Owners Backing off replacements?

[CGG]

In 2003-4, the average payroll was around $44 mil.

The drop in NHL revenues due to the lockout / lost season in the best case has to be 10%. The $30-50 mil cap range you refernce roughly averages out to $40 mil - a 10% drop in payroll. The owners would have a similar financial problem with those new numbers as they had with the old deal.

They'd be insane to sign such a deal. With those numbers, they lose less money if they let the players sit another year. You have to chop $10 mil off those numbers to get warm in the best revenue case after lockout according to Levitt's numbers (which I have much more faith in than Forbes guesses).

They'd be insane NOT to sign such a deal and keep this lockout thing going another year. You're forgetting that this range is all linked to revenue, and the $30-$50 million range is based on $2.1 billion. If $40 million is the avg:

$40 million x 30 teams = $1.2 billion / $2.1 billion = 57%

Why are the owners so against this that they're willing to flush another season down the toilet???

If they're not happy with "only" a 10% drop in payroll (I think it would be a lot more) then maybe they should have taken the 24% rollback. Oops.

I'm all for a smaller range, but if you lower the cap you have to raise the floor and (horrors) share more revenue. I have no problem with a $34-$44 million range, but I sure bet the owners do since it means giving the Nashville's of the world an extra $4 million to hit the floor.

 

[Crazy_Ike]

They'd be insane NOT to sign such a deal and keep this lockout thing going another year. You're forgetting that this range is all linked to revenue, and the $30-$50 million range is based on $2.1 billion. If $40 million is the avg:

What makes you think the average would split so nicely? In other sports, most teams are pressured to spend right to the cap.

 

[thinkwild]

What makes you think the average would split so nicely? In other sports, most teams are pressured to spend right to the cap.

Good point. When there's a magnetic cap, the teams have to spend to it. So what you are suggesting then is, take away the cap, and the pressure to spend is removed. Makes sense.

 

[nyr7andcounting]

What makes you think the average would split so nicely? In other sports, most teams are pressured to spend right to the cap.

What other sport has a cap like the NHL is going to have?

The NBA doesn't. The NFL doesn't, as every team in that league COULD spend the cap and not lose money...which isn't the case with the 30 NHL teams.

You are misinterperting the "magnet" theory, as used by Bettman. It means that the whole universe of salaries would rise by how much the cap rises. In other words if the top teams spend $50M instead of $45M, that means the bottom teams would spend $35M instead of $30M(in theory)...it doesn't mean that all teams would spend $50M...just that all teams would increase payrolls equally.

So if you are talking about the % going to players under a certain cap you have to look at what the average payroll would be and multiply that by 30....not take the cap and multiply it by 30 because 30 teams will not spend to the cap.

 

[thinkwild]

The cap should be an incentive you strive to achieve if you become great. One very market has a reasonable chance of spending to if they earn that success through smart team building and marketing. Not a figure every team can match regradless of their business acumen. That would be very marketplace distorting.

 

[Jarqui]

They'd be insane NOT to sign such a deal and keep this lockout thing going another year. You're forgetting that this range is all linked to revenue, and the $30-$50 million range is based on $2.1 billion. If $40 million is the avg:

$40 million x 30 teams = $1.2 billion / $2.1 billion = 57%

Why are the owners so against this that they're willing to flush another season down the toilet???.

That's Goodenow BS economics. That's only player salary. Who is picking up the tab on these player costs:
http://www.nhlcbanews.com/ap_d.html
Signing Bonuses
Performance Bonuses, Reporting Bonuses, etc.
Present Value of Deferred Compensation
Player Pension Benefits
Medical and Dental Insurance Benefits
Disability Insurance Benefits
Player per diems and Training Camp Allowances
Employer Payroll Taxes
Player Finish and Other Monetary Awards (Article 28)
Payments for Games 83-84 (Article 16)

Those are cost compoents of labor costs directly associated with labor that are included in the 75% number that concerned the league and included in the roughly 55% league target number. You cannot ignore them as you do above.

Rough Numbers:
(assuming 2003-4 is close enough to 2002-3 except the 5% rise in revenues & everything moves with it to keep it simple)

Player costs: payroll ++ are 75% of 2.1 billion / 30 teams = $52.5 mil/team. With $44 mil ave team payroll, 19.3% on top of that for benefits, bonuses, employer payroll taxes, etc (or +8.5 mil) gets you to the 75% number.

So with a new 40 mil average (instead of 44 mil), times 1.193 to add on the 19.3 % of other player payroll/benefit costs, times 30 teams = 1.432 bil / 2.1 bil = 68.2 % of revenues.

You still have a lot of work to do and the owners would be absolutely stupid to sign such a deal - as I said before.

If they're not happy with "only" a 10% drop in payroll (I think it would be a lot more) then maybe they should have taken the 24% rollback. Oops.

If they can't get more reasonable numbers, I hope they put the boots to them for another year and start over. Lock 'em out for another year for all I care and put the AHL on TV.

I'm all for a smaller range, but if you lower the cap you have to raise the floor and (horrors) share more revenue. I have no problem with a $34-$44 million range, but I sure bet the owners do since it means giving the Nashville's of the world an extra $4 million to hit the floor.

Under the 30-50 mil Cap range you support, you don't spend a nickel on taxes or revenues sharing because you're already going out of business.

 

[thinkwild]

That's Goodenow BS economics. That's only player salary. Who is picking up the tab on these player costs:
http://www.nhlcbanews.com/ap_d.html
Signing Bonuses
Performance Bonuses, Reporting Bonuses, etc.
Present Value of Deferred Compensation
Player Pension Benefits
Medical and Dental Insurance Benefits
Disability Insurance Benefits
Player per diems and Training Camp Allowances
Employer Payroll Taxes
Player Finish and Other Monetary Awards (Article 28)
Payments for Games 83-84 (Article 16)

Those are cost compoents of labor costs directly associated with labor that are included in the 75% number that concerned the league and included in the roughly 55% league target number. You cannot ignore them as you do above.

Who has ignored them? The players when they offered to rollback their salaries to cover it?

Under the 30-50 mil Cap range you support, you don't spend a nickel on taxes or revenues sharing because you're already going out of business.

Here's an idea. Maybe they should spend less if they are going out of business. Dotn tell me a $70mil team like Detroit that is losing money will be devestated if they are forced to spend at Calgary or Tampa Bay levels. They will have to make decisions. If they are losing in the new lower player cost market at the $50mil end of the range, then they should do what you want to force them to do. If they arent losing money at a $50mil payroll in this new lower labour market, why would you want to force them to?

I know, unless you have the security blanket of knowing the books are prime team building decision maker, you wont get any joy out of watching hockey. Better to hope the lockout continues.

 

[Exisled]

That's Goodenow BS economics. That's only player salary. Who is picking up the tab on these player costs:

Signing Bonuses
Performance Bonuses, Reporting Bonuses, etc.
Present Value of Deferred Compensation
Player Pension Benefits
Medical and Dental Insurance Benefits
Disability Insurance Benefits
Player per diems and Training Camp Allowances
Employer Payroll Taxes
Other Miscellaneous Costs
Player Finish and Other Monetary Awards (Article 28)
Payments for Games 83-84 (Article 16)

Gee....I dunno. Let's see. In the real world, it looks a bit like this:

Signing Bonuses - If a prospective employer wants me to jump ship with my current company and come to work for him? Well....If he wants me bad enough to offer me a "signing bonus", then that's on him. You're saying that I should be responsible for paying for that bonus by including it in my negotiated annual salary? If that's the case, what was the point of offering the bonus? Why not just offer a higher annual salary to begin with and call it a day?

Performance Bonuses, Reporting Bonuses, etc. - Same as above. Should my performance exceed expectations to the point where I'm earning substantial bonuses, then I'm doing my job very well, and deserve every penny. If the bonuses are kicking in at a level where they are EASILY acheivable, then WHO is to blame for setting the "bonus structure" too low? Again....why should I be asked to include those bonuses in my annual salary? What was the point in setting up a "bonus structure" to begin with?

Present Value of Deferred Compensation - If I were willing to defer some of my salary so that my employer could use that money to better the Company, then WHY should I have to have the money I've ALREADY "given up", (at least on a temporary basis), included as a "percentage" of my annual salary. I would be better off telling my employer to get BENT when he asks me to "take one for the team" so that we'll all be better off, and tell him he'll have to look ELSEWHERE than MY salary for working capital. Or are you suggesting that I should take a hit in salary to cover some OTHER employee"s "deferred compensation"?

Player Pension Benefits - It's called a "benefit" for a reason. If I'm paying for it mySELF by having it calculated into my annual salary, then how much of a "benefit" is it? ALL companies offer "benefits" in one form or another. If the employee is paying for it, it ceases to BE a "benefit".

Medical and Dental Insurance Benefits - No different than any OTHER company offering Medical/Dental Insurance. If they're going to include it as PART of my annual salary, then I'd expect them to BUMP UP my salary accordingly.

Disability Insurance Benefits - See above, but with a twist. Companies, ALL companies, are REQUIRED to pay DI Benefits. You want to include it in my annual salary? Then you're going to have to bump my salary up to cover the cost of something which YOU, as the EMPLOYER are REQUIRED to pay.

Player per diems and Training Camp Allowances - There's not a single company out there that forces it's employee's to pay for their OWN expenses while travelling on business or training for the benefit of the COMPANY. If you want me to pay for the cost of attending numerous symposiums/training seminars/business meetings out of my OWN pocket, then you're going to have to make sure that my annual salary is sufficient to cover these costs. If I spend $30K out of pocket per year while on the road on "company business"? Fine. I'll expect my annual salary to see a $30K increase to cover the cost.

Employer Payroll Taxes - You DO understand how "Employer Payroll Taxes" WORK, don't you? Here's a primer.....Every paycheck, your employer deducts a percentage, (based upon various "tables" provided by Federal/State/Local government), from your paycheck. He's deducted it from your paycheck, therefore, he is NOT paying it to YOU. What he DOES is take it and cut a check DIRECTLY to the Federal/State/Local government to which it is OWED. There's no "out of pocket" expense to HIM. He's simply acting as a "clearing house", a "go-between", between YOU and the Fed/State/Local Government. He's taking YOUR money and sending it directly to the appropriate agency. By asking that "Employer Payroll Taxes" be included in MY annual salary, my boss would be forcing ME to pay my taxes......TWICE.

Other Miscellaneous Costs - "Miscellaneous" as in what? The cost of pencils? Paper clips? File folders? Computer hardware? Software? Telephone bill? Other utilities? I don't know about you.....but I've NEVER been employed by a company which demands that I cover the cost of my own "office supplies".

Player Finish and Other Monetary Awards (Article 28) - Would fall under the category of "bonus". The better you perform for your company, the better your company does. It's a "reward" for making your company stronger than it was BEFORE you got there. Say your boss wants to hold a spring "sales drive". He asks all employees to come in, every day, AFTER work, to work the phones and try to drum up ADDITIONAL business. He advises you that you will be working from 5pm-9pm every night, AND "some weekends", for no increase in salary. Wouldn't YOU expect a "bonus" should your efforts result in a spike in business and more money in his coffers? Otherwise, why put in the extra hours? Pride? Hooey.

Those are cost compoents of labor costs directly associated with labor that are included in the 75% number that concerned the league and included in the roughly 55% league target number. You cannot ignore them.

Those are costs that are carried by EVERY company who does business.

No....you cannot "ignore" them. You simply have to LIVE WITH THEM.

They are ALL part of the "Cost of doing business."

I doubt you'll find ANY company who demands that it's employees accept a wholesale, company-wide, reduction in salary whenever the lease payments on the building goes up, or when the phone bill comes in too high, or when Workman's Comp. rates triple.

I also doubt you'll find ANY company who expects their employess to GUARANTEE that they will tie their salaries DIRECTLY to a percentage of what the company's annual telephone/utility/rent bills will be.

Especially when it is the EMPLOYER himself who is DRIVING up costs through STUPID business decisions.

 

[Crazy_Ike]

Good point. When there's a magnetic cap, the teams have to spend to it. So what you are suggesting then is, take away the cap, and the pressure to spend is removed. Makes sense.

Makes great sense, if you don't mind the only teams competing for players are the top few who have the money to throw around while everyone else scrambles trying to pick up the pieces and implements defensive systems to overcome their lack of skill.

Some of us don't think that's such a good thing, however... evidenced by the last ten years.

 

[Mess]

Makes great sense, if you don't mind the only teams competing for players are the top few who have the money to throw around while everyone else scrambles trying to pick up the pieces and implements defensive systems to overcome their lack of skill.

Some of us don't think that's such a good thing, however... evidenced by the last ten years.

Do you honestly believe that when the league caps the big market team spending teams taking them out of the UFA bidding wars by being capped out (of Cap space) that all the small markets teams are going to run out and sign the big UFA on the market to fair prices ??.

So teams like Florida, Pittsburgh, Washington, Nashville, Atlanta and Carolina are going to run out and spend money THEY DON'T HAVE and sign Kariya, Kovalev, Lindros, Palffy, Demitra, Murray, Selanne, Allison, etc and all the other soon to be flooded UFA market by the loss of a season ??

Well then when they do should make for a great league when they get their team Salaries up to that 40 mil or 54% linkage number and equal to the other teams ..

 

[Crazy_Ike]

Do you honestly believe that when the league caps the big market team spending teams taking them out of the UFA bidding wars by being capped out (of Cap space) that all the small markets teams are going to run out and sign the big UFA on the market to fair prices ??.

The big market teams will be capped out. That is a severe reduction on the "demand" portion of simple economics since those were the teams that did a lot of (though not all of) the big spending on too many people in the past. Logic, economics, and history all suggest that should that happen, the price of the remaining free agents will fall. This is exactly why the union doesn't like a salary cap; it's the most basic of its objections.

Once the pricetag is down on those players, 1. other teams will be more able to afford quality, and 2. it should act as a drag on other players' salaries even when they are just resigning or renegotiating. All helping the teams in weaker markets or the teams being hamstrung by circumstance.

Also, it goes without saying that I want revenue sharing with this new capped CBA. Revenue sharing doesn't work by itself, but it does work with a cap.

 

[Mess]

The big market teams will be capped out. That is a severe reduction on the "demand" portion of simple economics since those were the teams that did a lot of (though not all of) the big spending on too many people in the past. Logic, economics, and history all suggest that should that happen, the price of the remaining free agents will fall. This is exactly why the union doesn't like a salary cap; it's the most basic of its objections.

Once the pricetag is down on those players, 1. other teams will be more able to afford quality, and 2. it should act as a drag on other players' salaries even when they are just resigning or renegotiating. All helping the teams in weaker markets or the teams being hamstrung by circumstance.

Also, it goes without saying that I want revenue sharing with this new capped CBA. Revenue sharing doesn't work by itself, but it does work with a cap.

But you certainly can understand why the NHLPA would have no interest in this idea ..

First they are suppose to give back 24% of their Salaries ..

Then since the big market teams will be CAPPED OUT, they will be forced to shop their services to non-traditional Hockey markets at rock bottom prices when they become UFA just to continue to play hockey to the CASH STRAPPED ..

These same teams that have Cap room now NEED meaningful Revenue Sharing to even cover these drastically reduced salaries, and the very thing that the NHL to date has put very little effort into securing in any NHL proposal to date ..

The poor teams though have nothing to offer the rich teams in return for the revenue sharing money they are holding their hands out for, so it remains a tough sell and not surprisingly so. When its in the best interest of the rich teams that the poor teams fold instead which eliminates the need to continue revenue sharing and taking from their profits .. Now the problem is not just the NHLPA any longer but the 30 owners are now divided on the Revenue Sharing issue..

You can still play Hockey after all and make money with 20 strong teams, rather then a league watered down to 30 teams.. NO ??

Logically suggesting that without meaningful revenue sharing these players will remain unemployed in the NEW NHL, by capping the rich and affordability issues with the poor preventing employment .. Really not a whole lot different then sitting out when you think about it .. Unemployed or locked out puts the same money in their pockets ..

The most common response here at HF after reading your post is GREEDY Players .. Why are they not jumping at the opportunity and why to them does it seem better to lose a years wages then to hitch themselves to that wagon, and the oh so rosy picture you just painted ??..

From the NHLPA point of view there is very little difference between HARD CAPPED OUT, CASH STRAPPED OUT or LOCKED OUT ..

 

[vanlady]

Can I ask everyone a question. How many companies with less than 100 employees made a profit of over 25 million dollars last year, that you know of ?

Here in BC I can think of one. The Vancouver Canucks

 

[Mess]

Can I ask everyone a question. How many companies with less than 100 employees made a profit of over 25 million dollars last year, that you know of ?

Here in BC I can think of one. The Vancouver Canucks

Terrible example .... That was under the Old CBA , with no Hard Cap or Linkage ...

Times are a changing now ... For some teams they will be able to make less profit now under the NEW CAP.

No one knows how fans will react when the Cap affects the talent on the Ice and the success of the team .. Fans may for either reason chose to spend their money elsewhere ..

Canucks made a huge profit and got sold at the same time .. Ever wonder why ??

 

[PecaFan]

Employer Payroll Taxes - You DO understand how "Employer Payroll Taxes" WORK, don't you? Here's a primer.....Every paycheck, your employer deducts a percentage, (based upon various "tables" provided by Federal/State/Local government), from your paycheck. He's deducted it from your paycheck, therefore, he is NOT paying it to YOU. What he DOES is take it and cut a check DIRECTLY to the Federal/State/Local government to which it is OWED. There's no "out of pocket" expense to HIM. He's simply acting as a "clearing house", a "go-between", between YOU and the Fed/State/Local Government. He's taking YOUR money and sending it directly to the appropriate agency.

My God. Did you really just condescendingly say "You DO know how payroll taxes work", then get it completely wrong?

Here's a hint. Employers have to *MATCH* your contributions for some taxes, and *MATCH AND EXCEED* other taxes.

 

[Jarqui]

Gee....I dunno. Let's see. In the real world, it looks a bit like this:
Employer Payroll Taxes - You DO understand how "Employer Payroll Taxes" WORK, don't you?

Yes but I'm not so sure that you do.

Here's a primer.....Every paycheck, your employer deducts a percentage, (based upon various "tables" provided by Federal/State/Local government), from your paycheck. He's deducted it from your paycheck, therefore, he is NOT paying it to YOU. What he DOES is take it and cut a check DIRECTLY to the Federal/State/Local government to which it is OWED. There's no "out of pocket" expense to HIM. He's simply acting as a "clearing house", a "go-between", between YOU and the Fed/State/Local Government. He's taking YOUR money and sending it directly to the appropriate agency. By asking that "Employer Payroll Taxes" be included in MY annual salary, my boss would be forcing ME to pay my taxes......TWICE.

Yes, an employer deducts taxes from your paycheck. But that doesn't look like that's all for the employer, does it ? See below for some examples:

Canada Pension Plan & Unemployment Insurance :
Employer contributions are required by law or they shut your business down and the owner can ultimately go to jail or be nailed with pretty severe financial penalties and a stiff interest rate for not paying them.
http://www11.sdc.gc.ca/en/cs/sp/arb/publications/research/1998-000169/page06.shtml

The same applies to health taxes. Employer contributions vary by province (some none). It's close to 2% of a team's payroll in Ontario. The Leafs and Sens just got dinged in a tax case on this.
http://www.hrinfodesk.com/Articles/payrollrates.htm

I'm not bothering with states which may well require employer contributions but this link
http://www.txcpa.net/payroll_taxes.htm
is from Texas for 2001 that shows requirements for employer matching contributions for federal payroll taxes on :
FICA Social Security 6.2% (to some ceiling)
FICA Medicare 1.45% (to some ceiling)
FUTA Federal Unemployment Tax 1.45%

This is from Quick books (US payroll software) which confirms the above:
http://quickbooks-add-ons.com/links/shop/ch_11.HTM
FICA (Social Security) and Medicare payments come out next. And for every cent of employee contribution, there is one cent of employer contribution. All earned income is subject to Medicare XE "Medicare" XE "Social Security" . A ceiling applies to FICA XE "FICA" , and it increases each year

In light of your claim, how do you explain all this ? How do NHL owners and your employer get away with not makeing these contributions over and above what employees are paid ?

Are we to accept the PA Apologist's view that somehow NHL teams are exempt from goverment requirments of employers to make contributions to the payroll taxes ? OR is this just another garbage spin on Goodenow economics to waste our time ?

 

[Jarqui]

Gee....I dunno. Let's see. In the real world, it looks a bit like this:

Signing Bonuses - If a prospective employer wants me to jump ship with my current company and come to work for him? Well....If he wants me bad enough to offer me a "signing bonus", then that's on him. You're saying that I should be responsible for paying for that bonus by including it in my negotiated annual salary? If that's the case, what was the point of offering the bonus? Why not just offer a higher annual salary to begin with and call it a day?

Performance Bonuses, Reporting Bonuses, etc. - Same as above. Should my performance exceed expectations to the point where I'm earning substantial bonuses, then I'm doing my job very well, and deserve every penny. If the bonuses are kicking in at a level where they are EASILY acheivable, then WHO is to blame for setting the "bonus structure" too low? Again....why should I be asked to include those bonuses in my annual salary? What was the point in setting up a "bonus structure" to begin with?

Present Value of Deferred Compensation - If I were willing to defer some of my salary so that my employer could use that money to better the Company, then WHY should I have to have the money I've ALREADY "given up", (at least on a temporary basis), included as a "percentage" of my annual salary. I would be better off telling my employer to get BENT when he asks me to "take one for the team" so that we'll all be better off, and tell him he'll have to look ELSEWHERE than MY salary for working capital. Or are you suggesting that I should take a hit in salary to cover some OTHER employee"s "deferred compensation"?

Player Pension Benefits - It's called a "benefit" for a reason. If I'm paying for it mySELF by having it calculated into my annual salary, then how much of a "benefit" is it? ALL companies offer "benefits" in one form or another. If the employee is paying for it, it ceases to BE a "benefit".

Medical and Dental Insurance Benefits - No different than any OTHER company offering Medical/Dental Insurance. If they're going to include it as PART of my annual salary, then I'd expect them to BUMP UP my salary accordingly.

Disability Insurance Benefits - See above, but with a twist. Companies, ALL companies, are REQUIRED to pay DI Benefits. You want to include it in my annual salary? Then you're going to have to bump my salary up to cover the cost of something which YOU, as the EMPLOYER are REQUIRED to pay.

Player per diems and Training Camp Allowances - There's not a single company out there that forces it's employee's to pay for their OWN expenses while travelling on business or training for the benefit of the COMPANY. If you want me to pay for the cost of attending numerous symposiums/training seminars/business meetings out of my OWN pocket, then you're going to have to make sure that my annual salary is sufficient to cover these costs. If I spend $30K out of pocket per year while on the road on "company business"? Fine. I'll expect my annual salary to see a $30K increase to cover the cost.

Employer Payroll Taxes - You DO understand how "Employer Payroll Taxes" WORK, don't you? Here's a primer.....Every paycheck, your employer deducts a percentage, (based upon various "tables" provided by Federal/State/Local government), from your paycheck. He's deducted it from your paycheck, therefore, he is NOT paying it to YOU. What he DOES is take it and cut a check DIRECTLY to the Federal/State/Local government to which it is OWED. There's no "out of pocket" expense to HIM. He's simply acting as a "clearing house", a "go-between", between YOU and the Fed/State/Local Government. He's taking YOUR money and sending it directly to the appropriate agency. By asking that "Employer Payroll Taxes" be included in MY annual salary, my boss would be forcing ME to pay my taxes......TWICE.

Other Miscellaneous Costs - "Miscellaneous" as in what? The cost of pencils? Paper clips? File folders? Computer hardware? Software? Telephone bill? Other utilities? I don't know about you.....but I've NEVER been employed by a company which demands that I cover the cost of my own "office supplies".

Player Finish and Other Monetary Awards (Article 28) - Would fall under the category of "bonus". The better you perform for your company, the better your company does. It's a "reward" for making your company stronger than it was BEFORE you got there. Say your boss wants to hold a spring "sales drive". He asks all employees to come in, every day, AFTER work, to work the phones and try to drum up ADDITIONAL business. He advises you that you will be working from 5pm-9pm every night, AND "some weekends", for no increase in salary. Wouldn't YOU expect a "bonus" should your efforts result in a spike in business and more money in his coffers? Otherwise, why put in the extra hours? Pride? Hooey.

So what do we have here ? Another PA Apologist who screamed at the NHL to count all the revenues because Forbes unaudited guesses without looking at the books were different, but is taking a hypocritical pass by demanding that we not count or look at all the labor costs directly associated with the players while also contradicting what any acountant or MBA would look at and do ?

You do NOT merely look at "payroll salaries" in a CBA. You have to look at the entire compensation package - benefits, bonuses, etc. They all cost money and they're ALL negotiable - except the obvious things like tax rates.

Are you advocating that the NHL embrace a hard "payroll" cap that allow the owners to freely spend millions in bonuses not covered under the cap ? How does the cap solve the problem ?

This issue regarding labor cost components has been addressed on HF in this thread:
http://hfboards.com/showthread.php?p=2697760#post2697760
The approach that Levitt and the NHL have taken with their grouping of player payroll costs representing player salaries, bonuses, benefits, insurance, deferred compensation, employer tax contributions etc is classic in assessing what percentage of labor costs are of revenue. I've never seen a set of financials or a view of labor within a business that said "dump all the other labor expenses somewhere else and we'll look purely and exclusively at salaries to make our assessment". All companies know that employees cost them directly something roughly like 20-40% above the salaries they actually pay them due to the expenses mentioned above.

 

[Jarqui]

Those are costs that are carried by EVERY company who does business.

No....you cannot "ignore" them. You simply have to LIVE WITH THEM.

They are ALL part of the "Cost of doing business."

You don't have to "live" with them because they are part of the CBA. You do negotiate the majority of them while others ride a long as a pecentage of some number that has been negotiated.

I doubt you'll find ANY company who demands that it's employees accept a wholesale, company-wide, reduction in salary whenever the lease payments on the building goes up, or when the phone bill comes in too high, or when Workman's Comp. rates triple.

Delta Pilots Take 32.5% Pay Cut
http://www.cbsnews.com/stories/2004/11/12/national/main655260.shtml
) Pilots at Delta Air Lines Inc. gave the ailing carrier a major boost in its bid to escape bankruptcy by agreeing to lowered salaries, but their new contract offers no guarantees for the company's future.

Still, analysts call the pilots' assent to a 32.5 percent pay cut Thursday a linchpin in the struggle to turn Delta around.

Almost 80 percent of Delta's 7,000 pilots supported a new contract that will cut their pay by 32.5 percent and skip raises for the next five years. The concessions, which begin Dec. 1, will save Delta $1 billion yearly and were crucial as Delta attempts to persuade creditors to restructure more

 

[vanlady]

You don't have to "live" with them because they are part of the CBA. You do negotiate the majority of them while others ride a long as a pecentage of some number that has been negotiated.



Delta Pilots Take 32.5% Pay Cut
http://www.cbsnews.com/stories/2004/11/12/national/main655260.shtml
) Pilots at Delta Air Lines Inc. gave the ailing carrier a major boost in its bid to escape bankruptcy by agreeing to lowered salaries, but their new contract offers no guarantees for the company's future.

Still, analysts call the pilots' assent to a 32.5 percent pay cut Thursday a linchpin in the struggle to turn Delta around.

Almost 80 percent of Delta's 7,000 pilots supported a new contract that will cut their pay by 32.5 percent and skip raises for the next five years. The concessions, which begin Dec. 1, will save Delta $1 billion yearly and were crucial as Delta attempts to persuade creditors to restructure more

You forget to mention that in return for that contract the pilots union got a very large amount of Delta stock in return. If Delta survives and becomes profitable again the union could easily see that money back.

 

[Jarqui]

You forget to mention that in return for that contract the pilots union got a very large amount of Delta stock in return. If Delta survives and becomes profitable again the union could easily see that money back.

And you forgot to mention the pilots 32% wasn't linked to revenues to help protect their interests in the event that Delta revenues rose which they'd need to do for the NHL in order for the NHL to make big profits.

And you forgot to mention that the NHL offered profit sharing in February if that was an NHLPA concern or appealed to them as it did the pilots with with the option to by up to 15% of Delta's stock.

Because there are 30 different owners, offering NHL stock is almost impossible to logistically figure out and implement given their track record on CBA negotiations so far.

 

[kdb209]

You forget to mention that in return for that contract the pilots union got a very large amount of Delta stock in return. If Delta survives and becomes profitable again the union could easily see that money back.

Given the amount of money the former "Owner Employees" of United Airlines lost, I wouldn't hold my breath. And the only way Delta ever becomes healthy and profitable again will be with more significant job and wage cuts - kind of put's the union in bit of a conflict-of-interest.

And you make it sound like wage concessions are a rare thing - they are not. They have been quite commonplace in ailing industries - airlines, US automakers, steel, etc.

 

[vanlady]

Given the amount of money the former "Owner Employees" of United Airlines lost, I wouldn't hold my breath. And the only way Delta ever becomes healthy and profitable again will be with more significant job and wage cuts - kind of put's the union in bit of a conflict-of-interest.

And you make it sound like wage concessions are a rare thing - they are not. They have been quite commonplace in ailing industries - airlines, US automakers, steel, etc.

I don't disagree that wage concessions are common, however, all wage concessions I have seen have come with either large stock allotments, huge lump sum payments at the end of the contract or huge jumps in benefits(such as stock options, performance bonuses, etc, etc). I have yet to see a settlement that requires a union to not only take a wage cut, but huge cuts in benefits and the elimination of all contract dispute remedies.

 

[kdb209]

I don't disagree that wage concessions are common, however, all wage concessions I have seen have come with either large stock allotments, huge lump sum payments at the end of the contract or huge jumps in benefits(such as stock options, performance bonuses, etc, etc). I have yet to see a settlement that requires a union to not only take a wage cut, but huge cuts in benefits and the elimination of all contract dispute remedies.

There have been wage concessions in the auto and steel industries where the only real concession on the part of the owners were commitments to not close down plants for a finite amount of time.

 

[CGG]

All of these "additional player costs" are something that Gary brought into the equation to make it look like teams are paying the players more than they are. The famous 75% ratio was based on player costs, which includes everything the NHL could think of, even per diems. But Gary has referred to the 75% as salaries at least once.

Am I the only one who remembers all of the cap proposals, they always had 2 numbers, i.e. $40.0 million cap including player costs, $37.8 million cap salaries only. Every single time, all of these "additional costs" came out to $2.2 million per team, hardly the 17% that some are claiming. And this was a fixed cost too, didn't change with the level of salaries.

The whole "cap is a magnet" theory is a load of crap too, something else that Gary invented. Because it happens in the NFL, was his reasoning. Difference being, all teams in the NFL can easily afford to spend to the cap. I would like to see Nashville somehow decide that, although they can barely break even at a $25 million payroll, they feel they have to spend up to a $50 million cap all of a sudden, just because other teams do. There's no cap now, and they're spending $25 million. How does the introduction of a cap force them to instantly double their payroll?

Who knows what the avg salary would be in a $30-$50 million range. I bet it would be darn close to $40 million though. If you want the avg to be $40 million (pick another number if you wish, but same reasoning) then you need a range. A $38-$42 million range would guarantee an average close to $40 million, but to do that you would need serious revenue sharing so that Carolina could affor $38 million. Therefore you have to open the range a little so the crap teams can spend less. If you lower the floor, you need to raise the ceiling so the average stays the same.

If the owners want a narrower range with a lower cap, they have to cough up more revenue sharing. If they don't want to share, they have to live with a higher cap. Can't have it both ways. As soon as they decide how much they can share, then this lockout is over.

 

[CGG]

Canada Pension Plan & Unemployment Insurance :
Employer contributions are required by law or they shut your business down and the owner can ultimately go to jail or be nailed with pretty severe financial penalties and a stiff interest rate for not paying them.
http://www11.sdc.gc.ca/en/cs/sp/arb/publications/research/1998-000169/page06.shtml

CPP and UI are roughly 3.8% and 2.9% of earnings. Capped at $39,000 CDN a year, or the equivalent of 2 games worth of salary for someone making $1.3 million US. If owners match at the same rates it's roughly $2,600 CDN per player, a whopping $59,800 CDN a year. This is not why teams are in rough shape financially.