coachbob
Registered User
Ok all you economic experts.....we are all assuming a cap limit of 70-71 million next year....if our loonie continues to fall how will that affect the cap level going forward.
Cap limit and the declining loonie
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Mikeyg
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- Dec 26, 2011
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wont really affect it a lot imo, as more and more broadcasting deals become available the cap will continue to increase, the status of the canadian and american economies do play a role in revenue and whatnot but the declining loonie shouldnt have a large impact. The cap is rising by like 6 mill or whatever because of that new cbc broadcasting deal, i've heard that there is suppose to be another similar sort of thing happening over the next 1-2 years and the cap is expected to rise again in the coming years.
The devil is in the details. But basically the lower the loonie, the lower the cap limits as much of the league revenue will be tied to the loonie while a lot of expenses (player salaries) are in US dollars. Would not be too concerned about next year, but keep an eye on the future trend. Worse case, if it gets bad enough, another round of compliance buyouts might be necessary.
If it is true that players are paid in US currency then a declining Loonie would only inflate their salaries. (assuming they find a good exchange rate.)
Pretty certain most contract are now in US dollars. There may be the odd exceptions. If the loonie tanks, great deal for the players under contract...not so good for the Cdn teams paying the contracts
I assumed everyone was paid on US dollars... or at least the cap hit is calculated in US dollars. that's the only thing that makes sense.
however, what is not counted is the level of taxation. if you play in Florida, you're going to be allowed to keep a lot more of your paycheck than if you play in Ontario. when you also add in the cost of housing and the cost of living, you're way better off playing in a State like Florida that has no state income tax (not to mention the federal taxes and all the other taxes). But you've also gotta think that players have the potential to bring in more advertising revenue playing in place like Toronto compared to a Florida team. Not sure how much money the players see from things like jersey sales and whatnot... but I assume that some players make some money on the side for various things.
however, what is not counted is the level of taxation. if you play in Florida, you're going to be allowed to keep a lot more of your paycheck than if you play in Ontario. when you also add in the cost of housing and the cost of living, you're way better off playing in a State like Florida that has no state income tax (not to mention the federal taxes and all the other taxes). But you've also gotta think that players have the potential to bring in more advertising revenue playing in place like Toronto compared to a Florida team. Not sure how much money the players see from things like jersey sales and whatnot... but I assume that some players make some money on the side for various things.
All players are paid in US$.
Obviously, a declining loonie is pretty good for the players with contracts (especially those playing in Canada), but since a large proportion of the NHL's revenue is in Canadian, it will of course put downwards pressure on the cap.
Obviously, a declining loonie is pretty good for the players with contracts (especially those playing in Canada), but since a large proportion of the NHL's revenue is in Canadian, it will of course put downwards pressure on the cap.
gamer1035
Registered User
- Feb 14, 2012
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this will have a huge impact. my guess is toronto, mtl, and vancouver account for 50% of the nhls revenue. With the decreased loonie, that revenue will decrease, and therefore so shall the cap. Lets not forget the cap went up cause of the loonie, so it should go down with the loonie aswell. There was a point EDM and WPG were losing money while selling out cause of the weak loonie
Yeah, if there was no hard cap, the Leafs would be laughing. However, they have to abide by the system, so any downward pressure on the cap like a declining loonie would mean all the teams having less money to pass around to fill the roster. Remember the dire straits of many of the Canadian teams when the loonie was around 80 cents. Long term contracts will be toxic if there is cap stagnation.
DD03
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- Mar 15, 2010
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See but MLSE will never be losing that kind of money.
Wouldn't this mean the greater percentage of the league is doing better? If the American dollar strengthens?
The US teams will do relatively better than the Cdn teams with a declining loonie; but in absolute terms all the teams will suffer because league revenues will be down. The performance of the Cdn teams is critical to the health of the league...and the health of the league is measured in US dollars.
DD03
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- Mar 15, 2010
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Ah but with the Leafs making the playoffs likely on a regular basis, revenues will be up.
Ah but with the Leafs making the playoffs likely on a regular basis, revenues will be up.
Certainly that should not be discounted
But the Leafs will be making the playoffs independent of the loonie's fluctuations.
The negative effects of a declining loonie can be partially mitigated by a well designed currency hedging program. The extent to which the Canadian franchises use this financial tool correctly will go a long way to determine which teams will be more disadvantaged by the loonie's weakness.
Duke Silver
Truce?
Should the loonie continue to decline, Canadian teams will react by raising ticket prices to cover their losses. In Canada, perhaps with the exception of Ottawa, this should not have an effect on attendance.
ULF_55
Moderator
Regardless of the Leafs wealth they are limited by the cap and Clarkson will continue to get US$5.25 million per season with Canadian at par or 63 cents.
Leafs will be impacted if the cap goes down and a weak Canadian dollar will impact the cap.
Seeing as the Sportsnet deal is in Canadian dollars and the Canadian teams are the wealthiest teams (who also then help float the poorest teams) this will definitely play a part in the cap. I was saying it during the Phaneuf signing and people called me crazy. But here we are lowest dollar in years.
Golden_Jet
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- Sep 21, 2005
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Well if its true CDN teams bring in 35% of revenue, then it should have a 3.5% affect on what overall revenue would of been.
I guess this is the simplest answer I have seen.
If you assume a 10% cheaper dollar, and if the Canadian teams make up 35% of revenues, you can assume a 3.5% downward effect on the cap. That is of course if the people making the cap reductions next year were talking a Canadian dollar at par at that time.
Maybe back in fall when they were speaking of a 71 million cap, and if, they were looking at a dollar at par, 3.5% of 71 is over 2 million dollars. If they were basing it on 5%, it is 1 million.
Anyways, the point is, the cap limit is affected by the value of our loonie rising or dropping.
Something to think about for the Leaf capologists. Something to think about as well for teams that are always pushing the cap limit.
Our escape....this summer? Compliance buyout on Clarkson. Summer of '15....who knows.
Go Canada!
Of course the Leafs have already used up their allotment of compliance buyouts in the current CBA. Regular buyouts are still possible, but these have cap implications. That said, Clarkson is Nonis' golden child....much like Komisarek was Burke's. Translation: A buyout of Clarkson's contract is highly unlikely under a Nonis regime.
While Toronto does help out the welfare teams, I don't think it'll have that much of an impact in terms of the cap. Maybe 1-2mil at most, but I doubt much, if any at all. Currency values change all the time. And while the dollar may be sitting around 89 cents one month, it could be up to 91 a month or two down the road. The CAD has been the weaker currency most of the time when compared to the USD anyways.
What the nhl needs more than anything is lucrative tv contracts. That's where the big bucks are. That, and, well, you know, maybe relocate some of those crummy american teams that nobody cares about to that country north of it, where a small town would be willing to fill that arena for every game. Bettman's strategies are weird. Some are very good in terms of business, others are just, what in the hell are you doing?
What the nhl needs more than anything is lucrative tv contracts. That's where the big bucks are. That, and, well, you know, maybe relocate some of those crummy american teams that nobody cares about to that country north of it, where a small town would be willing to fill that arena for every game. Bettman's strategies are weird. Some are very good in terms of business, others are just, what in the hell are you doing?
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