2020-2021 salary cap. Upd Sept BOG est $84.5m

[LadyStanley]

31 Thoughts: Byfuglien decision will have major ripple effect - Sportsnet.ca

Earlier this week, the NBA informed its teams that the salary cap is projected to be $116 million in 2020–21 and $125 million in 2021–22. I think you’re going to see the NHL do a similar forecast. This season’s ceiling was announced just days before July 1, and it was lower than previously expected. That was a disaster for most teams, and many of the middle-class players. If, for argument’s sake, we go to $83.5 next year and $85.5 the season after, the NHLPA should be able to inform its constituency in advance about what escrow is expected to be, given the average growth everyone is used to. That might be the best way to handle the players’ biggest concern. Apparently, the possibility of an $84.5–$86 million cap for next season was raised at the Board of Governors’ meeting, but I can see a more modest figure being put in place.

With the cap at low end this season, a more conservative approach might be warranted

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[Fenway]

The elephant in the room is the next US national TV contract which expires after the 2021 season at 200M a year. NBC struck gold with the Blackhawks and it has been pure profit since 2015.

I suspect the NHL is looking at 800M a year or more with FOX as the leverage.

 

[StreetHawk]

The elephant in the room is the next US national TV contract which expires after the 2021 season at 200M a year. NBC struck gold with the Blackhawks and it has been pure profit since 2015.

I suspect the NHL is looking at 800M a year or more with FOX as the leverage.

No way to really know what nbc makes off their nhl deal.
How much more can they charge for their ads if their rights fees quadruple though?

 

[Ted Hoffman]

No way to really know what nbc makes off their nhl deal.
How much more can they charge for their ads if their rights fees quadruple though?

That's thinking of it backwards. The question is whether NBC could charge enough for ads to pay quadruple what they did the last time around and still at least break-even. They'll pay whatever they think they can recoup via ad fees over the life of the contract. If they don't think they can recoup that money, ... well, then the question becomes "how much is NBCSN willing to lose and still keep the rights?"

 

[gstommylee]

The elephant in the room is the next US national TV contract which expires after the 2021 season at 200M a year. NBC struck gold with the Blackhawks and it has been pure profit since 2015.

I suspect the NHL is looking at 800M a year or more with FOX as the leverage.

800m? That's quite a large increase. Has the NHL grown that much (besides adding Vegas and Seattle) to warrant such an increase?

 

[gstommylee]

That's thinking of it backwards. The question is whether NBC could charge enough for ads to pay quadruple what they did the last time around and still at least break-even. They'll pay whatever they think they can recoup via ad fees over the life of the contract. If they don't think they can recoup that money, ... well, then the question becomes "how much is NBCSN willing to lose and still keep the rights?"

Well NBC gain more viewership since Vegas joined and will gain more with Seattle coming online in 2021-22 season. But would the Vegas market and the entire pacific northwest provide enough viewership to where NBC can justify paying more in a TV contract?

 

[Fenway]

No way to really know what nbc makes off their nhl deal.
How much more can they charge for their ads if their rights fees quadruple though?

NBC reportedly recovered everything by the end of 2015 helped greatly by Chicago.

Digital rights will play a huge part and also the cities that the networks own the local OTA channel. ( NBC made a lot of money with local ads in Chicago on Channel 5 there )

Last year they did very well with their owned station in Boston and the year before in Washington.

NBC owns

Fox owns

The unknown is how badly FOX wants the NHL which could really help struggling FS1 and FS2

ESPN/ABC are limited because they are all in with the NBA.

 

[jkrdevil]

That's thinking of it backwards. The question is whether NBC could charge enough for ads to pay quadruple what they did the last time around and still at least break-even. They'll pay whatever they think they can recoup via ad fees over the life of the contract. If they don't think they can recoup that money, ... well, then the question becomes "how much is NBCSN willing to lose and still keep the rights?"

It is also about subscriber fees and the future of NBCSN without the NHL. While cable is breeding subscribers, it is still very lucrative. Without the NHL, NBCSN losing the bulk of their regular programming and could be in a situation where it is squeezed by other distributors.

Also, as Fenway notes digital rights are also key in this. The BAMTech/espn+ deal, which is now at about $100 million a year is up at the same time.

 

[Ted Hoffman]

Well NBC gain more viewership since Vegas joined and will gain more with Seattle coming online in 2021-22 season. But would the Vegas market and the entire pacific northwest provide enough viewership to where NBC can justify paying more in a TV contract?

This is why I'm an actuary and not a TV executive.

It is also about subscriber fees and the future of NBCSN without the NHL. While cable is breeding subscribers, it is still very lucrative. Without the NHL, NBCSN losing the bulk of their regular programming and could be in a situation where it is squeezed by other distributors.

Also, as Fenway notes digital rights are also key in this. The BAMTech/espn+ deal, which is now at about $100 million a year is up at the same time.

Damn it, I always forget about subscriber fees. I don't know what NBCSN gets now, but I just can't imagine that going up dramatically.

The point about ESPN+ being up is salient. We're talking $300 million combined between broadcast and digital; do they stay split or does it all go in a package? (My money is on another split.) That said, is ESPN recouping all that money through its digital rights for the NHL? (I leave this for others to find information on and report back.) I mean, ESPN has demonstrated it's willing to throw stupid money around for rights (if for no other reason than to keep someone else from having it) and losing money is apparently no object as long as it can continue to extract premium subscriber fees from cable / satellite providers (how else to make the company the one-stop shop for sports content like it's wanted to be for years now?), but I have to wonder how long that continues before someone there starts waiving a white flag on some of the content and says, "eh, we're not forking out all this money for it - it's gotta start making economic sense or we're out."

 

[LadyStanley]

We’ll see if the NHL and NHLPA agree to a different number as part of negotiations, but at last week’s Board of Governors meeting, the 2020-21 cap was estimated at $84.5 million, if the players do not use any escalator at all.

No escalator. Hmmm

 

[StreetHawk]

They just saw a 2.5% increase of the cap from $79.5 to $81.5 this season. Small escalator was included iirc.
Yet they forecast a 3.7% increase for next without the escalator being used?

 

[Ted Hoffman]

They just saw a 2.5% increase of the cap from $79.5 to $81.5 this season. Small escalator was included iirc.
Yet they forecast a 3.7% increase for next without the escalator being used?

You know there's an NHL GM who's already booking contracts assuming the escalator gets applied and we end up at $86 million or more, who's going to be stuck in cap hell (yet again) if (when) the actual cap falls short.

I look forward to finding out who that dumb schmuck is.

 

[Noldo]

They just saw a 2.5% increase of the cap from $79.5 to $81.5 this season. Small escalator was included iirc.
Yet they forecast a 3.7% increase for next without the escalator being used?

If I have understood correctly, the cap for 18/19 was based on 17/18 revenues (with potential escalator to take into account the revenue growth) while the previous cap figure was based on 16/17 revenue (with potential escalator). So even if no escalator would be used, the cap would rise if the revenue grows from season to season.

 

[Grudy0]

This is the list of escrow withholding and refunds for the past ten years. Note that escrow shot way up the year after the lockout:

Season	Withheld	Refunded	Lost
2009-10	4.1	3	1.1
2010-11	12.4	10	2.4
2011-12	8.5	8	0.5
2012-13	16.3	1.6	14.7
2013-14	14	3.8	10.2
2014-15	15	2.05	12.95
2015-16	17	3.2	13.8
2016-17	15.5
2017-18	11.5
2018-19	9.5

[TBODY] [/TBODY]

I don't think the use of the escalator was the only issue to increase escrow and net escrow.

 

[Master Yoda]

This is the list of escrow withholding and refunds for the past ten years. Note that escrow shot way up the year after the lockout:

Season	Withheld	Refunded	Lost
2009-10	4.1	3	1.1
2010-11	12.4	10	2.4
2011-12	8.5	8	0.5
2012-13	16.3	1.6	14.7
2013-14	14	3.8	10.2
2014-15	15	2.05	12.95
2015-16	17	3.2	13.8
2016-17	15.5
2017-18	11.5
2018-19	9.5

[TBODY] [/TBODY]

I don't think the use of the escalator was the only issue to increase escrow and net escrow.

Another problem is about 2/3 of the league is spending close to the upper cap limit, and in many cases more with LTIR.

 

[mouser]

This is the list of escrow withholding and refunds for the past ten years. Note that escrow shot way up the year after the lockout:

Season	Withheld	Refunded	Lost
2009-10	4.1	3	1.1
2010-11	12.4	10	2.4
2011-12	8.5	8	0.5
2012-13	16.3	1.6	14.7
2013-14	14	3.8	10.2
2014-15	15	2.05	12.95
2015-16	17	3.2	13.8
2016-17	15.5
2017-18	11.5
2018-19	9.5

[TBODY] [/TBODY]

I don't think the use of the escalator was the only issue to increase escrow and net escrow.

Have to keep in mind the main reason escrow shot up is because the share of HRR was reduced, but the cap wasn't immediately lowered in turn.

Also if you factor in the one-time payments from the NHL then effective escrow lost in 2013-14, 2014-15 and 2015-16 drops by 5-6% each year. In addition the compliance buyouts following the new CBA contributed another 1-3% in lost escrow each year.

 

[tony d]

A quadrupling for the next TV deal seems a bit much to me. It may double or even triple but I doubt it quadruples.

 

[StreetHawk]

Have to keep in mind the main reason escrow shot up is because the share of HRR was reduced, but the cap wasn't immediately lowered in turn.

Also if you factor in the one-time payments from the NHL then effective escrow lost in 2013-14, 2014-15 and 2015-16 drops by 5-6% each year. In addition the compliance buyouts following the new CBA contributed another 1-3% in lost escrow each year.

So really the last 3 seasons paint a fair picture of what the players have been experiencing with escrow. 16-17 & 17-18 numbers are in. 18-19 not until November I believe.

 

[TOGuy14]

A rapidly rising salary cap could make the longer term contracts signed this summer look a lot better in comparison to the bridge deals.

 

[Ted Hoffman]

A rapidly rising salary cap could make the longer term contracts signed this summer look a lot better in comparison to the bridge deals.

That's been the hope for a few years now. Instead, the actual cap falls short of projections and teams planning on big increases end up cap crunched.

 

[StreetHawk]

That's been the hope for a few years now. Instead, the actual cap falls short of projections and teams planning on big increases end up cap crunched.

Something significant has to impact revenues for a major cap spike.
It was the Canadian tv deal back between 13-14 to 14-15 season and LV coming in for 17-18 to 18-19.

Waiting for us tv deal along with legalizing sports betting to see a big bump.

Year to year increases have been around 2-3% in the cap the past 5/6 years.

 

[Ted Hoffman]

Something significant has to impact revenues for a major cap spike.
It was the Canadian tv deal back between 13-14 to 14-15 season and LV coming in for 17-18 to 18-19.

Waiting for us tv deal along with legalizing sports betting to see a big bump.

Year to year increases have been around 2-3% in the cap the past 5/6 years.

I'm not disagreeing with you here, just pointing out that the TV deals / Las Vegas have all been one-time bumps. Seattle coming in will also be a one-time bump on top of the TV deals. From there, something has to happen to get year-to-year changes to move out of the 2-3% range.

I suspect (though we haven't heard anything yet) that low-revenue teams are going to start signaling concern at some point. Revenue sharing helps, but probably not as much as it needs to. [No, "let's move those teams to 'deserving' places" crowd - relocation doesn't fix this problem, as I and KevFu and perhaps a few others have pointed out.] In MLB, you can be a low-revenue team but spend a pittance on salaries and you're fine; in the NFL, you can be a low-revenue team but the TV contract pretty much takes care of your player salaries. I haven't thoroughly researched this, but I believe it's safe to say that the disparity in revenues between the top end and bottom end is greatest in the NHL when it comes to North American pro leagues operating under a salary cap. I definitely believe that "spending on player salaries as a % of team revenues" is highest for NHL low-revenue teams than it is for other pro teams in capped league.

I don't think that can continue to happen. Of course, I've thought a lot of things couldn't continue and they've gone on far longer than I thought was possible.

 

[StreetHawk]

I'm not disagreeing with you here, just pointing out that the TV deals / Las Vegas have all been one-time bumps. Seattle coming in will also be a one-time bump on top of the TV deals. From there, something has to happen to get year-to-year changes to move out of the 2-3% range.

I suspect (though we haven't heard anything yet) that low-revenue teams are going to start signaling concern at some point. Revenue sharing helps, but probably not as much as it needs to. [No, "let's move those teams to 'deserving' places" crowd - relocation doesn't fix this problem, as I and KevFu and perhaps a few others have pointed out.] In MLB, you can be a low-revenue team but spend a pittance on salaries and you're fine; in the NFL, you can be a low-revenue team but the TV contract pretty much takes care of your player salaries. I haven't thoroughly researched this, but I believe it's safe to say that the disparity in revenues between the top end and bottom end is greatest in the NHL when it comes to North American pro leagues operating under a salary cap. I definitely believe that "spending on player salaries as a % of team revenues" is highest for NHL low-revenue teams than it is for other pro teams in capped league.

I don't think that can continue to happen. Of course, I've thought a lot of things couldn't continue and they've gone on far longer than I thought was possible.

New tv deal and new teams are like raises. Sets new standard. World Cup more like a bonus, one time not guaranteed going forward.

Interesting point about revenue sharing. I think it will Be a point of contention if high revenue teams are asked to give out more to revenue sharing. Most of those high revenue teams are in markets with higher taxes which players either don’t want to go to or want to be compensated for playing in. Even front loading the deal to increase time value of money only does so much. So costs those teams higher cap hits which is a challenge to their roster and thus ability to win and generate more playoff revenue.

 

[Jussi]

Something significant has to impact revenues for a major cap spike.
It was the Canadian tv deal back between 13-14 to 14-15 season and LV coming in for 17-18 to 18-19.

Waiting for us tv deal along with legalizing sports betting to see a big bump.

Year to year increases have been around 2-3% in the cap the past 5/6 years.

Why would sports betting raise NHL's revenue?

 

[Ted Hoffman]

New tv deal and new teams are like raises. Sets new standard. World Cup more like a bonus, one time not guaranteed going forward.

New TV deals are not a gradual increase kind of thing, they're a big one-time bump. Agreed that the World Cup [when it finally happens] is a one-time thing, but there's provisions to not let one-time events impact the cap. How they handle that is an open question.

Interesting point about revenue sharing. I think it will Be a point of contention if high revenue teams are asked to give out more to revenue sharing. Most of those high revenue teams are in markets with higher taxes which players either don’t want to go to or want to be compensated for playing in. Even front loading the deal to increase time value of money only does so much. So costs those teams higher cap hits which is a challenge to their roster and thus ability to win and generate more playoff revenue.

There's a few points to dissect here:

1. The entire point on higher taxes is IMO really overblown. It's especially overblown for sports franchises. [There's extended thoughts about how high-revenue teams correlate to high-tax areas and how after-tax profits are really the name of the game, but I don't have nearly enough time to get into this. Perhaps someone else will take it up.]

2. The point about players not wanting to go to high-tax areas is also IMO overblown. I'll let others point to discussions had elsewhere - especially out on the NHL Talk forum - to cover this. [Hint: there's only so many jobs available in the league, and each team only has so many jobs available.]

3. Front-loading contracts and/or paying much of it in signing bonuses doesn't impact the cap number on a contract. It impacts the timing of payments and potential buyout consequences, but a 7-year, $70M contract paid in salary at $10M each year is exactly the same in cap dollars as a 7-year, $70M contract paid as 14/14/12/9/7/7/7 with only league-minimum salaries and the rest of it as signing bonus.

4. High-revenue teams know that part of their value is based on the existence of all franchises in the league and the support they all provide each other. If the league were cut to 16 teams, the Maple Leafs and Rangers and Canadiens and other high-revenue teams would't retain their current valuations; they would be reduced by some amount [the amount can be debated] by the removal of 15 [soon to be 16] other franchises and the reduction in centrally-generated league revenues. Thus, there's an incentive for them to keep other franchises afloat by providing revenue sharing in some form. [Cue discussion of "how much revenue sharing is enough.]

Perhaps, instead of artificially constraining contract lengths [which necessarily forces up cap hits because low-dollar years are the ones that will be shed], we could come up with a much more reasonable idea to .......... nah, this makes way too much sense.