Are we witnessing the failure of the cap floor?

[WalterSobchak]

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.

pretty much what I was going to post, so thank you.

 

[CrAzYNiNe]

Not sure I'm in the right place but whatever.

If a team is at 50 million cap, and a player with a 7 million dollar contract gets injured. Next game they have to call up someone lets say 1 mill. Now they are at 44 mill cap and the floor is 48.3.
Where do they go from there?

 

[Diven]

Not sure I'm in the right place but whatever.

If a team is at 50 million cap, and a player with a 7 million dollar contract gets injured. Next game they have to call up someone lets say 1 mill. Now they are at 44 mill cap and the floor is 48.3.
Where do they go from there?

Injured players continue to count against the cap. So their cap hit would be 51 million.

 

[CrAzYNiNe]

Injured players continue to count against the cap. So their cap hit would be 51 million.

Ok now say he goes on LTIR, are they going to have to scramble and find salary, or do they just not put him on LTIR?

 

[sh724]

Ok now say he goes on LTIR, are they going to have to scramble and find salary, or do they just not put him on LTIR?

LTIR still counts against the cap but keeping with your example lets say a team at the cap ceiling has a player with a $7 mil cap hit, when the player gets put on LTIR the team is still at the cap ceiling but the team is able to spend $7 mil over the cap. The 7 mil does not disappear. That is how LTIR affect the cap, the players salary still counts. If LTIR salary came off the books lower salaried teams would never put players on LTIR. However there have been teams who at the end of the year where below the cap floor because of unearned bonuses and they were not punished at all.

Of course the example is very basic and does not take into account prorating the salaries because players salaries only count for days they are on the roster. The guy you called up with a $1 mil salary wont increase the teams cap by $1 mil because the 1 mil is for a season of service but if he gets called up 1/2 way threw the season only 500k counts against the cap. I believe it was SJ a few years ago that sent down a few players on non game days and then called them back up on game days to save cap room.

 

[MoreOrr]

I wonder what the League says to teams that will be struggling to meet the Cap Floor? And again, I don't think there should be a greater difference between Cap Ceiling and Cap Floor, or otherwise why have created the Salary Cap to begin with; and I do think the Salary Cap is a good thing, I'm just not sure it's working properly. So again, what does the League say to teams that are struggling to meet the Cap Floor? ... 'Don't worry, don't forget our revenue sharing.' ... 'It's your problem, you better deal with it, we've got several other cities with potential owners wanting to join the League.'.... Or are there other options of what the League could say?

 

[Stephen]

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.

Well that's a good point to describe Florida in microcosm, but I imagine if the cap floor was lower, you wouldn't suddenly have other teams spending money like it was going stale either, so Florida wouldn't necessarily have to overpay as much at the same dollar figure. An average NHL salary of $3 million these days and in conjunction with an ever rising cap ceiling just feels excessive compared to what the owners were fighting for when the lockout happened.

 

[Space Herpe]

Ken Campbell on why the 2011 NHL Free Agent Frenzy spells doom for the next CBA negotiation: "One agent suggested to me recently that things are all ass-backward now in the NHL. Back in the day, it was the Detroits and New York Rangers of the world that were the driving force behind escalating salaries, but now it's actually the small-market teams that are forcing the cost of business up because they're being forced to pay run-of-the-mill players — yes, you, Tomas Kopecky — far more than they're worth just to get up to the cap floor."

I copied and pasted that from Puck Daddy.

 

[MaskedSonja]

I wonder what the League says to teams that will be struggling to meet the Cap Floor? And again, I don't think there should be a greater difference between Cap Ceiling and Cap Floor, or otherwise why have created the Salary Cap to begin with; and I do think the Salary Cap is a good thing, I'm just not sure it's working properly. So again, what does the League say to teams that are struggling to meet the Cap Floor? ... 'Don't worry, don't forget our revenue sharing.' ... 'It's your problem, you better deal with it, we've got several other cities with potential owners wanting to join the League.'.... Or are there other options of what the League could say?

This is seriously what I wonder too-I too think there has to be some mechanism which says essentially "look, if you can't afford (over a multiyear period) to manage the franchise and contribute to the pool-perhaps we have to find someone who can(please note this does NOT mean relocating necessarily, but working it in the CBA so the NHL has the authority to strip an owner of a franchise who is deemed really "not cooperating", and allocate it elsewhere-but then I realise opens up new problems(and I also realise that's kind of what happened in Phoenix-the problem is illustrated too-what happens if you can't find a buyer?)

 

[Prussian_Blue]

If I were a player I would take the pay cut for a chance to contend.

You say that now, but if you were actually a player with bills to pay and an ol' lady ridin' your ass about money, you might think a little differently.

If you're a "tweener" type player, a guy who can play on the second or the third line and score something like 20 goals and 50 points a year, are you going to take $2MM a year from, say, Detroit because they "have a chance to contend," or are you going to take, say, $3MM from a team like St. Louis that's got every bit as much a "chance to contend," and doesn't have a lineup full of already-overpaid stars that would be harder to break into?

If you say you'd take the $2MM over the $3MM, you're a liar, and your wife/girlfriend will leave you and take the kids...

 

[Prussian_Blue]

People need to realize something. The cap has gone up nearly 50% from where it was 6 years ago. Would it not make sense that the salaries of players go along accordingly? All of this "x player is overpaid" isn't even close to true half the time simply because people are refusing to realize that this isn't 06 and a 4 million dollar contract isn't 10% of a team's cap space anymore.

Have revenues across the board -- for all teams -- gone up nearly 50% from where they were six years ago?

If not, then increasing the cap -- and raising the cap floor -- does not make economic sense for the league as a whole.

Having salaries go up in proportion to an league-wide revenue increase is all fine and dandy, but when salaries go up faster than league revenues, you get franchise movement, which leads to a perception that the league is unstable, which leads to decreased interest in the league, which leads to a poor TV contract.

Contraction comes next if salaries continue to outpace league-wide revenues.

Whoever said earlier in this thread the the cap and the cap floor should be tied to the revenues and expenditures of the bottom 15 teams was spot-on. I'd expand it to the bottom 20 teams, but teams like Philadelphia, Detroit, Toronto and the Rangers skew the average for everybody, and the current system makes it harder for teams like St. Louis, Phoenix and Dallas to compete with those big-market Eastern TV darlings.

 

[Prussian_Blue]

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.

Spot-on.

 

[MoreOrr]

This is seriously what I wonder too-I too think there has to be some mechanism which says essentially "look, if you can't afford (over a multiyear period) to manage the franchise and contribute to the pool-perhaps we have to find someone who can(please note this does NOT mean relocating necessarily, but working it in the CBA so the NHL has the authority to strip an owner of a franchise who is deemed really "not cooperating", and allocate it elsewhere-but then I realise opens up new problems(and I also realise that's kind of what happened in Phoenix-the problem is illustrated too-what happens if you can't find a buyer?)

I meant the comment/option fairly sarcastically when I said it, but if you think it's a valid possibility then fine. I just don't see a whole lot of potential other owners out there trying to knock down the NHL door in order to enter and take over a franchise (relocating it or not) that potentially can't keep up with the Cap Floor.

 

[5lidyzer19]

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.

Yep. This is my thought exactly.

As much as this cap was celebrated for saving small clubs, I can see more and more that the big bread winning clubs (Original 6, Canadien teams, Philly) never lost the control. It took a while, but it's coming into focus now.

Larger teams are just going to use their markets to drive up league wide revenues at a proportion that the smaller markets revenue increases can't keep up with(at the floor). A storm is coming for the NHL.

 

[5lidyzer19]

Solution: Tough. Why should NYR/TOR continue to be punished?

This is always a tough question for me. From a business perspective, I agree with you. The owners paid more to be in better markets. They should be able to use this market to their advantage when competing to make money.

But from a fairness perspective in sports, it doesn't make sense that just becase X team is in a big city they should be able to win because they just so happened to be in said city. In a perfect world, the management, ownership, and players would determine who wins; not what market they happened to land into deciding who wins and who loses.

It's so hard to seperate them, and I don't think it can ever happen because of trying to link normal fairness in a sport and business.

 

[Dado]

In a perfect world, the management, ownership, and players would determine who wins; not what market they happened to land into deciding who wins and who loses.

Completely and utterly disagree.

In a perfect world, the team with the largest number of passionate (read: high-spending) fans would win, because that's where the money is.

 

[5lidyzer19]

In a perfect world, the team with the largest number of passionate (read: high-spending) fans would win, because that's where the money is.

and as a business person I would agree. And as an owner I would agree. All resources should be used to try and win, which would help to maximize their revenue.

But say you're a small team fan looking at just hockey as a game. Why should the New York Rangers/or Maple Leafs be able to win simply because they happened to be in New York or Toronto?

It's hard for me to explain the conflict I feel about this. I hope I have made myself clear.

 

[MoreOrr]

This is always a tough question for me. From a business perspective, I agree with you. The owners paid more to be in better markets. They should be able to use this market to their advantage when competing to make money.

But from a fairness perspective in sports, it doesn't make sense that just becase X team is in a big city they should be able to win because they just so happened to be in said city. In a perfect world, the management, ownership, and players would determine who wins; not what market they happened to land into deciding who wins and who loses.

It's so hard to seperate them, and I don't think it can ever happen because of trying to link normal fairness in a sport and business.

Can we accept that hockey fans everywhere would like their own local major league team. And it does seem unfair that only a select group of large cities, or small to mid-size cities that don't have other competing major league sports, should have immediate access to a major league team. But thinking to make that comment, this dawned on me... If there are certain teams in certain cities that can make huge profits from an NHL team (the same should likely apply to other sports) then why not have it so that those cities have a 2nd or a 3rd team in order to balance their profits with smaller markets that struggle to support one franchise in an increasing Salary world. Take the Flyers, for example, could they afford the Salary Cap any more than Buffalo if there were in fact another Philadelphia team in town to compete with directly?

Just a thought.

 

[Stephen]

If the NHL was serious about fairness in competition, maybe they should just look into making the salary cap and salary floor one in the same, and making that lower than the cap floor now so the playing field is at least equal there. That would be the more communistic strategy I could think of.

But then again, I wonder if fairness in competition even makes sense when major league sports is basically a rich man's game with finances dictated by wildly different local market conditions? Why should the pursuit of greatness by wealthy established franchises who built up strong civic support be handcuffed out of some sense of responsibility and fairness to the mom and pop organizations in apathetic cities who can barely stay out of the red, whose existence is owed to the miscalculated over extension of the league? That would be the more free market capital stance I can come up with.

I guess it comes down to preference, is it more fun to follow a league whose storylines are based on intense, traditional rivalries, great marquee matchups and great teams, or constantly worrying about the survival of certain franchises?

 

[Pinkfloyd]

Solution: Tough. Why should NYR/TOR continue to be punished? My feeling is, the old CBA made it impossible for great, but small markets liek PIT/BUF to compete. This CBA allows PIT/BUF to compete and make money, if you can't make money with this CBA, arguably, you don't belong in the league.

To answer your question...it's because the game and the business doesn't revolve around New York and Toronto. The game and the business is about the league and the betterment of the whole. So if the Rangers and the Leafs have to rein in their spending so that a dozen other teams can survive and/or profit, then they'll have to deal with it.

If the cap doesn't exist to rein in that spending, Pittsburgh and Buffalo don't make money. Without it, other teams like pretty much all of Western Canada, San Jose, Nashville, and Tampa don't survive, much less break even or profit.

Even with the perfect cap system, there will still be lean years for franchises due to factors that are not controllable like the economy which includes things like arena issues and the owners other investments. A franchise doesn't deserve to be ran out of town because they suffer through some lean years that likely has nothing to do with the team in the first place. Dallas is an excellent example of it.

 

[Space Herpe]

See...I don't think the old CBA was fair where only 5 markets can afford FAs, and places like PIT/BUF, great markets, are farm systems.

But, I think there comes a point where if you can't reach the floor or make money, than maybe you shouldn't be in hockey.

I feel the current CBA allows small, but good markets (PIT/BUF/STL) to compete; but anything short of communist welfare systems WILL NOT allow markets like PHO/FLA to make money, and in that case, why should the best markets be punished or have to underwrite and ensure the weakest markets profit?

A system which has great markets suffer (PIT/BUF) is not fair.
A system though which punishes the wealthy to allow the meek to survive (PHO) is unfair too.

What if what determines the floor isn't sound?
What if the revenue is being schewed by a few teams?

 

[cbcwpg]

The basic question the NHL and the players have to ask themselves is:

Do you want 10 teams or do you want 30 teams?

If the NHL is happy being a 10 team league, then get rid of the cap all together, and let the strong survive.

If the NHL wants 30 teams, then both the owners and the players need to come up with a system of caps and revenue sharing that works for all.

To answer the question of the thread. Yes, we are witnessing the failure of the cap floor, but more so the CBA. Having an artificial floor that teams must spend to is insane IMO. All it does is force teams to pay players more than they are worth and more than teams can afford. If a player wants to earn more money he should have to prove it on the ice and therefore based on performance ask and receive more money.... not just get more money because he happens to be in the right place at the right time with a team that has to get to the floor.

 

[TheMoreYouKnow]

The basic question the NHL and the players have to ask themselves is:

Do you want 10 teams or do you want 30 teams?

If the NHL is happy being a 10 team league, then get rid of the cap all together, and let the strong survive.

If the NHL wants 30 teams, then both the owners and the players need to come up with a system of caps and revenue sharing that works for all.

To answer the question of the thread. Yes, we are witnessing the failure of the cap floor, but more so the CBA. Having an artificial floor that teams must spend to is insane IMO. All it does is force teams to pay players more than they are worth and more than teams can afford. If a player wants to earn more money he should have to prove it on the ice and therefore based on performance ask and receive more money.... not just get more money because he happens to be in the right place at the right time with a team that has to get to the floor.

The cap floor isn't really there to let players earn more money, it's there to have a league in which every team has to ice a team that's competitive.

What point is there to have a 30 team league that's really a 10 team league?

As I said before, if you don't mind having broad competitive differences, just drop the cap. Not like Toronto and New York dominated the league pre-cap anyway. Bad market owners weren't happy though and wanted to compete...the CBA with the cap floor just held them to it.

 

[Space Herpe]

The cap floor isn't really there to let players earn more money, it's there to have a league in which every team has to ice a team that's competitive.
What point is there to have a 30 team league that's really a 10 team league?

As I said before, if you don't mind having broad competitive differences, just drop the cap. Not like Toronto and New York dominated the league pre-cap anyway. Bad market owners weren't happy though and wanted to compete...the CBA with the cap floor just held them to it.

Perhaps a ridiclously hard cap then?

The most a team can pay players, all types bonuses included, is $40 million.

I know it'll never fly, but, that's probably what's needed.

 

[tarheelhockey]

The cap floor isn't really there to let players earn more money, it's there to have a league in which every team has to ice a team that's competitive.

I'm not so sure about that. My understanding is that the purpose of the cap floor is to guarantee a certain level of salary per season leaguewide. Parity is a nice side effect.