Salary Cap Formula?

Discussion in 'The Business of Hockey' started by fcbarcelona, Aug 11, 2005.

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  1. sakicisstupid

    sakicisstupid Registered User

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    Anyone know how the cap is to be determined on an annual basis? I figure that its largely determined by a figure midway between the cap floor/max that closely relates to the fixed percentage of a specified amount of revenue (based on previous year's revenues generated in the seasons following this year). For instance, the NHL is projecting 1.7 B in revenues for the upcoming season. 54% of this would result in 918 M going towards player compensation. That averages to 30.6 M in alotted monies per team. But with a payroll gap being allowed and not exceeding 17.5 M, the cap max would be 17.5 M/2 above the 30.6 M figure (39.35 M). Conversely, the floor would be 17.5 M/2 below (21.85 M).

    If this is the formula that is used, it would seem to me that should revenues fall to 1.5 B (as many suspect it will), the cap would become 35.75 M (with a floor of 18.25 M). Yet, if revenues recover and the NHL pots 2.2 B (at levels of what the league was making prior to the lockout, 55% of which would go to the players), the cap could become 49.08 M (while the floor would be 31.58 M). The player cap max would be 9.82 M.

    This increase in the cap is significant for a couple reasons. Many small market clubs are continuing to operate on a budget (close to 35 M) despite the cap being as low as it is. With revenue sharing being minimal (though clubs that restrict their budget at lower levels are rewarded with more revenue being shared with them), it may be possible that small market teams find themselves financially handicapped within 5 years. Even more important is that a 50 M cap allows big market clubs to bid much more competitively for UFAs. In fact, when the Avs won the cup in 2001, their payroll was 51.7 M despite featuring a star-studded roster containing Roy (7.5 M), Blake (5.3 M), Forsberg (10 M), Sakic (7.9 M), Hejduk (1.2 M), Tanguay (1.0 M), Bourque (5.5 M), Drury (1.3 M) and Foote (3.2 M).
     
  2. NotJT

    NotJT Registered User

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    Here is a post I wrote a few weeks ago:

    Here is the formula that seems to explain everything:
    LR=League revenue for the previous season
    NP=Negotiated percentage of league revenue the players get (as a decimal)
    .54 for revenue below 2.2billion
    .55 for revenue between 2.2-2.39 billion
    .56 2.4 billion to 2.69 billion
    .57 2.7+
    GAP=Negotiated gap between floor and ceiling
    17.5 million this season
    16 million for next year (and beyond?)

    ((LR * NP)/30)+/- (GAP/2)


    If the NHL gets to 2.2 billion in revenues (pre-lockout) the floor-cap would be 32.3-48.3, 2.4 billion 36.8-52.8, 2.7 billion 43.3-59.3 million

    This isn't 100% sure, just stuff I gleaned from various sources which when reverse engineering all made sense.
     
  3. Captain Ron

    Captain Ron Registered User

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    I have heard that future salary cap/floors will be average payroll +/- $8 million. I can't confirm that though. But if that were the case and the league revenue dropped to $1.5 billion then next years pay range would be $19M floor....and $35M ceiling. Going forward though the revenue sharing is suppose to bring up the budgets of the small market clubs. So even though they could not spend like Toronto or Detroit they could stay within $10 million of the top payroll.
     
  4. sakicisstupid

    sakicisstupid Registered User

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    its good to see our numbers are largely consistent with each other. thx for the help.
     
  5. sakicisstupid

    sakicisstupid Registered User

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    from what i've read, the amount of revenues being shared is quite minimal (average of 5-7 M from the top 10 clubs sharing money with 15 other teams). that works out to an average of 4 M per club receiving shared revenues. how much money that's added to revenue sharing if league revenues increase, i wouldn't know. but i doubt the league will get much more than 7 M from each of its top level clubs. perhaps it can pry out 10 M (6.7 M being alotted on average for the bottom 15 teams).

    hypothetically, though, a payroll gap of 8 M could work if revenues don't exceed 2.2 B. the cap floor would be 36.3 M while the max would be 44.3 M. that floor should be affordable to most NHL clubs. i also assume that if revenues will increase beyond 2.2 B, it'll come in the form of national TV coverage (as ticket revenues will have been exhausted). this woud mean that the amount of money going to small market clubs would increase substantially and could allow them to field payrolls up to 40 M (which would be necessary if revenues should reach 2.5 B).
     
    Last edited: Aug 11, 2005
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