Union Wants Lower Cap?

Status
Not open for further replies.

Brain Hemorrhage

Registered User
Jan 16, 2003
2,458
30
Boston, MA
Union wants lower cap? said:
Hockey News Story
Plus, some of the light-spending markets would actually be hurt by the change, since escrow account monies are used in part to fund the NHL's revenue sharing program.
Why/how is escrow account money used in part to fund the NHL's revenue sharing program? I am not quite sure how that makes any sense at all...

An escrow account by definition is managed by a third party, meaning the league should have no control over it.
 

Captain Ron

Registered User
Jun 9, 2003
17,409
0
Gardnerville, NV
Visit site
Brain Hemorrhage said:
Why/how is escrow account money used in part to fund the NHL's revenue sharing program? I am not quite sure how that makes any sense at all...

An escrow account by definition is managed by a third party, meaning the league should have no control over it.
You are correct. The Escrow money would not be used to fund revenue sharing until the conclussion of the season. When it is determined what percentage belongs to the players and what percentage belongs to the league. Only then is the revenue sharing money distributed.
 

Brain Hemorrhage

Registered User
Jan 16, 2003
2,458
30
Boston, MA
Spongebob said:
You are correct. The Escrow money would not be used to fund revenue sharing until the conclussion of the season. When it is determined what percentage belongs to the players and what percentage belongs to the league. Only then is the revenue sharing money distributed.
So is thehockeynews.com columnist completely wrong in saying that it hurts light-spending teams?
 

kdb209

Registered User
Jan 26, 2005
14,870
6
Spongebob said:
You are correct. The Escrow money would not be used to fund revenue sharing until the conclussion of the season. When it is determined what percentage belongs to the players and what percentage belongs to the league. Only then is the revenue sharing money distributed.
Correct. There is more details on revenue sharing and escrow in the Sticky Thread at the top of the BoH page ("Shedding Light on NHL Revenue Sharing"):

http://www.hfboards.com/showthread.php?t=162356

That thread quotes a Sports Business Journal article with details about revenue sharing:

Each year the league sets a payroll midpoint, equaling 54% of the avg. club's revenue
Teams can spend up to $8 mill. above or below the midpoint (the range is slightly higher for the 2005-06 season)
Since teams can spend anywhere in this $16 mill. range, there's a high probability that total compensation of players will be greater than 54%
To protect against such overpayment, the league requires a portion of each player's salary to be set in escrow; that money will be used as one of several sources to fund revenue sharing, which is designed to allow representative and competitive payrolls
Clubs start with 54% of their own revenues for payroll, and revenue sharing makes up the difference.

There are two batches of revenue sharing:
First batch - equal to 4.5% of league revenues (estimated to be $78 mill. this season); this batch aims to allow clubs to afford payrolls of $4 mill. below the midpoint; it is funded by league media revenue, playoff gate receipts, escrow funds, and top-grossing clubs

Second batch - designed to help clubs get to the midpoint but not over it; funded by excess escrow funds, if available

Any leftover escrow funds are to be distributed evenly between all 30 NHL clubs.

A lower cap will actually hurt the small market teams that receive revenue sharing. The second batch of revenue sharing is funded from any excess escrow funds at the end of the season. If the cap is lowered by $3M like the PA wants, the total league payroll will be reduced, and excess escrow dollars will then also be reduced - resulting in a smaller pot for revenue sharing.
 
Status
Not open for further replies.

Ad

Upcoming events

Ad

Ad

-->