why is Expansion money NOT part of formula?

[Brent Burns Beard]

Expansion money CBA question

Do any of our resident CBA experts know if new expansion money counts in the salary cap formula?

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[Ted Hoffman]

It's not explicitly mentioned; however, 50.1 mentions a "non-exhaustive" list of items that count as revenue and a "non-exhaustive" list of items that do not count as revenue. IMO it would since expansion fees are typically distributed among the existing teams - the only question would be the length of period over which the expansion fees would be spread out.

Example: if 2 teams are added at $200 million each, neither the league nor the NHLPA would want revenues used for calculating the salary cap to go from say $2.4 billion in 20X0 to $2.8 billion in 20X1 and then back down to $2.4 billion in 20X2.

 

[jamiebez]

It's not explicitly mentioned; however, 50.1 mentions a "non-exhaustive" list of items that count as revenue and a "non-exhaustive" list of items that do not count as revenue. IMO it would since expansion fees are typically distributed among the existing teams - the only question would be the length of period over which the expansion fees would be spread out.

Example: if 2 teams are added at $200 million each, neither the league nor the NHLPA would want revenues used for calculating the salary cap to go from say $2.4 billion in 20X0 to $2.8 billion in 20X1 and then back down to $2.4 billion in 20X2.

I was always under the impression that it wouldn't count as revenue for cap purposes. After all, the union wins by getting 40 new jobs (assuming 2 teams are added).

This could just be my impression gleaned from reading other un-CBA-educated sources (like most of the media )

 

[Ted Hoffman]

That's why both sides have lawyers. Let them fight over it.

 

[kdb209]

It's not explicitly mentioned; however, 50.1 mentions a "non-exhaustive" list of items that count as revenue and a "non-exhaustive" list of items that do not count as revenue. IMO it would since expansion fees are typically distributed among the existing teams - the only question would be the length of period over which the expansion fees would be spread out.

Actually it is explicitly listed as excluded from HRR - Article 50.1(b)(ii).

(b) Notwithstanding anything to the contrary in Section 50.1(a) above, HRR shall not include the following non-exhaustive list of revenues:

(i) Revenues from the Assignment (i.e., Waivers) of any SPC;

(ii) Revenues from the relocation or sale of any existing Club (or any interest therein) or the grant of any new franchise;​

 

[Ted Hoffman]

Actually it is explicitly listed as excluded from HRR - Articl2 50.1(b)(ii).

That is why you're HF's CBA guru.

 

[Brent Burns Beard]

I was always under the impression that it wouldn't count as revenue for cap purposes. After all, the union wins by getting 40 new jobs (assuming 2 teams are added).

This could just be my impression gleaned from reading other un-CBA-educated sources (like most of the media )

thanks for the answer .. and to answer this poster, i dont believe the union wins if the revenue does not up, it just means revenue/32 teams is the cap, which means each team cap goes down and so does each players share is spread over 40 more units.

i personally think the players should have been given a share of it, it is revenue afterall. whats to stop the owners from putting all their resources into generating excluded revenues at the expense of the health of the game?

 

[jamiebez]

thanks for the answer .. and to answer this poster, i dont believe the union wins if the revenue does not up, it just means revenue/32 teams is the cap, which means each team cap goes down and so does each players share is spread over 40 more units.

Fair enough... I assumed the new teams would be able to pull in "average" revenues to make up that gap, but that likely won't be the case.

 

[kdb209]

thanks for the answer .. and to answer this poster, i dont believe the union wins if the revenue does not up, it just means revenue/32 teams is the cap, which means each team cap goes down and so does each players share is spread over 40 more units.

i personally think the players should have been given a share of it, it is revenue afterall. whats to stop the owners from putting all their resources into generating excluded revenues at the expense of the health of the game?

No, the PA does win - revenues will go up by adding two (or more) new teams worth of gate receipts, luxury boxes, local TV deals, concessions, parking, etc.

It is not likely that teams could really generate large revenues from the excluded sources, and the PA learned from the NFL - the included/excluded lists are not exclusive, and any new revenue sources will be judged by an arbiter as to whether they are closer to the currently included revenue streams or the excluded ones. The NFL was not as flexible, so the owners came up with new revenue streams - exclusive stadium advertising deals, corporate sponsorships, and naming rights - that were not included in the CBA. This has resulted in a huge disparity in income between NFL teams, despite the leagues vaunted TV deals and revenue sharing.

The list of excluded revenues are pretty specific, and except for expansion fees, arena deals, and francise sales not large revenues.

(b) Notwithstanding anything to the contrary in Section 50.1(a) above, HRR shall not include the following non-exhaustive list of revenues:

(i) Revenues from the Assignment (i.e., Waivers) of any SPC;

(ii) Revenues from the relocation or sale of any existing Club (or any interest therein) or the grant of any new franchise;

(iii) Revenues from the operation of teams, other than NHL Clubs, that are owned or controlled by an NHL Club or a Club Affiliated Entity;

(iv) Revenues from the sale of Club personal property, including, without limitation, Club furniture, fixtures, and equipment, other than a Player's Game-Worn, practice-worn, or NHL-event worn or used jersey and/or equipment, or the sale of any other hockey-related items whose value is directly enhanced by a Player's personality rights;

(v) Proceeds from loans or other financing transactions;

(vi) Dues, loans, advances, cash calls, or capital contributions received by the NHL or an NHL-affiliated entity (e.g., NHL Enterprises, LP, NHL Enterprises Canada, LP), or a Club, any other entity owned by a Club, or any Club Affiliated Entity, from one or more of its owners, shareholders, members or partners;

(vii) Any amounts collected by the League from any Club, Player, or other Club personnel, including, without limitation, fines or other moneys collected by the League as a result of any League-imposed disciplinary action;

(viii) Revenues received by any Club in connection with Player Compensation Cost Redistribution that is paid by the League;

(ix) Interest income;

(x) Investments in, and the proceeds from investments in, currency contracts, equities, options, and other financial derivatives;

(xi) Insurance recoveries and expense reimbursements from insurance;

(xii) Proceeds received by a Club as a result of any legal proceeding that are in excess of any amount representing actual lost revenues that would otherwise be included in HRR, less all costs and attorneys' fees incurred in connection with such proceeding;

(xiii) Revenues from the sale or leasing of real estate;

(xiv) Revenues raised for charitable organizations or purposes that have been raised by a Club with or without Player participation, for the charitable organizations or purposes for which revenues have been raised prior to the effective date of this Agreement, and all other revenues raised for charitable organizations or purposes that do not use current Player names and likenesses or make de minimis use of such names or likenesses (e.g., a silent auction with one or two Player-autographed sticks);

(xv) Any thing of value received in connection with the design or construction of a new or renovated arena or other Club facility including, without limitation, receipt of title to or a leasehold interest in real property or improvements, reimbursements of expenses related to any such project, benefits from project-related infrastructure improvements, or tax credits or abatements, so long as such things of value or other revenues are not reimbursements for any operating expenses of the Club;

(xvi) Any thing of value that induced or is intended to induce a Club either to locate or to relocate (e.g., amounts paid to enable a Club to buy-out its lease obligations or enable it to pay any relocation fee) or remain in a particular geographic location such that it will enable the Club or its Club Affiliated Entity to enhance categories or revenue streams constituting HRR, so long as such things of value or other revenues are not reimbursements for operating expenses of the Club;

Illustration #1: A Club leases the arena for its home games from a public authority. The lease provides that the public authority will construct or improve luxury suites in the arena. In lieu of making the physical improvements required by the lease, the public authority makes specific guaranteed annual payments to the Club. Such payments would be included in HRR.

Illustration #2: In order to induce a Club to stay in its current location, a public authority pays the Club a lump sum payment in the form of a loan (e.g., $20 million), part of which (e.g., $10 million) is to reimburse the Club for improvements to the locker room, construction of a practice facility and suite improvements, and part of which (e.g., $10 million) is paid to the Club to induce it to stay at the location over a stated period of time (e.g., twenty (20) years). Each year 1/20th of the loan is forgiven by the public authority so long as the Club remains in the arena and uses the latter portion of funds loaned for operation of the Club. Should the team relocate, any unpaid balance of the loan must be repaid to the public authority. The $10 million portion of the loan devoted to physical improvements of the arena and for the practice facility is excluded from HRR. The remaining portion of the loan is included in HRR (at $500,000 per year) because the funds are used for operating revenues of the Club.​

and

(xvii) Reimbursements to Clubs from the Escrow Account made pursuant to Article 50.11.​

 

[Brent Burns Beard]

With speculation that an expansion team could cost north of $250 million dollars (http://www.tsn.ca/tsn_talent/columnists/darren_dreger/), how come this isnt included in the pool of hockey related revenue?

this is NEW revenue, as opposed to selling an existing franchise. i dont disagree that the proceeds from a sale of an existing franchise should have nothing to do with the players, but expansion fee's i dont see why they shouldnt. yes i know new teams will mean more money for the players, but this is a HUGE pot of gold for the owners that is not shared with the players. i thought Bettman was all about a "partnership"?

any opinions on the matter?

 

[Pepper]

Considering NHL isn't going to expand during the next CBA, it's a moot point.

Also NHLPA gets 23-25 new members to their association so I don't think they are complaining.

 

[Brent Burns Beard]

Considering NHL isn't going to expand during the next CBA, it's a moot point.

Also NHLPA gets 23-25 new members to their association so I don't think they are complaining.

i disagree that they wont expand ... especially if the new PIT owners manages to squeeze his team out of town, i can see the NHL going back to PIT with an expansion team, much like they did with MIN and ATL.

And if they expand by 1, they really need to expand by 2, which brings KC, Vegas and Houston into play. As well as expanding, they would then goto a 20 team playoff, which makes sense and drives revenues UP.

and as far as 23-25 new members, that only is a GOOD thing if the revenue goes up proportionatly, otherwise the current players are simplying spreading their 54% amongst more people. this is another reason why the players should get a share of the expansion money, as compensation for diluting their 54%.

 

[Pepper]

The total amount of money players get will go up in every case, how much is debatable.

 

[Ted Hoffman]

The likely reason is as Pepper mentioned - the addition of a new franchise means the addition of players to the payrolls, so the NHLPA gets something out of expansion as well. Signing a $70 million national TV contract doesn't automatically give the NHLPA something without an agreement in place that players will get a fixed percentage of league revenues. It's also possible to a lesser extent that adding expansion fees - even if spread out over 3-5 years - will cause too much of a change in year-to-year revenues that at some point when it's no longer counted, league revenues would have to have a pretty decent jump to catch up.

Also realize that the addition of 2 new teams means new sources of gate revenue, a pretty solid bump in merchandise sales, and so forth. It's not like league revenues ex-expansion fees will be the same before and after expansion ... so the players wouldn't (shouldn't) lose anything in the process. It's more likely they'll end up getting a bigger slice of the pie.

 

[crashlanding]

The likely reason is as Pepper mentioned - the addition of a new franchise means the addition of players to the payrolls, so the NHLPA gets something out of expansion as well. Signing a $70 million national TV contract doesn't automatically give the NHLPA something without an agreement in place that players will get a fixed percentage of league revenues. It's also possible to a lesser extent that adding expansion fees - even if spread out over 3-5 years - will cause too much of a change in year-to-year revenues that at some point when it's no longer counted, league revenues would have to have a pretty decent jump to catch up.

Also realize that the addition of 2 new teams means new sources of gate revenue, a pretty solid bump in merchandise sales, and so forth. It's not like league revenues ex-expansion fees will be the same before and after expansion ... so the players wouldn't (shouldn't) lose anything in the process. It's more likely they'll end up getting a bigger slice of the pie.

I think this is as good a reason as any, perhaps the NHL should use this to pay back any escrow payments to the players over the next five years if the league doesn't take in enough revenue, but it should not factor into the determination of the cap number. It would be an artificial inflation of league revenues that would disappear the next year or whenever the time span it's spread out across ends. At that point you could have teams over the cap when it drops back down, which could create financial chaos.

I hope the league doesn't expand, at least not until all the teams get comfortable with the new cap economy. If they do expand I hope do it by 2 and they break the league into four divisions and rename them Norris, Patrick, etc. and have divisional playoffs.

 

[crashlanding]

The likely reason is as Pepper mentioned - the addition of a new franchise means the addition of players to the payrolls, so the NHLPA gets something out of expansion as well. Signing a $70 million national TV contract doesn't automatically give the NHLPA something without an agreement in place that players will get a fixed percentage of league revenues. It's also possible to a lesser extent that adding expansion fees - even if spread out over 3-5 years - will cause too much of a change in year-to-year revenues that at some point when it's no longer counted, league revenues would have to have a pretty decent jump to catch up.

Also realize that the addition of 2 new teams means new sources of gate revenue, a pretty solid bump in merchandise sales, and so forth. It's not like league revenues ex-expansion fees will be the same before and after expansion ... so the players wouldn't (shouldn't) lose anything in the process. It's more likely they'll end up getting a bigger slice of the pie.

I think this is as good a reason as any, perhaps the NHL should use this to pay back any escrow payments to the players over the next five years if the league doesn't take in enough revenue, but it should not factor into the determination of the cap number. It would be an artificial inflation of league revenues that would disappear the next year or whenever the time span it's spread out across ends. At that point you could have teams over the cap when it drops back down, which could create financial chaos.

I hope the league doesn't expand, at least not until all the teams get comfortable with the new cap economy. If they do expand I hope do it by 2 and they break the league into four divisions and rename them Norris, Patrick, etc. and have divisional playoffs.

Edit: On second thought I think the owners would get screwed on such a deal in this CBA. Doesn't the players' slice of the pie increase once the league reaches a certain higher revenue total? Like when they hit 2.6B the players get 56%?

If the average team revenue stayed the same the players would get a larger slice from every team just because two more are going to skew the revenue totals. They'd probably have to negotiate a change in this number before any new franchises were added.

 

[Jumptheshark]

With speculation that an expansion team could cost north of $250 million dollars (http://www.tsn.ca/tsn_talent/columnists/darren_dreger/), how come this isnt included in the pool of hockey related revenue?

this is NEW revenue, as opposed to selling an existing franchise. i dont disagree that the proceeds from a sale of an existing franchise should have nothing to do with the players, but expansion fee's i dont see why they shouldnt. yes i know new teams will mean more money for the players, but this is a HUGE pot of gold for the owners that is not shared with the players. i thought Bettman was all about a "partnership"?

any opinions on the matter?

The NHL will(IMO) have some teams in trouble within the next few years do to no support from fans

I think you will be looking at 2012-2016 area if the nhl expands again

and it is not likely that they will expand any more

they shouldn't have more teams then the other pro leagues in America

 

[SJeasy]

Another issue with expansion is that new franchises tend to underperform established franchises initially. The franchise fees should at the very least be held in escrow to guarantee the survival of existing franchises. The other place for the franchise fees is that in the event of bankruptcy, all current player contracts should be guaranteed over and above the worth of the bankrupt franchise. The league should be the guarantor of last resort.

 

[Jaded-Fan]

i disagree that they wont expand ... especially if the new PIT owners manages to squeeze his team out of town, i can see the NHL going back to PIT with an expansion team, much like they did with MIN and ATL.

And if they expand by 1, they really need to expand by 2, which brings KC, Vegas and Houston into play. As well as expanding, they would then goto a 20 team playoff, which makes sense and drives revenues UP.

and as far as 23-25 new members, that only is a GOOD thing if the revenue goes up proportionatly, otherwise the current players are simplying spreading their 54% amongst more people. this is another reason why the players should get a share of the expansion money, as compensation for diluting their 54%.

If the NHL allows the Pens to leave when the offer that is on the table in writing is there for the taking - I am not so sure the Pens' fans would come right back. We have suffered through some God-awful hockey for the past six years, and right on the brink of good things happening we need to start all over with thatcrap? The NHL should not treat a town with over 100 years of hockey history that way. I would be very disheartened and likely would eventually come back, but it would be hard.

 

[OG6ix]

The NHL will expand to 32 by 2010 I bet. At that time the Sonics will potentially move leaving seattle vacant of a 3rd Professional franchise, Portland may be on the radar still, KC will be there with their arena, Houston and Vegas will also be there. I also think of the current franchises will relocate at some point to one of the cities I just mentioned.

 

[CanadianDestroyer]

At this moment the NHL is more concerned with finding stability under the new CBA. This means trying hard to keep teams where they are with stable ownership and steady revenue. If expansion is in the making, don't expect any news until the decade is out. The current CBA is good until 2011 so I would imagine they would starting planning one afterwards when the next CBA is out.

 

[Killiecrankie*]

If the NHL allows the Pens to leave when the offer that is on the table in writing is there for the taking - I am not so sure the Pens' fans would come right back. We have suffered through some God-awful hockey for the past six years, and right on the brink of good things happening we need to start all over with thatcrap? The NHL should not treat a town with over 100 years of hockey history that way. I would be very disheartened and likely would eventually come back, but it would be hard.

I personally would never come back, I went through it with these pens im not going to pay my money to watch a new team sorry. Pens leave Pittsburgh will be dead to NHL hockey forever-and th worst part is this areas kids hockey is taking off. Pretty soon it will be standard i think for 2 or 3 pittsburghers to be drafted each year at least. That would be DESTROYED if the pens left.

 

[Montrealer]

I could see expansion happening within the next two years if the KC people offer enough money (and they seem desperate to get a major tenant for their new-in-2007 arena)

Since they'd require 2 teams, I'd guess one of Portland, Las Vegas or Houston would end up with the other one.

 

[sticknrink]

With the way the divisions are setup, I cannot see the NHL expanding to 2 unless they add 4 more in quick succession.

The 3 divisions have 5 teams each and with the emphasis on division al play it would screw things up if one division had an extra team.

Unless of couse, they add 2 teams and the league switches to two divisions of 8 per conference ...

 

[Metallian*]

the nhl will never expand again. never.

relocate? maybe

but there is no reason to think the nhl believes it can have more teams than either the mlb or nba