hell, they will have a player who scores 30 goals want three quarters of that contract, a player who scores 20 goals want half of that contract.

    And then the smaller and mid-sized markets end up in trouble. Keeping the Cap at $42.5 keeps the salary creep lower.
     
  12. kdb209

    kdb209 Registered User

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    I agree that a salary cap is not necessary to ensure the financial health of a league - just look at MLB.

    It may however be a necessity if you want to maintain the competitive health of the league.
     
  13. SJeasy

    SJeasy Registered User

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    One system without a cap that would work is to pool revenues and let the league pay negotiated salaries to players. This can include performance incentives and increments for years of service. The league offered this kind of framework as one of its six proposals. The pool and negotiated percentage insure the financial health of the league.

    There is almost no chance for this because it eliminates negotiation by player agents and players who land the big contract and coast will no longer be able to do so and receive the same reward.

    In terms of fans and the excitement of the game, this is a promising solution because there will be much more incentive for players to perform at every opportunity.
     
  14. Snap Wilson

    Snap Wilson Registered User

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    I'm not sure what you mean by "competitive health." If you're talking about parity, then I would point out that the NHL has a lower standard deviation among winning percentages than the NBA (which has a salary cap). More NHL teams have made the playoffs the last five years than in the NBA, and one would usually agree that more teams have a shot at the title than in the NBA. Part of this is the nature of the respective games, sure, but if the NBA can be popular with their level of parity, than I don't see how it hurts the NHL.

    Now if you're saying that small-market teams can't be as competitive without a salary cap, I won't argue with you. But this issue is actually contradictory whether or not the league is financial successfully. That small markets are getting priced out is actually a sign of the product's financial success, in the same way that your lower-income person can't afford Cadillac Escalades or Louis Vuitton bags.

    Competitive health can mean something else, though. From an economic perspective, there are few things healthier for competition than a free market. "Cost certainty" solutions such as a salary cap and (especially) revenue sharing are, by their nature, anti-competitive, rewarding failure as well as success.
     
    Last edited: Mar 1, 2005
  15. me2

    me2 Calling out the crap

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    If the teams shared 100% of revenues (give or take leases etc) and teams agree not to go into debt. You still have to stop the hobby owner from spending a bunch of money his team doesn't have just to increase his chances, because then everyone else feels the need to join the arms race.
     
  16. Matty

    Matty Registered User

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    Scrap RFA, UFA, and arbitration. The team that drafts a player owns that player until they die or until the team decides to trade their rights.

    That's the other option...
     
  17. shveik

    shveik Registered User

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    There are no small market teams here. Like I said in the beginning, the markets are supposed to be equal! You people just do not listen. What I want to figure out if there is a reason for the salaries to be overblown in a uniform market, and what could be countermeasures other than salary cap. The crazy billionaire scenario is not so dangerous IMO. I think it would get resolved by itself. It did not take that long for Leonsis to step back and reassess.

    Anything else?
     
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