Are we witnessing the failure of the cap floor?

[knorthern knight]

Question for the CBA experts... is the 57% player share calculated based on

1. actual salary+bonuses paid to players each year
2. or on the averaged contracts, which circumvent the salary cap by under-reporting the actual amounts paid?

The reason I ask is because if it's #2, then the players could be getting more than 57% of actual HRR, due to the under-reporting averaging method. If so, the league should get rid of the averaging method, and just use actual salary paid.

 

[kdb209]

Question for the CBA experts... is the 57% player share calculated based on

1. actual salary+bonuses paid to players each year
2. or on the averaged contracts, which circumvent the salary cap by under-reporting the actual amounts paid?

The reason I ask is because if it's #2, then the players could be getting more than 57% of actual HRR, due to the under-reporting averaging method. If so, the league should get rid of the averaging method, and just use actual salary paid.

The Players Share and Escrow is based on the aggregate of Actual Club Salary - the actual amount of Salary and Bonuses paid in the League Year.

 

[Jeffrey93]

The cap floor is great. It is exposing the ultra-weak markets that need to be removed. Atlanta was first...Phoenix likely to be next. Miami...I'd start getting prepared.

 

[Jeffrey93]

Well that sucks then, what was the lockout for then if this cap floor still ruins teams?

Question to everyone posting in here: how many teams would spend below the floor to better match their markets if they were allowed?

Spending below the floor would only be a band-aid solution.

Costs are greater than revenues....so you reduce costs. Then revenues also fall...so costs are reduced further.

You end up with minor league teams playing in a major league.

The cap floor is perfect. It is showing...that even with revenue sharing some markets just can't make it work. I think that is/was the purpose. To set a minimum that franchises need to achieve...if they can't....well....if the owner isn't willing to swallow the losses.....we know it is a market that can and should be evacuated.

 

[sh724]

Spending below the floor would only be a band-aid solution.

Costs are greater than revenues....so you reduce costs. Then revenues also fall...so costs are reduced further.

You end up with minor league teams playing in a major league.

The cap floor is perfect. It is showing...that even with revenue sharing some markets just can't make it work. I think that is/was the purpose. To set a minimum that franchises need to achieve...if they can't....well....if the owner isn't willing to swallow the losses.....we know it is a market that can and should be evacuated.

Reducing cost does not reduce reduce revenues at all. Any economist or accountant or business manager will tell you that is wrong.

The only way your revenue drops is if you sell less and charge the same amount or charge less and sell the same amount. Nothing else will decrease revenue. Revenue is total money received and has no direct effect on changing of cost.

An established business like a NHL team is not going to lower what they charge because their labor cost drop. Do all the companies that outsource their work charge you less because of it? No, they are for profit business and their only true goal is to maximize profits by cutting cost and increasing revenues. A team is not going to drop ticket prices 10% if they spend 10% less on players. They will pocket that extra 10%. I Could sit here for weeks nonstop providing examples of companies cutting cost to increase profits. Business spend countless hours trying to reduce cost.

The point of the Cap Floor was to make the PA happy for agreeing to a Cap. The owners would not agree to a system that could be used against them. The owners agreed to the cap because they thought they could make more money with a cap than without. No owner said 'hey lets have a cap floor so we can see how bad other markets are.

 

[sh724]

The cap floor is great. It is exposing the ultra-weak markets that need to be removed. Atlanta was first...Phoenix likely to be next. Miami...I'd start getting prepared.

Ive posted this 3 times already...but whats one more time. This is what WILL happen if you move every team that cannot keep up with the ever increasing cap.

If you moved every team that was losing money to a market that could potential be profitable you will run out of markets long before teams to be moved. With Atlanta moving to Winnipeg the next cap will see a big jump just because of the moving. Every time you move a team to a more profitable market you are hurting every other team by artifically inflating the cap much faster than market growth more and more teams will continue to fail. Teams would start folding since their wont be an markets left to look at causing even more artificial cap increases and even more problems for the other teams. The league will continue to shrink indefinitly until sponsorship money dries up and the entire league folds. Basic economis says it is a horrible idea to move any team that cannot make money.

 

[BadHammy*]

The cap floor is great. It is exposing the ultra-weak markets that need to be removed. Atlanta was first...Phoenix likely to be next. Miami...I'd start getting prepared.

I think you're going a bit too far. Losses are inevitable and should be treated as such, though yes, it is a fair question when a franchise consistently loses money year after year. There's definitely such a thing as a long-term investment and that's why kids from California and Florida are now being drafted. Being short-sighted is a danger in itself.

 

[Dado]

Basic economics says it's horrible idea to keep afloat (consistently) money losing franchises. If there aren't enough good markets, franchises *should* be folded.

 

[knorthern knight]

Reducing cost does not reduce reduce revenues at all. Any economist or accountant or business manager will tell you that is wrong.

The only way your revenue drops is if you sell less and charge the same amount or charge less and sell the same amount. Nothing else will decrease revenue. Revenue is total money received and has no direct effect on changing of cost.

An established business like a NHL team is not going to lower what they charge because their labor cost drop. Do all the companies that outsource their work charge you less because of it?

If cutting costs results in an inferior product, you will have fewer customers, and revenues will go down. The question is "how can you cut costs without putting out an inferior product"?

 

[5lidyzer19]

Reducing cost does not reduce reduce revenues at all. Any economist or accountant or business manager will tell you that is wrong.

Actually, any accountant, business manager, or economist would tell you that you're wrong. At least I would say that it's wrong as an accountant. I can't think of anything in economics or business that's that black and white. There's always a blend of gray somewhere in between.

Reducing costs in the wrong areas or at the wrong times can absolutely reduce your overall revenues. For example, cutting costs in R&D, cutting costs on service/product quality, cutting promotional activities, cutting capital expenditures, reducing salary on current staff could hurt moral/productivity and your ability to attract and retain top talent, which all hurts revenue.

There are any number of ways where cutting costs would plummet revenue. See: The U.S government stimulus and spending during this recession. If they cut their costs, economic activity would contract severly, which leads to less revenue.

Even on the most basic of levels. If the Detroit Red Wings cut player salary and cost by getting rid of #5, #14, and #40, you don't think overall revenue would suffer?

 

[tarheelhockey]

I was disagreeing with you saying " that the purpose of the cap floor is to guarantee a certain level of salary per season " because that is incorrect. If salaries at the end of the year end up more than 57% of HRR the PA pays the owners the difference. If salaries are under 57% the owners pay the PA the difference. Total salary will be the same in the end no matter what the individual teams pay.

Perhaps, then, it would be better to say "the purpose of the cap floor is to guarantee that each owner takes a fair share of salary per season".

I'd imagine the big markets wouldn't be very happy about a small market cutting its spending down to $20m and leaving everyone else to pay off the difference.

 

[thinkwild]

I've often heard it suggested that the cap floor was a concession to the PA in negotiations, but of course this is nonsense. The floor, along with the ceiling, were the boundaries of the Payroll Range system, one of the 6 salary cap models proposed by the owners, and in the end, their chosen one.

So i dont think you can isolate the floor and say, is it failing. Perhaps we more honestly can ask, was the owners unilateral decision of a payroll range system defining the budgeting parameters for an escrow backed cost certainty system a failure in light of the realities of the markets.

It seems totally ridiculous to me now to hear fans, after spending years arguing for the perfect utopian cba, a triple cap with linkage, now suggesting the problem with utopia is that revenues kept growing, and so players need to take less to make up for it. That sounds like my strategy of coming to work half an hour late, and making up for it by leaving half an hour early.

Are we witnessing the failure of the cap floor to do what? To live up to the NHL generated propaganda and fan idealism it was sold with? No doubt!

Lets also remember that the owner created revenue sharing system is designed to increasingly decrease the help to struggling markets if they cant keep up with the league. So contrary to fan expectations that this was all designed to save all teams, it seems actually designed to ensure that if they cant keep up, they relocate or fold.

If the expectation was that of the propaganda, such a result will likely appear as a failure of the cap floor. And to fan desires, it probably is. But to the owners, looking at the system they wanted in place, it doesnt appear a failure of its intentions at all.

Also, the players arent likely to care if the floor is dropped, because they in the end get 57%, (should be at least 59% by now) of revenues, regardless of where the floor is set. Dropping the floor would have the effect of dropping actual spending, which reduces the amount of escrow, which is where most of the so called "revenue" that the owners share with the small markets comes from.

So as can be expected from a square peg in a round hole cap system, not all will turn out exactly as first thought as the market pops out in unexpected ways.

 

[sh724]

If cutting costs results in an inferior product, you will have fewer customers, and revenues will go down. The question is "how can you cut costs without putting out an inferior product"?

In this discussion it wont make the product inferior if a team at the cap floor already does not have a team that is going to compete for the cup and in most cases not be very competitive at all, if they drop below the cap floor their performance will not change much if any.

 

[sh724]

Actually, any accountant, business manager, or economist would tell you that you're wrong. At least I would say that it's wrong as an accountant. I can't think of anything in economics or business that's that black and white. There's always a blend of gray somewhere in between.

Reducing costs in the wrong areas or at the wrong times can absolutely reduce your overall revenues. For example, cutting costs in R&D, cutting costs on service/product quality, cutting promotional activities, cutting capital expenditures, reducing salary on current staff could hurt moral/productivity and your ability to attract and retain top talent, which all hurts revenue.

There are any number of ways where cutting costs would plummet revenue. See: The U.S government stimulus and spending during this recession. If they cut their costs, economic activity would contract severly, which leads to less revenue.

Even on the most basic of levels. If the Detroit Red Wings cut player salary and cost by getting rid of #5, #14, and #40, you don't think overall revenue would suffer?

Well considering I was talking about a hockey teams budgets which is a very different situation than other businesses. And a team at the cap floor dropping below the cap floor will not all of a sudden make the team horrible their revenues will not drop just bc of reduced player salaries which is what I was talking about

 

[sh724]

Perhaps, then, it would be better to say "the purpose of the cap floor is to guarantee that each owner takes a fair share of salary per season".

I'd imagine the big markets wouldn't be very happy about a small market cutting its spending down to $20m and leaving everyone else to pay off the difference.

Now this time I agree lol

 

[sh724]

I've often heard it suggested that the cap floor was a concession to the PA in negotiations, but of course this is nonsense. The floor, along with the ceiling, were the boundaries of the Payroll Range system, one of the 6 salary cap models proposed by the owners, and in the end, their chosen one.

So i dont think you can isolate the floor and say, is it failing. Perhaps we more honestly can ask, was the owners unilateral decision of a payroll range system defining the budgeting parameters for an escrow backed cost certainty system a failure in light of the realities of the markets.

It seems totally ridiculous to me now to hear fans, after spending years arguing for the perfect utopian cba, a triple cap with linkage, now suggesting the problem with utopia is that revenues kept growing, and so players need to take less to make up for it. That sounds like my strategy of coming to work half an hour late, and making up for it by leaving half an hour early.

Are we witnessing the failure of the cap floor to do what? To live up to the NHL generated propaganda and fan idealism it was sold with? No doubt!

Lets also remember that the owner created revenue sharing system is designed to increasingly decrease the help to struggling markets if they cant keep up with the league. So contrary to fan expectations that this was all designed to save all teams, it seems actually designed to ensure that if they cant keep up, they relocate or fold.

If the expectation was that of the propaganda, such a result will likely appear as a failure of the cap floor. And to fan desires, it probably is. But to the owners, looking at the system they wanted in place, it doesnt appear a failure of its intentions at all.

Also, the players arent likely to care if the floor is dropped, because they in the end get 57%, (should be at least 59% by now) of revenues, regardless of where the floor is set. Dropping the floor would have the effect of dropping actual spending, which reduces the amount of escrow, which is where most of the so called "revenue" that the owners share with the small markets comes from.

So as can be expected from a square peg in a round hole cap system, not all will turn out exactly as first thought as the market pops out in unexpected ways.

The problem with the current cap floor and the one originally agreed upon is the original said cap and floor would be 55% different the current cap is a set 16 mil difference

 

[TaketheCannoli]

Ive posted this 3 times already...but whats one more time. This is what WILL happen if you move every team that cannot keep up with the ever increasing cap.

If you moved every team that was losing money to a market that could potential be profitable you will run out of markets long before teams to be moved. With Atlanta moving to Winnipeg the next cap will see a big jump just because of the moving. Every time you move a team to a more profitable market you are hurting every other team by artifically inflating the cap much faster than market growth more and more teams will continue to fail. Teams would start folding since their wont be an markets left to look at causing even more artificial cap increases and even more problems for the other teams. The league will continue to shrink indefinitly until sponsorship money dries up and the entire league folds. Basic economis says it is a horrible idea to move any team that cannot make money.

Meh, your wasting your breath. He just wants this to continue until a team moves to Hamilton. At that point, he would like it to stop, so that his Hamilton team can make a profit without charging $500 per ticket.

 

[CoolburnIsGone]

We all know the OP was directing this at the Florida Panthers. And I know we're all talking about the cap floor either succeeding or failing by using them as an example of a team being supposedly "forced" to reach the floor. But does everyone realize that the Florida Panthers had a cap hit last season of $46,738,149??!!?

All they did this offseason was re-distribute where that salary was being spent and adding maybe the salary of 1 overpaid player. Tallon wanted to remake the roster and so he moved out a lot of players and brought in new players in a 12 month span. I really fail to see how their spending in free agency should be tied to whether the cap floor is working or not.

As a side note, it appears that the league, in particular Gary Bettman, was actually pleased with what the Panthers did in free agency. He's always wanted the Florida franchise to succeed where it is and I dont see that changing.

"Gary is very, very happy," Panthers Chairman Cliff Viner said at Friday's official rollout at BankAtlantic Center. "He has complimented us on what we've done."

Source: http://www.sun-sentinel.com/sports/...orida-panthers-0709-20110708,0,4376778.column

 

[mindmasher]

Average NHL player salary as a percentage of the cap:

05-06: 3.74
06-07: 3.88
07-08: 3.79
08-09: 3.94
09-10: 3.90*
10-11: 4.04**

*usa today number (~2.2)
**forbes number (~2.4)

 

[xerox]

Such a fail man.

 

[Kimota]

"Gary is very, very happy," Panthers Chairman Cliff Viner said at Friday's official rollout at BankAtlantic Center. "He has complimented us on what we've done."

Man this league is run by monkeys.