Are we witnessing the failure of the cap floor?

[angry_treefrog]

Let's see:

Florida:
Tomas Kopecky - 4/12 -3 million
Jose Theodore - 2/3 - 1.5 million
Scottie Upshall - 4/14 - 3.5 million
Ed Jovanovski - 4/16.5 - 4.125 million
Marcel Goc - 3/5.1 - 1.7 million
Tomas Fleischmann - 4/18 - 4.5 million
Sean Bergenheim - 4/11 - 2.75 million

COMPARED TO

Buffalo:
Christian Ehrhoff - 10/40 - 4 million
Cody McCormick - 3/36- 1.2 million
Ville Leino - 6/27 - 4.5 million

Montreal -
Hal Gill - 1/2.25 - 2.25 million
Mathieu Darche - 1/700K - 700K
Andrei Markov - 3/17.25 -5.75 million
Peter Budaj - 2/2.3 - 1.15 million
Erik Cole - 4/18 - 4.5 million

Edmonton-
Ben Eager - 3/3.3 - 1.1 million
Darcy Hordichuk - 1/800K - 800K
Cam Barker - 1/2.25 - 2.25 million
Eric Belanger - 3/5.25 - 1.75 million

Washington
Dany Sabourin - 1/525K - 525K
Brooks Laich - 6/27 - 4.5 million
Jeff Halpern - 1/825K - 825K
Joel Ward- 4/12- 3 million
Roman Hamrilik - 2/7 - 3.5 million

Which Eastern Conference team would that be? Washington? Buffalo? Montreal? Or how about the Western conference team of Edmonton?

This is nothing more than 'Sunbelt hockey' bashing under a different guise.

Teams like Washington, Montreal were throwing money around like a bachelor at his own strip party.

3 million for Ward? 4 million for Cole? 4.5 for Leino?

No need to be hostile. They are just discussing hockey.

 

[seanlinden]

I'm suggesting the market has been severely inflated because a certain team is signing average players to contracts well above their usual value just so they can meet the cap floor.

This is anything but a failure of the cap floor... this is it working. The Panthers (amognst others) are being forced to ice more competitive teams. It's not like Tallon is saying "no I won't sign you for $3m but I will sign you for $4m", he has money to spend and he's spending it in the best way he sees fit. You can agree or disagree with his signings, but there is no option to "sign them for less", it's either pay that price or don't get the player. It's not like guys are lining up to play for the Panthers.

The fact that it's the mid-tier players getting more (this isn't new, this has been a trend for the last few years) is just a byproduct of how the system has evolved.

When the long term deals started, you had top tier players signing for cap hits that are well below their actual value. When Detroit gets a player like Zetterberg for a $6m cap hit, you can't be competitive if you're giving Brad Richards a $9m cap hit. This in essence has put a cap on individual players around $9m for the best, and going down from there.

However, as revenues rise so must salaries, so it's the mid-tier guys benefitting as keeping the cap hits of the top players low allows teams to spend more on depth.

That being said, as another poster alluded to, the rising cap has meant that the floor teams have to closer to the cap teams because of the fixed-range instead of being based on a percentage.

 

[Hull Fan]

The other problem is that revenue is rising for some teams more than others and its not uniform throughout the league. The rich are getting richer but the poor are also getting poorer because they are forced to spend nearly 6 million more this season than last, and more than each of the previous years. More money is going out but a corresponding increase in revenue is not necessarily coming back in.

 

[MaskedSonja]

The other problem is that revenue is rising for some teams more than others and its not uniform throughout the league. The rich are getting richer but the poor are also getting poorer because they are forced to spend nearly 6 million more this season than last, and more than each of the previous years. More money is going out but a corresponding increase in revenue is not necessarily coming back in.

And that's part of the problem that I see going forward.


WHAT does the NHL WANT? Do they want a way where they can continue making increased revenue for all the teams? Then you need to look at contraction or removal of franchises from ownership IMO-if making MORE money is the key: OR, if the NHL is just content with being hunky dory "let's keep 30 teams afloat", (and I'm sure the owners would REALLY love that ), then just drop the cap floor and let teams ice a team on a 20 million dollar payroll, but that also means you get NO revenue sharing if you're below the cap floor. That way other teams are not keeping those "beneath the floor" subsidized, and the teams can operate beneath the floor,




THE NHL wants it both ways IMO, and it can't have it.

 

[TheMoreYouKnow]

Well, if the cap floor forces Florida to ice a competitive team then it's doing its job. It can't replace good sense and smart management obviously.

Florida is a better team today than it was 48 hours ago, I don't think anyone can dispute that.

 

[MoreOrr]

Let's see:

Florida:
Tomas Kopecky - 4/12 -3 million
Jose Theodore - 2/3 - 1.5 million
Scottie Upshall - 4/14 - 3.5 million
Ed Jovanovski - 4/16.5 - 4.125 million
Marcel Goc - 3/5.1 - 1.7 million
Tomas Fleischmann - 4/18 - 4.5 million
Sean Bergenheim - 4/11 - 2.75 million

Florida dumped a ton of players this past Season leading up to the Trade Deadline. Everyone assumed them that Talon was going to go out and rebuild a team with all the cap space he created. I don't see what the surprise is here, other than if some people are surprised by who he's paying the money to.

 

[Dado]

I'm wondering when the NHLPA is going to start having an issue with the escrow mechanism - if I understand Errhoff's deal, he's bagging $15M in actual pay over the next 366 days, which is going to ding every PA member in escrow.

The PA should institute a "over cap cost" escrow surcharge on contracts like this.

 

[MaskedSonja]

I'm wondering when the NHLPA is going to start having an issue with the escrow mechanism - if I understand Errhoff's deal, he's bagging $15M in actual pay over the next 366 days, which is going to ding every PA member in escrow.

The PA should institute a "over cap cost" escrow surcharge on contracts like this.

That Errhoff contract sure is something-he's effectively the highest paid player-actual pay wise-for the next year is he not?

It will be interesting to see how this sort of contract is dealt with in the next CBA.

 

[SlickM32]

The simple thing is...the system works well because Star players were SUPPOSED to eat a large chunk of the cap, meaning each team could have 1-3 star players, and teams could not load up like the Wings and Rangers and Avalanche used to do. But, there was a loophole in the contracts, something the Red Wings started with the Zetterberg deal. Now, the rich teams can pay a guy like Brad Richards 12 million per, something a team like Nashville could never do, but have a cap hit of like 6.7 million. Meaning, these rich teams can afford 4-5 megastars on lower cap hits with frontloaded deals.

This means the Panthers of the world need to spend a little more on mid level guys to sign them. This also means the super stars are not evenly distributed throughout the league.

So now we are getting to the point...the rich teams have a payroll expense that is WAY HIGHER than the 64.3 cap hit. The lower level income teams can't compete anymore.

There needs to be one of two things. Either cap the number of years per contract, or allow only even money deals, meaning the money cannot fluxuate year to year.

 

[Space Herpe]

Well, if the cap floor forces Florida to ice a competitive team then it's doing its job. It can't replace good sense and smart management obviously.

Florida is a better team today than it was 48 hours ago, I don't think anyone can dispute that.

I want to reply, but, someone already hit the nail on the head.

The other problem is that revenue is rising for some teams more than others and its not uniform throughout the league. The rich are getting richer but the poor are also getting poorer because they are forced to spend nearly 6 million more this season than last, and more than each of the previous years. More money is going out but a corresponding increase in revenue is not necessarily coming back in.

What if Florida can't afford to pay that extra 6 million? I know they "can" and they "are", but at what cost? How much can and should the lose (assuming they're gonna lose money because they are forced to pay a higher payroll than they want.)

 

[TheMoreYouKnow]

What if Florida can't afford to pay that extra 6 million? I know they "can" and they "are", but at what cost? How much can and should the lose (assuming they're gonna lose money because they are forced to pay a higher payroll than they want.)

I keep hearing from Florida people on here that the team is fine. If they are fine they can meet the cap floor.

With regards to the whole thing, my view is the cap floor is there to make sure you've got a competitive league. If you have no interest in that, get rid of the cap. If you do, you gotta keep the cap floor and if teams can't meet it well maybe they shouldn't be in the league.

 

[Space Herpe]

I keep hearing from Florida people on here that the team is fine. If they are fine they can meet the cap floor.

With regards to the whole thing, my view is the cap floor is there to make sure you've got a competitive league. If you have no interest in that, get rid of the cap. If you do, you gotta keep the cap floor and if teams can't meet it well maybe they shouldn't be in the league.

i just wanna make it clear, that I agree with that logic. But, at what cost.

 

[karnige]

The other problem is that revenue is rising for some teams more than others and its not uniform throughout the league. The rich are getting richer but the poor are also getting poorer because they are forced to spend nearly 6 million more this season than last, and more than each of the previous years. More money is going out but a corresponding increase in revenue is not necessarily coming back in.

i agree. the thing is make the cap floor a little lower. almost 50 million seems awful high

 

[Trevor3]

The simple thing is...the system works well because Star players were SUPPOSED to eat a large chunk of the cap, meaning each team could have 1-3 star players, and teams could not load up like the Wings and Rangers and Avalanche used to do. But, there was a loophole in the contracts, something the Red Wings started with the Zetterberg deal. Now, the rich teams can pay a guy like Brad Richards 12 million per, something a team like Nashville could never do, but have a cap hit of like 6.7 million. Meaning, these rich teams can afford 4-5 megastars on lower cap hits with frontloaded deals.

This means the Panthers of the world need to spend a little more on mid level guys to sign them. This also means the super stars are not evenly distributed throughout the league.

So now we are getting to the point...the rich teams have a payroll expense that is WAY HIGHER than the 64.3 cap hit. The lower level income teams can't compete anymore.

There needs to be one of two things. Either cap the number of years per contract, or allow only even money deals, meaning the money cannot fluxuate year to year.

I'm not sure this would ever fly because the PA is unlikely to ever accept giving up job security (ie: 12 year contracts) and the owners are unlikely to ever give up their favourite contract structure.

A compromise would be allowing lenthly contracts but perhaps not allow a player to sign for more than 2 years beyond age 39 and implementing a series of guards against the magnitude of front loading deals. For instance, a player's salary can only rise or fall 10% from one year to the next of his contract, to a maximum of 40% over the duration of the deal. If I make 10 million in year one, it could drop by up to 10% annually but my lowest salary could never be more than 40% of the original amount (in this case 4 million).

It creates a stipulation that a player can only drop so much, and takes away the fantasy of front loading deals where guys make more than I will in a lifetime in year one, and less than my garbage man in year 26.

 

[Hull Fan]

People are using Florida as an example but the floor is what's going to drive PHX from Glenndale. That's not necessarily a bad thing but there are only so many teams that can move. Dallas again has ownership issues and the NHL is running the team. They'll lose money again this year. Despite the monster tv deal does anyone want to bet the Islanders actually make money? Nashville is lucky to break even but again this upcoming year they're going to have to pay out more. Will their revenue really rise 6 additional million? Carolina? Anaheim? Columbus? Detroit with a terrible Michigan economy? If it were only two or three clubs they could probably be moved but its not 2 clubs and changes are going to have to be made.

 

[Pinkfloyd]

The only problem with the cap floor is that the revenue sharing system doesn't make up for the forced rise in the cost to operate a team. The floor is fine but the revenue sharing isn't working enough. Either you set it up so that the revenue sharing is enough to cover the rise in the floor or you drop the floor to the point where it won't kill the bottom barrel teams in revenue.

 

[sh724]

People are using Florida as an example but the floor is what's going to drive PHX from Glenndale. That's not necessarily a bad thing but there are only so many teams that can move. Dallas again has ownership issues and the NHL is running the team. They'll lose money again this year. Despite the monster tv deal does anyone want to bet the Islanders actually make money? Nashville is lucky to break even but again this upcoming year they're going to have to pay out more. Will their revenue really rise 6 additional million? Carolina? Anaheim? Columbus? Detroit with a terrible Michigan economy? If it were only two or three clubs they could probably be moved but its not 2 clubs and changes are going to have to be made.

Just because the 'team' is losing money does not mean the owner is not making money. There is a big difference between they 2. If all the teams you mentioned were losing so much money the owners would be trying to sell them. Dallas has ownership issues because of mistakes the owner made that had nothing to do with the team. If Detroit was losing so much money and the economy is so bad Ilich would not be trying to build a new arena and would not have been interested in buying the Pistons. Nashville: nobody is making money because they are lucky, they make money because of good marketing being competitive and signing smart contracts. NYI owner has no interest in selling the team if they are losing money Wang has no problem with it. Anaheim's owner had an extra $100 million laying around to try and get an NBA team to move to ANA.

The owners are no where near as financially strained as people think they are. The only number people see are from Forbes who has as much access to teams finances as everyone on this board and they only report their estimates of the teams profitability they do not report the profitability of everything that goes along with owning an NHL team.

 

[MoreOrr]

I look at it like this... I figure the League understands the financial situation of all its teams, at least I certainly hope so. So if the League decides to raise the Salary Cap, including the Cap Floor, to a certain level, I assume it does so with the understanding that financial situations that exist can be managed, either through revenue sharing or whatever. If on the otherhand the League is simply jeopardising the future of certain teams by this continual increasing of the Salary Cap, then they're ultimately only creating problems for themselves as a collective group. In some things, we have to simply assume that they know what they're doing, because if they don't, if the League is run by a group of idiots, then really is there any reason to have any hope.

As for those who seem to be suggesting that the Cap Floor should be lower, while the Cap Ceiling is allowed to increase... Hell, the difference is increasing every year, isn't it; allow more differentiation and the League will indeed be right back to where it was prior to installing the Salary Cap. As it is, the whole system seems to be a contradiction of a great part of why most of us did without the NHL for a whole Season during the Lockout. Perhaps the League truly is in the hands of fools!

 

[sh724]

I look at it like this... I figure the League understands the financial situation of all its teams, at least I certainly hope so. So if the League decides to raise the Salary Cap, including the Cap Floor, to a certain level, I assume it does so with the understanding that financial situations that exist can be managed, either through revenue sharing or whatever. If on the otherhand the League is simply jeopardising the future of certain teams by this continual increasing of the Salary Cap, then they're ultimately only creating problems for themselves as a collective group. In some things, we have to simply assume that they know what they're doing, because if they don't, if the League is run by a group of idiots, then really is there any reason to have any hope.

As for those who seem to be suggesting that the Cap Floor should be lower, while the Cap Ceiling is allowed to increase... Hell, the difference is increasing every year, isn't it; allow more differentiation and the League will indeed be right back to where it was prior to installing the Salary Cap. As it is, the whole system seems to be a contradiction of a great part of why most of us did without the NHL for a whole Season during the Lockout. Perhaps the League truly is in the hands of fools!

No the difference does not change the floor is always 16 Mil below the ceiling. Originally it was 55% below the ceiling but was changed to be a constant 16

 

[Retail1LO*]

I think Dale Tallon's misuse of cap space has been a pretty blatant example of the cap floor not working, turning middle tier players into overpaid, bloated contracts. If anything, this just places more emphasis on the importance of developing disposable home grown talent on ELCs. All you can afford now are a couple of superstars and a bunch of interchangeable parts consisting of reclamation projects, young players and over the hill veterans.

I don't agree with this at all. Tallon had a number of ways to approach Florida's roster situation. However, it's important to understand something. Florida's had a tough time for the last several years. They haven't been competitive, and there isn't exactly an existing marquee lineup that makes the team attractive to free agents.

That being said, in order to secure decent talent, he was going to have to overpay. From a trade standpoint, he could have surely acquired other players at established, more reasonable contracts, but it likely would have come at the expense of some of the massive amounts of picks, and top tier prospects they've been stockpiling, and I'm sure that wasn't appealing. They now have a pretty decent stable of established, veteran NHL'ers who will be complimented and supplanted by the stable of young horses they have.

Tallon didn't overpay because he doesn't have a clue what players are worth. He overpaid because he DOES know what they're worth...and all other things being equal, who's going to take an identical pay day to go to Florida rather than another market? Florida had to up the ante on every contract it gave out, in either increased term, increased salary, or a combination of the two.

 

[Retail1LO*]

No the difference does not change the floor is always 16 Mil below the ceiling. Originally it was 55% below the ceiling but was changed to be a constant 16

Maybe that's a problem. Difference between a floor predicated off a 55% drop from the ceiling, versus one that's 16M below the ceiling, can be huge...depending on what that ceiling is. 16M becomes a relative number. The higher the ceiling, the less of a difference there is between the ceiling and the floor.

What's really amazing, is that league wide revenues dictate the floor and ceiling. Seeing as how a handful of teams account for the largest portion of the revenue...their reality is being imposed on the league as a whole, more or less. Just because Chicago and Boston are knockin' it dead, doesn't mean their success should be used to dictate smaller markets spend more.

I guarantee the system in its current iteration can not continue indefinitely. I find it particularly ironic, because the NHL wanted this...and in pretty short order, I think we're going to find that it isn't what the owner's had envisioned. They got cost certainty alright. They got certainty that the cost is going to be astronomical.

 

[Hockify]

The only problem with the cap floor is that the revenue sharing system doesn't make up for the forced rise in the cost to operate a team. The floor is fine but the revenue sharing isn't working enough. Either you set it up so that the revenue sharing is enough to cover the rise in the floor or you drop the floor to the point where it won't kill the bottom barrel teams in revenue.

This is a good point but not every team that needs it even gets revenue sharing. This should be done along with you modify how revenue sharing eligibility is decided. The Islanders get no revenue sharing even though they are a small market team because their TV audience is considered huge (even though everyone knows they are counting areas where people are mostly Rangers fans no offense to Islanders fans).

I like the idea of limiting the difference from the last year(s) to the highest paid years. You don't have to limit the number of years if you do that because that will stop alot or all of these contracts but still allow you to lock someone up long term if you want to.

 

[Hockify]

This is anything but a failure of the cap floor... this is it working. The Panthers (amognst others) are being forced to ice more competitive teams. It's not like Tallon is saying "no I won't sign you for $3m but I will sign you for $4m", he has money to spend and he's spending it in the best way he sees fit. You can agree or disagree with his signings, but there is no option to "sign them for less", it's either pay that price or don't get the player. It's not like guys are lining up to play for the Panthers.

The fact that it's the mid-tier players getting more (this isn't new, this has been a trend for the last few years) is just a byproduct of how the system has evolved.

When the long term deals started, you had top tier players signing for cap hits that are well below their actual value. When Detroit gets a player like Zetterberg for a $6m cap hit, you can't be competitive if you're giving Brad Richards a $9m cap hit. This in essence has put a cap on individual players around $9m for the best, and going down from there.

However, as revenues rise so must salaries, so it's the mid-tier guys benefitting as keeping the cap hits of the top players low allows teams to spend more on depth.

That being said, as another poster alluded to, the rising cap has meant that the floor teams have to closer to the cap teams because of the fixed-range instead of being based on a percentage.

What you say here makes sense only if you presume that players want to sign with all teams equally but that's not true. Sometimes these poorer teams can't get guy's who are worth giving that much money to want to come there but the cap is still making them spend as if they can.

 

[seanlinden]

What you say here makes sense only if you presume that players want to sign with all teams equally but that's not true. Sometimes these poorer teams can't get guy's who are worth giving that much money to want to come there but the cap is still making them spend as if they can.

Not really.

Sure, a player would rather go to a good team, while the floor makes the bad teams offer up more money to make them competitive. "worth" is all relative.

 

[sh724]

Maybe that's a problem. Difference between a floor predicated off a 55% drop from the ceiling, versus one that's 16M below the ceiling, can be huge...depending on what that ceiling is. 16M becomes a relative number. The higher the ceiling, the less of a difference there is between the ceiling and the floor.

What's really amazing, is that league wide revenues dictate the floor and ceiling. Seeing as how a handful of teams account for the largest portion of the revenue...their reality is being imposed on the league as a whole, more or less. Just because Chicago and Boston are knockin' it dead, doesn't mean their success should be used to dictate smaller markets spend more.

I guarantee the system in its current iteration can not continue indefinitely. I find it particularly ironic, because the NHL wanted this...and in pretty short order, I think we're going to find that it isn't what the owner's had envisioned. They got cost certainty alright. They got certainty that the cost is going to be astronomical.

Early in the thread I wrote about that being the problem with the cap floor. Under the original system of 55% the current cap floor would be about $33 Mil that's $15 Mil less than the floor this season. Currently its only about a 24% difference.

Whether the cap floor is $48 Mil or $33 Mil makes no difference to the players as a whole. No matter what the players make the total has to add up to 57% of Hockey Related Revenues. If it is more than that the PA pays the owners and if its less the owners pay the PA. If every team spends to the cap floor or spends to the ceiling the players make the same amount. Individual players would get paid differently in those scenarios but the total of all salaries will end up the same